NorthWestern Energy Group, Inc. · NASDAQ:NWE
NorthWestern Energy — Investor Presentation (March 2013)
42 slides from NorthWestern Energy's investor presentation, March 2013
Slide 1: Investor Update March 2013
Energy Delivering a Bright Future INVESTOR UPDATE March 2013 * CELEBRATING OUR FIRST CENTURY 1912 - 2012
Slide 2: Forward Looking Statement
2 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: About NorthWestern
3 ABOUT NORTHWESTERN Our Vision: Enriching lives through a safe, sustainable energy future Our Mission: Working together to deliver safe, reliable and innovative energy solutions Our Values: S - safety E - excellence R - respect V - value I - integrity C - community E - environment
Slide 4: NWE: An Investment for the Long Term
4 NWE: AN INVESTMENT FOR THE LONG TERM We’re a fully regulated and financially solid utility; with – Diversity across states, service type and customer segments – A 100 year history of competitive customer rates, system reliability and customer satisfaction – 5 years of significant earnings and divi
Slide 5: NorthWestern Energy Profile
5 NORTHWESTERN ENERGY PROFILE TICKER: NWE
Slide 6: A Strong & Well Rounded Board & Executive Team
6 A STRONG & WELL ROUNDED BOARD & EXECUTIVE TEAM
Slide 7: NWE Corporate Responsibility
7 NWE CORPORATE RESPONSIBILITY
Slide 8: Better Than Average Economic Indicators
8 BETTER THAN AVERAGE ECONOMIC INDICATORS Top Left: Unemployment rate consistently below National Average for our service territory. National Ranking (NE 2nd, SD 3rd & MT 15th) Top: Bad Debt/Revenue Write-off better than peer average in AGA/EEI 2011 Survey – Our customers pay their bills. Left: Proj
Slide 9: A Diversified Electric and Gas Utility
9 A DIVERSIFIED ELECTRIC AND GAS UTILITY The “80/20” rules of NorthWestern Gross Margin in 2012: Electric: $528M Natural Gas: $146M Gross Margin in 2012 Other $ 1M Montana: $570M South Dakota: $ 95M Nebraska: $ 10M Average Customers in 2012: Residential: 557k Above data reflects full year 2012 resul
Slide 10: Strong Utility Foundation
10 STRONG UTILITY FOUNDATION Electric source: Edison Electric Institute Typical Bills and Average Rates Report, 1/1/12 Natural gas source: US Dept of Energy Monthly residential supply and delivery rates as of 1/1/12 Strong utility operations: Solid system reliability (EEI 2nd quartile); A NWE cu
Slide 11: 2013 Earnings Guidance
11 2013 EARNINGS GUIDANCE 2013 Diluted GAAP EPS Range of $2.40-2.55 1 Midpoint 2013 guidance range of $2.40-$2.55 based upon, but not limited to, the following major assumptions and expectations: • A consolidated income tax rate of approximately 12% - 16% of pre-tax income; • Colstrip Unit 4, Big St
Slide 12: 5 Year Track Record of Delivering Results
12 5 YEAR TRACK RECORD OF DELIVERING RESULTS Return on Equity has steadily improved each year from 2008 – 2012 and Dividend per Share has increased each of the last 5 years. 1 1 2 5 Year (2008-12) Average Return on Equity : 9.8% 5 Year (2008-12) CAGR Dividend: 2.9% Current Dividend Yield Approximate
Slide 13: Strong Cash Flows
13 STRONG CASH FLOWS While maintenance capex and dividend payments have continued to grow over the past 5 years (6.5% and 2.1% CAGR respectively), Cash Flow from Operations has continued to outpace maintenance capex and provided approximately $40-60 million of positive Free Cash Flow per year. We an
Slide 14: Solid Pension Funding
14 SOLID PENSION FUNDING We calculated our pension obligation with conservative estimates relative to our peers. Updated 2013 pension assumptions include an expected long-term rate of return of 7.00% and discount rate assumed at 3.55%-3.80%. NorthWestern pension funding status as of 12/31/12 is 78%.
