Northwestern Energy Group, Inc. · NASDAQ:NWE
Northwestern Energy — Barclays Energy 2024
78 slides from Northwestern Energy's conference presentation, Sep 4, 2024
Slide 1: Investor Update September 2024
Investor Update September 2024 8-K Date: September 4, 2024 1
Slide 2: Forward Looking Statements
NorthWestern Energy 2 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
Slide 3: Overview
Thank youOverview 3
Slide 4: NWE – An Investment for the Long Term
NWE – An Investment for the Long Term 4 • Approved Montana electric & natural gas and South Dakota electric rate reviews aid earnings, cash flow, and balance sheet strength • NOLs and tax credits expected to mitigate future cash tax obligations • History of consistent annual dividend growth • 100% p
Slide 5: About NorthWestern
About NorthWestern 5 Montana Operations Electric 405,500 customers 25,274 miles – transmission & distribution lines 887 MW maximum capacity owned power generation Natural Gas 212,100 customers 7,390 miles of transmission and distribution pipeline 17.85 Bcf of gas storage capacity Own 31.5 Bcf of pro
Slide 6: The NorthWestern Value Proposition
9%-11% Total Growth 11%+ Total Growth Incremental Opportunities: 6% + EPS Growth ~5% Dividend Yield Base Capital Plan: 4%-6% EPS Growth FERC Transmission Incremental generating capacity (subject to successful resource procurement bids) Qualifying Facility and / or Power Purchase Agreement buyo
Slide 7: A Diversified Electric and Gas Utility
A Diversified Electric and Gas Utility 7 NorthWestern’s ‘80/20’ rules: Approximately 80% Electric and 80% Montana. Over $4.8 billion of rate base investment to serve our customers Data as reported in our 2023 10-K (1) Utility Margin is a non-GAAP Measure. See appendix for additional disclosure. * Re
Slide 8: Highly Carbon-Free Supply Portfolio
8 Highly Carbon-Free Supply Portfolio NorthWestern does not own all the renewable energy certificates (RECs) generated by contracted wind, and periodically sells its own RECs with proceeds benefiting retail customers. Accordingly, we cannot represent that 100% of carbon-free energy in the portfolio
Slide 9: Strong Utility Foundation
Strong Utility Foundation 9 Solid and generally improving JD Power Overall Customer Satisfaction Scores Solid electric system reliability • Residential rates below national average1 • Better than average natural gas leaks per mile 1) NWE rates are average for 2023: total residential revenues divid
Slide 10: Solid Economic Indicators
Solid Economic Indicators 10 • Customer growth rates historically exceed National Averages. • Projected population growth in our service territories better than the National Average. • Unemployment rates better than National Average Source: Company 10K’s, 2021/2022 EEI Statistical Yearbook – Table 7
Slide 11: NorthWestern's Combo-Advantage
NorthWestern’s Combo-Advantage 11 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
Slide 12: Natural Gas LDC – AECO Advantage to Customers
Natural Gas LDC – AECO Advantage to Customers 12 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
Slide 13: Corporate Sustainability
Corporate Sustainability 13 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 Disclosur
Slide 14: Best Practices Governance
Best Practices Governance 14 America’s Most Responsible Companies Recognized by Newsweek as one of the most responsible companies in 2023. One of only eleven EEI member utilities selected. Board of Directors Executive Team 5th Best Score Among 50 Publicly Traded North American Utility and Power Comp
Slide 15: Financial & Regulatory Update
Thank youFinancial & Regulatory Update 15
Slide 16: Strong Growth Outlook
Strong Growth Outlook 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 outstandi
Slide 17: Credit, Cash Flow, and Financing Plans
Credit, Cash Flow, and Financing Plans 17 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 2
Slide 18: Track Record of Growing Capital Investment
Track Record of Growing Capital Investment 18 2019-2023 Invested over the last 5 years* * Historical Capital Investment includes property, plant and equipment additions and AFUDC Credit, both from our cash flow statement, and change in capital expenditures included in accounts payable. ** See Regula
