Northwestern Energy Group, Inc. · NASDAQ:NWE
Northwestern Energy — Non-Deal Roadshow (October 2019)
42 slides from Northwestern Energy's roadshow presentation, Oct 2, 2019
Slide 1: Midwest Investor Update
Mystic Dam, Montana Midwest Investor Update October 2-3, 2019 8-K October 2, 2019
Slide 2: Forward Looking Statements
2 Forward Looking Statements Forward Looking Statements O’Dell Creek - Madison River Valley - Montana 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-l
Slide 3: About NorthWestern
3 About NorthWestern South Dakota Operations Electric 63,800 customers 3,572 miles – transmission & distribution lines 440 MW nameplate owned power generation Natural Gas 46,900 customers 1,697 miles of transmission and distribution pipeline Montana Operations Electric 374,000 customers 24,767 miles
Slide 4: NWE - An Investment for the Long Term
4 NWE - An Investment for the Long Term • 100% regulated electric & natural gas utility business Black Eagle dam Pure Electric & with over 100 years of operating history Gas Utility • Solid economic indicators in service territory • Diverse electric supply portfolio ~55% hydro, wind & solar • Reside
Slide 5: A Diversified Electric and Gas Utility
5 A Diversified Electric and Gas Utility (1) September 2018 Montana electric rate review, filed (1) with rate base of $2.34 billion, calculated with 13th month average and known and measurable adjustments. NorthWestern’s ‘80/20’ rules: Approximately 80% Electric, 80% Residential and 80% Montana. Ove
Slide 6: Highly Carbon-Free Supply Portfolio
6 Highly Carbon-Free Supply Portfolio Based upon 2018 MWH’s of owned and long-term contracted resources. Approximately 55% of our total company owned and contracted supply is carbon-free. NorthWestern does not own all the renewable energy certificates (RECs) generated by contracted wind, and periodi
Slide 7: Strong Utility Foundation
7 Strong Utility Foundation Solid and improving JD Power Overall Customer Satisfaction Scores Residential electric and natural gas rates below national average Solid electric system reliability and low gas leaks per mile
Slide 8: Solid Economic Indicators
8 Solid Economic Indicators Source: NorthWestern customer growth - 2008-2016 Forms 10-K Unemployment Rate: US Department of Labor via SNL Database 2/21/17 Electric: EEI Statistical Yearbook (published December 2015, table 7.2) Natural Gas: EIA.gov (Data table "Number of Natural Gas Consumers") Sourc
Slide 9: A History of Growth
9 A History of Growth $3.30-$3.50 $3.10 - $3.30 $2.60$3.20-$3.40 - $2.75 2009-2018 CAGR’s: GAAP EPS: 7.6% - Non-GAAP EPS: 5.9% - Dividend: 5.7% See appendix for “Non-GAAP Financial Measures”
Slide 10: Track Record of Delivering Results
10 Track Record of Delivering Results * Peer Group: ALE, AVA, BKH, EE, IDA, MGEE, NWN, OGE, OTTR, PNM, POR & SR Return on Equity on GAAP Earnings within 9.5% - 11.0% band over the last 8 years with average of 10.3%. Total Shareholder Return is better than our 12 peer average for the 1 & 10 year peri
Slide 11: Investment for Our Customers' Benefit
11 Investment for Our Customers’ Benefit Over the past 8 years we have been reintegrating our Montana energy supply portfolio and making additional investments across our entire service territory to enhance system safety, reliability and capacity. We have made these enhancements with minimal impact
Slide 12: Balance Sheet Strength and Liquidity
12 Balance Sheet Strength and Liquidity Investment grade credit ratings, generally liquidity in excess of $100 million target, debt to cap within our targeted 50%-55% range and no long-term debt maturities until 2023.
