Northwestern Energy Group, Inc. · NASDAQ:NWE
Northwestern Energy — American Gas Association Financial Forum May 2015
41 slides from Northwestern Energy's conference presentation, May 18, 2015
Slide 1: American Gas Association May 2015
American Gas Association May 2015 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 Montana Operations Electric 353,600 customers 24,300 miles – transmission & distribution lines 895 MW of baseload power generation 105 MW of regulating services generation Natural Gas 189,000 customers 7,200 miles of transmission and distribution pipeline 18 Bcf of gas storage c
Slide 4: NWE: An Investment for the Long Term
NWE: An Investment for the Long Term 4 • 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 5: A Diversified Electric and Gas Utility
84% Montana 14% South Dakota 2% Nebraska A Diversified Electric and Gas Utility 5 Gross Margin in 2014: Electric: $529M Natural Gas: $193M Gross Margin in 2014: Montana: $609M South Dakota: $102M Nebraska: $ 11M Average Customers in 2014: Residential: 572k Commercial: 110k Industrial: 7k 83% Residen
Slide 6: NorthWestern Energy Profile
NorthWestern Energy Profile 6 Financial and Company Statistics See “Non-GAAP Financial Measure” slide in appendix for Net Debt and EBITDA reconciliation (1) The FERC regulated portion of Montana electric transmission and DGGS are included as revenue credits to our MPSC jurisdiction customers. Theref
Slide 7: Solid Economic Indicators
Solid Economic Indicators 7 • Unemployment rates in all three of our states are meaningfully below National Average. • Customer growth rates historically exceed National Average by a good margin. Source: NorthWestern 2008-2014 Forms 10-K and Unemployment Rate: US Department of Labor via SNL Database
Slide 8: Strong Utility Foundation
0 2 4 6 8 10 5.30 6.80 Leaks per 100 Miles of Pipe Excluding Excavation Damages - 2013 NWE - 2013 AGA 1st Quartile Average - 2013 $- $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
Slide 9: Reaffirm 2015 Earnings Guidance
Reaffirm 2015 Earnings Guidance 9 We reaffirm our 2015 adjusted earnings EPS guidance range of $3.10-$3.30 based upon, but not limited to, the following major assumptions and expectations: • Normal weather in our electric and natural gas service territories in 2015; • Successful integration and a fu
Slide 10: Track Record of Delivering Results
Track Record of Delivering Results 10 Notes: - ROE in 2010, 2011, 2012 , 2013 & 2014, on a Non-GAAP Adjusted basis, would be 9.2%, 10.5%, 9.8%, 9.6% & 9.4% respectively. - 2015 ROAE and 2015 Dividend payout ratio estimate based on midpoint of guidance range of $3.10-$3.30. - Details regarding Non-GA
Slide 11: Investment for Our Customers' Benefit
Investment for Our Customers’ Benefit Over the past 6 years 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. 2014 includes hydro assets in rate base but only 1.5 mo
Slide 12: Total Shareholder Return
Total Shareholder Return 12 * 15 member peer group: ALE, AVA, BKH, CNL, EDE, EE, GXP, IDA, MGEE, PNM, POR, STR, UIL, VVC, WR
Slide 13: Strong Cash Flows
While maintenance capex and total dividend payments have continued to grow since 2010 (8.2% and 7.3% CAGR respectively), Cash Flow from Operations has continued to outpace maintenance capex and averaged approximately $42 million of positive Free Cash Flow per year. Even with the additional income ge
Slide 14: Balance Sheet Strength and Liquidity
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% Senior Secured Rating Senior Unsecured Rating Commercial Paper Outlook Fitch A A- F2 Stable Moody's A1 A3 Prime-2 Stable S&P A- BBB A-2 Stable A secu
Slide 15: The Hydro Facilities
The Hydro Facilities 15 (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 16: Hydro – Owned and Contracted Resources
Coal (Colstrip 4) 29% Hydro 42% Hydro (QF / contracted) 1% Wind (Spion Kop) 2% Wind (QF / contracted) 11% Natural Gas 1% Thermal (QF / contracted) 13% 16 Hydro – Owned and Contracted Resources MONTANA Yellowstone River ll t i r Yellowstone River ll t i r ll t i r Ye lowstone River l t i r Ye lowston
Slide 17: Meeting Montana Customer Demands
- 100,000 200,000 300,000 400,000 Hydro Contracted Owned Generation Light Load Demand Light Load Hours (MWh's) M W h' s - 100,000 200,000 300,000 400,000 500,000 Hydro Contracted Owned Generation Heavy Load Demand Heavy Load Hours (MWh's) M W h' s Meeting Montana Customer Demands 17 We expect to be
Slide 18: Big Stone and Neal Air Quality Projects
Big Stone and Neal Air Quality Projects 18 Big Stone Power Plant Neal Power Plant
Slide 19: South Dakota Rate Filing
South Dakota Rate Filing 19 34 Years of Declining ‘Real’ Rates Docket EL14-106 The requested $26.5 million revenue increase is primarily due to investments made to meet federal environmental mandates and to maintain our high-level of system reliability in South Dakota. We anticipate implementing int
Slide 20: Natural Gas Reserves Opportunity