Slide 15: Balance Sheet Strength and Liquidity
15 BALANCE SHEET STRENGTH AND LIQUIDITY
Slide 16: Hard Assets Providing Real Value
HARD ASSETS PROVIDING REAL VALUE 16 (Left) We believe continued investment in our system to provide an even more safe, reliable, environmentally responsible and cost-effective service for our customers will produce additional value for our shareholders. (Below) NWE Total Shareholder Return has outpe
Slide 17: Net Investment in Existing Business
17 NET INVESTMENT IN EXISTING BUSINESS Maintenance capital expenditures have cumulatively outpaced depreciation by $160 million over the last five years (2008 to 2012), while maintaining a positive Free Cash Flow during the same period.
Slide 18: 2012 Montana Natural Gas Rate Filing
18 2012 MONTANA NATURAL GAS RATE FILING We are dedicated to operating a safe, reliable natural gas system and that requires ongoing investment in infrastructure replacements. If approved by the MPSC, on average this request would result in a monthly increase of $5.69 or 7.17% for a residential custo
Slide 19: Investment Opportunity Outlook
19 INVESTMENT OPPORTUNITY OUTLOOK Energy Supply – Big Stone/Neal pollution control – South Dakota natural gas peaking generation – Montana Spion Kop Wind facility - completed – Other vertical integration opportunities in Montana including gas reserves or base load generation Transmission – Netwo
Slide 20: Investment Project Summary
20 INVESTMENT PROJECT SUMMARY COMPLETED IN 2012 Note: Color / label indicate NorthWestern Energy's current probability of execution and timing of expenditures. Several opportunities exist to further increase and diversify earnings as compared to our approximately $1.8 billion of rate base today. Add
Slide 21: Natural Gas Needs and Supply
21 NATURAL GAS NEEDS AND SUPPLY Top Left: Approximately 11% of our total natural gas needs go toward electric generation and the remaining 89% is sold to our retail customers Top: We own approximately 10% of our total retail needs in Montana Left: As we continue to add to our natural gas reserves to
Slide 22: Montana Electric Generation Opportunity
22 MONTANA ELECTRIC GENERATION OPPORTUNITY The total load served over our Montana system is approximately 11 million MWh. The load we currently have responsibility for providing supply is approximately 6 million MWh. Our owned generation in Montana , including the addition of Spion Kop in 2013, woul
Slide 23: Distribution Investment Outlook
DISTRIBUTION INVESTMENT OUTLOOK 23 Distribution System Integrity Program (DSIP) The Project addresses the emerging issue of our aging infrastructure and prepares our natural gas and electric distribution systems for the next generation of technology. For the electric distribution system, the Program
Slide 24: Capital Spending
CAPITAL SPENDING 24 DSIP – Distribution System Infrastructure Project - $253M over the next 5 years. Energy Supply includes the planned environmental spending, in South Dakota, on our Big Stone, Neal 4, and Aberdeen Peaker plants. Does not include any electric or natural gas supply acquisitions or a
Slide 25: Conclusion
CONCLUSION 25 We’re a fully- Best practices Attractive future regulated and corporate growth prospects financially sound governance and utility; with - Reintegrating energy - Diversity across states, supply portfolio (natural -A strong and well rounded service type and customer gas and electric) boa
Slide 26: Appendix
26 APPENDIX NorthWesterni Energy Delivering a Bright Future
Slide 27: Earnings Reconciliation
EARNINGS RECONCILIATION 27 Total Operating Expense Operating Income Interest Expense Other Income (Expense) Income Before Inc. Taxes Income Tax Benefit (Expense)' Net Income (Loss) Diluted Shares Diluted EPS Twelve Months Ended December 31, 2012 {$millions, except EPS) 5 P j 5 pa og a o Qo ao 3 : 5.