Slide 13: Strong Cash Flows
13 Strong Cash Flows While maintenance capex and total dividend payments have continued to grow since 2011 (11.9% and 11.2% CAGR respectively), Cash Flow from Operations (CFO) has, on average, exceeded maintenance capex and dividend payments by approximately $7 million per year. Note: 2016 CFO is le
Slide 14: Earnings Growth
14 Earnings Growth $3.30-$3.45 $3.10 - $3.30 $2.60 - $2.75 Non-GAAP Adjusted EPS Growth averaged 6.3% from 2013-2018 We are not providing 2019 EPS guidance at this time due to the pending Montana rate case. However, continued investment in our system to serve our customers and communities is expecte
Slide 15: Recent Significant Achievements
15 Recent Significant Achievements Strong year for safety at NorthWestern • Continue to be a top performer among Edison Electric Institute member companies. Record best customer satisfaction scores with JD Power & Associates • Once again received our best JD Powers overall satisfaction survey score.
Slide 16: Looking Forward
16 Looking Forward Regulatory • MPSC decision on Montana general electric rate review expected in fourth quarter 2019. • FERC rate case filed in May 2019 for associated Montana transmission assets. Continue to Invest in our T&D infrastructure • Comprehensive infrastructure capital investment program
Slide 17: Montana Electric Rate Case
17 Montana Electric Rate Case September 2018 Filing (Docket D2018.2.12) Black Eagle Power House The filing also requests approval to: • Filed based on 2017 test year and $2.34 billion of rate base. • Capitalize Demand Side Management Costs; • Requested $34.9 million annual increase to electric rates
Slide 18: South Dakota Electricity Supply Resource Plan
18 South Dakota Electricity Supply Resource Plan South Dakota • Published fall of 2018, the plan focuses on modernization of our fleet to improve reliability and flexibility, maintain compliance in Southwest Power Pool, and lowering operating costs. The plan identifies 90MWs of existing generation t
Slide 19: Montana Electricity Supply Resource Plan
19 Montana Electricity Supply Resource Plan Montana • The draft plan was filed in early March 2019 followed by a 60 day public comment period. • The final plan, including responses to public comment, was filed August 20th. • The plan demonstrates an urgent need for additional flexible capacity that
Slide 20: Capital Investment Forecast
20 Capital Investment Forecast $1.6 billion of total capital investment over five years We anticipate funding the expenditures with a combination of cash flows (aided by NOLs available into 2020) and long- term debt issuances. Significant capital investments that are not in the above projections or
Slide 21: Conclusion
21 Conclusion Best Attractive Pure Strong Solid Utility Practices Future Electric & Earnings & Foundation Corporate Growth Gas Utility Cash Flows Governance Prospects
Slide 22: Upetivering a bright future NorthWestern Energy
Upetivering a bright future NorthWestern Energy
Slide 23: Summary Financial Results (Six Months Ended June 30)
Appendix 23 Summary Financial Results (Six Months Ended June 30) (1) (1) Gross Margin, defined as revenues less cost of sales, is a non-GAAP Measure See appendix for additional disclosure.
Slide 24: Gross Margin (Six Months Ended June 30)
Appendix 24 Gross Margin (Six Months Ended June 30) (dollars in millions) Six Months Ended June 30, 2019 2018 Variance(1) Electric $ 373.0 $ 371.2 $ 1.8 0.5% Natural Gas 110.4 103.8 6.6 6.4% Total Gross Margin $ 483.4 $ 475.0 $ 8.4 1.8% Increase in gross margin due to the following factors: (1) Gros
Slide 25: Weather (Six Months Ended June 30)
Appendix 25 Weather (Six Months Ended June 30) We estimate favorable weather through the first 6 months of 2019 has contributed approximately $13.7M pretax benefit as compared to normal and $10.3M pretax benefit as compared to the same period in 2018.
Slide 26: Operating Expenses (Six Months Ended June 30)
Appendix 26 Operating Expenses (Six Months Ended June 30) (dollars in millions) Six Months Ended June 30, 2019 2018 Variance Operating, general & admin. $ 161.9 $ 148.2 $ 13.7 9.2% Property and other taxes 89.1 85.9 3.2 3.7% Depreciation and depletion 86.6 87.3 (0.7) (0.8%) Operating Expenses $ 337.
