Slide 1: First Quarter 2014 Earnings Webcast
First Quarter 2014 Earnings Webcast 4/24/2014
Slide 2: On the Call Today
On the Call Today 2 • Bob Rowe, President & CEO • Brian Bird, VP & CFO • Kendall Kliewer, VP & Controller • John Hines, VP Energy Supply • Mike Cashell, VP Transmission •Travis Meyer, Director of Investor Relations
Slide 3: Forward Looking Statements
3 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 future business and financia
Slide 4: First Quarter Significant Activities
• Improvement in net income of approximately $7.7 million as compared with the same period in 2013, due primarily to the impact of our acquisition of natural gas production assets and colder winter weather. • Moody’s upgrade in January 2014 – Secured: A2 to A1 and Unsecured from Baa1 to A3 • Board d
Slide 5: Summary Financial Results
Summary Financial Results 5 (in millions except EPS) 2014 2013 Variance Operating Revenues 369.7$ 313.0$ 56.7$ Cost of Sales 167.4 132.2 35.2 Gross Margin 202.3 180.8 21.5 Operating Expenses Operating, general & administrative 72.1 68.8 3.3 Property and other taxes 28.5 25.8 2.7 Depreciation 30.3 29
Slide 6: Gross Margin
________________________________________ 6 $ 9.5 Natural gas production $ 5.7 Electric retail volumes $ 4.5 Montana natural gas rate increase $ 3.2 Natural gas retail volumes $ (1.4) Other $ 21.5 ($millions) 2014 2013 Variance Electric Margin $132.9 $127.0 $ 5.9 4.6% Natural Gas Margin 69.4 53.4 16.
Slide 7: Operating Expenses
______________________________________ Operating Expenses 7 Three Months Ended March 31, ($millions) 2014 2013 Variance Operating, General & Administrative 72.1 68.8 3.3 4.8% Property & other taxes 28.5 25.8 2.7 10.5% Depreciation 30.3 29.2 1.1 3.8% Operating Expenses $130.9 $123.8 $ 7.1 5.7% Increa
Slide 8: Operating Income to Net Income
Operating Income to Net Income 8 (in millions) 2014 2013 Variance Primarily due to: Operating Income $71.4 $57.0 $14.4 Items discussed previously Interest Expense (20.0) (16.8) (3.2) Interest expense increase includes $1.9 million of expense associated with bridge credit facility related to the Hydr
Slide 9: Balance Sheet and Capitalization
(in millions) As of March 31, As of December 31, 2014 2013 Cash 19.5$ 16.6$ Restricted cash 12.6 6.9 Accounts receivable, net 171.2 174.9 Inventories 38.1 55.6 Other current assets 75.6 67.0 Goodwill 355.1 355.1 PP&E and other non-current assets 3,079.2 3,039.2 Total Assets 3,751.3$ 3,715.3$ Payable
Slide 10: Cash Flow
Cash Flow 10 (in millions) 2014 2013 Operating Activities Net Income 45.6$ 37.9$ Non-Cash adjustments to net income 58.4 56.0 Changes in working capital 28.5 35.5 Other (20.3) (17.5) Cash provided by operating activities 112.2 111.9 Investing Activities PP&E additions (51.7) (38.1) Asset acquisition
Slide 11: Adjusted EPS Schedule
Adjusted EPS Schedule 11 2014 Q1 2014 Q2 2014 Q3 2014 Q4 2014 FY 2014 Reported GAAP diluted EPS 1.17$ 1.17$ Non-GAAP Adjustments: Weather (0.05) (0.05)$ Hydro transaction professional fees & bridge financing 0.04 0.04$ Adjusted diluted EPS 1.16$ -$ -$ -$ 1.16$ 2013 Q1 2013 Q2 2013 Q3 2013 Q4 2013 FY
Slide 12: 2014 Earnings Guidance
2014 Earnings Guidance 12 Continued investment in our system to serve our customers and communities is expected to provide a targeted 7-10% total return to our investors through a combination of earnings growth and dividend yield. 2014 guidance range of $2.60-$2.75 and a midpoint of $2.68 based upon
Slide 13: Dave Gates Generating Station Update (DGGS)
Dave Gates Generating Station Update (DGGS) 13 • We operate a transmission system and balancing authority within Montana and are responsible for providing safe and reliable electric services to both retail and wholesale customers, or face stiff penalties for non-compliance. • DGGS was designed and c
Slide 14: Big Stone and Neal Air Quality Projects
Big Stone and Neal Air Quality Projects 14 Big Stone Power Plant Neal Power Plant Big Stone Neal Location Northeast South Dakota Northwest Iowa Ownership 23.4% of 475 MW coal plant 8.7% of 644 MW coal plant Project Subject to Best Available Retrofit Technology (BART) requirements of the Regional Haz
Slide 15: Natural Gas Reserves Opportunity
Natural Gas Reserves Opportunity 15 We continue to pursue opportunities to secure low cost gas reserves for our customers. • Remaining 18% unfilled position to reach our targeted 50% owned supply. • Other potential opportunities to procure reserves to provide up to 50% (or 3-4 Bcf of natural gas ann
