Northwestern Energy Group, Inc. · NASDAQ:NWE
Northwestern Energy — West Coast Conference 2008
28 slides from Northwestern Energy's conference presentation, Dec 11, 2008
Slide 1: West Coast Conference
West Coast Conference Sponsored by Shields & Company and Berenson & Company December 11, 2008 THEhotel at Mandalay Bay
Slide 2: forward-looking statement
forward-looking statement… 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 financial
Slide 3: who we are
who we are… 650,000 customers 388,000 electric 262,000 natural gas Approximately 123,000 square miles of service territory in Montana, Nebraska and South Dakota Total generation (mostly base load coal) MT – 222 MW – regulated as of 1/1/09 SD – 312 MW – regulated Total Assets: $2,593 MM (2) Total Cap
Slide 4: Colstrip Unit 4
Colstrip Unit 4… Our 222 MW interest in Colstrip Unit 4 to go into rate base MPSC issued a finalorder on November 13, 2008 – Rates related to To rate base CU4 at $407 million CU4 go Recognize that $161 million NOL balance belongs to the Company into effect on 1/1/09, The MCC had filed a request for
Slide 5: regulatory update
regulatory update… Rate case to be filed in Montana in 2009 Filing will include both electric and natural gas distribution businesses Expect to file in 2Q 2009 on 2008 test year Expect decision by April 1, 2010 In 2007 rate cases, we agreed to defer rate cases in South Dakota for 3 years Mill Creek
Slide 6: NorthWestern's future
NorthWestern’s future… Operationally strong Cost competitive Above-average reliability Award-winning customer service Financially strong Steady earnings growth and strong cash flow Sufficient liquidity with no significant maturities within next 12 months Rate case to be filed in Montana on electric
Slide 7: generation growth highlights
generation growth highlights… Mill Creek Generating Unit in Montana 120-150 MW plant near Anaconda, MT Built for regulation services to balance supply and load for NWE’s Balancing Area Rate-based cost of service investment Estimated to cost approximately $200 million Existing services are becoming m
Slide 8: Mill Creek timeline
Mill Creek timeline… MGST has been filed for pre-approval, with the MPSC w/decision expected in 2Q ’09. 8
Slide 9: update on generation queue in MT
update on generation queue in MT… Potential Generation Development in Montana New generation in Montana will need to find an end user. 9
Slide 10: state by state renewable standards
state by state renewable standards… 10
Slide 11: export "delivery" system for MSTI
export “delivery” system for MSTI… 11
Slide 12: our transmission developments
our transmission developments… Colstrip 500 kV Upgrade Line already exists – represents an upgrade Upgrades substation capacity Increases load capacity of existing line NorthWestern announced partnership with others Portland General Puget Sound Energy Pacificorp Avista Needed to relieve congestion t
Slide 13: transmission project developments
transmission project developments… 230 kV “Collector System” Our project with no partners Open Season early ‘09 to determine configuration Needed to collect the potential renewables in Montana Cost estimate of “collector” project = $200M In service date of January 1, 2014. 13
Slide 14: transmission project developments cont'd: MSTI
transmission project developments cont’d… MSTI Developing a request for FERC declaratory order on incentive rate principles Beginning an updated Open Season for long term contracts to be completed by early 2009 Continuing the public outreach process Expect to complete the WECC path rating process Q1
Slide 15: cap ex spending – next few years
cap ex spending – next few years… Includes more than $1 billion of potential generation and transmission growth projects. Non-discretionary cap ex is funded 100% by free cash flow. MSTI project is now slated for 2014 and cap exp has been modified accordingly. Don’t anticipate needing equity unless w
Slide 16: growth project potential
growth project potential… Annual Earnings (in millions) Opportunity * Cost of Project Timing Mill Creek Generator $ 10.0 to $ 11.3 $ 200 to $ 225 Jan 2011 Colstrip 500 kV transmission upgrade** $ 2.5 to $ 3.0 $ 50 to $ 60 Jan 2012 South Dakota Peaking generation $ 3.8 to $ 4.5 $ 75 to $ 90 Jan 2013
Slide 17: Brian Bird, Chief Financial Officer
Brian Bird Chief Financial Officer
Slide 18: 2008 guidance
2008 guidance… $1.65 to $1.80 per fully diluted share Increased guidance after third quarter results Increased from $1.60 to $1.75 per fully diluted share Includes an increase in pension expense Increase due to – Share buyback Lower legal costs (insurance recoveries) Better pricing at Colstrip Unit
Slide 19: base earnings of company since '05
base earnings of company since ’05… $2.00 $1.80 CAGR = 5.44% Earnings $1.60 profile is $1.40 improving. $1.20 $1.00 $0.80 $0.60 $0.40 $0.20 $0.00 2005 2006 2007 2008 P 2005 2006 2007 2008 P GAAP earnings per share $ 1.73 $ 1.06 $ 1.45 $1.65 - $1.80 Adjustments: Weather $ (0.01) $ (0.05) $ 0.01 $ (0.