Slide 19: Solid Balance Sheet
Solid Balance Sheet 19 Investment grade credit ratings, liquidity significantly greater than our $100 million target, debt to capitalization at the bottom of our targeted 50%-55% range, and a manageable schedule of debt maturities. * Liquidity target was raised to $200 million during the height of t
Slide 20: Disciplined Expense Program
20 Disciplined Expense Program 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 power generation, water costs for hydro operations, and purchased power cost unless identified in company disclosures. Electri
Slide 21: Rate Reviews
Thank youRate Reviews 21
Slide 22: Rate Review Summary
22 Rate Review Summary MT Natural Ga July 10, 2024 July 10, 2024 June 21, 2024 June 6, 2024 2023 with 2024 Known & 2023 with 2024 Known & 2023 with 2024 Known & 2023 with 2024 Known & Test Year End M leasurables Measurables Measurables Measurables $156.5 Million $6. .0 Million $3.6 Million Revenue R
Slide 23: Montana Electric Rate Review
Montana Electric Rate Review Montana Electric: • 74.6 Million Net Request • $874 Million Plant-in-Service additions (’23-’24F) • Operating Costs increase 1.1% CAGR (’21-’23) • Typical Residential Bill increase 8.3% at full request 23 $156.5 Million Base Rate Increase Requested & $74.6 Million Total
Slide 24: Montana Gas Rate Review
Montana Gas Rate Review 24 $28.6 Million Base Rate Increase Requested 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 17.0% at full request Typical 65 Therm Resi
Slide 25: South Dakota Natural Gas Rate Review
South Dakota Natural Gas Rate Review 25 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 increase 7.9% at full request $6.0 Million Rate Increase Requested Typical 100 T
Slide 26: Nebraska Natural Gas Rate Review
Nebraska Natural Gas Rate Review 26 $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 incr
Slide 27: Strategic Update
Thank youStrategic Update 27
Slide 28: Energy West / Cut Bank Natural Gas Acquisition
Energy West / Cut Bank Natural Gas Acquisition 28 Transaction Highlights Purchase Price Approvals and Timing • Two natural gas LDC’s in Montana: Energy West Montana (“EWM”) and Cut Bank Gas Co. (“CBGC”) from Hope Utilities • 33,000 customers in Great Falls area, West Yellowstone and Cut Bank communi
Slide 29: Colstrip Transaction Overview
Colstrip Transaction Overview 29 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 Avista to acquire their ownership interest in Colstrip. Similar to
Slide 30: Colstrip Facility Ownership Overview
Colstrip Facility Ownership Overview 30 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 i
Slide 31: Montana Wildfire Mitigation Plan
Montana Wildfire Mitigation Plan 31 Reduction of Ignition Potential System and Environmental Monitoring Enhanced Vegetation Maintenance Enriched Public Communication and Outreach Comprehensive summary of wildfire mitigation activities Expect to update plan with each electric rate review filing
Slide 32: Montana Public Safety Power Shutoff Plan
Montana Public Safety Power Shutoff Plan 32 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
Slide 33: Conclusion
Conclusion Pure Electric & Gas Utility Solid Utility Foundation Best Practices Corporate Governance Attractive Future Growth Prospects Strong Earnings & Cash Flows 33
Slide 34: Appendix
Thank youAppendix 34
Slide 35: Regulated Utility Five-Year Capital Forecast
$2.5 billion of highly-executable and low-risk capital investment Regulated Utility Five-Year Capital Forecast 35 Appendix
Slide 36: Rate Base and Authorized Returns Footnotes
(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 rate base or authorized returns. (2) The Montan
Slide 37: 2023 System Statistics
2023 System Statistics 37 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 (60 MW FERC & 45MW MPSC jurisdictions) peaker Appendix
Slide 38: January 2024 Cold Weather Event - Montana
January 2024 Cold Weather Event - Montana 38 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 result of
Slide 39: Our Net-Zero Vision
