Northwestern Energy Group, Inc. · NASDAQ:NWE
Northwestern Energy — Mizuho Mid-Cap Conference June 2023
68 slides from Northwestern Energy's conference presentation, Jun 8, 2023
Slide 1: Mizuho Mid-Cap Conference
Madison Dam Mizuho | Mid-Cap Conference June 2023 8-K June 8, 2023
Slide 2: Forward Looking Statements
2 Forward Looking Statements Forward Looking Statements O’Dell Creek - Madison River Valley - Montana 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-l
Slide 3: Company Overview
pa Oy ae a p eae = Company Overview Delivering © Bright Future
Slide 4: NWE - An Investment for the Long Term
4 NWE - An Investment for the Long Term • 100% pure electric & natural gas utility business Pure Electric & with over 100 years of operating history Gas Utility • Solid economic indicators in service territory • Diverse electric supply portfolio ~55% hydro, wind & solar • Residential electric & gas
Slide 5: About NorthWestern
5 About NorthWestern South Dakota Operations Electric 64,700 customers 3,650 miles – transmission & distribution lines 446 MW nameplate owned power generation Natural Gas 49,200 customers 1,779 miles of transmission and distribution pipeline Montana Operations Electric 398,200 customers 25,131 miles
Slide 6: NorthWestern's Combo-Advantage
6 NorthWestern’s Combo-Advantage 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 7: A Diversified Electric and Gas Utility
7 A Diversified Electric and Gas Utility (1) (1) NorthWestern’s ‘80/20’ rules: Approximately 80% Electric and 80% Montana. Over $4.5 billion of rate base investment to serve our customers Data as reported in our 2022 10-K (1) Utility Margin is a non-GAAP Measure. See appendix for additional disclosu
Slide 8: Highly Carbon-Free Supply Portfolio
8 Highly Carbon-Free Supply Portfolio MT NWE Contracted energy from Colstrip Energy Limited Partners (CELP), Yellowstone Energy Limited Partners (YELP) as well as a majority of the contracted wind, hydro and solar are federally mandated Qualifying Facilities, as defined under the Public Utility Regu
Slide 9: Strong Utility Foundation
9 Strong Utility Foundation Solid and generally improving JD Power Overall Customer Satisfaction Scores * NE bills temporarily impacted by ongoing recovery of Residential electric and natural gas rates below national average * the February 2021 prolonged cold weather event that Solid electric
Slide 10: Solid Economic Indicators
10 Solid Economic Indicators Source: NorthWestern customer growth - 2008-2016 Forms 10-K Unemployment Rate: US Department of Labor via SNL Database 2/21/17 Electric: EEI Statistical Yearbook (published December 2015, table 7.2) Natural Gas: EIA.gov (Data table "Number of Natural Gas Consumers") Sour
Slide 11: Regulatory & Financial Update
11 Regulatory & Financial Update
Slide 12: Montana Rate Review
12 Montana Rate Review Interim Rates Settlement Reached Next Steps The MPSC approved the On April 3rd, NWE and the primary intervenors • May – July post-hearing briefs recommendations of the staff for reached a settlement agreement for electric and interim rates, subject to refund, natural gas rates
Slide 13: Legislative Update
13 Legislative Update MT – Revised Environmental Policy & Permitting Statutes (HB 971 & SB 557 ) 1 • Revised statutes clarify that the Montana Department of Environmental Quality may not consider greenhouse gasses and related climate impacts in environmental permitting decisions and allow us to ap
Slide 14: Colstrip Transfer
14 Colstrip Transfer Reliable Existing resource, ready to serve our Montana customers. Avoids NorthWestern Energy executed lengthy planning, permitting and construction of a new facility that would an agreement with Avista stretch in-service beyond 2026. Corporation for the transfer of Reduces r
Slide 15: December 2022 Polar Vortex
15 December 2022 Polar Vortex The chart illustrates the actual resource specific contribution of energy, the capacity deficit we faced, and the market price of power during the late December 2022 multi-day cold weather event in Montana. As a result of our capacity deficit, we were reliant upon the h
Slide 16: Financial Outlook
16 Financial Outlook 2023 earnings guidance is expected to Rowe Dam at Mystic Lake, Montana be provided following an outcome in our pending Montana rate review Anticipate requesting an electric general rate review in South Dakota (2022 test year) $510 million capital plan for 2023 (inclusive of $
Slide 17: Capital Investment
17 Capital Investment ($millions, unless stated otherwise) 5 Year History of Capital Investment 5 Year Forecast of Capital Investment Yellowstone County Generating Station Over $2.1 Billion investment* over last 5 years $2.4 billion of forecasted low-risk capital investment opportunity… • Capital in
Slide 18: Solid Balance Sheet
18 Solid Balance Sheet Investment grade credit ratings, debt to capitalization within our targeted 50%-55% range and a manageable schedule of debt maturities.
