Northwestern Energy Group, Inc. · NASDAQ:NWE
Northwestern Energy — Siebert Williams Shank West Coast Utilities Conference 2024
67 slides from Northwestern Energy's conference presentation, Mar 21, 2024
Slide 1: Siebert Williams Shank West Coast Utilities Conference
Siebert Williams Shank West Coast Utilities Conference March 21, 2024 1 March 21, 2024 8-K
Slide 2: NorthWestern Energy / Forward Looking Statements
NorthWestern Energy NorthWestern Energy Group, Inc. dba: NorthWestern Energy Ticker: NWE (Nasdaq) www.northwesternenergy.com Corporate Support Office 3010 West 69th Street Sioux Falls, SD 57108 (605) 978-2900 Investor Relations Officer Travis Meyer 605-978-2967 travis.meyer@northwestern.com Forward
Slide 3: Overview
Thank Overview you 3
Slide 4: NWE – An Investment for the Long Term
NWE – An Investment for the Long Term • 100% pure electric & natural gas utility with over 100 years of operating history Pure Electric & • Solid economic indicators in service territory Gas Utility • Diverse electric supply portfolio ~55% hydro, wind & solar • Residential electric & gas rates below
Slide 5: About NorthWestern
About NorthWestern South Dakota Operations Electric 64,800 customers 3,675 miles – transmission & distribution lines 446 MW nameplate owned power generation Natural Gas 49,800 customers 1,802 miles of transmission and distribution pipeline Montana Operations Electric 405,500 customers 25,274 miles –
Slide 6: The NorthWestern Value Proposition
The NorthWestern Value Proposition ~5% Dividend Yield + + Nearly $2.5 billion of Base Capital Plan: Incremental Opportunities: highly executable and 4%-6% EPS Growth 6% + EPS Growth low-risk capital investment forecasted over the next five years. FERC Transmission This investment is Incremental
Slide 7: A Diversified Electric and Gas Utility
A Diversified Electric and Gas Utility * Reflects settled filings in Montana and South Dakota. NorthWestern’s ‘80/20’ rules: Approximately 80% Electric and 80% Montana. Over $4.8 billion of rate base investment to serve our customers 7 Data as reported in our 2023 10-K (1) Utility Margin is a non-GA
Slide 8: Highly Carbon-Free Supply Portfolio
Highly Carbon-Free Supply Portfolio Contracted coke and MT waste tailings as well as a majority of the contracted wind, hydro and solar are federally mandated Qualifying Facilities, as defined NWE under the Public Utility Regulatory Policies Act of 1978 (PURPA). NorthWestern does not own all the ren
Slide 9: Strong Utility Foundation
Strong Utility Foundation NWE rates as of 7/1/2023 (Electric) and December 2023 (Natural Gas) Electric source: Edison Electric Institute Typical Bills and Average Rates Report, Summer (July) 2023 Natural Gas source: US EIA - Monthly residential supply and delivery rates as of December 2023 Solid a
Slide 10: Solid Economic Indicators
Solid Economic Indicators • Customer growth rates historically exceed National Averages. Source: Company 10K’s, 2020/2021 EEI Statistical Yearbook – Table 7.2 and EIA.gov • Projected population growth in our service territories in-line or better than the National Average. 10
Slide 11: NorthWestern's Combo-Advantage
NorthWestern’s Combo-Advantage Combination electric & natural gas provider in Montana & South Dakota • Targeting best-in-class Customer Experience • Opportunity to invest in critical Capacity expansion (supply & transmission) • Continued Grid Evolution to improve resiliency and enhance wildfire mi
Slide 12: Natural Gas LDC – AECO Advantage to Customers
Natural Gas LDC – AECO Advantage to Customers NWE has access to some of the lowest and most stable natural gas prices in the nation, Source: S&P Global 12 through the Alberta Energy Company (AECO) trading hub.
