Slide 1: Third Quarter 2013 Earnings
1 Third Quarter 2013 Earnings 10/24/2013
Slide 2: On the Call Today
On the Call Today 2 • Bob Rowe, President & CEO • Brian Bird, VP & CFO • Heather Grahame, VP & General Counsel • Kendall Kliewer, VP & Controller • John Hines, VP - Energy Supply • Travis Meyer, Director of Investor Relations
Slide 3: Forward Looking Statements
3 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 future business and financia
Slide 4: Significant Activities
• September 26th hydro acquisition announcement – $900 million purchase of 11 hydro facilities and a storage reservoir – October 18th informational meeting with MPSC • Fortnightly 40 Company – Recognized as one of the “40 best energy companies” • Board declared a stock dividend – $0.38 cents – Payab
Slide 5: Fortnightly 40 Ranking
FORTNIGHTLY 40 5 76 59 63 58 47 38 0 20 40 60 80 2008 2009 2010 2011 2012 2013 Pu bli c U til ity Co m pa nie s NorthWestern's Ranking 40
Slide 6: Strong Corporate Governance
Strong Corporate Governance 6 Fortnightly 40 NorthWestern Energy was recently recognized as one of the top 40 best energy companies in the United States by Fortnightly 40. The report compares shareholder value performance by looking at uniform data sets among the leading publicly traded electric and
Slide 7: Strong Corporate Citizenship
Strong Corporate Citizenship NorthWestern Energy works to help build strong communities everywhere we serve. 7 Montana Business of the Year NorthWestern Energy was recently selected as the 2012 Business of the Year by the Montana Ambassadors. The Ambassadors are a group of 120 business leaders from
Slide 8: Summary Financial Results
Summary Financial Results 8 (in millions, except per share) 2013 2012 2013 2012 Operating Revenues $262.3 $235.9 $835.5 $789.5 Cost of Sales 104.3 93.0 343.4 327.9 Gross Margin 158.0 142.9 492.1 461.6 Operating Expenses Operating, general & administrative 72.5 63.1 208.7 195.7 MSTI impairment - 24.0
Slide 9: Gross Margin Variance: Electric and Natural Gas
9 • $13.1 million increase in electric gross margin • $10.2 DGGS revenue due to $11.4 million deferral in third quarter 2012 • $ 5.8 DSM lost revenues recognized • $ 1.6 Spion Kop acquired in the fourth quarter 2012 • $ 0.5 Montana Property tax tracker • $ (3.5) Retail volumes due to cooler summer w
Slide 10: Operating Expenses
Operating Expenses 10 Three Months Ended September 30, ($millions) 2013 2012 Variance Operating Expenses $126.6 $138.4 $ (11.8) (8.5)% Decrease due mainly to the following factors: • $(24.0) million decrease due to MSTI Impairment in 2012 • $9.4 million increase in OG&A • $ 3.3 Distribution System I
Slide 11: Operating to Net Income
Operating to Net Income 11 (in millions) 2013 2012 Variance Primarily due to: Operating Income $31.4 $4.4 $27.0 Items discussed previously Interest Expense (17.1) (17.7) 0.6 Interest accrued on DGGS deferred revenue in the third quarter of 2012 Other Income 3.1 1.0 2.1 Changes in the value of deferr
Slide 12: Balance Sheet
Balance Sheet 12 (in millions) Sept. 30, 2013 Dec. 31, 2012 Cash 10.9 9.8 Restricted cash 8.2 6.7 Accounts receivable, net 129.2 143.7 Inventories 62.6 54.2 Other current assets 69.7 88.8 Goodwill 355.1 355.1 PP&E and other non-current assets 2,997.9 2,827.3 Total Assets 3,633.7$ 3,485.5$ Payables 6
Slide 13: Cash Flow
Cash Flow 13 (in millions) 2013 2012 Operating Activities Net Income $67.9 $39.7 Non-Cash adjustments to net income 123.6 124.0 Changes in working capital 6.5 68.7 Other (26.7) (9.8) Cash provided by operating activities 171.3 222.6 Investing Activities PP&E additions (153.9) (157.8) Asset acquisiti
Slide 14: 2013 Earnings Guidance
2013 EARNINGS GUIDANCE 14 Updated 2013 guidance range of $2.45 to $2.60 based upon, but not limited to the following major assumptions and expectations: • A consolidated income tax rate of approximately 12% of pre-tax income; • Normal weather in our electric and natural gas service territories for t
Slide 15: Adjusted EPS Schedule
Adjusted EPS Schedule 15 Q1 Q2 Q3 Q4 2013 2013 Reported GAAP diluted EPS $1.01 $0.37 $0.40 $1.78 Non-GAAP Adjustments: Weather (0.02) (0.02) (0.04)$ Hydro Transaction related legal and professional fees 0.05 0.05$ DSM lost revenue recovery - portion related to 2012 (0.04) (0.04)$ 2013 Adjusted dilut
Slide 16: 2014 Earnings Drivers
