Northwestern Energy Group, Inc. · NASDAQ:NWE
Northwestern Energy — Investor Presentation (December 2014)
48 slides from Northwestern Energy's investor presentation, Dec 9, 2014
Slide 1: Investor Update December 9-10, 2014
Investor Update | December 9-10, 2014 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 Our Vision: Enriching lives through a safe, sustainable energy future Our Mission: Working together to deliver safe, reliable and innovative energy solutions Our Values: S - safety E - excellence R - respect V - value I - integrity C - community E - environment Electric Operatio
Slide 4: NorthWestern Energy Profile
NorthWestern Energy Profile 4 TICKER: NWE Natural Gas $73 M Other ($5 M) Electric $229 M EBITDA EBITDA - Earnings before Interest, Tax, Depreciation and Amortization - For the 12 months ending 9/30/14 - Other category includes $3.9 million of costs related to the hydro transaction announced in Septe
Slide 5: NWE: An Investment for the Long Term
NWE: An Investment for the Long Term 5 • 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 6: A Diversified Electric and Gas Utility
A Diversified Electric and Gas Utility 6 The “80/20 rules” of NorthWestern Gross Margin in 2013: Electric: $506M Natural Gas: $167M Other $ 2M Gross Margin in 2013: Montana: $561M South Dakota: $103M Nebraska: $ 11M Average Customers in 2013: Residential: 561k Commercial: 108k Industrial: 6k 83% Mon
Slide 7: Solid Economic Indicators
Solid Economic Indicators 7 Top Left: Unemployment rate consistently below National Average for our service territory. National Ranking (SD & NE tie for 2nd & MT 8th) Top: Bad debt / revenue write-off is less than ½ of a percent even during tough economic times – Our customers pay their bills. Left:
Slide 8: Strong Utility Foundation
$- $20 $40 $60 $80 $100 $120 $140 MT SD MT SD NE Electric (750 kwh) Natural Gas (100 therms) National Average National Average "Typical Bill" Residential Rate Comparison 0 25 50 75 100 125 150 M in u te s NorthWestern 3-Year Average Customer Average Interruption Duration Index (CAIDI) 0.00 0.25 0.50
Slide 9: 2014 Earnings Guidance
$2.02 $2.14 $2.53 $2.66 $2.46 $- $1.50 $1.75 $2.00 $2.25 $2.50 $2.75 $3.00 2009 2010 2011 2012 2013 2014E GAAP Diluted EPS 2014 Earnings Guidance 9 We are reaffirming our 2014 guidance range of $2.60-$2.75 based upon, but not limited to, the following major assumptions and expectations: • Normal wea
Slide 10: Track Record of Delivering Results
Track Record of Delivering Results 10 Notes: - ROE in 2011, 2012 & 2013, on a Non-GAAP Adjusted basis, would be 10.5%, 9.8% & 9.7% respectively. - 2014 ROE and 2014 Dividend payout ratio estimate based on midpoint of guidance range of $2.60-$2.75. - 2011 and 2012 Dividend Payout Ratio based upon Non
Slide 11: Investment for Our Customers' Benefit
$60 $70 $80 $90 $100 $110 $120 $130 2008 2009 2010 2011 2012 2013 Typical NorthWestern Electric and Natural Gas Bill (average Montana, South Dakota and Nebraska monthly residential customer bill) Electric (750 kW) Natural Gas (10 Dkt) Investment for Our Customers’ Benefit Over the past 5 years we ha
Slide 12: Total Shareholder Return
Total Shareholder Return 12 * Peer Group: ALE, AVA, BKH, CNL, EDE, EE, GXP, IDA, MGEE, PNM, POR, UIL, VVC, WR NWE 71.2% 14 Peer Avg. * 55.7% S&P 500 76.8% DJUA 50.5% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 3 Year Total Shareholder Return 12/1/2011 to 11/30/2014 NWE 25.3% 14 Peer Avg. * 20.8% S&P 500
Slide 13: Strong Cash Flows