Slide 13: Montana Wildfire Mitigation Plan
Montana Wildfire Mitigation Plan Reduction of System and Enhanced Enriched Public Ignition Potential Environmental Vegetation Communication Monitoring Maintenance and Outreach Former plan filed in 2022 with the Montana general rate review • Approved settlement provides enhancement to former wildfi
Slide 14: Corporate Sustainability
Corporate Sustainability Environmental Social Governance These eight publications provide valuable insight into NorthWestern Energy’s Environmental, Social and Governance (ESG) Sustainability practices. Sustainability Report includes Sustainability Accounting Standards Board (SASB) and Task Force on
Slide 15: Best Practices Governance Diverse Leadership
Best Practices Governance Diverse Leadership Board of Directors Executive Team 5 th Best Score Among 50 Publicly Traded North American Utility and Power Companies by Moody’s Investment Services for Best Governance Practices Recent Governance Recognition America’s Most Responsible Companies Recognize
Slide 16: Financial & Regulatory Update
Thank you Financial & Regulatory Update 16
Slide 17: Strong Growth Outlook
Strong Growth Outlook 2024 Non-GAAP EPS Guidance1 of $3.42 - $3.62 Affirming long-term (5 Year) expected growth rates • EPS growth of 4% to 6% from 2022 base year of $3.18 Non-GAAP • Rate base growth of 4% to 6% from 2022 base year $4.54 billion • Continued focus on earned returns driven by financ
Slide 18: 2024 Earnings Bridge
2024 Earnings Bridge This guidance range is based upon, but not limited to, the following major assumptions: • Normal weather in our service territories; • An effective income tax rate of approximately 12%-14%; and • Diluted average shares outstanding of approximately 61.3 million. We project an ann
Slide 19: Track Record of Growing Capital Investment
Track Record of Growing Capital Investment $2.3 Billion 2019-2023 Invested over the last 5 years* $2.5 Billion Forecasted2024-2028 over the next 5 years** 19 * Historical Capital Investment includes property, plant and equipment additions and AFUDC Credit, both from our cash flow statement, and chan
Slide 20: Credit, Cash Flow and Financing Plans
Credit, Cash Flow and Financing Plans Credit Ratings FFO / Total Debt 2024 Financing Plan Financing plans (targeting a FFO to Debt ratio > 14%) are expected to maintain our current credit ratings. We expect to pay minimal cash taxes into 2028 due to utilization of our NOL’s and tax credits. Financin
Slide 21: Solid Balance Sheet
Solid Balance Sheet Target: 50% - 55% - Annual ratio based on average of each quarter's debt/cap ratio Excludes Basin Creek capital lease and New Market Tax Credit Financing * Liquidity target was raised to $200 million during the height of the Covid pandemic Investment grade credit ratings, liquidi
Slide 22: Disciplined Expense Program
Disciplined Expense Program Per Customer… Per Employee… Per Rate Base… NorthWestern maintains best-in-class expense efficiency among our regional peers. Source: FERC Form 1 Reports - 2022 expenses and company filings through S&P Global IQ Electric Non-Fuel O&M excludes fuel and steam costs for power
Slide 23: South Dakota Electric Rate Review
South Dakota Electric Rate Review Unanimous approval from the South Dakota Public Utility Commission of a constructive settlement with the PUC staff in January 2024 • First rate review since 2015 with base rate increase driven by more than $267 million invested in South Dakota critical electric infr
Slide 24: Holding Company Reorganization Completed
Holding Company Reorganization Completed Stock Governance • New name – NorthWestern Energy Group, Inc. • Same board of directors, but now at new parent • Same NWE stock ticker NorthWestern Energy Group, Inc. • Same shareholders • Same executive team 24 • Same stock plans • Same policies
Slide 25: Generation Investment
