Northwestern Energy Group, Inc. · NASDAQ:NWE
Northwestern Energy — Q3 2019 Earnings Presentation
40 slides from Northwestern Energy's earnings presentation, Oct 30, 2019
Slide 1: 2019 Third Quarter Earnings Webcast
Hauser Dam, near Helena, MT 2019 Third Quarter Earnings Webcast October 30, 2019
Slide 2: Presenting Today / Forward Looking Statements
Presenting Today Forward Looking Statements During the course of this presentation, there will be forward-looking statements within the meaning of the “safe harbor” provisions of the Private Securities Bob Rowe, Litigation Reform Act of 1995. Forward-looking statements often address our expected fut
Slide 3: Third Quarter Highlights
Third Quarter Highlights • Net income for the quarter decreased $6.5 million, or 23.0%, as compared to the same period in 2018. This decrease was primarily due to higher operating costs, lower demand to transmit energy across our system and lower electric retail volumes due to mild weather. These de
Slide 4: Summary Financial Results
Summary Financial Results (Third Quarter) (1) 4 (1) Gross Margin, defined as revenues less cost of sales, is a non-GAAP Measure See appendix for additional disclosure.
Slide 5: Gross Margin
Gross Margin (Third Quarter) (dollars in millions) Three Months Ended September 30, 2019 2018 Variance Electric $ 182.5 $ 178.7 $ 3.8 2.1% Natural Gas 28.1 29.0 (0.9) (3.1%) (1) Total Gross Margin $ 210.6 $ 207.7 $ 2.9 1.4% Increase in gross margin due to the following factors: $ 2.8 Tax Cuts and Jo
Slide 6: Weather
Weather (Third Quarter) Difference from Average Temperatures We estimate unfavorable weather in Q3 2019 resulted in a $5.7M pretax detriment as compared to normal and $4.6M pretax detriment as compared to Q3 2018. 6
Slide 7: Operating Expenses
Operating Expenses (Third Quarter) (dollars in millions) Three Months Ended September 30, 2019 2018 Variance Operating, general & admin. $ 77.0 $ 73.8 $ 3.2 4.3% Property and other taxes 44.1 42.5 1.6 3.8% Depreciation and depletion 43.2 43.6 (0.4) (0.9%) Operating Expenses $ 164.3 $ 159.9 $ 4.4 2.8
Slide 8: Operating to Net Income
Operating to Net Income (Third Quarter) (dollars in millions) Three Months Ended September 30, 2019 2018 Variance Operating Income $ 46.4 $ 47.8 $ (1.4) (2.9%) Interest Expense (23.7) (22.0) (1.7) (7.7%) Other (Expense) / Income (0.4) 2.0 (2.4) (120.0%) Income Before Taxes 22.2 27.8 (5.6) (20.1%) In
Slide 9: Income Tax Reconciliation
Income Tax Reconciliation (Third Quarter) 9
Slide 10: Balance Sheet
10 (dollars in millions) Cash and cash equivalents Restricted cash Accounts receivable, net Inventories Other current assets Goodwill and other intangibles, net PP&E and other non-current assets Total Assets Payables Finance leases Other current liabilities Long-term debt & capital leases Other non-
Slide 11: Cash Flow
Cash Flow Cash from operating activities decreased by ~$92M primarily due to the under collection of supply costs from customers in 2019 as compared with an over collection in 2018 resulting in ~$44.9M reduction of working capital, credits to Montana customers during the current period related to th
Slide 12: Adjusted Non-GAAP Earnings
Adjusted Non-GAAP Earnings (Third Quarter) The adjusted non-GAAP measures presented in the table are being shown to reflect significant items that are non-recurring or variance from normal weather, however they should not be considered a substitute for financial results and measures determined or ca
Slide 13: Summary Financial Results
Summary Financial Results (Nine Months Ended September 30) (1) (1) Gross Margin, defined as revenues less cost of sales, is a non-GAAP Measure. 13 See appendix for additional disclosure.
