Slide 1: 2016 Second Quarter Earnings Webcast
2016 Second Quarter Earnings Webcast July 22, 2016 General Operations Building – Butte, MT
Slide 2: Presenting Today
Presenting Today 2 Bob Rowe, President & CEO Brian Bird, Vice President & CFO
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: Second quarter net income highlights
• Net income for the quarter was $35.6 million, or $0.73 per diluted share, as compared with net income of $31.0 million, or $0.65 per diluted share, for the same period in 2015. • This $4.6 million, or 14.8%, increase in net income is primarily due to improved gross margin and lower income tax expe
Slide 5: Summary Financial Results (Second Quarter)
Summary Financial Results (Second Quarter) 5
Slide 6: Gross Margin (Second Quarter)
6 Gross Margin (Second Quarter) (dollars in millions) Three Months Ended June 30, 2016 2015 Variance Electric $ 176.2 $ 155.5 $ 20.7 13.3% Natural Gas 35.2 35.6 (0.4) (1.1%) Gross Margin $ 211.4 $ 191.1 $ 20.3 10.6% Increase in gross margin due to the following factors: $ 12.6 Lost revenue adjustmen
Slide 7: Weather (Second Quarter)
Weather (Second Quarter) 7 The tables on the top represent the variances for the quarter from historical average and prior year. The 2nd quarter is primarily a heating degree period in our service territory – 2nd quarter typically has 1,200+ Heating Degree Days (HDD) versus less than 100 Cooling Deg
Slide 8: Operating Expenses (Second Quarter)
Operating Expenses (Second Quarter) 8 Increase in operating expenses due mainly to the following factors: $10.9 million increase in OG&A $ 20.8 Insurance recovery, net (included in 2015) $ 1.6 Non-employee directors deferred compensation $ (5.6) Hydro operations (Kerr Conveyance) $ (1.3) Distributio
Slide 9: Operating to Net Income (Second Quarter)
Operating to Net Income (Second Quarter) 9 $3.5 million increase in interest expenses was primarily due to $2.9 million of interest associated with the MPSC disallowance, increased debt outstanding associated with the September 2015 Beethoven wind project acquisition and lower capitalization of allo
Slide 10: Balance Sheet
Balance Sheet (dollars in millions) As of June 30, As of December 31, 2016 2015 Cash $ Restricted cash Accounts receivable, net Inventories Other current assets Goodwill PP&E and other non-current assets Assets Payables Short-term borrowings Other current liabilities Long-term debt & capital leases
Slide 11: Cash Flow
Cash Flow 11 Changes in working capital is largely attributed to the $30.8 million* refund to customers in June 2016 associated with the DGGS/FERC ruling. * $27.3 million of deferred revenues plus accrued interest of $3.5 million.
Slide 12: Income Tax Reconciliation (Second Quarter)
Income Tax Reconciliation (Second Quarter) 12 Even with approximately the same pre-tax income, our income taxes are considerably lower in second quarter 2016 versus the prior year largely due to higher flow through repairs deductions, higher production tax credits related to Beethoven wind farm and
Slide 13: Non-GAAP Adjusted Earnings ('16 vs '15)
Non-GAAP Adjusted Earnings (‘16 vs ’15) 13 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 calculat
Slide 14: Summary Financial Results (YTD thru Qtr 2)
Summary Financial Results (YTD thru Qtr 2) 14
Slide 15: Weather (YTD thru Qtr 2)
Weather (YTD thru Qtr 2) 15 Average Temperature Ranks (last 122 years) Mean Temperature from Normal For the months January through June, the 2016 period was the 2nd warmest period in Montana, the 5th warmest in South Dakota and the 5th warmest in Nebraska over the last 122 years.