Slide 19: Supply Update
19 Supply Update Electric Supply Resource Additions South Dakota: 58 MW Bob Glanzer Generating Station place in service in May 2022 completed under budget with a total cost of $83.1 million Montana: 175 MW Yellowstone County Generating Station • Construction began in April 2022 with costs of approx
Slide 20: Corporate Responsibility
20 Corporate Responsibility
Slide 21: 2022 Sustainability Report
21 2022 Sustainability Report • Published in November 2022 • Guided by our commitment to sustainability and our robust environmental, social and governance policies and practices. • Provides transparency into the social, environmental and economic impacts of NorthWestern Energy and offers insights i
Slide 22: ESG - Environmental
22 ESG - Environmental 55% Carbon-Free Owned and Long-Term Contracted Portfolio in 2022 vs ~40% National Average (2022 data) NWE Based on MWh’s Montana & Source: U.S. Energy Information Administration – form EIA.gov South Dakota Table 7.2b Electric Net Generation: U.S. Electric Power Sector 2021 com
Slide 23: ESG - Social
23 ESG - Social Community Customers Employees $2.9 Billion Economic Output in Typical Residential Bills Lower than Safety Culture Transformation 2022 ($2.56B in Montana & $350M National Average in SD/NE) Over $5 million Donations, Sponsorships, Economic Development, Scholarship Funding, Public Recre
Slide 24: ESG - Governance
24 ESG - Governance 5 th Best Score Among 50 Publicly Traded North American Diverse Leadership Board of Directors Executive Team Utility and Power Companies by Moody’s Investment Services on Best Governance Practices Recent Governance Recognition America’s Most Responsible Companies Recognized by Ne
Slide 25: ESG Publications
25 ESG Publications Environmental Social Governance These eight publications provide valuable insight into NorthWestern Energy’s Environmental, Social and Governance (ESG) Sustainability practices. Available at www. Northwesternenergy.com
Slide 26: Conclusion
26 Conclusion Best Attractive Improving Pure Earnings & Solid Utility Practices Future Electric & Cash Flows Foundation Corporate Growth Gas Utility (current rate Governance Prospects review pending)
Slide 27: Delivering a bright future
Upetivering a bright future
Slide 28: Regulated Utility Five-Year Capital Forecast
28 Appendix Regulated Utility Five-Year Capital Forecast Electric Supply Resource Plans - Our energy resource plans identify portfolio resource requirements including potential investments. Included within our full year 2023 & 2024 projections is approximately $120.0 million of capital to complete c
Slide 29: NWE Rate Base and Earnings Profile
29 Appendix NWE Rate Base and Earnings Profile Data as reported in our 2022 10-K (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 s
Slide 30: Transmission System Update
30 Appendix Transmission System Update Electric Transmission: WEIM Participants • In June 2021, we joined the Western Energy Imbalance Market (WEIM). This real-time, within-hour energy market will provide the company’s Montana customers with economically efficient energy to resolve imbalances and va
Slide 31: Montana Rate Review
31 Appendix Montana Rate Review
Slide 32: Montana Rate Review
32 Appendix Montana Rate Review
Slide 33: Montana Rate Review
33 Appendix Montana Rate Review Reliable, Sustainable and still Affordable service for our customers. While still significant – the resulting increase in customer bills, from current rates, amounts to pennies a day (Electric: $8.24 per month or 27 cents per day | Natural Gas $3.94 per month or 13 ce
Slide 34: Montana Rate Review
34 Appendix Montana Rate Review Operating and other costs increases are not driving this request. 41% of total requested increase is driven by capital investment. 52% is driven by increases in flow-through costs (PCCAM 41% and Property Taxes 11%). Updated for Settlement pending approval
Slide 35: Delivering Customer Value
35 Appendix Delivering Customer Value NorthWestern’s utility infrastructure investment (gross plant) - providing increased capacity, reliability and safety for our Montana customers - has more than doubled over the last decade (increasing over $2.9 billion) yet increases to customer bills have remai
Slide 36: Montana General Rate Review Proposals
36 Appendix Montana General Rate Review Proposals Enhanced PCCAM FCRM Wildfire Cyber/IT Reliability Redesign Redesign Mitigation Plan Proposal included Proposed a redesign of Proposed a rider to Proposed a rider to Proposed a rider to multiple changes: the Fixed Cost allow for the recovery of recove
Slide 37: Colstrip Transfer Agreement
37 Appendix Colstrip Transfer Agreement
Slide 38: Colstrip Transaction Overview
38 Appendix Colstrip Transaction Overview NorthWestern Energy executed an agreement with Avista Corporation (Exit Agreement) for the transfer of Avista’s ownership interests in Colstrip Units 3 and 4. • Effective date of transfer: December 31, 2025 • Generating capacity: 222 MW (bringing our total o
Slide 39: Why Colstrip?
