Northwestern Energy Group, Inc. · NASDAQ:NWE
Northwestern Energy — Q2 2020 Earnings Presentation
38 slides from Northwestern Energy's earnings presentation, Jul 29, 2020
Slide 1: 2020 Second Quarter Earnings Webcast
2020 Second Quarter Earnings Webcast July 29, 2020
Slide 2: Presenting Today / Forward Looking Statements
Presenting Today 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 Bob Rowe, Litigation Reform Act of 1995. Forward-looking statements often address our expected fut
Slide 3: Second Quarter Highlights
Second Quarter Highlights • Net income for the second quarter decreased $26.2 million as compared to the same period in 2019. This decrease was primarily due to an income tax benefit in 2019, lower gross margin due to impacts of the COVID-19 pandemic, and higher depreciation expense. These were offs
Slide 4: Summary Financial Results
Summary Financial Results (Second Quarter) (1) 4 (1) Gross Margin, defined as revenues less cost of sales, is a non-GAAP Measure See appendix for additional disclosure.
Slide 5: Gross Margin
Gross Margin (Second Quarter) (dollars in millions) Three Months Ended June 30, 2020 2019 Variance Electric $ 169.6 $ 177.0 ($ 7.4) (4.2%) Natural Gas 38.7 38.0 0.7 1.8% (1) Total Gross Margin $ 208.3 $ 215.0 ($ 6.7) (3.1%) Decrease in gross margin due to the following factors: ($4.4) Montana electr
Slide 6: Weather
Weather (Second Quarter) We estimate favorable weather in Q2 2020 resulted in a $0.5M pretax benefit as compared to normal and $0.8M pretax benefit as compared to Q2 2019. 6
Slide 7: Operating Expenses
Operating Expenses (Second Quarter) (dollars in millions) Three Months Ended June 30, 2020 2019 Variance Operating, general & admin. $ 71.7 $ 80.8 ($ 9.1) (11.3%) Property and other taxes 47.0 44.3 2.7 6.1% Depreciation and depletion 44.8 41.0 3.8 9.3% Operating Expenses $ 163.5 $ 166.1 ($ 2.6) (1.6
Slide 8: Operating to Net Income
Operating to Net Income (Second Quarter) (dollars in millions) Three Months Ended June 30, 2020 2019 Variance Operating Income $ 44.8 $ 48.8 $ (4.0) (8.2%) Interest Expense (24.3) (23.5) (0.8) (3.4%) Other Income 0.2 0.1 0.1 100.0% Income Before Taxes 20.8 25.5 (4.7) (18.4%) Income Tax Benefit 0.7 2
Slide 9: Income Tax Reconciliation
Income Tax Reconciliation (Second Quarter) 9
Slide 10: Balance Sheet
10 {dollars in millions) Cash and cash equivalents Restricted cash Accounts receivable, net Inventories Other current assets Goodwill PP&E and other non-current assets Total Assets Payables Current Maturities - debt and leases Other current liabilities Long-term debt & capital leases Other non-curre
Slide 11: Cash Flow
Cash Flow Cash from operating activities increased by ~$75M primarily due to the improved collections of energy supply costs in the current period, as compared with higher procured supply costs, credits to Montana customers of approximately $20.5 million in the first quarter of 2019, and transmissio
Slide 12: Adjusted Non-GAAP Earnings
Adjusted Non-GAAP Earnings (Second Quarter) The adjusted non-GAAP measures presented in the table are being shown to reflect significant items that are non- recurring or variance from normal weather, however they should not be considered a substitute for financial results and measures determined or
Slide 13: Diluted Earnings Per Share
Diluted Earnings Per Share Updated 2020 Guidance Range Non-GAAP Adjusted EPS Growth Averaged 5.4% from 2013 - 2019 NorthWestern is affirms its 2020 previously revised earnings guidance range of $3.30 to $3.45 per diluted share based upon, but not limited to, the following major assumptions and expec
Slide 14: 2019 Non-GAAP to 2020 Revised EPS Bridge
2019 Non-GAAP to 2020 Revised EPS Bridge Since first quarter earnings, the primary change reflected in the earnings bridge above is increased property tax expense (based on Montana Dept. of Revenue’s valuation finalized in second quarter) partially offset by increased Seegross appendix for additiona
Slide 15: COVID-19: Margin Expectations
COVID-19: Margin Expectations Applying our high-level estimated impacts above to customer loads results in the following overall impact to load by class: Second quarter gross margin was generally in line with our Covid assumptions. We experienced a decline in gross margin of approximately $3 - $4 mi
Slide 16: COVID-19: Expense Expectations
COVID-19: Expense Expectations Expenses we expect to increase: • Bad debt expense • We assume significant recovery through a regulatory mechanism • COVID related charitable contributions Expenses we expect to decrease: • Distribution customer work • Contract services and material costs • Fleet fuel
Slide 17: Maintaining Capital Investment Forecast
Maintaining Capital Investment Forecast $1.8 billion of total capital investment over five years We anticipate financing this capital with a combination of cash flow from operations (aided by NOLs available into 2021), first mortgage bonds and equity issuances. Based on current expectations, any equ
Slide 18: Looking Forward
Looking Forward Regulatory • The MPSC recently approved a pilot Fixed Cost Recovery Mechanism (FCRM) effective July 1, 2020. We asked the MPSC to delay the start of the pilot for one year until July 1, 2021 due to the uncertainty created by the COVID- 19 pandemic. The MPSC granted the requested one-
Slide 19: Conclusion
Conclusion Best Attractive Pure Strong Solid Utility Practices Future Electric & Earnings & Foundation Corporate Growth Gas Utility Cash Flows Governance Prospects 19
Slide 20: Appendix
Cr Appendix 20
Slide 21: 25% of Colstrip Unit 4 Acquisition
25% of Colstrip Unit 4 Acquisition On December 9, 2019 NorthWestern (NWE) executed a Purchase and Sale Agreement for the acquisition of Puget Sound Energy’s (PSE) 25% ownership interests in Colstrip Unit 4 (CU4). • Generating Capacity: 185 MW (bringing our total ownership to 407 MW, or 55% of CU4) •
Slide 22: Segment Results
Appendix Segment Results (Second Quarter) (1) (1) (1) Gross Margin, defined as revenues less cost of sales, is a non-GAAP Measure. See appendix for additional disclosure. 22
Slide 23: Electric Segment
Appendix Electric Segment (Second Quarter) (1) (1) Gross Margin, defined as revenues less cost of sales, is a non-GAAP Measure. 23 See appendix for additional disclosure.