Slide 16: Distribution System Infrastructure Project
Distribution System Infrastructure Project 16 • Montana Distribution System Infrastructure Project (DSIP) to maintain a safe and reliable electric and natural gas distribution system. – The primary goals: reverse the trend in aging infrastructure, maintain reliability, proactively manage safety, bui
Slide 17: Pending Hydro Transaction
Pending Hydro Transaction Our Vision Statement: Working together to deliver safe, reliable and innovative energy solutions that create value for our customers, communities, employees and investors. With the addition of these assets, we anticipate over 50% of our owned and contracted generation in Mo
Slide 18: Hydro – Process and Timeline (Past)
• Transaction announced on September 26, 2013 • Pre-filing informational meeting with the Montana PSC on October 18, 2013 • Bridge facility – entered into a $900 million 364-day senior bridge credit facility on November 12, 2013 • Filed Application for Approval to Purchase and Operate the Hydro Elec
Slide 19: Hydro – Process and Timeline (Anticipated)
Hydro - Process and Timeline (Anticipated) 19 • Montana PSC hearing set for July 8, 2014 • Final day for Montana PSC to issue an order on September 16, 2014 – MPSC can extend timeline for final order if it determines that extraordinary circumstances require additional time. • On approval, we plan to
Slide 20: Appendix
20 APPENDIX
Slide 21: EPS Reconciliation
21 EPS Reconciliation NORTHWESTERN CORPORATION Three Months Ended March 31, 2014 ($millions, except EPS) T h re e M o n th s E n d ed , M ar ch 3 1, 2 01 3 N at ur al g as p ro du ct io n E le ct ric r et ai l v ol um es M on ta na n at ur al g as r at e in cr ea se N at ur al g as r et ai l v ol um
Slide 22: Effective Tax Reconciliation
Effective Tax Reconciliation 22 (in millions) 2014 2013 Variance Income Before Income Taxes $53.6 $42.9 $10.7 Income tax calculated at 35% federal statutory rate 18.8 15.0 3.8 Permanent or flow through adjustments: State income, net of federal provisions 0.4 (1.4) 1.8 Flow through repairs deductions
Slide 23: Consolidated Statements of Income
23 Consolidated Statements of Income 2014 2013 (in thousands except per share amounts) Revenues Electric 234,511$ 210,092$ Gas 135,212 102,518 Other - 410 Total Revenues 369,723 313,020 Operating Expenses Cost of Sales 167,428 132,196 Operating, general and administrative 72,082 68,837 Property and
Slide 24: Consolidated Balance Sheets
24 Consolidated Balance Sheets March 31, 2014 December 31, 2013 (in thousands) ASSETS Current assets 316,917$ 320,956$ Property, plant and equipment, net 2,706,645 2,690,128 Goodwill 355,128 355,128 Regulatory assets 338,687 316,952 Other noncurrent assets 33,881 32,096 Total Assets 3,751,258$ 3,715
Slide 25: Statement of Cash Flows
25 Statement of Cash Flows (in thousands) 2014 2013 Operating Activities Net income 45,580$ 37,902$ Non-cash items 58,402 55,953 Changes in operating assets and liabilities 8,253 18,025 Cash Provided by Operating Activities 112,235$ 111,880$ Cash Used in Investing Activities (50,128)$ (38,114)$ Cash
Slide 26: Regulated Electric Segment
26 Regulated Electric Segment Heating Degree Days 2014 2013 Historic Average 2013 Historic Average Montana 3,475 3,223 3,275 8% colder 6% colder S uth Dakota 4,626 4, 17 4,098 10 l r 13 l r Degree Days 4 as compared with: (dollars in millions) 2014 2013 Change % Change Retail revenues 209.5$ 200.0$
Slide 27: Regulated Natural Gas Segment
27 Regulated Natural Gas Segment Heating Degree Days 2014 2013 Historic Average 2013 Historic Average Montana 3,475 3,223 3,275 8% colder 6% colder S uth Dakota 4,626 4, 17 4,098 10 c l r 13 c l r Nebrask 3,578 3,355 3,400 7% colder 5% colder Degree Days 4 as compared with: (dollars in millions) 201
Slide 28: Segment Results
28 Segment Results Three Months Ending March 31, 2014 Electric Gas Other Eliminations Total Operating revenues 234,511$ 135,212$ -$ -$ 369,723$ Cost of sales 101,596 65,832 - - 167,428 Gross margin 132,915 69,380 - - 202,295 Operating, general and administrative 47,136 22,596 2,350 - 72,082 Property
Slide 29: 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 numerical measure of a company's financi
Slide 30: Delivering a bright future
Upelivering a bright future