Generation Investment Montana South Dakota 175 MW Yellowstone County Capacity generation in Aberdeen, SD Generating Station natural gas fired to replace aging generation resources facility • Construction to start in 2024 • Construction started April 2022 • Total cost of $70 million • Total cost of $
Slide 26: Conclusion
Conclusion Best Attractive Pure Strong Solid Utility Practices Future Electric & Earnings & Foundation Corporate Growth Gas Utility Cash Flows Governance Prospects 26
Slide 27: Appendix
Thank Appendix you 27
Slide 28: Regulated Utility Five-Year Capital Forecast
Appendix Regulated Utility Five-Year Capital Forecast $2.5 billion of highly-executable and low-risk capital investment 28
Slide 29: Rate Base & Authorized Return Summary
Appendix Rate Base & Authorized Return Summary (1) The revenue requirement associated with the FERC regulated portion of Montana electric transmission and ancillary services are included as revenue credits to our MPSC jurisdictional customers. Therefore, we do not separately reflect FERC authorized
Slide 30: 2023 System Statistics
Appendix 2023 System Statistics Note: Statistics above are as of 12/31/2023 (1) Nebraska is a natural gas only jurisdiction (2) Dave Gates Generating Station (DGGS) in Montana is a 150 MW nameplate facility but consider it a 105 MW 30 (60 MW FERC & 45MW MPSC jurisdictions) peaker
Slide 31: Colstrip Transfer Agreement
Thank you Colstrip Transfer Agreement 31
Slide 32: Colstrip Transfer Overview
Appendix Colstrip Transfer Overview NorthWestern Energy executed an agreement with Avista Corporation (Exit Agreement) for the transfer of Avista’s ownership interests in Colstrip Units 3 and 4. • Effective date of transfer: December 31, 2025 • Generating capacity: 222 MW (bringing our total ownersh
Slide 33: Colstrip Facility Ownership Overview
Appendix Colstrip Facility Ownership Overview NorthWestern is actively working with the other owners to resolve outstanding issues, including the associated pending legal proceedings. Additionally, the owners intend to pursue a mutually beneficial reallocation (swap) of megawatts between the two uni
Slide 34: Why Colstrip?
Appendix Why Colstrip? NorthWestern Energy executed an agreement with Reliable Avista Corporation for the Existing resource, ready to serve our Montana customers. Avoids lengthy planning, permitting and transfer of Avista’s construction of a new facility that would stretch in-service beyond 2026.
Slide 35: Why Colstrip?
Appendix Why Colstrip? Reduces Risk We are in a supply capacity crisis due to lack of resource adequacy, with approx. 40% of our customers’ peak needs on the market. This transaction will reduce our need to import expensive capacity during critical times. Establishes clarity regarding operations
Slide 36: January 2024 Cold Weather Event - Montana
Appendix January 2024 Cold Weather Event - Montana The above charts illustrate our resource nameplate capacity, the actual resource specific contribution of energy, the capacity deficit we faced, and the market price of power during the January 2024 multi-day cold weather event in Montana. As a resu
Slide 37: Our Net-Zero Vision
Appendix Our Net-Zero Vision Over the past 100 years, NorthWestern Energy has maintained our commitment to provide customers with reliable and affordable electric and natural gas service while also being good stewards of the environment. We have responded to climate change, its implications and risk
Slide 38: Timeline of Montana Generation Portfolio
Appendix 38 Timeline of Montana Generation Portfolio Since 2011, we have added approximately 954 MW, both owned and long-term contracted, to our generation portfolio, all of which is from carbon-free resources. 38
Slide 39: Comparison of Installed Capacity
Appendix Comparison of Installed Capacity Source: EIA.gov – 2022 Form EIA-860 Data - Schedule 3 for calendar year 2022 California is dealing with significant capacity issues DESPITE having a greater amount of dispachable 39 generation and fewer renewables than NorthWestern Energy in Montana (as a pe