Slide 24: Natural Gas Segment
Appendix Natural Gas Segment (Second Quarter) (1) (1) Gross Margin, defined as revenues less cost of sales, is a non-GAAP Measure. 24 See appendix for additional disclosure.
Slide 25: Summary Financial Results
Appendix Summary Financial Results (Six Months Ended June 30) (1) (1) Gross Margin, defined as revenues less cost of sales, is a non-GAAP Measure. 25 See appendix for additional disclosure.
Slide 26: Gross Margin
Appendix Gross Margin (Six Months Ended June 30) (dollars in millions) Six Months Ended June 30, 2020 2019 Variance(1) Electric $ 350.4 $ 373.0 ($ 22.6) (6.1%) Natural Gas 101.9 110.4 (8.5) (7.7%) Total Gross Margin $ 452.3 $ 483.4 ($ 31.1) (6.4%) Decrease in gross margin due to the following factor
Slide 27: Weather
Appendix Weather (Six Months Ended June 30) We estimate unfavorable weather through the first 6 months of 2020 has contributed approximately $3.5M pretax detriment as compared to normal and $17.2M pretax 27 detriment as compared to the same period in 2019.
Slide 28: Operating Expenses
Appendix Operating Expenses (Six Months Ended June 30) (dollars in millions) Six Months Ended June 30, 2020 2019 Variance Operating, general & admin. $ 150.7 $ 161.9 ($ 11.2) (6.9%) Property and other taxes 91.5 89.1 2.4 2.7% Depreciation and depletion 90.0 86.6 3.4 3.9% Operating Expenses $ 332.2 $
Slide 29: Operating to Net Income
Appendix Operating to Net Income (Six Months Ended June 30) (dollars in millions) Six Months Ended June 30, 2020 2019 Variance Operating Income $ 120.1 $ 145.8 ($ 25.7) (17.6%) Interest Expense (48.6) (47.3) (1.3) (2.7%) Other (Expense) / Income (1.8) 1.3 (3.1) (238.5%) Income Before Taxes 69.7 99.8
Slide 30: Income Tax Reconciliation
Appendix Income Tax Reconciliation (Six Months Ended June 30) 30
Slide 31: Adjusted Non-GAAP Earnings
Appendix Adjusted Non-GAAP Earnings (Six Months Ended June 30) The adjusted non-GAAP measures presented in the table are being shown to reflect significant items that were non- recurring or variance from normal weather, however they should not be considered a substitute for financial results and mea
Slide 32: Segment Results
Appendix Segment Results (Six Months Ended June 30) (1) (1) (1) Gross Margin, defined as revenues less cost of sales, is a non-GAAP Measure. 32 See appendix for additional disclosure.
Slide 33: Electric Segment
Appendix Electric Segment (Six Months Ended June 30) (1) (1) Gross Margin, defined as revenues less cost of sales, is a non-GAAP Measure. 33 See appendix for additional disclosure.
Slide 34: Natural Gas Segment
Appendix Natural Gas Segment (Six Months Ended June 30) (1) (1) Gross Margin, defined as revenues less cost of sales, is a non-GAAP Measure. 34 See appendix for additional disclosure.
Slide 35: Quarterly PCCAM Impacts
Appendix Quarterly PCCAM Impacts 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 established a baseline o
Slide 36: Qualified Facility Earnings Adjustment
Appendix Qualified Facility Earnings Adjustment The gain in 2020 for our QF liability was $3.1 million in total, it was comprised of $2.2 million adjustment to the liability and $0.9 million lower actual costs over last 12 months (QF contract year). This $3.1 million benefit is $3.3 million less tha
Slide 37: Non-GAAP Financial Measures
Appendix 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 nu
Slide 38: Upetivering a
Upetivering a bright future NorthWestern Energy
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