Northwestern Energy Group, Inc. · NASDAQ:NWE
Northwestern Energy — Non-Deal Roadshow (September 2024)
78 slides from Northwestern Energy's roadshow presentation, Sep 4, 2024
Slide 1: Investor Update
Investor Update September 2024 1 8-K Date: September 4, 2024
Slide 2: 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 Director of Corporate Development & Investor Relations Officer Travis Meyer 605-978-2967 tr
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 + + Base Capital Plan: Incremental Opportunities: Nearly $2.5 billion of 4%-6% EPS Growth 6% + EPS Growth highly executable and 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 1) NWE rates are average for 2023: total residential revenues divided by total residential loads delivered Electric source: U.S. EIA - Average Retail Price of Electricity, Monthly for 2023 Natural Gas source: U.S. EIA - U.S. Price of Natural Gas Delivered to Residential Cus
Slide 10: Solid Economic Indicators
Solid Economic Indicators • Customer growth rates historically exceed National Averages. • Projected population growth Source: Company 10K’s, 2021/2022 EEI Statistical Yearbook – Table 7.2, and EIA.gov Source: Company 10K’s and EIA.gov in our service territories better than the National Average. • U
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 Natural gas is one of the most affordable energy sources, and NWE has access to some of the lowest and most stable natural gas prices in the nation through the Alberta Energy Company (AECO) and Henry trading hubs. Source: S&P Global By the end of 2025 in
Slide 13: Corporate Sustainability
Corporate Sustainability Environmental Social Governance These eight publications provide valuable insight into NorthWestern Energy’s Sustainability practices. The Sustainability Report includes Sustainability Accounting Standards Board (SASB) and Task Force on Climate-Related Financial Disclosures
Slide 14: 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 15: Financial & Regulatory Update
Thank you Financial & Regulatory Update 15
Slide 16: 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 17: Credit, Cash Flow, and Financing Plans
Credit, Cash Flow, and Financing Plans Credit Ratings 2024 Financing Plan No equity expected to fund the current 5-year | $2.5 billion capital 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
Slide 18: 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** 18 * Historical Capital Investment includes property, plant and equipment additions and AFUDC Credit, both from our cash flow statement, and chan
Slide 19: 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 20: 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 - 2023 expenses and company filings through S&P Global IQ. Electric Non-Fuel O&M excludes fuel and steam costs for powe
Slide 21: Rate Reviews
Thank Rate Reviews you 21
Slide 22: Rate Review Summary
"Rate Review Summary MT Electric MT Natural Gas July 10, 2024 June 21, 2024 July 10, 2024 2023 with 2024 Known & 2023 with 2024 Known & 2023 with 2024 Known & 2023 with 2024 Known & Test Year End Measurables Measurables Measurables Measurables $156.5 Million $6.0 Million $3.6 Million Revenue Request
Slide 23: Montana Electric Rate Review
Montana Electric Rate Review $156.5 Million Base Rate Increase Requested & $74.6 Million Total Request Typical 750 kWh Residential Electric Bill YCGS Net Customer Impact Montana Electric: • 74.6 Million Net Request • $874 Million Plant-in-Service additions (’23-’24F) • Operating Costs increase 1.1%
Slide 24: Montana Gas Rate Review
Montana Gas Rate Review $28.6 Million Base Rate Increase Requested Typical 65 Therm Residential Natural Gas Bill Montana Natural Gas: • $28.6 Million Total Request • $174 Million Plant-in-Service additions (’23-’24F) • Operating Costs increase 3.3% CAGR (’21-’23) • Typical Residential Bill increase
Slide 25: South Dakota Natural Gas Rate Review
South Dakota Natural Gas Rate Review $6.0 Million Rate Increase Requested Typical 100 Therm Residential Natural Gas Bill South Dakota Natural Gas: • $6.0 Million Total Request • $80 Million Plant-in-Service additions (’10-’23) • Operating Costs increase 1.9% CAGR (’10-’23) • Typical Residential Bill
Slide 26: Nebraska Natural Gas Rate Review
