Northwestern Energy Group, Inc. · NASDAQ:NWE
Northwestern Energy — Investor Day (December 2010)
38 slides from Northwestern Energy's investor day presentation, Dec 7, 2010
Slide 1: 2011 Analyst Day
December 9, 2010 Omni Berkshire Place New York 2011 Analyst Day
Slide 2: Forward-looking statement
forward-looking statement… 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 financial
Slide 3: Who we are
who we are… Above data as of 9/30/10 (1) Book capitalization calculated as total debt, excluding capital leases, plus shareholders’ equity. ¾ 661,000 customers » 399,000 electric » 262,000 natural gas ¾ Approximately 123,000 square miles of service territory in Montana, South Dakota, and Nebraska »
Slide 4: NorthWestern's attributes
NorthWestern’s attributes… ¾ Solid operations » Cost competitive » Above-average reliability » Award-winning customer service ¾ Low single A secured credit ratings with a strong balance sheet and liquidity » April 15, 2010 Fitch upgraded secured and unsecured ratings to A- and BBB+ respectively ¾ Po
Slide 5: Brian Bird, Chief Financial Officer
Brian Bird Chief Financial Officer
Slide 6: Strong credit ratings
strong credit ratings… A security rating is not a recommendation to buy, sell or hold securities. Such rating may be subject to revision or withdrawal at any time by the credit rating agency and each rating should be evaluated independently of any other rating.
Slide 7: Strong balance sheet and liquidity
strong balance sheet and liquidity… ¾ Total liquidity approximately $145 million ¾ Total Debt / Total capitalization of 55.8% (1) ¾ In past two years refinanced nearly all outstanding debt » In May 2010 we refinanced existing $225 million, 5.875% Senior Secured Notes due 2014 with 5.01% First Mortga
Slide 8: Strong cash flows
Earnings trend and NOLs provide strong cash flows to fund future investment. strong cash flows…
Slide 9: Solid pension funding position
As a result of the significant contribution of $93 million to our pension plan and solid market returns in 2009, we are better positioned than our peers at December 31, 2009 solid pension funding position… Data source: SNL Financial
Slide 10: And sustainable dividend
and sustainable dividend… Goal for dividend payout ratio of 60% - 70%. Current dividend yield about 5% with year-over-year dividend growth . (1) 2010 estimated payout range assumes midpoint of $1.95 - $2.10 guidance range
Slide 11: Reaffirming 2010 EPS guidance
reaffirming 2010 EPS guidance… ¾ The major assumptions include, but are not limited to, the following expectations: » Excludes approximately $.06/share for the 2010 estimated effect of the Montana rate increase proposed by the Stipulation, which is pending approval by the MPSC; » The release of the
Slide 12: 2009 to 2010 earnings bridge
2009 to 2010 earnings bridge… The major assumptions include, but are not limited to, the following expectations: » Excludes approximately $.06/share for the 2010 estimated effect of the Montana rate increase proposed by the Stipulation, which is pending approval by the MPSC; » The release of the sec
Slide 13: Near-term potential earnings drivers
near-term potential earnings drivers… ¾ 2011 expectations/assumptions: » Mill Creek in rate base in 2011 adding about $.20/share ♦ $7.5 million incremental post-tax contribution compared to 2010 ♦ MCGS rates pick up full interest costs & equity return in 2011 » Full year effect of Montana rate adjus
Slide 14: NorthWestern Energy: Delivering a Bright Future
NorthWestern Energy Delivering a Bright Future
Slide 15: Constructive regulatory environment
constructive regulatory environment… ¾ Montana » Rate case ♦ MPSC reached a decision on the rate case at a recent work session; decision and approval is subject to MPSC issuance of a final order ● MPSC approved the Stipulated settlement with Consumer Counsel for a $6.7 million rate increase ● MPSC a
Slide 16: Regulatory environment con't
regulatory environment con’t… ¾ South Dakota » Expect to file natural gas rate cases during 2011 pending 2010 results » Expect to file on environmental rider on the Neal plant for emissions compliance » Election results ♦ Current Chairman Dusty Johnson re-elected but appointed by new Governor to be
Slide 17: Regulatory milestones in 2011
Montana Distribution Infrastructure ¾ Accounting Order (in 2010) ¾ Make filing Q4 Q2 Prudency Review for Mill Creek P Interim filing (in 2010) Q4 ¾ Prudency filing Q1 ¾ FERC filing Q2 Approval for Montana Wind Projects ¾ Pre - approval filing Q2 Natural Gas - Rate base Battle Creek ¾ Rate base filin
Slide 18: Longer term investment opportunities
longer term investment opportunities… ¾ Distribution system enhancements » Incremental rate based investment to enhance reliability and capacity, improve rural service, and prepare the system for potential smart grid applications ¾ Energy supply » Big Stone and Neal plants’ pollution control equipme
Slide 19: Curt Pohl, Vice President - Retail Operations
Curt Pohl Vice President - Retail Operations
Slide 20: Distribution infrastructure project
distribution infrastructure project … ¾ Project Scope: » Electric $222M CAPEX $55M O&M » Gas $50M CAPEX $16M O&M ¾ Project Goals: » Electric System ♦ Arrest or reverse the trend in aging infrastructure
Slide 21: Proactive vs. reactive
proactive vs. reactive… (what is the least cost replacement rate?)