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 risks, by inc
Slide 40: Timeline of Montana Generation Portfolio
40 Timeline of Montana Generation Portfolio 40 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. Appendix
Slide 41: Comparison of Installed Capacity
Comparison of Installed Capacity 41 California is dealing with significant capacity issues DESPITE having a greater amount of dispachable generation and fewer renewables than NorthWestern Energy in Montana (as a percentage of the total). Source: EIA.gov – 2022 Form EIA-860 Data - Schedule 3 for cale
Slide 42: Earnings and Other
Thank youEarnings and Other 42
Slide 43: EPS & Dividend History
EPS & Dividend History 43 2009-2023 CAGR’s: GAAP EPS: 3.4% Non-GAAP EPS: 3.5% Dividend: 4.7% See appendix for “Non- GAAP Financial Measures” Appendix
Slide 44: 2024 Earnings Bridge
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 outstandin
Slide 45: 2024 Second Quarter Earnings
Thank you2024 Second Quarter Earnings 45
Slide 46: Second Quarter Earnings Drivers
After-tax EPS vs Prior Year Second Quarter Earnings Drivers 46 1 2 Improvement in Utility Margin offset mild weather, higher OA&G expense, depreciation, interest expense, and slight dilution from higher share count. 1.) Utility Margin is a non-GAAP Measure. See appendix slide titled “Reconciling Gro
Slide 47: Second Quarter Financial Results
Second Quarter Financial Results 47 1.) Utility Margin is a non- GAAP Measure. See appendix slide titled “Reconciling Gross Margin to Utility Margin” for additional disclosure. (in millions except per share amounts) 2024 2023 Variance % Variance Operating Revenues 319.9$ 290.5$ 29.4$ 10.1% 76.5 67.6
Slide 48: 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 employee benefit expense is now disaggregated on the
Slide 49: Second Quarter Utility Margin Bridge
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 NOTE: Utility Margin is a non-GAAP Measure. See appendix slide titled “Reconciling Gross Margin to Utility Margin” for additional disclosure. 49 Appendi
Slide 50: Utility Margin (Q2)
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% (1) Utility Margin is a non-GAAP Measure. See appendix slide titled “Reconciling Gross Margi
Slide 51: Operating Expenses (Q2)
Operating Expenses (Q2) Increase in operating expenses due to the following factors: $ 4.5 Depreciation expense due to plant additions and higher depreciation rates 2.0 Electric generation maintenance 1.8 Labor and benefits(1) 0.5 Insurance expense 0.4 Technology implementation and maintenance expen
Slide 52: Operating to Net Income (Q2)
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) (2.2) (2.0)
Slide 53: Tax Reconciliation (Q2)
Tax Reconciliation (Q2) 53 Appendix (in millions) Variance Income Before Income Taxes $35.9 $21.3 14.6 Income tax calculated at federal statutory rate 7.5 21.0% 4.5 21.0% 3.0 Permanent or flow through adjustments: State income tax, net of federal provisions - 0.1% 0.3 1.3% (0.3) Flow-through repairs
Slide 54: Segment Results (Q2)
Segment Results (Q2) (1) Utility Margin is a non-GAAP Measure. See appendix slide titled “Reconciling Gross Margin to Utility Margin” for additional disclosure. 54 Appendix Three Months Ended June 30, 2024 Electric Gas Other Total Operating revenues 260,134$ 59,795$ -$ 319,929$ Fuel, purchased suppl
Slide 55: Electric Segment (Q2)
2024 2023 $ % 2024 2023 2024 2023 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 Residential 101,420 99,526 1,894 1.9 % 699 703 378,995 372,982 Montana 99,655 101,919 (2,264) (2.2) % 756 759 75,602 74,234 South Dakota 26,35
Slide 56: Natural Gas Segment (Q2)
2024 2023 $ % 2024 2023 2024 2023 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 Nebraska 3,798 7,457 (3,659) (49.1) % 438 508 37,889 37,711 Residential 28,613 33,421 (4,808) (14.4) % 3,230 3,075 265,778 263,294 Montan
Slide 57: 2024 Year-to-Date Earnings
Thank you2024 Year-to-Date Earnings 57
Slide 58: Year-to-Date 2024 Non-GAAP Earnings
(1) As a result of the adoption of Accounting Standard Update 2017-07 in March 2018, pension and other employee benefit expense is now disaggregated on the GAAP income statement with portions now recorded in both OG&A expense and Other (Expense) Income lines. To facilitate better understanding of tr