$(200) $(150) $(100) $(50) $- $50 $100 $150 $200 $250 $300 2009 2010 2011 2012 2013 Dividends Maintenance Capex CFO CFO Less CapEx & Dividends Mil lion s While maintenance capex and total dividend payments have continued to grow since 2009 (4.1% and 4.6% CAGR respectively), Cash Flow from Operations
Slide 14: Balance Sheet Strength and Liquidity
$0 $50 $100 $150 $200 $250 $300 $350 '10 Q4 Q1 Q2 Q3 '11 Q4 Q1 Q2 Q3 '12 Q4 Q1 Q2 Q3 '13 Q4 Q1 Q2 Q3 M illi on s Liquidity Actual >$100M Target 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% 54.0%
Slide 15: Net Investment in Existing Business
Net Investment in Existing Business 15 ($150) ($100) ($50) $0 $50 $100 $150 $200 $250 2009 2010 2011 2012 2013 ($m illi on s) Maintenance Capex vs. Depreciation Distribution System Infrastructure Project (DSIP) Capital Maintenance capex Depreciation Cumulative capex in excess of depreciation Mainten
Slide 16: Montana Hydro Acquisition - Update
Montana Hydro Acquisition - Update 16 • On September 26, 2014, after a yearlong process, the Montana Public Service Commission issued a final order approving our application to purchase eleven hydroelectric generating facilities (633 MW) from PPL Montana, subject to certain conditions, including the
Slide 17: The Hydro Facilities
The Hydro Facilities 17 (1) Hebgen facility (0 MW net capacity) excluded from figures. All facilities are “run-of-river” dams except for Kerr and Mystic, which are “storage generation”. (2) As of June 2013. (3) The Confederated Salish and Kootenai Tribes have an option to purchase the Kerr facility
Slide 18: Hydro - A Great Fit at the Right Time
• Existing resources built for our distribution and transmission customers. • Excellent fit for our portfolio’s needs. Meets our light-load need but we will need additional resources to meet our heavy-load needs. • Non-carbon emitting - reduces environmental compliance cost and risk compared to othe
Slide 19: Hydro – Owned and Contracted Resources
Coal (Colstrip 4) 29% Hydro (Pending) 42% Hydro (QF / contracted) 1% Wind (Spion Kop) 2% Wind (QF / contracted) 11% Natural Gas 1% Thermal (QF / contracted) 13% 19 Hydro – Owned and Contracted Resources MONTANA Yellowstone River ll t r Yellowstone River ll t r ll t r Ye lowstone River l t r Ye lowst
Slide 20: Meeting Montana Customer Demands
Meeting Montana Customer Demands 20 We expect to be able to provide nearly all the power during the light load periods with some flexibility to use market purchases or other resources to meet demand during heavy load periods. The addition of the hydro generation assets into our Montana electric port
Slide 21: Big Stone and Neal Air Quality Projects
Big Stone and Neal Air Quality Projects 21 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 22: Natural Gas Reserves Opportunity
Owned Owned Target Total Annual Need Natural Gas Reserves Opportunity 22 As we continue to add to our natural gas reserves portfolio, we anticipate a reduction in supply cost volatility for our customers. $- $20 $40 $60 $80 $100 $120 $140 $160 Transmission, Distribution & Storage Costs Natural Gas S
Slide 23: Distribution System Infrastructure Project
Distribution System Infrastructure Project 23 • 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/improve reliability and safety; – build
Slide 24: Transmission System Infrastructure Project
Transmission System Infrastructure Project 24 • Montana Transmission System Infrastructure Project (TSIP) to maintain a safe and reliable electric and natural gas transmission system. – The primary project goals: – reverse the trend in aging infrastructure; – maintain/improve reliability and safety;