Slide 27: Operating to Net Income (Six Months Ended June 30)
Appendix 27 Operating to Net Income (Six Months Ended June 30) (dollars in millions) Six Months Ended June 30, 2019 2018 Variance Operating Income $ 145.8 $ 153.7 $ (7.9) (5.1%) Interest Expense (47.3) (46.2) (1.1) (2.4%) Other Income / (Expense) 1.3 (0.3) 1.6 533.3% Income Before Taxes 99.8 107.3 (
Slide 28: Income Tax Reconciliation (Six Months Ended June 30)
Appendix 28 Income Tax Reconciliation (Six Months Ended June 30)
Slide 29: Adjusted Non-GAAP Earnings (Six Months Ended June 30)
Appendix 29 Adjusted Non-GAAP Earnings (Six Months Ended June 30) The adjusted non- GAAP measures presented in the table are being shown to reflect significant items that were non- recurring or variance from normal weather, however they should not be considered a substitute for financial results and
Slide 30: Qualified Facility Earnings Adjustment
Appendix 30 Qualified Facility Earnings Adjustment The gain in 2019 for our QF liability was $6.3 million in total, it was comprised of $3.3 million adjustment to the liability and $3.0 million lower actual costs over last 12 months (QF contract year). This $6.6 million benefit is $20.9 million less
Slide 31: Balance Sheet
Appendix 31 Balance Sheet Improvement in debt to capitalization ratio; which is now closer to bottom end of 50%-55% targeted range.
Slide 32: Cash Flow
Appendix 32 Cash Flow Cash from operating activities decreased by ~$103M primarily due to the under collection of supply costs from customers in 2019 as compared with an over collection in 2018 resulting in ~$39M in reduction of working capital, credits to Montana customers during the current period
Slide 33: Estimated Impacts of the Tax Cuts & Jobs Act
33 Estimated Impacts of the Tax Cuts & Jobs Act Montana: In December 2018, the MPSC approved a settlement agreement providing a $20.5 million one-time customer credit to electric and natural gas customers. In addition, the settlement provides: • A $1.3 million annual reduction in natural gas rates b
Slide 34: Montana State and Regional Coal Retirements
Appendix 34 Montana State and Regional Coal Retirements The total planned energy generation reductions in the Pacific Northwest region exceed 3,600 MWs through 2032. The Northwest Power and Conservation Council forecasts regional capacity shortfalls as early as 2021. NorthWestern Energy’s continued
Slide 35: NorthWestern Energy Profile
Appendix 35 NorthWestern Energy Profile (1) Rate base reflects amounts on which we are authorized to earn a return. (2) Rate base amounts are estimates as of December 31, 2018 (3) The revenue requirement associated with the FERC regulated portion of Montana electric transmission and DGGS are include
Slide 36: 2018 System Statistics
Appendix 36 2018 System Statistics (1) (2) Note: Statistics above are as of 12/31/2018 (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 (60 MW FERC & 45MW MPSC jurisdictions) peaker
Slide 37: Solid Leadership & Corporate Governance
37 Solid Leadership & Corporate Governance Board of Directors (left to right) Stephan Adik – Chairman of the Board - Independent Director since November 1, 2004 Anthony Clark – Independent Director since December 6, 2016 – Governance & Innovation and Human Resources Committees Dana Dykhouse – Indepe
Slide 38: Our Commissioners
Appendix 38 Our Commissioners
Slide 39: Non-GAAP Financial Measures (1 of 3)
Appendix 39 Non-GAAP Financial Measures (1 of 3) These materials include financial information prepared in accordance with GAAP, as well as other financial measures, such as Gross Margin and Adjusted Diluted EPS, that are considered “non-GAAP financial measures.” Generally, a non-GAAP financial meas
Slide 40: Non-GAAP Financial Measures (2 of 3)
Appendix 40 Non-GAAP Financial Measures (2 of 3) Disclaimer on Net Operating Net Operating Losses (NOL’s): The expected tax rate and the expected availability of NOLs are subject to significant business, economic, regulatory and competitive uncertainties and contingencies, many of which are beyond t
Slide 41: Non-GAAP Financial Measures (3 of 3)
Appendix 41 Non-GAAP Financial Measures (3 of 3) The data presented in this presentation includes financial information prepared in accordance with GAAP, as well as other Non-GAAP financial measures such as Gross Margin (Revenues less Cost of Sales), Free Cash Flows (Cash flows from operations less
Slide 42: Upetivering a bright future NorthWestern Energy
Upetivering a bright future NorthWestern Energy
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