Northwestern Energy Group, Inc. · NASDAQ:NWE
Northwestern Energy — Q4 2023 Earnings Presentation
60 slides from Northwestern Energy's earnings presentation, Feb 15, 2024
Slide 1: 2023 Year-End Earnings Webcast
2023 Year-End Earnings Webcast February 15, 2024 1 February 15, 2024 8-K
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 Investor Relations Officer Travis Meyer 605-978-2967 travis.meyer@northwestern.com Forward
Slide 3: Recent Highlights
Recent Highlights • Reported GAAP diluted EPS of $3.22 o Non-GAAP diluted EPS of $3.271 • Affirming 2024 diluted EPS guidance of $3.42 - $3.622 • Affirming long-term (5 year) rate base and earnings per share growth rates targets of 4% - 6%2 • Unanimous approval of multi-party rate review settlements
Slide 4: 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 5: 2023 Financial Results
2023 Financial Results Fourth Quarter 2023 EPS vs Prior Period •GAAP: 21 cents or 18.1% Fourth Quarter Earnings Per Share •Non-GAAP1: 25 cents or 22.1% Full Year 2023 EPS vs Prior Period •GAAP: $0.03 or (0.9%) Full Year Earnings Per Share •Non-GAAP1: $0.09 or 2.8% 5 1.) See reconciliation of Non-GAA
Slide 6: Fourth Quarter Financial Review
Thank you Fourth Quarter Financial Review 6
Slide 7: Fourth Quarter Earnings Drivers
Fourth Quarter Earnings Drivers After-tax EPS vs Prior Year Improvement in Utility Margin and income tax impacts offset weather, depreciation, interest expense and share count dilution 1.) Utility Margin is a non-GAAP Measure. See appendix slide titled “Explaining Utility Margin” for additional disc
Slide 8: Fourth Quarter 2023 Non-GAAP Earnings
Fourth Quarter 2023 Non-GAAP Earnings We estimate weather to be a $5.2 million pre-tax detriment as compared to normal and a $7.5 million detriment as compared to fourth quarter 2022. The adjusted non-GAAP measures presented in the table reflect significant items that are non-recurring or a variance
Slide 9: Full Year Financial Review
Thank you Full Year Financial Review 9
Slide 10: Year Over Year Earnings Drivers
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 additional dis
Slide 11: Year Over Year Utility Margin Bridge
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. 11
Slide 12: Full Year Non-GAAP Earnings
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 should not b
Slide 13: Credit, Cash flow and Financing Plans
Credit, Cash flow and Financing Plans Credit Ratings FFO / Total Debt 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
Slide 14: 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 15: Regulated Utility Five-Year Capital Forecast
Regulated Utility Five-Year Capital Forecast $2.5 billion of highly-executable and low-risk capital investment 15
Slide 16: 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 • First rate review since 2015 with base rate increase driven by more than $267 million invested in South Dakota critical electric infrastructure, whil
Slide 17: Holding Company Reorganization Completed
Holding Company Reorganization Completed 17
Slide 18: Conclusion
Conclusion Best Attractive Pure Strong Solid Utility Practices Future Electric & Earnings & Foundation Corporate Growth Gas Utility Cash Flows Governance Prospects 18
Slide 19: Appendix
Thank Appendix: you 19
Slide 20: Full Year Appendix
Thank you Full Year Appendix 20
Slide 21: 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. 21
Slide 22: 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) 22
Slide 23: 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 Margin $ 1001.9 $ 985.8 $ 16.1 1.6% Increase in utility margin due to the following factors: $ 32.6 Hi
Slide 24: 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 25: 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 26: Tax Reconciliation (Full-Year)
Appendix Tax Reconciliation (Full-Year) 26
Slide 27: Segment Results (Full-Year)
Appendix Segment Results (Full-Year) (1) Utility Margin is a non-GAAP Measure See appendix slide titled “Explaining Utility Margin” for 27 additional disclosure.
