Northwestern Energy Group, Inc. · NASDAQ:NWE
Northwestern Energy — Non-Deal Roadshow (September 2023)
76 slides from Northwestern Energy's roadshow presentation, Sep 13, 2023
Slide 1: Investor Update
Rowe Dam at Mystic Lake, Montana Investor Update September 2023 8-K September 13, 2023
Slide 2: Forward Looking Statements
2 Forward Looking Statements O’Dell Creek - Forward Looking Statements 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: Vision Mission Values
NorthWestern Energy Vision Mission Values Enriching Working Safety lives through together to Excellence a safe and deliver safe, Respect sustainable reliable and Value energy affordable Integrity future. energy Community solutions. Environment 3
Slide 4: Company Overview
pa Oy ae a p eae = Company Overview Delivering © Bright Future
Slide 5: NWE - An Investment for the Long Term
5 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 6: About NorthWestern
6 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 7: NorthWestern's Combo-Advantage
7 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 8: Montana Enhanced Wildfire Mitigation Plan
Montana Enhanced Wildfire Mitigation Plan Reduction of System and Enhanced Enriched Public Ignition Environmental Vegetation Communication Potential Monitoring Maintenance and Outreach Filed in August 2022 with Montana general rate review Settlement provides for deferral of fire mitigation opera
Slide 9: A Diversified Electric and Gas Utility
9 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 10: Highly Carbon-Free Supply Portfolio
10 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 Reg
Slide 11: Strong Utility Foundation
11 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 12: Solid Economic Indicators
12 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 13: Regulatory & Financial Update
13 Regulatory & Financial Update
Slide 14: Montana Rate Review
14 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 15: South Dakota Rate Review
15 South Dakota Rate Review Request to update our rates to reflect the current cost to provide safe and reliable service to our customers • First rate review since 2015. Seeking recovery of nearly 30 percent of rate base that is not included in South Dakota electric rates today. • Requested base rat
Slide 16: South Dakota Rate Review
16 South Dakota Rate Review Infrastructure investment drives nearly 99%* of the requested base rate adjustment * $19.0 million Cost of Capital plus $17.2 million Infrastructure Investment as a percent of $36.6 million Total Change in Cost of Service.
Slide 17: South Dakota Rate Review
17 South Dakota Rate Review $19.14 Per month Increase for an average residential electric customer that uses 750 kWh if our requested rate increase is approved.
Slide 18: South Dakota Rate Review
18 South Dakota Rate Review Since our last rate adjustment, NorthWestern’s typical residential electric customer bills have maintained a pace well below inflation. This request, if granted in full, would still result in customer bills in line with inflation.
Slide 19: Legislative Update
19 Legislative Update MT – Revised Environmental Policy & Permitting Statutes (HB 971 & SB 557) • 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 apply
Slide 20: Colstrip Transfer
20 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 21: December 2022 Polar Vortex
21 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 22: Financial Outlook
22 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 $510 million capital plan for 2023 (inclusive of $80 million of investment specific to Yellowstone County Generating Station). Long-term
Slide 23: Capital Investment
23 Capital Investment ($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 24: Solid Balance Sheet
24 Solid Balance Sheet Investment grade credit ratings, debt to capitalization within our targeted 50%-55% range and a manageable schedule of debt maturities.
Slide 25: Supply Update
25 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 26: Corporate Responsibility
26 Corporate Responsibility
Slide 27: ESG Publications
27 ESG Publications Environmental Social Governance These eight publications provide valuable insight into NorthWestern Energy’s Environmental, Social and Governance (ESG) Sustainability practices. Sustainability Report includes Sustainability Accounting Standards Board (SASB) and Task Force on Clim
Slide 28: 2022 Sustainability Report
28 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 29: ESG - Environmental
29 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 30: ESG - Social
30 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 31: ESG - Governance
31 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 32: Conclusion
32 Conclusion Best Attractive Improving Pure Earnings & Solid Utility Practices Future Electric & Cash Flows Foundation Corporate Growth Gas Utility (rate reviews Governance Prospects pending)
Slide 33: Delivering a bright future
Upetivering a bright future
Slide 34: Regulated Utility Five-Year Capital Forecast
34 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 35: NWE Rate Base and Earnings Profile
35 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 36: Transmission System Update
36 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 37: Montana Rate Review
37 Appendix Montana Rate Review
Slide 38: Montana Rate Review
38 Appendix Montana Rate Review
Slide 39: Montana Rate Review
39 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 40: Montana Rate Review
40 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 41: Delivering Customer Value
41 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 42: Montana General Rate Review Proposals
42 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 43: Colstrip Transfer Agreement
43 Appendix Colstrip Transfer Agreement
Slide 44: Colstrip Transaction Overview
44 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 45: Why Colstrip?
45 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 46: Facility Ownership Overview
46 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 47: Timeline of Montana Generation Portfolio
47 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 48: Comparison of Installed Capacity
48 Appendix Comparison of Installed Capacity Source: EIA.gov – 2022 Form EIA-860 Data - Schedule 3 for calendar year 2022 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 49: Earnings & Other
Earnings & Other Delivering © Bright Future
Slide 50: Q2 2023 Financial Results
Appendix Q2 2023 Financial Results Second Quarter Net Income vs Prior Period •GAAP: ↓ $10.7 Million (or 35.9%) •Non-GAAP*: ↓ $9.7 Million (or 32.2%) •Non-GAAP Pro Forma: ↓ $0.8 Million (or 2.7%) (Impact if MT Rate Review Settlement approved as filed) Second Quarter EPS vs Prior Period •GAAP: ↓ $0.22
Slide 51: Q2 2023 Financial Results
Appendix Q2 2023 Financial Results (1) ( ) 51 (1) Utility Margin is a non-GAAP Measure See appendix slide titled “Explaining Utility Margin” for additional disclosure.