Slide 25: Dave Gates Generating Station Update (DGGS)
Dave Gates Generating Station Update (DGGS) 25 • 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 26: 2014 to 2015 Preliminary EPS & Dividend Bridge
2014 to 2015 Preliminary EPS & Dividend Bridge PRELIMINARY 2015 ESTIMATES Basic assumptions include, but are not limited to: • Normal weather in our electric and natural gas service territories; • Assumes successful integration and a full year earnings contribution from the recently acquired hydro a
Slide 27: Capital Spending Forecast
$182 $197 $200 $203 $170 $52 $51 $52 $54 $24 $38 $32 $16 $39 $40 $56 $10 $9 $12 $9 $272 $306 $300 $309 $259 $- $50 $100 $150 $200 $250 $300 $350 2014 2015 2016 2017 2018 $M illio ns Estimate as of October 2014 Maintenance Capex DSIP Big Stone TSIP Hydro Capital Spending Forecast 27 Current estimated
Slide 28: Conclusion
Conclusion 28 Pure Play Electric and Gas Utility Solid Utility Foundation Strong Earnings and Cash Flows Attractive Future Growth Prospects Best Practices Corporate Governance Hydro Transaction Announced 9/26/2013 Transaction Closed 11/18/2014 Thompson Falls Hauser Rainbow Ryan Morony Kerr Madison H
Slide 29: Appendix
Appendix 29
Slide 30: Non-GAAP Adjusted EPS
Non-GAAP Adjusted EPS We anticipate an improvement in the fourth quarter 2014 EPS over the same quarter in 2013 due primarily to customer and load growth, a full quarter of Bear Paw South earnings contribution (asset was placed into service in December 2013), cost controls and a lower effective tax
Slide 31: Income Statement
Income Statement 31 (in millions, except per share items) 2014 2013 2014 2013 Operating Revenues 251.9$ 262.3$ 892.0$ 835.5$ Cost of Sales 94.6 104.3 374.5 343.4 Gross Margin 157.3 158.0 517.5 492.1 Operating Expenses Operating, general & administrative 68.1 72.5 214.6 208.7 Property and other taxes
Slide 32: EPS Reconciliation (Qtr 2014 vs 2013)
32 EPS Reconciliation (Qtr 3 2014 vs 2013) ($millions, except EPS) Thr ee M ont hs End ed, Sep tem ber 30, 201 3 DS M lo st r eve nue rec ove ries Ope ratin g ex pen ses rec ove red in tr ack er Ele ctric ret ail v olum es Ele ctric tra nsm issi on c apa city Nat ura l ga s pr odu ctio n Nat ura l g
Slide 33: EPS Reconciliation (YTD through Qtr 2014 vs 2013)
33 EPS Reconciliation (YTD through Qtr 3 2014 vs 2013) NORTHWESTERN CORPORATION Nine Months Ended September 30, 2014 ($millions, except EPS) Ni ne M on th s En de d, Se pt em be r 3 0, 2 01 3 Na tu ra l g as p ro du ct ion M on ta na n at ur al ga s ra te in cr ea se El ec tri c tra ns m iss ion c a
Slide 34: Cash Flow
Cash Flow 34 (in millions) 2014 2013 Operating Activities Net Income 83.5$ 67.9$ Non-Cash adjustments to net income 123.0 123.6 Changes in working capital 36.5 6.5 Other (38.1) (26.7) Cash provided by operating activities 205.0 171.3 Investing Activities PP&E additions (186.1) (154.0) Other (37.6) 3
Slide 35: Balance Sheet
Balance Sheet 35 (in millions) As of September 30, As of December 31, 2014 2013 Cash 17.7$ 16.6$ Restricted cash 38.4 6.9 Accounts receivable, net 120.7 174.9 Inventories 63.0 55.6 Other current assets 80.7 67.0 Goodwill 355.1 355.1 PP&E and other non-current assets 3,198.7 3,039.2 Total Assets 3,87
Slide 36: Effective Tax Reconciliation
Effective Tax Reconciliation 36 The $12.6 million release of unrecognized tax benefits resulted from the lapse of statute of limitation in the third quarter of 2014. In addition, we submitted a tax accounting method change related to the deductibility of repair costs to bring our existing method int
