Northwestern Energy Group, Inc. · NASDAQ:NWE
Northwestern Energy — 50th EEI Financial Conference 2015
43 slides from Northwestern Energy's conference presentation, November 2015
Slide 1: 50th EEI Financial Conference
Beethoven Wind Farm 50th EEI Financial Conference November, 2015
Slide 2: Forward Looking Statements
Forward Looking Statements Company Information NorthWestern Corporation Forward Looking Statements dba: NorthWestern Energy During the course of this presentation, there will be forward- www.northwesternenergy.com looking statements within the meaning of the “safe harbor” Corporate Support Office pr
Slide 3: About NorthWestern
About NorthWestern South Dakota Operations Electric 62,500 customers 3,500 miles – transmission & distribution lines 440 MW* of power generation Natural Gas 45,500 customers 1,655 miles of transmission and distribution pipeline Beethoven Montana Operations Electric 353,600 customers 24,300 miles – t
Slide 4: NWE: An Investment for the Long Term
NWE: An Investment for the Long Term • 100% Regulated electric & natural gas utility business Pure Electric • 100 year history of competitive customer rates, system reliability and customer satisfaction & Gas Utility • Solid economic indicators in service territory • Constructive regulatory relation
Slide 5: A Diversified Electric and Gas Utility
A Diversified Electric and Gas Utility Gross Margin in 2014: Gross Margin in 2014: Montana: $609M Electric: $529M South Dakota: $102M 73% Electric Natural Gas: $193M Nebraska: $ 11M 27% Natural Gas 84% Montana 83% Residential 14% South Dakota 16% Commercial 1% Industrial 2% Nebraska Above data refle
Slide 6: NorthWestern Energy Profile
NorthWestern Energy Profile (1) The FERC regulated portion of Montana electric transmission and DGGS are included as revenue credits to our MPSC jurisdiction customers. Therefore we do not separately reflect FERC authorized rate base or authorized returns. (2) For those items marked as "n/a," the re
Slide 7: Solid Economic Indicators
Solid Economic Indicators • 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 2
Slide 8: Strong Utility Foundation
Strong Utility Foundation JD Power - Customer Service Index Score 800 JD Power 26 Combination Electric and Natural Gas Company Average Index Score 700 600 2009 2010 2011 2012 2013 2014 Electric source: Edison Electric Institute Typical Bills and Average Rates Report, 1/1/15 NorthWestern Energy Score
Slide 9: Track Record of Delivering Results
Track Record of Delivering Results Return on Equity within 9.5% - 11.0% band over the last 5 years. Annual dividend increases since emergence in 2004. 5 Year (2010-2014) Avg. Return on Equity: 10.3% 5 Year (2010-2014) CAGR Dividend Growth: 4.1% Current Dividend Yield Approximately 3.5% Notes: - ROE
Slide 10: 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 11: Total Shareholder Return
Total Shareholder Return 11 *15 member peer group: ALE, AVA, BKH, CNL, EDE, EE, GXP, IDA, MGEE, PNM, POR, STR, UIL, VVC, WR
Slide 12: Strong Cash Flows
Strong Cash Flows Components of Free Cash Flow 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 Fl
Slide 13: Credit Ratings
Balance Sheet Strength and Liquidity Credit Ratings Senior Senior Secured Unsecured Commercial Rating Rating Paper Outlook Fitch A A- F2 Stable Moody's A1 A3 Prime-2 Stable S&P A- BBB A-2 Stable A security rating is not a recommendation to buy, sell or hold securities. Such ratings may be subject to
Slide 14: Diluted Earnings Per Share
Affirming 2015 Updated Earnings Guidance $3.50 Diluted Earnings Per Share GAAP Diluted EPS $3.25 $2.60 - $2.75 $3.10 - $3.25 Initial Guidance Range $3.00 Non-GAAP "Adjusted" EPS $2.75 $2.50 $2.25 $2.00 $1.75 $2.02 $2.14 $2.53 $2.66 $2.46 $2.99 $1.50 2009 2010 2011 2012 2013 2014 $- 2015E We affirm o
Slide 15: 2015 to 2016 EPS & Dividend Bridge
2015 to 2016 EPS & Dividend Bridge Preliminary 2016 ESTIMATES Basic assumptions include, but are not limited to: • Normal weather in our electric and natural gas service territories; • Excludes any potential additional impact as a result of the FERC decision regarding revenue allocation at our Dave
Slide 16: The Hydro Facilities
The Hydro Facilities Overview of Hydro Facilities Hydro Asset Integration (1) • Montana Asset Optimization Study: With the acquisition of the hydros, we are modeling different scenarios in an attempt to optimize the integration and operation of our entire generation fleet and determine the most econ
Slide 17: Meeting Montana Customer Demands
Meeting Montana Customer Demands Light Load Hours (MWh's) 400,000 Conveyance of Kerr Dam to Confederated Salish and Kootenai Tribes 300,000 MWh's 200,000 100,000 - Hydro Contracted Owned Generation Light Load Demand Heavy Load Hours (MWh's) 500,000 Conveyance of Kerr Dam to Confederated Salish and K
Slide 18: Big Stone and Neal Air Quality Projects
Big Stone and Neal Air Quality Projects Big Stone Power Plant Neal Power Plant 18
Slide 19: South Dakota Rate Filing
South Dakota Rate Filing Original Request (Docket EL14-106) Settlement Agreement Approved In September 2015, we reached a settlement with the Three major projects alone account for 96% of the SDPUC staff and intervenors providing for an requested $26.5M increase. increase in base rates of approximat
Slide 20: Natural Gas Reserves Opportunity