2014 Earnings Drivers 16 Potential earnings drivers for 2014 • Hydro transaction related expenses with potential income offset • Bear Paw South (Devon acquisition) • Organic volumetric electric and gas load growth • Full year of the 2013 Montana natural gas rate relief • Full year of depreciation wi
Slide 17: Update: FERC / DGGS
Update: FERC / DGGS 17 • The Issue: FERC Administrative Law Judge issued a nonbinding decision to allocate only a fraction of the amount of revenue we believe should be allocated based on past practice to FERC customers for our Dave Gates Generating Station. – FERC is not obligated to follow any of
Slide 18: Update: South Dakota Energy Supply - Big Stone
Update: South Dakota Energy Supply 18 • Big Stone Power Plant – Ownership: 23.4% of 475 MW coal plant – Project: Big Stone is subject to the Best Available Retrofit Technology (BART) requirements of the Regional Haze Rule. In order to comply, we are required to install Air Quality Control System (AQ
Slide 19: Update: South Dakota Energy Supply - Neal
Update: South Dakota Energy Supply 19 • Neal 4 – Ownership: 8.7% Partner in 644 MW coal plant – Project: To comply with national ambient air quality standards and Mercury & Air Toxics Standards (MATS), we are installing a scrubber, a baghouse, activated carbon and a selective non-catalytic reduction
Slide 20: Update: Southern Bear Paw Transaction
Update: Southern Bear Paw Transaction 20 • Pending acquisition of Bear Paw South – Entered into an agreement in May of 2013 to purchase 64.6 Bcf proven reserves and 82% interest in Havre Pipeline Company for $70 million. – The regulatory waiver, necessary due to a previous stipulation, filed in June
Slide 21: Update: Other Gas Reserve Opportunities?
Battle Creek ~1% Bear Paw North ~8% Bear Paw South ~28% Unfilled ~13% Update: Other Gas Reserve Opportunities? 21 • We continue to pursue opportunities to secure low cost gas reserves for our customers. – Remaining 13% unfilled position (assuming successful close on Bear Paw South) to reach our targ
Slide 22: Update: DSIP
Update: DSIP 22 • Montana Distribution System Infrastructure Project (DSIP) to maintain a safe and reliable electric and natural gas distribution system. – The primary goals: reverse the trend in aging infrastructure, maintain reliability, proactively manage safety, build capacity into the system, a
Slide 23: Pending Hydro Transaction
Pending Hydro Transaction Our Vision Statement: Working together to deliver safe, reliable and innovative energy solutions that create value for our customers, communities, employees and investors. The acquisition of these highly valuable assets should allow NorthWestern to further our mission state
Slide 24: Assets are a Great Fit at the Right Time
• Existing resources with no development risk. • Location within the service territory eliminates need for additional transmission to serve our customers. • Excellent fit for our portfolio needs. Meets our off-peak need and provides additional opportunity to meet heavy-load needs. – We expect the fi
Slide 25: Hydro Financing Strategy
• Financing Plans – Plan to close into permanent financing with approximately $450 – 500 million of debt, up to $400 million of equity, and up to $50 million of free cash flows. – If capital market access is limited we have the option of closing into the $900 million committed Bridge Facility with C
Slide 26: Delivering a bright future
Upelivering a bright future
Slide 27: Appendix: Three Months Net Income Variance
APPENDIX 27 NORTHWESTERN CORPORATION Three Months Ended September 30, 2013 ($millions, except EPS) Th re e M on th s E nd ed , Se pt em be r 3 0, 20 12 DG GS DS M los t r ev en ue s Sp ion K op Na tur al Ga s p rod uc tio n Mo nta na na tur al ga s r ate in cre as e Pr op ert y t ax tr ac ke rs El e
Slide 28: Appendix: Nine Months Net Income Variance
28 APPENDIX NORTHWESTERN CORPORATION Nine Months Ended September 30, 2013 ($millions, except EPS) Ni ne M on ths E nd ed , Se pte mb er 30 , 2 01 2 Na tur al ga s p rod uc tio n DG GS Sp ion K op Ele ctr ic tra ns mi ss ion Na tur al ga s r eta il v olu me s Mo nta na na tur al ga s r ate in cre as
Slide 29: Appendix: Income Tax Reconciliation
APPENDIX 29 (in millions) 2013 2012 2013 2012 Income (Loss) Before Income Taxes $17.5 ($12.4) $76.9 $41.7 Income tax calculated at 35% federal statutory rate 6.1 (4.3) 26.9 14.6 Permanent or flow through adjustments: Flow-through repairs deductions (3.1) (1.8) (12.9) (9.5) Flow-through of state bonu
Slide 30: 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 numerical measure of a company's financi