Slide 40: Earnings and Other
Thank you Earnings and Other 40
Slide 41: EPS & Dividend History
Appendix EPS & Dividend History 2009-2023 CAGR’s: GAAP EPS: 3.4% Non-GAAP EPS: 3.5% Dividend: 4.7% See appendix for “Non- GAAP Financial Measures” 41
Slide 42: Full Year Financial Results
Appendix Full Year Financial Results Decrease in revenues is primarily related to pass-through property tax and supply trackers and non-cash regulatory amortizations. 1.) Utility Margin is a non-GAAP Measure. See appendix slide titled “Explaining Utility Margin” for additional disclosure. 42
Slide 43: Full Year Non-GAAP Earnings
Appendix Full Year Non-GAAP Earnings We estimate weather to be a $4.3 million pre-tax detriment as compared to normal and a $13.2 million detriment as compared to 2022. The adjusted non-GAAP measures reflect significant items that are non-recurring or a variance from normal weather, however they sho
Slide 44: Year Over Year Earnings Drivers
Appendix Year Over Year Earnings Drivers After-tax EPS vs Prior Year Improvement in Utility Margin offset weather, inflationary impacts, depreciation, interest rates and share count dilution 1 2 1.) Utility Margin is a non-GAAP Measure. See appendix slide titled “Explaining Utility Margin” for addit
Slide 45: Year Over Year Utility Margin Bridge
Appendix Year Over Year Utility Margin Bridge Pre-tax Millions vs. Prior Year 5.3% increase in Utility Margin NOTE: Utility Margin is a non- GAAP Measure See appendix slide titled “Explaining Utility Margin” for additional disclosure. 45
Slide 46: Year Over Year Operating & Administrative Costs
Appendix Year Over Year Operating & Administrative Costs Pre-tax Millions vs Prior Year NorthWestern maintains best- in-class expense efficiency among our regional peers. (See slide “Disciplined Expense Program” that follows in appendix) 46
Slide 47: Utility Margin (Full-Year)
Appendix Utility Margin (Full-Year) (dollars in millions) Twelve Months Ended December 31, 2023 2022 Variance Electric $ 806.1 $ 782.1 $ 24.0 3.1% Natural Gas 195.8 203.7 (7.9) (3.9)% Total Utility Margin1 $ 1001.9 $ 985.8 $ 16.1 1.6% Increase in utility margin due to the following factors: $ 32.6 H
Slide 48: Operating Expenses (Full-Year)
Appendix Operating Expenses (Full-Year) (dollars in millions) Twelve Months Ended December 31, 2023 2022 Variance Operating & maintenance $ 220.5 $ 221.4 $ (0.9) (0.4)% Administrative & general 117.3 113.8 3.5 3.1% Property and other taxes 153.1 192.5 (39.4) (20.5)% Depreciation and depletion 210.5
Slide 49: Operating to Net Income (Full-Year)
Appendix Operating to Net Income (Full-Year) (dollars in millions) Twelve Months Ended December 31, 2023 2022 Variance Operating Income $ 300.5 $ 263.1 $ 37.4 14.2% Interest expense (114.6) (100.1) (14.5) (14.5)% Other income, net 15.8 19.4 (3.6) (18.6)% Income Before Taxes 201.6 182.4 19.2 10.5% In
Slide 50: Tax Reconciliation (Full-Year)
Appendix Tax Reconciliation (Full-Year) 50
Slide 51: Reconciling Gross Margin to Utility Margin
Appendix Reconciling Gross Margin to Utility Margin Management believes that Utility Margin provides a useful measure for investors and other financial statement users to analyze our financial performance in that it excludes the effect on total revenues caused by volatility in energy costs and assoc
Slide 52: Segment Results (Full-Year)
Appendix Segment Results (Full-Year) (in thousands) Twelve Months Ending December 31, 2023 Electric Gas Other Total Operating revenues $ 1,068,833 $ 353,310 $ - $ 1,422,143 Fuel, purchased supply & direct transmission* 262,755 157,507 - 420,262 Utility margin1 806,078 195,803 - 1,001,881 Operating a
Slide 53: Electric Segment (Full-Year)