Slide 37: Updated Effective Tax Rate Guidance
(in millions) Income before taxes $53.6 $8.9 $11.8 $74.3 ($2.7) $8.0 $79.6 Statutory tax rate (Federal & State) x 38.5% x 38.5% x 38.5% x 38.5% x 38.5% x 38.5% x 38.5% Tax expense before adjustments ($20.6) ($3.4) ($4.5) ($28.5) $1.0 ($3.1) ($30.6) Permanent or flow through adjustments: Flow-through
Slide 38: Three Months Non-GAAP Adjusted P&L
(in millions) Three Months Ended September 30, 2014 Fa vo ra bl e we at he r Hy dr o tra ns ac tio n ex pe ns e No n- em p. d ef er re d co m pe ns at io n Re le as e of u nr ec og ni ze d ta x be ne fit s an d sa fe h ar bo r el ec tio n (p rio r y ea rs ) Three Months Ended September 30, 2014 Thre
Slide 39: Year-to-Date Non-GAAP Adjusted P&L
Year-to-Date Non-GAAP Adjusted P&L (in millions) Nine Months Ended September 30, 2014 Fa vo ra bl e we at he r Hy dr o tra ns ac tio n ex pe ns e No n- em p. d ef er re d co m pe ns at io n Re le as e of u nr ec og ni ze d ta x be ne fit s an d sa fe h ar bo r el ec tio n (p rio r y ea rs ) Nine Mon
Slide 40: Hydro - Montana Generation Profile
Hydro - Montana Generation Profile 40 99% 31% 44% NWE SD NWE MT NWE Total 99% 63% 69% NWE SD NWE MT NWE Total This transaction will allow us to approximately double owned resources in MT and significantly reduce our reliance on third-party power purchase agreements and spot market purchases. (1) Per
Slide 41: Forbes America's Most Trustworthy Companies 2013
Forbes America's Most Trustworthy Companies 2013 For the 3rd consecutive time, NorthWestern Corporation was recognized by Forbes as one of "America's Most Trustworthy Companies," which identifies the most transparent and trustworthy businesses that trade on the American exchanges. In the past, Forbe
Slide 42: 2013 System Statistics
Energy Supply Transmission Distribution Electric (MW) MT SD Total 2013 Tx for Others MT SD Total Demand MT SD / NE Total Base load coal 222 254 476 Electric (GWh) 10,300 100 10,400 Daily MWs 750 179 929 Wind 40 40 Natural Gas (Bcf) 22.8 - 22.8 Peak MWs 1,730 326 Other resources 150 106 256 Annual GW
Slide 43: Well Rounded Board of Directors
Well Rounded Board of Directors 43 Members of the Board of Directors tour backstage at The Mansfield Center for the Performing Arts in Great Falls, Montana. From the left: Dana J. Dykhouse – Chief Executive Officer of First PREMIER Bank. Director since 2009 Dorothy M. Bradley – Retired District Cour
Slide 44: Strong Executive Team
Strong Executive Team 44 NorthWestern Energy’s executive officers tour backstage at The Mansfield Center for the Performing Arts in Great Falls, Montana. From the left: Michael R. Cashell – VP of Transmission. 27 years utility industry experience; current position since 2011 Curtis T. Pohl – VP of D
Slide 45: Our Commissioners
Our Commissioners 45 Name Party Began Serving Term Ends Kirk Bushman R Jan-13 Jan-17 Bill Gallagher (Chairman) R Jan-11 Jan-15 Travis Kavulla R Jan-11 Jan-15 Roger Koopman R Jan-13 Jan-17 Bob Lake R Jan-13 Jan-17 Commissioners are elected in statewide elections from each of five districts. Chairpers
Slide 46: FERC's April 17, 2014 Order
FERC’s April 17, 2014 Order 46 Relying on the regulatory process to provide an equitable outcome should be as American as…. apple pie.
Slide 47: Non-GAAP Financial Measures
Non-GAAP Financial Measures 47 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 measur
Slide 48: Delivering a bright future
Upelivering a bright future