Owned Owned Target Total Annual Need Natural Gas Reserves Opportunity 20 As we continue to add to our natural gas reserves portfolio, we anticipate a reduction in supply cost volatility for our customers. First ~6 Bcf annual production acquired for ~$100M Remaining 6-7 Bcf annual production needed t
Slide 21: Infrastructure Projects
Infrastructure Projects 21 • In Montana, our Distribution System Infrastructure Project (DSIP) and Transmission System Infrastructure Project (TSIP), both of which are currently in process, are to maintain a safe and reliable electric and natural gas distribution and transmission system. – The prima
Slide 22: DGGS Update – Still waiting on FERC
DGGS Update – Still waiting on FERC 22
Slide 23: Capital Spending Forecast
Capital Spending Forecast 23 Nearly $1.5 billion estimated cumulative capital spending from 2015 through 2019. We anticipate funding the capital projects with a combination of cash flows (aided by NOLs) and long-term debt to deliver a 7-10% total return (EPS growth & dividend yield) to our investors
Slide 24: Conclusion
Conclusion 24 Pure 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 Holter
Slide 25: Appendix
Appendix 25
Slide 26: Recent Significant Activities
• Successful first full quarter of owning and operating our recently acquired fleet of hydro assets. • Improvement in net income of $5.8 million, or 13%, in the first quarter of 2015 as compared with the same period in 2014. • GAAP Diluted EPS of $1.09 as compared to $1.17 for the same period in 201
Slide 27: Summary Financial Results (First Quarter)
Summary Financial Results (First Quarter) 27
Slide 28: Heating Degree Days (First Quarter)
Heating Degree Days (First Quarter) 28 Maximum Temperature from Normal Minimum Temperature from Normal Source: National Climatic Data Center, NOAA
Slide 29: Adjusted Earnings (First Quarter '15 vs '14)
Adjusted Earnings (First Quarter ‘15 vs ’14) 29 Non-GAAP adjusted Net Income increased 23.5% over same period prior year. However, due to $400 million equity issuance in November 2014, our adjusted diluted EPS only increased by 1.7%. We anticipate realizing a majority of the expected accretion benef
Slide 30: Hypothetical Accretion Illustration
Hypothetical Accretion Illustration 30 As shown in the example above, a company making an acquisition that would contribute relatively consistent net income over each of the four quarters could anticipate the most earnings per share benefit in the quarters with the ‘lightest’ earnings. (Illustrative
Slide 31: 2014 to 2015 Reconciliation (First Quarter)
31 2014 to 2015 Reconciliation (First Quarter)
Slide 32: Balance Sheet
Balance Sheet (dollars in mittions) As of March 31, As of December 31, 2015, 2014 ash Restricted cash Accounts receivable, net Inventories Other current assets Goodwill PP&E and other non-current assets Total Assets Payables Short-term borrowings Other current liabilities Long-term debt & capital le
Slide 33: Cash Flow (First Quarter)
Cash Flow (First Quarter) 33 $14.6 million improvement in cash flow provided by operating activities primarily due to: • a reduction in our under collection of supply costs in our trackers; • Improved collections of customer receivables; and • improved earnings from the hydro acquisition. These impr
Slide 34: Income Tax Reconciliation (First Quarter)
Income Tax Reconciliation (First Quarter) 34
Slide 35: 2014 to 2015 EPS & Dividend Bridge
2014 to 2015 EPS & Dividend Bridge 2015 ESTIMATES Basic assumptions include, but are not limited to: • Normal weather in our electric and natural gas service territories; • Successful integration and a full year earnings contribution from the recently acquired hydro assets; • Excludes any potential
Slide 36: 2014 System Statistics
2014 System Statistics 36 Note: Statistics above are as of 12/31/2014 (1) Nebraska is a natural gas only jurisdiction (1)
Slide 37: Experienced & Engaged Board of Directors
Experienced & Engaged Board of Directors 37 Members of the Board of Directors tour the Madison Dam power house in Ennis, Montana. From the left are Dana J. Dykhouse, Dorothy M. Bradley, Philip L. Maslowe, E. Linn Draper Jr., Julia L. Johnson, Robert C. Rowe, Denton Louis Peoples, and Stephan P. Adik
Slide 38: Strong Executive Team
Strong Executive Team 38 NorthWestern Energy’s executive officers at the Madison Dam in Ennis, Montana From the left: Patrick R. Corcoran - VP of Government and Regulatory Affairs. 35 years utility industry experience; current position since 2001 John D. Hines - VP of Supply. 25 years utility indust
Slide 39: Our Commissioners
Our Commissioners 39 Name Party Began Serving Term Ends Kirk Bushman R Jan-13 Jan-17 Travis Kavulla R Jan-11 Jan-19 Roger Koopman R Jan-13 Jan-17 Brad Johnson (Chairman) R Jan-15 Jan-19 Bob Lake R Jan-13 Jan-17 Commissioners are elected in statewide elections from each of five districts. Chairperson
Slide 40: Non-GAAP Financial Measures
Non-GAAP Financial Measures 40 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 measure
Slide 41: Delivering a bright future
Upelivering a bright future
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