Appendix Electric Segment (Full-Year) Twelve Months Ended December 31, Megawatt Hours Average Customer Revenues Change (MWH) Counts 2023 2022 $ % 2023 2022 2023 2022 (in thousands) Montana $ 408,341 $ 357,384 $ 50,957 14.3 % 2,795 2,868 322,489 316,968 South Dakota 67,888 69,809 (1,921) (2.8) % 603
Slide 54: Natural Gas Segment (Full-Year)
Appendix Natural Gas Segment (Full-Year) Twelve Months Ended December 31, Average Customer Revenues Change Dekatherms (Dkt) Counts 2023 2022 $ % 2023 2022 2023 2022 (in thousands) Montana $ 136,097 $ 152,343 $ (16,246) (10.7) % 14,008 15,319 183,810 181,879 South Dakota 36,638 39,178 (2,540) (6.5) %
Slide 55: Full Year Cash Flow
Appendix Full Year Cash Flow Twelve Months Ending December 31, Cash from Operating Activities increased by (dollars in m illions) 2023 2022 $182.0 million driven primarily by a $123.9 million Operating Activities increase in collection of energy supply costs from Net Income $ 194.1 $ 183.0 customers
Slide 56: Balance Sheet
Appendix Balance Sheet Debt to Total Capitalization remains at the bottom of our targeted 50% - 55% range. 56
Slide 57: PCCAM Impact by Quarter
Appendix PCCAM Impact by Quarter Pretax millions – shareholder (detriment) benefit In 2017, the Montana legislature revised the statute regarding our recovery of electric supply costs. In response, the MPSC approved a new design for our electric tracker in 2018, effective July 1, 2017. The revised e
Slide 58: Qualified Facility Earnings Adjustment
Appendix Qualified Facility Earnings Adjustment Our electric QF liability consists of unrecoverable costs associated with contracts covered under PURPA that are part of a 2002 stipulation with the MPSC and other parties. Risks / losses associated with these contracts are born by shareholders, not cu
Slide 59: Weather and Hydro Conditions
Appendix Weather and Hydro Conditions For Q4, we estimated a $5.2 million pre-tax detriment as compared to normal and a $7.5 million detriment as compared to Q4 2022. For 2023, we estimated a $4.3 million pre-tax detriment as compared to normal and a $13.2 million detriment as compared to 2022. Snow
Slide 60: Historic 5-Year Capital Investment
Appendix Historic 5-Year Capital Investment $2.3 billion invested into our operations over the last five years of which 65% was transmission and distribution. 60
Slide 61: Experienced & Engaged Board of Directors
Appendix Experienced & Engaged Board of Directors Dana J. Brian B. Bird Anthony T. Sherina M. Jan R. Horsfall Dykhouse • President & Chief Clark Edwards • SETO (chair), • Chairman Executive Officer • Nominating & • Nominating & Audit • Independent • Non-independent Governance., HR Governance, HR • I
Slide 62: Strong Executive Team
Appendix Strong Executive Team Brian B. Bird Crystal D. Lail Michael R. Cashell Cynthia S. Fang Shannon M. Heim • President & Chief • Vice President and Chief • Vice President - • Vice President - • Vice President & General Executive Officer Financial Officer Transmission Regulatory Counsel • Curren
Slide 63: Our Commissioners
Appendix Our Commissioners 63
Slide 64: Reconciling Gross Margin to Utility Margin
Appendix Reconciling Gross Margin to Utility Margin Management believes that Utility Margin provides a useful measure for investors and other financial statement users to analyze our financial performance in that it excludes the effect on total revenues caused by volatility in energy costs and assoc
Slide 65: Non-GAAP Financial Measures
Appendix Non-GAAP Financial Measures 65
Slide 66: Non-GAAP Financial Measures
Appendix Non-GAAP Financial Measures This presentation includes financial information prepared in accordance with GAAP, as well as other financial measures, such as Utility Margin, Adjusted Non-GAAP pretax income, Adjusted Non-GAAP net income and Adjusted Non-GAAP Diluted EPS that are considered “no
Slide 67: Thank you
Thank you Delivering a bright future 67
NorthWestern Energy Group — Siebert Williams Shank West Coast Utilities Conference 2024 on 6ix