Slide 16: Non-GAAP Adjusted Earnings ('16 vs '15)
Non-GAAP Adjusted Earnings (‘16 vs ’15) 16 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 calculat
Slide 17: Non-GAAP Adjusted EPS
Non-GAAP Adjusted EPS 17 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 accordance w
Slide 18: 2016 Earnings Guidance
2016 Earnings Guidance 18 NorthWestern reaffirms our full-year 2016 adjusted (Non-GAAP) guidance range of $3.20 - $3.35 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; • A conso
Slide 19: Capital Spending Forecast
Capital Spending Forecast 19 Current estimated cumulative capital spending for 2016 through 2020 is $1.66 billion. This reflects a $187 million increase from the capital plan included in our 2015 10-K; approximately $122 million increase for internal combustion units in Montana and $65 million incre
Slide 20: Montana 2015 Electric Supply Resource Plan
Montana 2015 Electric Supply Resource Plan 20 The resource initiatives and actions developed in 2015 Electricity Supply Resource Procurement Plan identify the critical future needs of our portfolio, including solutions to resolve our current negative planning reserve margin. The plan identifies how
Slide 21: Montana 2015 Electric Supply Resource Plan
Montana 2015 Electric Supply Resource Plan 21 Spending on the generation assets will be subject to the development of a plan for clear regulatory recovery. * Assumes no retirements and no additions. ** Montana supply plan would add 689MW of capacity and require approximately $1.3 billion of investme
Slide 22: Regulatory Update
22 Regulatory Update Regulatory Item Current / Anticipated Action FERC / DGGS: April 2014 order regarding cost allocation at DGGS between retail and wholesale customers. FERC denied our request for rehearing and required us to make refunds. Refunds were made in June 2016. Also in June 2016, we filed
Slide 23: Colstrip Unit / Sierra Club Litigation
23 Colstrip Unit 4 / Sierra Club Litigation Background • On March 6, 2013, the Sierra Club and the Montana Environmental Information Center (MEIC) (both are plaintiffs) filed suit in the United States District Court for the District of Montana (court) against the six individual Owners of the Colstri
Slide 24: Appendix
24 Appendix
Slide 25: Segment Results (Second Quarter)
25 Segment Results (Second Quarter) Appendix
Slide 26: Electric Segment (Second Quarter)
26 Electric Segment (Second Quarter) Appendix
Slide 27: Natural Gas Segment (Second Quarter)
27 Natural Gas Segment (Second Quarter) Appendix
Slide 28: Gross Margin (YTD thru Qtr 2)
28 Gross Margin (YTD thru Qtr 2) (dollars in millions) Six Months Ended June 30, 2016 2015 Variance Electric $ 333.9 $ 327.6 $ 6.3 1.9% Natural Gas 94.6 97.1 (2.5) (2.6%) Gross Margin $ 428.5 $ 424.7 $ 3.8 0.9% Increase in gross margin due to the following factors: $ 18.6 South Dakota electric rate
Slide 29: Operating Expenses (YTD thru Qtr 2)
Operating Expenses (YTD thru Qtr 2) 29 Increase in operating expenses due mainly to the following factors: $9.6 million increase in OG&A $ 20.8 Insurance recovery, net (included in 2015) 4.7 Non-employee directors deferred compensation 0.9 Insurance reserves (11.2) Hydro operations - Kerr Conveyance
Slide 30: Operating to Net Income (YTD thru Qtr 2)
Operating to Net Income (YTD thru Qtr 2) 30 $4.8 million increase in interest expenses was primarily due to $2.9 million of interest associated with the MPSC disallowance, increased debt outstanding associated with the September 2015 Beethoven wind project acquisition and lower capitalization of all
Slide 31: Income Tax Reconciliation (YTD thru Qtr 2)
Income Tax Reconciliation (YTD thru Qtr 2) 31 Income taxes are considerably lower year-to-date through second quarter 2016 versus the prior year largely due to lower pre-tax income, differences in state income tax, net of federal provisions and higher production tax credits related to Beethoven wind
Slide 32: Segment Results (YTD thru 2nd Quarter)
32 Segment Results (YTD thru 2nd Quarter ) Appendix
Slide 33: Electric Segment (YTD thru 2nd Quarter)
33 Electric Segment (YTD thru 2nd Quarter) Appendix
Slide 34: Natural Gas Segment (YTD thru 2nd Quarter)
34 Natural Gas Segment (YTD thru 2nd Quarter) Appendix
Slide 35: Highly Renewable Supply Portfolio
35 Highly Renewable Supply Portfolio Based upon 2015 delivered electric portfolio, approximately 54% of our total company owned and contracted supply is renewable or supports renewables. * Wind Owned delivered in 2015 includes a partial year of production from the Beethoven wind farm, which was acqu
Slide 36: NWE Generation & Contribution to Peak Hours
NWE Generation & Contribution to Peak Hours 36 Appendix During the peak load hours of the 5 day Thanksgiving cold snap in Montana, Colstrip/Coal produced at 99% capacity, Hydro at 64%, but Wind produced only at 9% capacity. During the peak load hours, Colstrip provided 23% of the total need, Hydro p
Slide 37: 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 financ
Slide 38: Delivering a bright future
Upelivering a bright future Energy