Slide 22: Electric plan components
5 year costs (millions) 50 100 electric plan components… Poles Accelerated inspection and replacement 5 Year cycle $90M Capex $8M O&M U/G Cable Accelerated replacement (10 years) Collect data $46M Capex $3 O&M Tree Trimming Accelerated trimming (5 years) Cut beetle kill trees $24M O&M Substations &
Slide 23: Gas plan components
NWE’s Gas Distribution Infrastructure Plan Mitigation of Safety Threats 5 Projects $45M Capex $1.5M O&M Evaluation and ranking of components for leak potential Damage Prevention $7.6M O&M Tactics to minimize third party damage leading to excavation-related leaks DIMP-guided threat analysis of system
Slide 24: Dave Gates, Vice President - Wholesale Operations
Dave Gates Vice President - Wholesale Operations
Slide 25: Generation growth highlights
In service date for Mill Creek Generation Station = Jan 1, 2011 generation growth highlights… Mill Creek Generating Unit in Montana ¾ What: 120-150 MW plant near Anaconda, MT » Built for regulation services to balance supply and load for NWE’s Balancing Area » Rate based cost of service investment »
Slide 26: Mill Creek project milestones
Mill Creek project milestones… 2010 and Prior Mill Creek ü Pre-approved for public interest by the MPSC ü Begin construction 2009 ü Construction completed 2010 ü Plant ‘test fired’ 2010 ü Interim rates approved 2010 (both at FERC and MT PSC) Mill Creek ¾ Final Prudency filed with MPSC Q1 ¾ FERC rate
Slide 27: Generation growth highlights: renewable generation in Montana
Needs to be added to meet Montana RPS generation growth highlights… Renewable Generation in Montana ¾ What: 25-50 MW’s of Wind Generation » Could be PPA or rate based asset » Estimated construction cost between $40 - $100 million ¾ Why: Needed to meet the Montana RPS standard of 10% by 2012 and 15%
Slide 28: Generation investments: South Dakota peaker
In service date for SD Peaker 2013-2015 generation investments… Peaking Plant in South Dakota ¾ What: 60 MW peaking plant near Aberdeen, SD » Current contract expires December » Rate based cost of service investment » Estimated to cost around $60 million ¾ Why: » Existing regional services are becom
Slide 29: Pollution control investments: Big Stone Plant
Required to occur by 2016 pollution control investments… Pollution Control - Big Stone Plant (SD) ¾ What: Emissions reduction to Big Stone 454 MW plant located in NE SD » Compliance with Clean Air Visibility Rule » Estimated to cost between $130 - $150 million for our portion (23.4%) » Emissions tra
Slide 30: Pollution control investments: Neal Plant
Expected by 2014 pollution control investments… Pollution Control - Neal Plant (SD) ¾ What: Scrubber installation to 655 MW Neal plant located in NW Iowa » Compliance with Clean Air Visibility Rule » Estimated to cost between $15 - $25 million for our portion (8.7%) » Emissions tracker mechanism exi
Slide 31: Natural gas supply: Battle Creek acquisition
Closed on acquisition in September and December 2010 natural gas supply… Battle Creek acquisition ¾ Purchase of proven natural gas reserves located proximate to our MT system » ½ bcf annual production (8.7 bcf total) » Represents 2.4% of MT retail usage » Interim rates collected through monthly trac
Slide 32: Wind Resource (50m)
Wind Resource (50m) & United States BN Need more be sai
Slide 33: Our proposed transmission projects
our proposed transmission projects…
Slide 34: Extended open seasons
Expected to remain open until the end of 2011 extended open seasons… ¾ MSTI siting delays: » Draft EIS delayed by Jefferson County, MT litigation against MDEQ ¾ General economic conditions: » Slow down in economy making developers cautious on LT commitments » Low natural gas prices making renewables
Slide 35: Electric Transmission America study
Headed by AEP & MidAmerican Energy 1. Phase 2 of study just released 2. Summarizes two overlay paths to consider 3. Transmission supporting integration of about 55 GW of wind generation 4. Estimated overlay cost range between $20 - $25 Billion 5. South Dakota would have over 4,000 MW wind generation
Slide 36: Green Power Express
Headed by ITC Holdings 1. Transfer capacity of 10 -12 GW of power supporting up to 22 GW of new wind generation 2. Crosses 7 states, numerous utility areas and two RTO’s 3. Estimated cost of project $10 - $12 Billion 4. Investment in SD would be significant Green Power Express …
Slide 37: Potential project summary
Opportunity to increase and diversify earnings as compared with our existing $1.8 billion rate base (including Mill Creek). potential project summary…
Slide 38: In summary
in summary… ¾ Solid operations ¾ Low single A secured credit ratings with a strong balance sheet and liquidity ¾ Positive earnings and ROE trend ¾ Strong cash flows ¾ Competitive total shareholder return and dividend that has increased every year since 2005 ¾ Constructive regulatory environment ¾ Fo