Slide 59: Year-to-Date Financial Results
(in millions except per share amounts) 2024 2023 Variance % Variance Operating Revenues 795.3$ 745.1$ 50.2$ 6.7% 251.2 233.1 18.1 7.8% Utility Margin 544.1 512.0 32.1 6.3% Operating Expenses Operating and maintenance 111.5 110.7 0.8 0.7% Administrative and general 71.7 64.7 7.0 10.8% Property and ot
Slide 60: Utility Margin (YTD)
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% (1) Utility Margin is a non-GAAP Measure. See appendix slide titled “Reconciling Gross Margin
Slide 61: 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% Operating Expenses $ 380.3 $ 370.3 $ 10.0
Slide 62: Operating to Net Income (YTD)
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) (12.4)
Slide 63: Tax Reconciliation (YTD)
Tax Reconciliation (YTD) 63 Appendix Variance Income Before Income Taxes $111.3 $94.0 $17.3 Income tax calculated at federal statutory rate 23.4 21.0% 19.7 21.0% 3.7 Permanent or flow through adjustments: State income taxes, net of federal provisions 0.7 0.6% 1.2 1.3% (0.5) Flow-through repairs dedu
Slide 64: Segment Results (YTD)
Segment Results (YTD) (1) Utility Margin is a non-GAAP Measure. See appendix slide titled “Reconciling Gross Margin to Utility Margin” for additional disclosure. 64 Appendix Six Months Ended June 30, 2024 Electric Gas Other Total Operating revenues 603,320$ 191,951$ -$ 795,271$ Fuel, purchased suppl
Slide 65: Electric Segment (YTD)
Electric Segment (YTD) (1) Utility Margin is a non-GAAP Measure. See appendix slide titled “Reconciling Gross Margin to Utility Margin” for additional disclosure. 65 Appendix 2024 2023 $ % 2024 2023 2024 2023 Montana 203,391$ 209,302$ (5,911)$ (2.8) % 1,429 1,439 326,986 321,278 South Dakota 34,702
Slide 66: Natural Gas Segment (YTD)
Natural Gas Segment (YTD) 66 Appendix (1) Utility Margin is a non-GAAP Measure. See appendix slide titled “Reconciling Gross Margin to Utility Margin” for additional disclosure. 2024 2023 $ % 2024 2023 2024 2023 Montana 67,511$ 84,471$ (16,960)$ (20.1) % 8,482 8,381 185,332 183,583 South Dakota 19,4
Slide 67: PCCAM Impact by Quarter
PCCAM Impact by Quarter 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 share
Slide 68: Balance Sheet
(dollars in millions) 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-current assets 6,992.2 6,836.1$ Tot
Slide 69: Year-to-Date Cash Flow
Cash from Operating Activities decreased by $70.2 million due primarily to significant net cash inflows from recovery of previously under-collected energy supply cost in the prior period, and net cash outflows in 2024 from our January 2024 cold weather event. Funds from Operations increased by $53.1
Slide 70: Reconciling Gross Margin to Utility Margin
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 associated reg
Slide 71: Electric Wallet Share
Electric Wallet Share Appendix 71
Slide 72: Natural Gas Wallet Share
Natural Gas Wallet Share Appendix 72 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 per
Slide 73: Experienced & Engaged Board of Directors
Experienced & Engaged Board of Directors 73 Britt E. Ide • Nominating & Governance, HR • Independent • Since April 2017 Anthony T. Clark • Nominating & Governance, HR • Independent • Since Dec. 2016 Jan R. Horsfall • SETO (chair), Audit • Independent • Since April 2015 Brian B. Bird • President & Ch
Slide 74: Strong Executive Team
Strong Executive Team 74 Brian B. Bird • President & Chief Executive Officer • Current position since 2023 (formerly President & Chief Operating Officer ’21-’22 and Chief Financial Officer ’03-’21) Crystal D. Lail • Vice President and Chief Financial Officer • Current position since 2021 (formerly V
Slide 75: Our Commissioners
Our Commissioners 75 Appendix 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
Slide 76: Non-GAAP Financial Measures
Non-GAAP Financial Measures 76 Appendix
Slide 77: Non-GAAP Financial Measures
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 “non-GAAP fi
Slide 78: Thank you
Thank youDelivering a bright future 78