Northwestern Energy Group, Inc. · NASDAQ:NWE
Northwestern Energy — Corporate Update (September 2009)
41 slides from Northwestern Energy's corporate update, Sep 16, 2009
Slide 1: MPSC Presentation: Finance Department Five Year Progress Report
MPSC Presentation Finance Department Five Year Progress Report
Slide 2: Forward-looking statement
2 forward-looking statement… During the course of this presentation, there will be forward-looking statements within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements often address our expected future business and financia
Slide 3: Agenda
3 agenda… Finance department overview 5 year progress 2009 June YTD update
Slide 4: Finance department org chart
Out of 161 Finance and Information Technology & Utility Communication employees, 121 are Montana employees. 4 finance department org chart…
Slide 5: Accounting
5 accounting… Accounting Financial reporting SEC and FERC reporting Annual quarterly MPSC reporting Annual Support Regulatory Affairs Accounting Accounts Payable Payroll Benefits Administration Compensation and benefits benchmarking Administer benefits Medical Retirement Incentive Compliance reporti
Slide 6: Achievements over past 5 years: accounting
Improvements were accomplished while reducing headcount over the same time period. 6 achievements over past 5 years… Accounting Made significant improvements in controls over financial reporting Increased compliance and reporting requirements Significantly reduced external audit fees Significantly r
Slide 7: Audit
7 audit… Internal Audit Independent, objective assurance and consulting. Helps organization accomplish its objectives. Risk management Internal controls Governance Authorized by, and reports directly to, the Audit Committee Annual approval of Internal Audit Plan and Charter At least quarterly report
Slide 8: Achievements over past years: audit
8 achievements over past 5 years… Internal Audit Led effort to implement the requirements of Sarbanes-Oxley Continually improving annual independent review of key processes Coordinated with external auditors to reduce fees Re-established department which conforms to IIA Standards ERM Implemented pro
Slide 9: Financial planning
9 financial planning… Financial Planning and Analysis Annual Budget and Operating Plan Responsible for development of annual operating and capital budget Work with each area in the company for development of annual plans Review and approval by Board of Directors Monthly Internal Reporting Responsibl
Slide 10: Achievements over past years: financial planning
10 achievements over past 5 years… Financial Planning and Analysis Refined and enhanced annual budget process Develop budgets by operational activities and work needs Budget available by individual segments, FERC level Working to control costs to benefit all stakeholders Refined and enhanced monthly
Slide 11: Investor relations / corporate strategy
Goal is to communicate strategy and business operations to attract a shareholder base that matches our philosophy and investment time horizons 11 investor relations / corporate strategy… Investor Relations Inform potential shareholders Press releases Conference presentations Face to face meetings Co
Slide 12: Achievements over past 5 years: investor relations
NorthWestern’s has attracted longer term shareholders while serving all stakeholders 12 achievements over past 5 years… Investor Relations Shareholder base has morphed to longer term holders Hedge holdings after bankruptcy> 50% of the shareholders Hedge holdings now < 15% of shareholder base Emerged
Slide 13: Tax
Goal is to minimize corporate tax liabilities within the confines of applicable federal and state tax laws. 13 tax… Tax Department Tax Returns Income Tax Returns for Federal & State Property Tax Returns by State Sales & Use Tax Returns by State Income Tax Accrual for Financial Statements for SEC, FE
Slide 14: Achievements over past 5 years: tax
Reduction in corporate tax liabilities will yield value for NorthWestern’s customers and shareholders. 14 achievements over past 5 years… Tax Department Reduced the effective tax rate from 41% to 36.5% and are working to reduce it further. Negotiated 4-year settlement in Montana achieving lower prop
Slide 15: Treasury
15 treasury… Treasury Cash Management Bank account management Cash forecasting Investments Short-term borrowing Credit Seek credit from counter parties Counterparty credit evaluation / determination Collateral management Corporate Finance (Capital Management) Debt financing / management Equity finan
Slide 16: Achievements over past years: treasury
16 achievements over past 5 years… Treasury Refinanced all long term debt to all in cost less than 6% Provided persuasive case to rating agencies that ratings should be higher Successful outcome on Colstrip lease buyouts and rate-basing efforts Instrumental in selling many of non-core assets Provide
Slide 17: Audit committee – role
17 audit committee – role… Quarterly – Review and Certify 10-Q Assessment of Internal Controls Over Financial Reporting Review Earnings Press Release Report from Deloitte Recommend Dividend Payment Internal Audit Update General Counsel Update, including Compliance Line Report Executive Sessions (man
