Northwestern Energy Group, Inc. · NASDAQ:NWE
Northwestern Energy — Investor Presentation (September 2015)
43 slides from Northwestern Energy's investor presentation, Sep 15, 2015
Slide 1: Investor Update September 2015
Investor Update September 2015 Thompson Falls
Slide 2: Forward Looking Statements
2 Forward Looking Statements 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 Litigation Reform Act of 1995. Forward-looking statements often address our expected
Slide 3: About NorthWestern
About NorthWestern 3 Montana Operations Electric 353,600 customers 24,300 miles – transmission & distribution lines 701 MW of baseload power generation (excludes Kerr Dam) 105 MW of regulating services generation Natural Gas 189,000 customers 7,200 miles of transmission and distribution pipeline 18
Slide 4: NWE: An Investment for the Long Term
NWE: An Investment for the Long Term 4 • 100% Regulated electric & natural gas utility business • 100 year history of competitive customer rates, system reliability and customer satisfaction • Solid economic indicators in service territory • Constructive regulatory relationship • Customer service sa
Slide 5: A Diversified Electric and Gas Utility
84% Montana 14% South Dakota 2% NebraskaA Diversified Electric and Gas Utility 5 Gross Margin in 2014: Electric: $529M Natural Gas: $193M Gross Margin in 2014: Montana: $609M South Dakota: $102M Nebraska: $ 11M Average Customers in 2014: Residential: 572k Commercial: 110k Industrial: 7k 83% Resident
Slide 6: NorthWestern Energy Profile
NorthWestern Energy Profile 6 Financial and Company Statistics See “Non-GAAP Financial Measure” slide in appendix for Net Debt and EBITDA reconciliation (1) The FERC regulated portion of Montana electric transmission and DGGS are included as revenue credits to our MPSC jurisdiction customers. Theref
Slide 7: Solid Economic Indicators
Solid Economic Indicators 7 • Unemployment rates in all three of our states are meaningfully below National Average. • Customer growth rates historically exceed National Average by a good margin. Source: NorthWestern 2008-2014 Forms 10-K and Unemployment Rate: US Department of Labor via SNL Database
Slide 8: Strong Utility Foundation
Strong Utility Foundation 8 Electric source: Edison Electric Institute Typical Bills and Average Rates Report, 1/1/15 Natural gas source: US Dept of Energy Monthly residential supply and delivery rates as of 1/1/15 Customer service satisfaction scores in line or better than survey average (JD Powe
Slide 9: Reaffirm 2015 Earnings Guidance
Reaffirm 2015 Earnings Guidance 9 We reaffirm our 2015 adjusted earnings EPS guidance range of $3.10-$3.30 based upon, but not limited to, the following major assumptions and expectations: • Normal weather in our electric and natural gas service territories in 2015; • Successful integration and a fu
Slide 10: Track Record of Delivering Results
Track Record of Delivering Results 10 Notes: - ROE in 2010, 2011, 2012 , 2013 & 2014, on a Non-GAAP Adjusted basis, would be 9.2%, 10.5%, 9.8%, 9.6% & 9.4% respectively. - 2015 ROAE and 2015 Dividend payout ratio estimate based on midpoint of guidance range of $3.10-$3.30. - Details regarding Non-GA
Slide 11: Investment for Our Customers' Benefit
Investment for Our Customers’ Benefit Over the past 6 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. 2014 includes hydro assets in rate base but only 1.5 mo
Slide 12: Total Shareholder Return
Total Shareholder Return 12 • 15 member peer group: ALLETE, Avista, Black Hills, Cleco, Empire District Electric, El Paso Electric, Great Plains, IDA Corp, Madison Gas & Electric, PNM Resources, Portland Electric, Questar, UIL Holdings, Vectren, Westar
Slide 13: Strong Cash Flows
While maintenance capex and total dividend payments have continued to grow since 2010 (8.2% and 7.3% CAGR respectively), Cash Flow from Operations has continued to outpace maintenance capex and averaged approximately $42 million of positive Free Cash Flow per year. Even with the additional income ge
Slide 14: Balance Sheet Strength and Liquidity
Balance Sheet Strength and Liquidity 14 Annual ratio is average of each quarter end debt/cap ratio Excludes Basin Creek capital leases Goal: 50% - 55% Senior Secured Rating Senior Unsecured Rating Commercial Paper Outlook Fitch A A- F2 Stable Moody's A1 A3 Prime-2 Stable S&P A- BBB A-2 Stable A secu
Slide 15: The Hydro Facilities
The Hydro Facilities 15 (1) Hebgen facility (0 MW net capacity) excluded from figures. All facilities are run-of-river dams except for Mystic, which is storage generation. (2) As of June 2013. The Confederated Salish and Kootenai Tribes (CSKT) executed their option to purchase the Kerr facility in S
Slide 16: Meeting Montana Customer Demands
- 100,000 200,000 300,000 400,000 Hydro Contracted Owned Generation Light Load Demand Light Load Hours (MWh's) MW h's - 100,000 200,000 300,000 4 , 500,000 Hydro Contracted Owned Generation Heavy Load Demand Heavy Load Hours (MWh's) MW h's Meeting Montana Customer Demands 16 We expect to be able to
Slide 17: Big Stone and Neal Air Quality Projects
Big Stone and Neal Air Quality Projects 17 Big Stone Power Plant Neal Power Plant . . . . . .