Slide 20: potential impact of CU4 in rate base in '09
potential impact of CU4 in rate base in ‘09… Colstrip Unit 4 Rate Base Approved ** $407.0 million Equity ratio 50% Authorized ROE 10% Potential annual earnings of our interest of CU4 $20.4 million Earnings of unregulated electric in '07 $10.3 * Potential accretive annual earnings of rate basing CU4
Slide 21: impact of accounting order on pension expense
impact of accounting order on pension expense… 2005 2006 2007 2008 2009 2010 2011 2012 Total New MPSC Accounting Order: * * * * * Total pension expense $ 18.84 $ 21.95 $ 21.95 $ 30.59 $ 30.59 $ 30.59 $ 30.59 $ 30.59 $ 215.69 Payments to be made to MT Pension by year$ 31.20 $ 15.75 $ 22.00 $ 32.74 $
Slide 22: free cash flow
free cash flow… (in 000's) Proj 2008 Cash flow from operations (1) 200,000 Maintenance Cap Ex -105,000 Dividends -50,000 Free Cash Flow 45,000 (1) Includes additional pension payments of approximately $11 million for Montana during 2008 and excludes working capital. Free cash flow and balance sheet
Slide 23: strong balance sheet
strong balance sheet… Unaudited (Dollars in 000's) September 30 2008 2007 Cash 8,575 12,773 Restricted Cash 16,166 14,482 Accounts Receivable, Net 108,540 143,482 Inventories 90,896 63,586 Other Current Assets 54,077 44,031 Goodwill 355,128 355,128 PP&E and Other Non-current Assets 1,960,432 1,913,8
Slide 24: net operating loss balance
net operating loss balance… in 000's Range Projected '08 Income before taxes 100,000 110,000 The NOL should shield taxes until early 2012 Adjustment for 'bonus' depr. -45,000 -45,000 Impact of goodwill amortization -22,000 -22,000 The Company potentially Other -11,000 -11,000 has a large tax payment
Slide 25: liquidity highlights
liquidity highlights… Liquidity position remains strong Total liquidity currently in the $120 million range No collateral currently posted to commodity suppliers Commodity supplier open credit lines of $311 million or 362% of 60-day commodity cost Debt maturities in late 2009 Unsecured revolver matu
Slide 26: credit ratings
credit ratings… Fitch S&P Moody’s Senior Secured Rating BBB A- (MT) Baa2 BBB+ (SD) Senior Unsecured BBB- BBB Baa3 Corporate Rating BBB- BBB N/A Outlook Positive Stable Positive Colstrip Unit 4 regulatory ruling is expected to be ratings positive. 26
Slide 27: NorthWestern = value
NorthWestern = value… Value Dividend yield of about 6.2% Currently trading at just below 1.0 x book value Opportunity for growth January 1, 2009 rate basing our 222 MW interest in CU4 Possibility of increasing rate base on growth projects with investment in excess of $1 billion Potential additional
Slide 28: summary
summary… 2009 earnings will be entirely from regulated business Objectives achieved Recent rate relief received in all jurisdictions related to focus on Outstanding bankruptcy litigation nearly completed core business Strong balance sheet No equity required for existing core business Solid foundatio