Slide 28: 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 29: 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 30: Balance Sheet
Appendix Balance Sheet Debt to Total Capitalization remains at the bottom of our targeted 50% - 55% range. 30
Slide 31: 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 32: Disciplined Expense Program
Appendix 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
Slide 33: 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; • An effective income tax rate of approximately 12%- 14%; and • Diluted average shares outstanding of approximately 61.3 million. 33
Slide 34: 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 35: 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 36: 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 37: Fourth Quarter Appendix
Thank you Fourth Quarter Appendix 37
Slide 38: Financial Results (Q4)
Appendix Financial Results (Q4) 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. 38
Slide 39: Utility Margin (Q4)
Appendix Utility Margin (Q4) (dollars in millions) Three Months Ended December 31, 2023 2022 Variance Electric $ 200.0 $ 205.6 $ (5.6) (2.7)% Natural Gas 57.8 66.7 (8.9) (13.3)% Total Utility Margin $ 257.8 $ 272.3 $ (14.5) (5.3)% Decrease in utility margin due to the following factors: $ 9.2 Higher
Slide 40: Operating Expenses (Q4)
Appendix Operating Expenses (Q4) (dollars in millions) Three Months Ended December 31, 2023 2022 Variance Operating & maintenance $ 56.6 $ 60.7 $ (4.1) (6.8)% Administrative & general 23.3 26.8 (3.5) (13.1)% Property and other taxes 22.0 52.2 (30.2) (57.9)% Depreciation and depletion 52.7 49.3 3.4 6
Slide 41: Operating to Net Income (Q4)
Appendix Operating to Net Income (Q4) (dollars in millions) Three Months Ended December 31, 2023 2022 Variance Operating Income $ 103.2 $ 83.3 $ 19.9 23.9% Interest expense (29.5) (27.1) (2.4) (8.9)% Other income, net 2.9 7.6 (4.7) (61.8)% Income Before Taxes 76.6 63.8 12.8 20.1% Income tax benefit
Slide 42: Tax Reconciliation (Q4)
Appendix Tax Reconciliation (Q4) 42
Slide 43: Segment Results (Q4)
Appendix Segment Results (Q4) (in thousands) Three Months Ending December 31, 2023 Electric Gas Other Total Operating revenues $ 264,229 $ 91,780 $ - $ 356,009 Fuel, purchased supply & direct transmission* 64,263 33,986 - 98,249 1 Utility margin 199,966 57,794 - 257,760 Operating and maintenance 42,
Slide 44: Electric Segment (Q4)
Appendix Electric Segment (Q4) (1) Utility Margin is a non-GAAP Measure See appendix slide titled “Explaining Utility 44 Margin” for additional disclosure.
Slide 45: Natural Gas Segment (Q4)
Appendix Natural Gas Segment (Q4) (1) Utility Margin is a non-GAAP Measure See appendix slide titled “Explaining Utility 45 Margin” for additional disclosure.
Slide 46: Weather and Hydro Conditions (Q4)
Appendix Weather and Hydro Conditions (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. Snow Water Equivalent vs. 30-Year Median Snow water equivalents 42% to 73% of the 30-year medians for our hydro territory. 46
Slide 47: 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 48: 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. 48
Slide 49: Montana General Rate Review
Appendix Montana General Rate Review Unanimous MPSC approval of a constructive multi-party settlement 49
Slide 50: South Dakota Electric Rate Review
Appendix South Dakota Electric Rate Review Electric $13.67 Per month Increase for an average residential electric customer that uses 750 kWh with our new rates. 50
Slide 51: Colstrip Transfer
Thank you Colstrip Transfer 51
Slide 52: 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 53: 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 54: Why Colstrip?
Appendix Why Colstrip? NorthWestern Energy Reliable executed an agreement with Existing resource, ready to serve our Montana customers. Avoids lengthy planning, permitting and Avista Corporation for the construction of a new facility that would stretch in-service beyond 2026. transfer of Avista’s
Slide 55: 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 56: 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 57: 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 58: Non-GAAP Financial Measures
Appendix Non-GAAP Financial Measures 58
Slide 59: 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 60: Thank you
Thank you Delivering a bright future 60
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