Nebraska Natural Gas Rate Review $3.6 Million Rate Increase Requested Typical 100 Therm Residential Natural Gas Bill Nebraska Natural Gas: • $3.6 Million Total Request • $42 Million Plant-in-Service additions (’07-’23) • Operating Costs increase 1.3% CAGR (’07-’23) • Typical Residential Bill increas
Slide 27: Strategic Update
Thank you Strategic Update 27
Slide 28: Energy West / Cut Bank Natural Gas Acquisition
Energy West / Cut Bank Natural Gas Acquisition • Two natural gas LDC’s in Montana: Energy West Montana (“EWM”) and Cut Bank Gas Co. (“CBGC”) from Hope Utilities Transaction • 33,000 customers in Great Falls area, West Yellowstone and Cut Bank communities Highlights • EWM’s and CBGC’s currently autho
Slide 29: Colstrip Transaction Overview
Colstrip Transaction Overview NorthWestern Energy entered into an agreement to acquire Puget Sound Energy’s ownership interests in Colstrip Units 3 and 4. This transaction is in addition to our previously disclosed agreement with Reliability Avista to acquire their ownership interest in Colstrip. No
Slide 30: Colstrip Facility Ownership Overview
Colstrip Facility Ownership Overview In January 2026, we will own 55% of Colstrip Units 3 &4. This allows us to guide investments in operation and maintenance in providing on- demand, 24/7 cost-effective generation for our Montana customers until a viable equivalent, carbon-free energy resource is a
Slide 31: Montana Wildfire Mitigation Plan
Montana Wildfire Mitigation Plan Reduction of System and Enhanced Enriched Public Ignition Potential Environmental Vegetation Communication Monitoring Maintenance and Outreach Comprehensive summary of wildfire mitigation activities Expect to update plan with each electric rate review filing De
Slide 32: Montana Public Safety Power Shutoff Plan
Montana Public Safety Power Shutoff Plan Guiding Plan Principles • Uphold our commitment to sustainable, affordable and reliable service • Ensuring the safety of our employees, customers, the public, communities, and the environment • Maintain robust situational awareness strategy for monitoring and
Slide 33: Conclusion
Conclusion Best Attractive Pure Strong Solid Utility Practices Future Electric & Earnings & Foundation Corporate Growth Gas Utility Cash Flows Governance Prospects 33
Slide 34: Appendix
Thank Appendix you 34
Slide 35: Regulated Utility Five-Year Capital Forecast
Appendix Regulated Utility Five-Year Capital Forecast $2.5 billion of highly-executable and low-risk capital investment 35
Slide 36: 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 37: 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 37 (60 MW FERC & 45MW MPSC jurisdictions) peaker
Slide 38: 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 39: 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 40: Timeline of Montana Generation Portfolio
Appendix 40 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. 40
Slide 41: 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 41 generation and fewer renewables than NorthWestern Energy in Montana (as a pe
Slide 42: Earnings and Other
Thank you Earnings and Other 42
Slide 43: 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” 43
Slide 44: 2024 Earnings Bridge
Appendix 2024 Earnings Bridge This guidance range is based upon, but not limited to, the following major assumptions: • Normal weather in our service territories; • Interim rates in Montana in the fourth quarter; • An effective income tax rate of approximately 12%-14%; and • Diluted average shares o
Slide 45: 2024 Second Quarter Earnings
Thank you 2024 Second Quarter Earnings 45
Slide 46: Second Quarter Earnings Drivers
Appendix Second Quarter Earnings Drivers After-tax EPS vs Prior Year Improvement in Utility Margin offset mild weather, higher OA&G expense, depreciation, interest expense, and slight dilution from higher share count. 1 2 1.) Utility Margin is a non-GAAP Measure. See appendix slide titled “Reconcili
Slide 47: Second Quarter Financial Results
Appendix Second Quarter Financial Results (in millions except per share amounts) Three Months Ended June 30, 2024 2023 Variance % Variance Operating Revenues $ 319.9 $ 290.5 $ 29.4 10.1% Fuel, purchased supply & direct transmission expense (exclusive of depreciation and depletion) 76.5 67.6 8.9 13.2
Slide 48: Second Quarter 2024 Non-GAAP Earnings