Slide 18: Five year progress
18 5 year progress… Improving controls Stronger financial position Investing in the business Funding pension plan Stock performance in-line with 11 peers Credit ratings improving Attractive refinancing & improved liquidity
Slide 19: Net income
(5000's) $80,000 $70,000 $60,000 $60,000 840,000 $30,000 820,000 $10,000 80 2005 BINWE Net Income 2008 2007 2008 mAmmondson Verdict (after-tax)
Slide 20: Return on average equity
Authorized Return on Average Equity (ROAE) of 10-11% in utility space 20 return on average equity …
Slide 21: 2008 NWE net income composition
21 2008 NWE net income composition…
Slide 22: Why does return on equity matter
22 why does return on equity matter … The Shareholders own our company They elect a Board of Directors The Board appoints a Chief Executive Officer – with his executive team, they are responsible for the operation of the Company Shareholders have expectations for return on equity If we fail to provi
Slide 23: Balance sheet
12/31/2008 Debt to Capitalization 53.0% Target of 50 – 55% 23 balance sheet…
Slide 24: Cash flow
Ample Cash Flow to reinvest in business Cash Flow from Operations 24 cash flow…
Slide 25: Capital spending
25 capital spending… As most companies nationally have cut back capital investments NorthWestern Energy’s Capital spend continues to grow Historic and 2009 Budget Utility Capital - 20,000 40,000 60,000 80,000 100,000 120,000 2005 A 2006 A 2007 A 2008 A 2009 B SD Regulated MT Regulated $109M $82M Avg
Slide 26: OG&A expense
Labor, Pension & Benefits alone comprise 63% of our total OA&G expense. 26 OG&A expense…
Slide 27: People costs
Compounded Annual Growth Rate (CAGR) of 4.8% in total due to new hires, cost of living increases, and increased pension expense. 27 people costs…
Slide 28: Pension expense vs funding
Significant pension increases due to past market conditions. Prefunding in 2009 to take advantage of low equity market conditions. 28 pension expense vs funding…
Slide 29: Stock price since emergence
Stock Price since Emergence (11/2/04 - 8/18/09) snnzrcia s00zreis NorthWestern snnzrese Bo0zIziLE soozrcta sonics soncicie z00zieibb eonzrese sonics sonzrese so0zicttb sonzraie sonics sonzieie —11 Peer Avg, soncietbb sonata NE sonics soncrete 840.00 onzicibb $38.00 ss.00 + 528.00 20.00 516.00 s10.00
Slide 30: Shareholder mix
30 shareholder mix… Shareholder mix continues to morph More mutual funds, which includes index funds More bank management divisions and investment banker asset management 12/31/2008 3/31/2009 6/30/2009 Ave of peers @ 6-30-09 Institutional: Investment advisor 37% 36% 36% 25% Hedge funds 31% 24% 13% 5
Slide 31: Dividend history
Long-term targeted Dividend Payout Ratio of 60-70% 31 dividend history…
Slide 32: Improving credit ratings
32 improving credit ratings… Secured Ratings S&P A- Moody’s A3 Fitch BBB+ NWE credit ratings now better than peer average shown here.
Slide 33: Declining interest rates
33 declining interest rates… 1.) Interest rate does not include other costs of debt such as debt issuance expenses, discounts or premiums, and losses on reacquired debt. 2.) $305 million of Montana Mortgage Bonds includes the $55 million 30 year new issue priced at 5.71% in September and expected to
Slide 34: Improving counterparty credit position
Improving credit ratings has resulted in enhanced counterparty credit and reduced collateral requirements. 34 improving counterparty credit position…
Slide 35: Total cash capacity
Dollars (000s) Total Cash Capacity SY gt Sad of NorthWestern
Slide 36: $250MM unsecured revolving credit facility
36 $250MM unsecured revolving credit facility… Maturity: June 30, 2012 Pricing: Grid based on credit ratings currently at Libor + 300bps Financial Covenant: Maximum Debt to Cap = 65% Relationship Banks: Note: First 3-year revolver executed in the Utility sector in the current economic environment
Slide 37: 2009 June YTD performance
37 2009 June YTD performance… 2 nd quarter & YTD June financials poor Reduced guidance from $1.85-$2.00 per share to $1.75-$1.85 per share on second quarter earnings call.
Slide 38: Economic environment
38 economic environment… Our Country is in the worst national recession in the past 25 years MT, SD, and NE fairing better than a lot of areas NE, SD, and MT have the 2 nd lowest, 3 rd lowest, and 8 th lowest unemployment respectively Our Company has been impacted by: reduced transmission OASIS sale
Slide 39: Unemployment rates by state, June 2009
NV=12.0% a Unemployment rates by state, seasonally adjusted, June 2009 (US. rate=9.5 percent) > MMI=15289 aimoane light S Lomest Gorm 69% 5080 59% ~ dorm doe > s0%n3 SOURCE: rent Liber Stasis 20% w 29% ‘ loca Aes Urempeymen Sats L3tierbelow ‘orthWestern
Slide 40: 2009 June YTD financial performance: earnings behind prior year
40 Overall company earnings behind prior year $4.0M or 12.3% through June 2009 June YTD financial performance …
Slide 41: 2009 June YTD financial performance
41 2009 June YTD financial performance … Earnings YTD impacted by: Impacts of the economic downturn Transmission OASIS sales – lack of demand in other states SD wholesale loads – reduced pricing due to demand in MAPP region Slow down in customer growth and new connects Write-offs growing but being m