Slide 18: South Dakota Rate Filing
South Dakota Rate Filing 18 34 Years of Declining ‘Real’ Rates Docket EL14-106 The requested $26.5 million revenue increase is primarily due to investments made to meet federal environmental mandates and to maintain our high-level of system reliability in South Dakota. We implemented interim rates J
Slide 19: Natural Gas Reserves Opportunity
Owned Owned Target Total Annual Need Natural Gas Reserves Opportunity 19 As we continue to add to our natural gas reserves portfolio, we anticipate a reduction in supply cost volatility for our customers. First ~6 Bcf annual production acquired for ~$100M Remaining 6-7 Bcf annual production needed t
Slide 20: Infrastructure Projects
Infrastructure Projects 20 • In Montana, our Distribution System Infrastructure Project (DSIP) and Transmission System Infrastructure Project (TSIP), both of which are currently in process, are to maintain a safe and reliable electric and natural gas distribution and transmission system. – The prima
Slide 21: DGGS Update – Still waiting on FERC
DGGS Update – Still waiting on FERC 21
Slide 22: Capital Spending Forecast
Capital Spending Forecast 22 * 2015 capex excludes the $143 million Beethoven Wind acquisition expected to close by the end of 2015. Nearly $1.5 billion estimated cumulative capital spending from 2015 through 2019. We anticipate funding the capital projects with a combination of cash flows (aided by
Slide 23: Beethoven Wind Acquisition
23 Beethoven Wind Acquisition The acquisition will result in significantly lower costs to customers over the long-term and is expected to be accretive to earnings but cannot be quantified until the South Dakota Public Utility Commission makes a final determination on our general rate case, which is
Slide 24: Environmentally Strong Owned Generation Fleet
24 Environmentally Strong Owned Generation Fleet Since 2007 including the Beethoven acquisition, NWE will have invested over $1.5 billion in generation assets, of which, nearly $1.3 billion are renewable assets, adding 566 name-plate MW of renewable generation to its portfolio and, with Beethoven, 4
Slide 25: 'Clean' Owned & Contracted Supply Portfolio
25 ‘Clean’ Owned & Contracted Supply Portfolio Base upon nameplate capacity, except for DGGS, approximately 54% of our total company owned and contracted supply portfolio is renewable or support renewables (pro forma for Beethoven wind addition). Charts above are calculated using nameplate megawatts
Slide 26: Conclusion
Conclusion 26 Pure Electric and Gas Utility Solid Utility Foundation Strong Earnings and Cash Flows Attractive Future Growth Prospects Best Practices Corporate Governance Hydro Transaction Announced 9/26/2013 Transaction Closed 11/18/2014 Thompson Falls Hauser Rainbow Ryan Morony Kerr Madison Holter
Slide 27: Appendix
Appendix 27
Slide 28: Summary Financial Results (Qtr & YTD)
Summary Financial Results (Qtr 2 & YTD) 28
Slide 29: Second Quarter Weather
Second Quarter Weather 29 Maximum Temperature from Normal Minimum Temperature from Normal For our service territory, 2nd quarter is still typically a heating quarter (very few cooling degree days). Q2 was over 12% warmer than last year and historical average in all three states we service.