Appendix Second Quarter 2024 Non-GAAP Earnings We estimate weather to be a $0.7 million pre-tax detriment as compared to normal and a $1.1 million benefit as compared to second quarter 2023. (1) As a result of the adoption of Accounting Standard Update 2017-07 in March 2018, pension and other employ
Slide 49: Second Quarter Utility Margin Bridge
Appendix Second Quarter Utility Margin Bridge Pre-tax Millions vs. Prior Year $24.1 million or 10.8% increase in Utility Margin items that impact Net Income 49 NOTE: Utility Margin is a non-GAAP Measure. See appendix slide titled “Reconciling Gross Margin to Utility Margin” for additional disclosure
Slide 50: Utility Margin (Q2)
Appendix Utility Margin (Q2) (dollars in millions) Three Months Ended June 30, 2024 2023 Variance Electric $ 199.2 $ 186.9 $ 12.3 6.6% Natural Gas 44.2 36.0 8.2 22.8% Total Utility Margin1 $ 243.4 $ 222.9 $ 20.5 9.2% Increase in utility margin due to the following factors: $ 16.4 Base rates 4.1 Tran
Slide 51: Operating Expenses (Q2)
Appendix Operating Expenses (Q2) (dollars in millions) Three Months Ended June 30, 2024 2023 Variance Operating & maintenance $ 57.4 $ 54.8 $ 2.6 4.7% Administrative & general 31.3 30.0 1.3 4.3% Property and other taxes 36.3 40.1 (3.8) (9.5)% Depreciation and depletion 56.9 52.4 4.5 8.6% Operating E
Slide 52: Operating to Net Income (Q2)
Appendix Operating to Net Income (Q2) (dollars in millions) Three Months Ended June 30, 2024 2023 Variance Operating Income $ 61.6 $ 45.6 $ 16.0 35.1% Interest expense (31.9) (28.4) (3.5) (12.3)% Other income, net 6.2 4.1 2.1 51.2% Income Before Taxes 35.9 21.3 14.6 68.5% Income tax expense (4.2) (2
Slide 53: Tax Reconciliation (Q2)
Appendix Tax Reconciliation (Q2) (in millions) Three Months Ended June 30, 2024 2023 Variance Income Before Income Taxes $35.9 $21.3 14.6 Income tax calculated at federal statutory rate 7.5 21.0% 4.5 21.0% 3.0 Permanent or flow through adjustments: State income tax, net of federal provisions - 0.1%
Slide 54: Segment Results (Q2)
Appendix Segment Results (Q2) (in thousands) Three Months Ended June 30, 2024 Electric Gas Other Total Operating revenues $ 260,134 $ 59,795 $ - $ 319,929 Fuel, purchased supply & direct transmission* 60,887 15,593 - 76,480 1 Utility margin 199,247 44,202 - 243,449 Operating and maintenance 43,467 1
Slide 55: Electric Segment (Q2)
Appendix Electric Segment (Q2) Three Months Ended June 30, Megawatt Hours Average Customer Revenues Change (MWH) Counts 2024 2023 $ % 2024 2023 2024 2023 (in thousands) Montana $ 86,028 $ 83,840 $ 2,188 2.6 % 582 568 327,655 321,820 South Dakota 15,392 15,686 (294) (1.9) % 117 135 51,340 51,162 Resi
Slide 56: Natural Gas Segment (Q2)
Appendix Natural Gas Segment (Q2) Three Months Ended June 30, Average Customer Revenues Change Dekatherms (Dkt) Counts 2024 2023 $ % 2024 2023 2024 2023 (in thousands) Montana $ 18,921 $ 17,589 $ 1,332 7.6 % 2,224 1,864 185,449 183,669 South Dakota 5,894 8,375 (2,481) (29.6) % 568 703 42,440 41,914
Slide 57: 2024 Year-to-Date Earnings
Thank you 2024 Year-to-Date Earnings 57
Slide 58: Year-to-Date 2024 Non-GAAP Earnings
Appendix Year-to-Date 2024 Non-GAAP Earnings For the six months ended June 30, we estimate weather to be a $1.9 million pre-tax detriment as compared to normal and a $3.7 million detriment as compared to 2023. The adjusted non-GAAP measures presented in the table reflect significant items that are n
Slide 59: Year-to-Date Financial Results
Appendix Year-to-Date Financial Results (in millions except per share amounts) Six Months Ended June 30, 2024 2023 Variance % Variance Operating Revenues $ 795.3 $ 745.1 $ 50.2 6.7% Fuel, purchased supply & direct transmission expense (exclusive of depreciation and depletion) 251.2 233.1 18.1 7.8% U
Slide 60: Utility Margin (YTD)
Appendix Utility Margin (YTD) (dollars in millions) Six Months Ended June 30, 2024 2023 Variance Electric $ 427.1 $ 404.1 $ 23.0 5.7% Natural Gas 117.0 107.9 9.1 8.4% Total Utility Margin $ 544.1 $ 512.0 $ 32.1 6.3% Increase in utility margin due to the following factors: $ 36.2 Base rates 7.6 Trans
Slide 61: Operating Expenses (YTD)
Appendix Operating Expenses (YTD) (dollars in millions) Six Months Ended June 30, 2024 2023 Variance Operating & maintenance $ 111.5 $ 110.7 $ 0.8 0.7% Administrative & general 71.7 64.7 7.0 10.8% Property and other taxes 83.4 89.3 (5.9) (6.6)% Depreciation and depletion 113.7 105.6 8.1 7.7% Operati