39 Appendix Why Colstrip? Reduces Risk We are in a supply capacity crisis due to lack of resource adequacy, with approx. 40% of our customers’ peak needs on the market. This transaction will reduce our need to import expensive capacity during critical times. Establishes clarity regarding operati
Slide 40: Facility Ownership Overview
40 Appendix Facility Ownership Overview NorthWestern is actively working with the other owners to resolve outstanding issues, including the associated pending legal proceedings. Additionally, the owners intend to pursue a mutually beneficial reallocation (swap) of megawatts between the two units tha
Slide 41: Timeline of Montana Generation Portfolio
41 Appendix Timeline of Montana Generation Portfolio Owned and Long-Term Resource Portfolio Timeline Since 2011, we have added approximately 870 MW, both owned and long- term contract, to our generation portfolio, all of which is from carbon-free resources.
Slide 42: Comparison of Installed Capacity
42 Appendix Comparison of Installed Capacity Source: EIA.gov – 2021 Form EIA-860 Data - Schedule 3 for calendar year 2021 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 pe
Slide 43: Earnings & Other
Earnings & Other Delivering © Bright Future
Slide 44: 2022 Financial Results
44 Appendix 2022 Financial Results (1) (1) Utility Margin is a non-GAAP Measure See appendix slide titled “Explaining Utility Margin” for additional disclosure.
Slide 45: 2022 EPS Bridge
45 Appendix 2022 EPS Bridge After-tax Earnings Per Share Full year earnings per share driven by increased operating expense (including See “Non-GAAP Financial property taxes and depreciation), interest expense and dilution from higher Measures” slide in the average shares outstanding. These determen
Slide 46: 2022 Utility Margin Bridge
46 Appendix 2022 Utility Margin Bridge Pre-tax Earnings NOTE: Utility Margin is a non-GAAP Measure $24.9 Million or 2.6% increase in Utility Margin See appendix slide titled “Explaining Utility due to items that impact Net Income. Margin” for additional disclosure. *Interim rates subject to refund *
Slide 47: 2022 Tax Reconciliation
47 Appendix 2022 Tax Reconciliation
Slide 48: 2022 GAAP to Non-GAAP Earnings
48 Appendix 2022 GAAP to Non-GAAP Earnings The adjusted non- GAAP measures presented in the table are being shown to reflect significant items that are non-recurring or a variance from normal weather, however they should not be considered a substitute for financial results and measures determined or
Slide 49: Q1 2023 Financial Results
Appendix Q1 2023 Financial Results (1) ( ) 49 (1) Utility Margin is a non-GAAP Measure See appendix slide titled “Explaining Utility Margin” for additional disclosure.
Slide 50: Q1 2023 EPS Bridge
50 Appendix Q1 2023 EPS Bridge After-tax Earnings Per Share See slide 7 and “Non-GAAP Solid improvement in first quarter net income but offset by Financial Measures” slide in dilution from higher outstanding share count. the appendix for additional detail on this measure.