Slide 52: Q2 2023 EPS Bridge
52 Appendix Q2 2023 EPS Bridge After-tax Earnings Per Share Solid improvement in first quarter net income but offset by dilution from higher outstanding share count. See slide 7 and “Non-GAAP Financial Measures” slide in the appendix for additional detail on this measure. Change in Items impacting N
Slide 53: Q2 2023 Utility Margin Bridge
53 Appendix Q2 2023 Utility Margin Bridge Pre-tax Millions NOTE: Utility Margin is a non-GAAP Measure $2.9 Million or 1.3% increase in Utility Margin See appendix slide titled “Explaining Utility due to items that impact Net Income. Margin” for additional disclosure.
Slide 54: Q2 2023 OA&G Expense Bridge
54 Appendix Q2 2023 OA&G Expense Bridge Pre-tax Millions NOTE: Utility Margin is a non-GAAP Measure $7.2 Million or 8.9% increase in Operating, Administrative, See appendix slide titled “Explaining Utility and General Expenses due to items that impact Net Income. Margin” for additional disclosure.
Slide 55: Q2 2023 Tax Reconciliation
55 Appendix Q2 2023 Tax Reconciliation
Slide 56: Q2 2023 GAAP to Non-GAAP Earnings
56 Appendix Q2 2023 GAAP to Non-GAAP Earnings Three Months Ended June 30, Non-GAAP Adjustments Non-GAAP Adjustments Non Non-GAAP Non The adjusted non- GAAP GAAP GAAP Variance GAAP GAAP measures Community Renewable Energy Project (1) (1) presented in the table are being Move Pension Expense to OG&A M
Slide 57: Year-to-Date 2023 Financial Results
Appendix Year-to-Date 2023 Financial Results (through Q2) Year-to-Date Net Income vs Prior Period •GAAP: ↓ $7.3 Million (or 8.2%) •Non-GAAP*: ↓ $6.3 Million (or 7.0%) •Non-GAAP Pro Forma: ↑ $14.3 Million (or 15.9%) (Impact if MT Rate Review Settlement approved as filed) Year-to-Date EPS vs Prior Per
Slide 58: Year-to-Date Financial Results
58 Appendix Year-to-Date Financial Results (through Q2)
Slide 59: Year-to-Date Utility Margin
59 Appendix Year-to-Date Utility Margin (through Q2) (dollars in millions) Six Months Ended June 30, 2023 2022 Variance Electric $ 404.1 $ 379.8 $ 24.3 6.4% Natural Gas 107.9 107.5 0.4 0.4% (1) Total Utility Margin $ 512.0 $ 487.3 $ 24.7 5.1% Increase in utility margin due to the following factors:
Slide 60: Year-to-Date Operating Expenses
60 Appendix Year-to-Date Operating Expenses (through Q2) (dollars in millions) (1) In order to present Six Months Ended June 30, the total change in labor and benefits, we 2023 2022 Variance have included the change in the non- service cost component Operating & maintenance $ 110.7 $ 106.1 $ 4.6 4.3
Slide 61: Year-to-Date Operating to Net Income
61 Appendix Year-to-Date Operating to Net Income (through Q2) (dollars in millions) Six Months Ended June 30, 2023 2022 Variance Operating Income $ 141.6 $ 131.5 $ 10.1 7.7% Interest expense (56.4) (47.7) (8.7) (18.2)% Other income, net 8.8 7.6 1.2 15.8% Income Before Taxes 94.0 91.4 2.6 2.8% Income
Slide 62: Year-to-Date Tax Reconciliation
62 Appendix Year-to-Date Tax Reconciliation (through Q2)
Slide 63: Year-to-Date GAAP to Non-GAAP Earnings
63 Appendix Year-to-Date GAAP to Non-GAAP Earnings (through Q2) 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 m
Slide 64: Quarterly PCCAM Impacts
64 Appendix Quarterly PCCAM Impacts Pre-tax Millions Q1 Q2 Q3 Q4 Full Year '17/'18 Tracker First full year recorded in Q3 $3.3 $3.3 '18/'19 Tracker ($5.1) $0.3 (4.8) 2018 (Expense) Benefit $0.0 $0.0 ($1.8) $0.3 ($1.5) In 2017, the Montana legislature revised Full Year the statute regarding our recov
Slide 65: Qualified Facility Earnings Adjustment
65 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 66: EPS & Dividend History
66 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 67: Investment for Our Customers' Benefit
67 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 68: Natural Gas LDC - AECO Advantage to Customers
68 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 69: 2022 System Statistics
69 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 70: Our Commissioners
70 Appendix Our Commissioners
Slide 71: Non-GAAP Financial Measures (1 of 5)
71 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 72: Non-GAAP Utility Margin Reconciliation (2 of 5)
72 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 73: Non-GAAP Utility Margin Reconciliation (3 of 5)
73 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 74: Non-GAAP Earnings (4 of 5)
74 Appendix Non-GAAP Earnings (4 of 5)
Slide 75: Non-GAAP Ratios and Metrics (5 of 5)
75 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 76: Delivering a bright future
Upetivering a bright future
NorthWestern Energy Group — Non-Deal Roadshow (September 2023) on 6ix