Slide 30: Adjusted Earnings (Second Quarter '15 vs '14)
Adjusted Earnings (Second Quarter ‘15 vs ’14) 30 The non-GAAP measures presented in the table above are being shown to reflect significant items that were not contemplated in our original guidance; however they should not be considered a substitute for financial results and measures determined or ca
Slide 31: Adjusted Earnings (YTD '15 vs '14)
Adjusted Earnings (YTD ‘15 vs ’14) 31 The non-GAAP measures presented in the table above are being shown to reflect significant items that were not contemplated in our original guidance; however they should not be considered a substitute for financial results and measures determined or calculated in
Slide 32: Hypothetical Accretion Illustration
Hypothetical Accretion Illustration 32 As shown in the example above, a company making an acquisition that would contribute relatively consistent net income over each of the four quarters could anticipate the most earnings per share benefit in the quarters with the ‘lightest’ earnings. (Illustrative
Slide 33: 2014 to 2015 Reconciliation (2nd Qtr & YTD)
33 2014 to 2015 Reconciliation (2nd Qtr & YTD)
Slide 34: Balance Sheet
Balance Sheet (dollars in millions) As of June 30, 2015, Cash $ Restricted cash Accounts receivable, net Inventories Other current assets Goodwill PP&E and other non-current assets Total Assets: Payables Current maturities oe aii debt & capital leases ther non- ficial liabilities Shareholders’ Total
Slide 35: Cash Flow Statement (dollars in millions)
(dollars in millions) perating Activities Net Income Non-Cash adjustments ee te income Changes in working capi Other non-current Lae Z liabilities Cash provided by operating activities Investing Activities PP8E additions Other Cash used in investing activities Financing Activities Proceeds from issu
Slide 36: Income Tax Reconciliation (Qtr & YTD)
Income Tax Reconciliation (Qtr 2 & YTD) 36
Slide 37: 2014 to 2015 EPS & Dividend Bridge
2014 to 2015 EPS & Dividend Bridge 2015 ESTIMATES Basic assumptions include, but are not limited to: • Normal weather in our electric and natural gas service territories in 2015; • Successful integration and a full year earnings contribution from the recently acquired hydro assets; • Excludes any po
Slide 38: 2014 System Statistics
2014 System Statistics 38 Note: Statistics above are as of 12/31/2014 (1) Nebraska is a natural gas only jurisdiction (1)
Slide 39: Experienced & Engaged Board of Directors
Experienced & Engaged Board of Directors 39 Members of the Board of Directors tour the Madison Dam power house in Ennis, Montana. From the left are Dana J. Dykhouse, Dorothy M. Bradley, Philip L. Maslowe, E. Linn Draper Jr., Julia L. Johnson, Robert C. Rowe, Denton Louis Peoples, and Stephan P. Adik
Slide 40: Strong Executive Team
Strong Executive Team 40 NorthWestern Energy’s executive officers at the Madison Dam in Ennis, Montana From the left: Patrick R. Corcoran - VP of Government and Regulatory Affairs. 35 years utility industry experience; current position since 2001 John D. Hines - VP of Supply. 25 years utility indust
Slide 41: Our Commissioners
Our Commissioners 41 Name Party Began Serving Term Ends Kirk Bushman R Jan-13 Jan-17 Travis Kavulla R Jan-11 Jan-19 Roger Koopman R Jan-13 Jan-17 Brad Johnson (Chairman) R Jan-15 Jan-19 Bob Lake R Jan-13 Jan-17 Commissioners are elected in statewide elections from each of five districts. Chairperson
Slide 42: Non-GAAP Financial Measures
Non-GAAP Financial Measures 42 The data presented above includes financial information prepared in accordance with GAAP, as well as another financial measure, Gross Margin, Free Cash Flows, Net Debt and EBITDA, but is considered a “Non-GAAP financial measure.” Generally, a Non-GAAP financial measure
Slide 43: Delivering a bright future
Upelivering a bright future
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