Slide 62: Operating to Net Income (YTD)
Appendix Operating to Net Income (YTD) (dollars in millions) Six Months Ended June 30, 2024 2023 Variance Operating Income $ 163.7 $ 141.7 $ 22.0 15.5% Interest expense (62.9) (56.4) (6.5) (11.5)% Other income, net 10.5 8.8 1.7 19.3% Income Before Taxes 111.3 94.0 17.2 18.3% Income tax expense (14.6
Slide 63: Tax Reconciliation (YTD)
Appendix Tax Reconciliation (YTD) Six Months Ended June 30, 2024 2023 Variance Income Before Income Taxes $111.3 $94.0 $17.3 Income tax calculated at federal statutory rate 23.4 21.0% 19.7 21.0% 3.7 Permanent or flow through adjustments: State income taxes, net of federal provisions 0.7 0.6% 1.2 1.3
Slide 64: Segment Results (YTD)
Appendix Segment Results (YTD) (in thousands) Six Months Ended June 30, 2024 Electric Gas Other Total Operating revenues $ 603,320 $ 191,951 $ - $ 795,271 Fuel, purchased supply & direct transmission* 176,228 74,973 - 251,201 Utility margin1 427,092 116,978 - 544,070 Operating and maintenance 83,766
Slide 65: Electric Segment (YTD)
Appendix Electric Segment (YTD) Six Months Ended June 30, Megawatt Hours Average Customer Revenues Change (MWH) Counts 2024 2023 $ % 2024 2023 2024 2023 (in thousands) Montana $ 203,391 $ 209,302 $ (5,911) (2.8) % 1,429 1,439 326,986 321,278 South Dakota 34,702 35,457 (755) (2.1) % 290 330 51,396 51
Slide 66: Natural Gas Segment (YTD)
Appendix Natural Gas Segment (YTD) Six Months Ended June 30, Average Customer Revenues Change Dekatherms (Dkt) Counts 2024 2023 $ % 2024 2023 2024 2023 (in thousands) Montana $ 67,511 $ 84,471 $ (16,960) (20.1) % 8,482 8,381 185,332 183,583 South Dakota 19,499 28,310 (8,811) (31.1) % 2,005 2,455 42,
Slide 67: PCCAM Impact by Quarter Qualified Facility Earnings Adjustment
Appendix PCCAM Impact by Quarter Qualified Facility Earnings Adjustment Pretax millions – shareholder (detriment) benefit 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
Slide 68: Balance Sheet
Appendix Balance Sheet (dollars in m illions) As of June 30, As of December 31, 2024 2023 Cash and cash equivalents $ 6.4 $ 9.2 Restricted cash 24.6 $ 16.0 Accounts receivable, net 149.5 $ 212.3 Inventories 115.0 $ 114.5 Other current assets 68.6 $ 55.0 Goodwill 357.6 $ 357.6 PP&E and other non-curr
Slide 69: Year-to-Date Cash Flow
Appendix Year-to-Date Cash Flow Cash from Operating Activities decreased by $70.2 million due primarily to significant net cash inflows Six Months Ended June 30, from recovery of previously under-collected energy (dollars in m illions) 2024 2023 supply cost in the prior period, and net cash outflows
Slide 70: Reconciling Gross Margin to Utility Margin
Appendix Reconciling Gross Margin to Utility Margin Reconciliation of Gross Margin to Utility Margin for the Three Months Ended June 30, Electric Natural Gas Total 2024 2023 2024 2023 2024 2023 (in millions) Reconciliation of gross margin to utility margin Management believes that Utility Margin Ope
Slide 71: Electric Wallet Share
Appendix Electric Wallet Share 71
Slide 72: Natural Gas Wallet Share
Appendix Natural Gas Wallet Share Note: Montana typical bill is based on 65 therms which translates to ~0.32% lower wallet share than pictured. For consistency with South Dakota and Nebraska, 100 therms is used for Montana in this illustration. Oct. - Sept. Fiscal Year *2023 - 2024 is partial period
Slide 73: Experienced & Engaged Board of Directors
Appendix Experienced & Engaged Board of Directors Brian B. Bird Anthony T. Sherina M. Jan R. Horsfall Linda G. • President & Chief Clark Edwards • SETO (chair), Sullivan Executive Officer • Nominating & • Nominating & Audit • Board Chair • Non-independent Governance, HR Governance, HR • Independent
Slide 74: 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 75: Our Commissioners
Appendix Our Commissioners There will be at least two new commissioners in Montana after November’s election. Commissioners Brown (not running) and O’Donnell (termed out) will be leaving while commissioner Fielder is running for reelection unchallenged. District 2 – Brad Molner (R) vs Susan Bilo (D)
Slide 76: Non-GAAP Financial Measures
Appendix Non-GAAP Financial Measures 76
Slide 77: 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 78: Thank you
Thank you Delivering a bright future 78
NorthWestern Energy Group — Non-Deal Roadshow (September 2024) on 6ix