Natural Gas Reserves Opportunity We continue to pursue opportunities to secure Total Annual Need low cost gas reserves for our customers. First ~6 Bcf annual • Three acquisitions totaling approximately $100 million production acquired since September 2010: Owned for ~$100M • 84.6 Bcf of natural gas
Slide 21: Infrastructure Projects
Infrastructure Projects • 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 primary
Slide 22: DGGS Update – Still waiting on FERC
DGGS Update – Still waiting on FERC 22
Slide 23: Capital Spending Forecast
Capital Spending Forecast In the chart below, 2015 excludes the $143 million of capital related to the Beethoven Wind acquisition completed in September 2015. * Nearly $1.5 billion estimated cumulative capital spending from 2015 through 2019. We anticipate funding the capital projects with a combina
Slide 24: Beethoven Wind Acquisition
Beethoven Wind Acquisition Opportunity: In September 2015, we completed the purchase of the 80 MW Beethoven wind project, near Tripp, South Dakota, for approximately $143 million (subject to customary post closing adjustments) with BayWa r.e. Wind LLC. Prior to the acquisition, the energy and renewa
Slide 25: 'Clean' Owned & Contracted Supply Portfolio
‘Clean’ Owned & Contracted Supply Portfolio 54% 25% Renewable Renewable 67% Renewable Charts above are calculated using nameplate megawatts and include long-term contracts extending beyond 5 years. * DGGS is a 150 MW regulating facility constructed to support the integration of wind generations vari
Slide 26: EPA's 2030 carbon target for Montana
EPA’s 2030 carbon target for Montana NWE’s CO2 intensity* decreased by approximately 41% with the addition of the hydro facilities to our Montana generation portfolio. However EPA’s Clean Power Plan targets are statewide and not utility specific targets. CO2 Intensity* 41% * lbs CO2 per MWH produced
Slide 27: EPA's Clean Power Plan
EPA’s Clean Power Plan • If the Clean Power Plan rules were utility specific, NorthWestern would be in excellent shape…. but emission targets are established at a state level. • NorthWestern’s Montana electric supply portfolio has a low carbon emissions rate, lower than the final 2030 Montana rate m
Slide 28: Conclusion
Conclusion Pure Electric Strong Attractive Best Practices Solid Utility and Gas Utility Earnings and Future Growth Corporate Foundation Cash Flows Prospects Governance Madison Morony Thompson Falls Hauser Holter Rainbow Hydro Transaction Transaction Announced Closed 9/26/2013 11/18/2014 Cochrane Rya
Slide 29: Appendix
Appendix 29
Slide 30: Summary Financial Results (Qtr & YTD)
Summary Financial Results (Qtr 3 & YTD) 30
Slide 31: Weather (Third Quarter)
Weather (Third Quarter) Maximum Temperature from Normal Minimum Temperature from Normal 31
Slide 32: Adjusted Earnings (Third Quarter '15 vs '14)
Adjusted Earnings (Third Quarter ‘15 vs ’14) 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 32 results and measures determined or cal
Slide 33: Adjusted Earnings (YTD '15 vs '14)
Adjusted Earnings (YTD ‘15 vs ’14) The non-GAAP measures presented in the table above are being shown to reflect significant items that 33 were not contemplated in our original guidance, however they should not be considered a substitute for financial results and measures determined or calculated in
Slide 34: 2014 to 2015 Reconciliation (3rd Qtr & YTD)
2014 to 2015 Reconciliation (3rd Qtr & YTD) 34
Slide 35: Balance Sheet
35 (dollars in millions) Cash Restricted cash Accounts receivable, net Inventories Other current assets Goodwill PP&E and other non-current assets Total Assets Payables Current maturities of long-term debt & capital leases Short-term borrowings Other current liabilities Long-term debt & capital leas
Slide 36: Cash Flow
Cash Flow Year-to-date Cash from Operations has increase by $100 million as compared to prior year primarily due to increased income and a reduction in the under collection of supply costs in our trackers. 36
Slide 37: Income Tax Reconciliation (Qtr & YTD)
Income Tax Reconciliation (Qtr 3 & YTD) 37
Slide 38: 2014 System Statistics
2014 System Statistics (1) Note: Statistics above are as of 12/31/2014 (adjusted for Beethoven Wind project acquisition and Conveyance of Kerr Dam in 2015) (1) Nebraska is a natural gas only jurisdiction 38
Slide 39: Experienced & Engaged Board of Directors
Experienced & Engaged Board of Directors Dana J. Dykhouse - Chief Executive Officer of First PREMIER Bank. Director since 2009 Dorothy M. Bradley - Retired District Court Administrator for the 18th Judicial Court of Montana. Director since 2009 E. Linn Draper Jr. - Chairman of the Board - Retired Ch
Slide 40: Strong Executive Team
Strong Executive Team 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 industry experience; current position since 2011 Kendall G. Kliewer - [Resigned 10/19/1
Slide 41: Our Commissioners
Our Commissioners Montana Public Service Commission Commissioners are elected in statewide elections from each of five districts. Chairperson is elected by fellow Commissioners. Commissioner term is 4 years, Chairperson term is 2 years. Began Term Name Party Serving Ends Kirk Bushman R Jan-13 Jan-17
Slide 42: Non-GAAP Financial Measures
Non-GAAP Financial Measures 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 is
Slide 43: Upetivering a
Upetivering a bright future