Slide 28: Adjusted EPS Schedule
28 ADJUSTED EPS SCHEDULE 2012 Q12012— Q22012-Q32012, 42012 | =FY 2012 Reported GAAP diluted EPS $ 0.88 $ 0.31 $§ (0.10) $ 1.57] $ 2.66 Non-GAAP Adjustments: Weather 0.09 0.05 (0.06) 0.06 | $ 0.14 Release of MPSC DGGS deferral (0.05) $ (0.05) Lost revenue recovery related to 2010/2011 (0.05) $ (0.05)
Slide 29: 2013 EPS Bridge from 2012
2013 EPS BRIDGE FROM 2012 29 Basic assumptions include the following expectations in 2013: A consolidated income tax rate of approximately 12% - 16% of pre-tax income; Colstrip Unit 4, Big Stone, and Coyote generation plants are scheduled for routine maintenance during second quarter of 2013; Dilute
Slide 30: Consolidated Statement of Income
30 CONSOLIDATED STATEMENT OF INCOME
Slide 31: Consolidated Statement of Cash Flows
31 CONSOLIDATED STATEMENT OF CASH FLOWS
Slide 32: Consolidated Balance Sheet
32 CONSOLIDATED BALANCE SHEET
Slide 33: Effective Tax Rate Reconciliation
33 EFFECTIVE TAX RATE RECONCILIATION
Slide 34: 2012 System Statistics
34 2012 SYSTEM STATISTICS (2) (1) •MT electric supply increased 40 MW in 2012 due to the addition of Spion Kop wind. •MT NG reserves includes 13.4 Bcf Bear Paw acquisition in 2012. Note: Statistics above are as of 12/31/2012 (1) Includes 60 MW Aberdeen Peaker to be placed in service during 2013 (2)
Slide 35: Environmental Controls
35 ENVIRONMENTAL CONTROLS PRESENT Primary Pollutant Controlled Nitrogen Oxide (NOX) Particulate Matter | 0 Low Nox HG Control Plant Name SNCR Burner B E Injection Colstrip 3 & 4 x x x x Big Stone nis x DGGS (Natural Gas) x (Coyote x x Neal #4 x x PLANNED / REQUIRED Primary Pollutant Controlled Nitro
Slide 36: Our Commissioners
36 OUR COMMISSIONERS . ow 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. Moxras® Began Term Name Party Serving Ends Kirk Bushman
Slide 37: One Hundred Years Later
37 ONE HUNDRED YEARS LATER. . . . After One Hundred Years, Electricity is still a great value
Slide 38: South Dakota Electric Supply Capex
SOUTH DAKOTA ELECTRIC SUPPLY CAPEX 38 We are planning on spending approximately $190 million on capital expenditures on our South Dakota electric supply plants.
Slide 39: Montana Major Transmission Projects
MONTANA MAJOR TRANSMISSION PROJECTS 39 Jack Rabbit – Big Sky 161kV Line Columbus – Rapelje 100kV NorthWestern Energy continues to make significant investments to upgrade our transmission system to add capacity and improve reliability. Two such projects are: Jack Rabbit – Big Sky 161kV Line and Colum
Slide 40: FERC's ALJ Ruling – We Got the Crust
40 FERC’s ALJ RULING – WE GOT THE CRUST 40
Slide 41: The Back Story on DGGS
41 THE BACK STORY ON DGGS Background •NorthWestern Energy operates a transmission system and balancing authority within Montana and is charged with the responsibility of providing safe and reliable electric service to all of its customers. This includes retail and wholesale customers. • Part of Nort
Slide 42: The Back Story on DGGS (Continued)
42 THE BACK STORY ON DGGS (CONTINUED) Support for DGGS (continued) • On April 29, 2010, NorthWestern made a filing with FERC proposing to collect costs associated with DGGS under the same cost allocation methodology and for the same magnitude of Regulating Resource as had been previously approved by
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