Slide 14: Adjusted Non-GAAP Earnings
Adjusted Non-GAAP Earnings (Nine Months Ended September 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 measur
Slide 15: 2018 to 2019 Non-GAAP EPS Bridge
2018 to 2019 Non-GAAP EPS Bridge NorthWestern initiates its 2019 adjusted non-GAAP earnings guidance range of $3.38 - $3.48 per diluted share based upon, but not limited to, the following major assumptions and expectations: • Normal weather in our electric and natural gas service territories; • MPSC
Slide 16: 2019 Non-GAAP Diluted EPS Guidance
2019 Non-GAAP Diluted EPS Guidance We will need fourth quarter diluted EPS of $1.14 to $1.24 to meet our guidance range of $3.38 to 3.48 for 2019. This compares to $1.07 during the same quarter last year. We anticipate achieving this with a fourth quarter commensurate with the first (i.e. first quar
Slide 17: NWE Energy Supply Resource Plans
NWE Energy Supply Resource Plans South Dakota Electricity Supply Resource Plan • 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 exis
Slide 18: Looking Forward
Looking Forward Regulatory • In May 2019, we reached a settlement in our Montana electric rate case that would result in an annual increase to electric revenue of approximately $6.5 million (based upon a 9.65% ROE and capital structure as filed) and a $9.0 million decrease in depreciation expense. A
Slide 19: Capital Investment Forecast
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 projections or further ne
Slide 20: NorthWestern Welcomes new Board Members
NorthWestern Welcomes new Board Members Jeffrey Yingling is a Senior Advisor Investment of Banking for Power, Energy and Renewables at Guggenheim Securities, LLC, the investment banking and capital markets business of Guggenheim Partners, with more than 35 years of investment banking experience, ser
Slide 21: Conclusion
Conclusion Best Attractive Pure Strong Solid Utility Practices Future Electric & Earnings & Foundation Corporate Growth Gas Utility Cash Flows Governance Prospects 21
Slide 22: Appendix
Cr Appendix 22
Slide 23: Montana Electric Rate Case
Appendix Montana Electric Rate Case September 2018 Filing (Docket D2018.2.12) • Filed based on 2017 test year and $2.34 billion of rate base. The filing also requests approval to: • Capitalize Demand Side Management Costs; • Requested $34.9 million annual increase to electric rates. • Establish a ne
Slide 24: Segment Results
Appendix Segment Results (Third Quarter) (1) (1) (1) Gross Margin, defined as revenues less cost of sales, is a non-GAAP Measure. See appendix for additional disclosure. 24
Slide 25: Electric Segment
Appendix Electric Segment (Third Quarter) (1) (1) Gross Margin, defined as revenues less cost of sales, is a non-GAAP Measure. 25 See appendix for additional disclosure.
Slide 26: Natural Gas Segment
Appendix Natural Gas Segment (Third Quarter) (1) (1) Gross Margin, defined as revenues less cost of sales, is a non-GAAP Measure. 26 See appendix for additional disclosure.
Slide 27: Summary Financial Results
Appendix Summary Financial Results (Nine Months Ended September 30) (1) (1) Gross Margin, defined as revenues less cost of sales, is a non-GAAP Measure. 27 See appendix for additional disclosure.
Slide 28: Gross Margin
Appendix Gross Margin (Nine Months Ended September 30) (dollars in millions) Nine Months Ended September 30, 2019 2018 Variance(1) Electric $ 555.5 $ 549.9 $ 5.6 1.0% Natural Gas 138.6 132.8 5.8 4.4% Total Gross Margin $ 694.1 $ 682.7 $ 11.4 1.7% Increase in gross margin due to the following factors
Slide 29: Weather
Appendix Weather (Nine Months Ended September 30) We estimate favorable weather through the first 9 months of 2019 (all due to a cold Qtr 1) has contributed approximately $8.0M pretax benefit as compared to normal and $5.7M pretax benefit as 29 compared to the same period in 2018.
Slide 30: Operating Expenses
Appendix Operating Expenses (Nine Months Ended September 30) (dollars in millions) Nine Months Ended September 30, 2019 2018 Variance Operating, general & admin. $ 238.9 $ 222.0 $ 16.9 7.6% Property and other taxes 133.2 128.3 4.9 3.8% Depreciation and depletion 129.8 130.9 (1.1) (0.8%) Operating Ex
Slide 31: Operating to Net Income
Appendix Operating to Net Income (Nine Months Ended September 30) (dollars in millions) Nine Months Ended September 30, 2019 2018 Variance Operating Income $ 192.2 $ 201.5 $ (9.3) (4.6%) Interest Expense (71.0) (68.2) (2.8) (4.1%) Other Income 0.9 1.8 (0.9) (50.0%) Income Before Taxes 122.0 135.1 (1
Slide 32: Income Tax Reconciliation
Appendix Income Tax Reconciliation (Nine Months Ended September 30) 32
Slide 33: Adjusted Non-GAAP Earnings
Appendix Adjusted Non-GAAP Earnings (Nine Months Ended September 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 a
Slide 34: Segment Results
Appendix Segment Results (Nine Months Ended September 30) (1) (1) (1) Gross Margin, defined as revenues less cost of sales, is a non-GAAP Measure. 34 See appendix for additional disclosure.
Slide 35: Electric Segment
Appendix Electric Segment (Nine Months Ended September 30) (1) (1) Gross Margin, defined as revenues less cost of sales, is a non-GAAP Measure. 35 See appendix for additional disclosure.
Slide 36: Natural Gas Segment
Appendix Natural Gas Segment (Nine Months Ended September 30) (1) (1) Gross Margin, defined as revenues less cost of sales, is a non-GAAP Measure. 36 See appendix for additional disclosure.
Slide 37: Qualified Facility Earnings Adjustment
Appendix 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 th
Slide 38: Quarterly PCCAM Impacts
Appendix Quarterly PCCAM Impacts 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 electric tracker, or PCCAM established a baseline o
Slide 39: Non-GAAP Financial Measures
Appendix Non-GAAP Financial Measures 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 measure is a num
Slide 40: Upetivering a
Upetivering a bright future NorthWestern Energy
NorthWestern Energy Group — Q3 2019 Earnings Presentation on 6ix