Slide 51: Q1 2023 Utility Margin Bridge
51 Appendix Q1 2023 Utility Margin Bridge Pre-tax Millions PCCAM Impact $0.8M expense in 2022 vs. $0.5M benefit in 2023 NOTE: Utility Margin is a non-GAAP Measure $25.7 Million or 9.9% increase in Utility Margin See appendix slide titled “Explaining Utility due to items that impact Net Income. Margi
Slide 52: Q1 2023 Tax Reconciliation
52 Appendix Q1 2023 Tax Reconciliation
Slide 53: Q1 2023 GAAP to Non-GAAP Earnings
53 Appendix Q1 2023 GAAP to Non-GAAP Earnings The adjusted non- GAAP measures presented in the table are being shown to reflect significant items that are non-recurring or a variance from normal weather, however they should not be considered a substitute for financial results and measures determined
Slide 54: Quarterly PCCAM Impacts
54 Appendix Quarterly PCCAM Impacts Pre-tax Millions In 2017, the Montana legislature revised the statute regarding our recovery of electric supply costs. In response, the MPSC approved a new design for our electric tracker in 2018, effective July 1, 2017. The revised electric tracker, or PCCAM esta
Slide 55: Qualified Facility Earnings Adjustment
55 Appendix 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 shareholders, not
Slide 56: EPS & Dividend History
56 Appendix EPS & Dividend History $3.30-$3.50 $3.10 - $3.30 $2.60$3.20-$3.40 - $2.75 2013-2022 CAGR’s: GAAP EPS: 3.1% - Non-GAAP EPS: 2.7% - Dividend: 5.8% See appendix for “Non-GAAP Financial Measures”
Slide 57: Investment for Our Customers' Benefit
57 Appendix Investment for Our Customers’ Benefit Over the past decade we have been reintegrating our Montana energy supply portfolio and making additional investments across our entire service territory to enhance system safety, reliability and capacity. We have made these enhancements with minimal
Slide 58: Natural Gas LDC - AECO Advantage to Customers
58 Appendix Natural Gas LDC - AECO Advantage to Customers NWE has access to some of the lowest and stable natural gas prices in the nation, through the Alberta Energy Company (AECO) trading hub. Source: S&P Global
Slide 59: 2022 System Statistics
59 Appendix 2022 System Statistics (1) (2) Note: Statistics above are as of 12/31/2022 (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
Slide 60: Experienced and Engaged Board of Directors
60 Appendix Experienced and Engaged Board of Directors Dana J. Dykhouse Brian B. Bird Anthony T. Clark Sherina M. Edwards Jan R. Horsfall • Chairman • President & Chief • Nom. & Gov., HR • Nom. & Gov., HR • SETO (chair), Audit • Independent Executive Officer • Independent • Independent • Independent
Slide 61: Strong Executive Team
61 Appendix Strong Executive Team Brian B. Bird Crystal D. Lail Michael R. Cashell Cynthia S. Fang Shannon M. Heim • President & Chief • Vice President and Chief • Vice President - • Vice President - • Vice President & General Executive Officer Financial Officer Transmission Regulatory Counsel • Cur
Slide 62: Our Commissioners
62 Appendix Our Commissioners
Slide 63: Non-GAAP Financial Measures (1 of 5)
63 Appendix Non-GAAP Financial Measures (1 of 5) 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 co
Slide 64: Non-GAAP Utility Margin Reconciliation (2 of 5)
64 Appendix Non-GAAP Utility Margin Reconciliation (2 of 5) 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 a
Slide 65: Non-GAAP Utility Margin Reconciliation (3 of 5)
65 Appendix Non-GAAP Utility Margin Reconciliation (3 of 5) 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 a
Slide 66: Non-GAAP Earnings (4 of 5)
66 Appendix Non-GAAP Earnings (4 of 5)
Slide 67: Non-GAAP Ratios and Metrics (5 of 5)
67 Appendix Non-GAAP Ratios and Metrics (5 of 5) The data presented in this presentation includes financial information prepared in accordance with GAAP, as well as other Non-GAAP financial measures such as Utility Margin (Revenues less Fuel, purchased supply and direct transmission expense (exclusi
Slide 68: Delivering a bright future
Upetivering a bright future
NorthWestern Energy Group — Mizuho Mid-Cap Conference June 2023 on 6ix