Northwestern Energy Group, Inc. · NASDAQ:NWE
Northwestern Energy — Mizuho Mid-Cap Utilities Conference 2024
60 slides from Northwestern Energy's conference presentation, Jun 3, 2024
Slide 1: Mizuho Mid-Cap Utilities Conference
8-K Date: June 03, 2024 Mizuho Mid-Cap Utilities Conference New York | June 3, 2024
Slide 2: Forward Looking Statements
NorthWestern Energy 2 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
Slide 3: Overview
Thank youOverview 3
Slide 4: NWE – An Investment for the Long Term
NWE – An Investment for the Long Term 4 • Approved Montana electric & natural gas and South Dakota electric rate reviews aid earnings, cash flow, and balance sheet strength • NOLs and tax credits expected to mitigate future cash tax obligations • History of consistent annual dividend growth • 100% p
Slide 5: About NorthWestern
About NorthWestern 5 Montana Operations Electric 405,500 customers 25,274 miles – transmission & distribution lines 887 MW maximum capacity owned power generation Natural Gas 212,100 customers 7,390 miles of transmission and distribution pipeline 17.85 Bcf of gas storage capacity Own 31.5 Bcf of pro
Slide 6: The NorthWestern Value Proposition
9%-11% Total Growth 11%+ Total Growth Incremental Opportunities: 6% + EPS Growth ~5% Dividend Yield Base Capital Plan: 4%-6% EPS Growth FERC Transmission Incremental generating capacity (subject to successful resource procurement bids) Qualifying Facility and / or Power Purchase Agreement buyo
Slide 7: A Diversified Electric and Gas Utility
A Diversified Electric and Gas Utility 7 NorthWestern’s ‘80/20’ rules: Approximately 80% Electric and 80% Montana. Over $4.8 billion of rate base investment to serve our customers Data as reported in our 2023 10-K (1) Utility Margin is a non-GAAP Measure. See appendix for additional disclosure. * Re
Slide 8: Highly Carbon-Free Supply Portfolio
8 Highly Carbon-Free Supply Portfolio NorthWestern does not own all the renewable energy certificates (RECs) generated by contracted wind, and periodically sells its own RECs with proceeds benefiting retail customers. Accordingly, we cannot represent that 100% of carbon-free energy in the portfolio
Slide 9: Strong Utility Foundation
Strong Utility Foundation 9 Solid and generally improving JD Power Overall Customer Satisfaction Scores Solid electric system reliability • Residential rates below national average1 • Better than average natural gas leaks per mile 1) NWE rates as of 2/1/2024 Electric source: U.S. EIA - Average Ret
Slide 10: Solid Economic Indicators
Solid Economic Indicators 10 • Customer growth rates historically exceed National Averages. • Projected population growth in our service territories better than the National Average. • Unemployment rates better than National Average Source: Company 10K’s, 2021/2022 EEI Statistical Yearbook – Table 7
Slide 11: NorthWestern's Combo-Advantage
NorthWestern’s Combo-Advantage 11 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 12: Natural Gas LDC – AECO Advantage to Customers
Natural Gas LDC – AECO Advantage to Customers 12 NWE has access to some of the lowest and most stable natural gas prices in the nation, through the Alberta Energy Company (AECO) trading hub. Source: S&P Global By the end of 2025 in South Dakota, we expect to facilitate the injection of enough renewa
Slide 13: Montana Wildfire Mitigation Plan
Montana Wildfire Mitigation Plan 13 Reduction of Ignition Potential System and Environmental Monitoring Enhanced Vegetation Maintenance Enriched Public Communication and Outreach Comprehensive summary of wildfire mitigation activities Expect to update plan with each electric rate review filing
Slide 14: Montana Public Safety Power Shutoff Plan
Montana Public Safety Power Shutoff Plan 14 Guiding Plan Principles • Uphold our commitment to sustainable, affordable and reliable service • Ensuring the safety of our employees, customers, the public, communities, and the environment • Maintain robust situational awareness strategy for monitoring
Slide 15: Corporate Sustainability
Corporate Sustainability 15 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
Slide 16: Best Practices Governance
Best Practices Governance 16 America’s Most Responsible Companies Recognized by Newsweek as one of the most responsible companies in 2023. One of only eleven EEI member utilities selected. Board of Directors Executive Team 5th Best Score Among 50 Publicly Traded North American Utility and Power Comp
Slide 17: Financial & Regulatory Update
Thank youFinancial & Regulatory Update 17
Slide 18: Strong Growth Outlook
Strong Growth Outlook This guidance range is based upon, but not limited to, the following major assumptions: • Normal weather in our service territories; • An effective income tax rate of approximately 12%-14%; and • Diluted average shares outstanding of approximately 61.3 million. 2024 Non-GAAP EP
Slide 19: Track Record of Growing Capital Investment
Track Record of Growing Capital Investment 19 2019-2023 Invested over the last 5 years* * Historical Capital Investment includes property, plant and equipment additions and AFUDC Credit, both from our cash flow statement, and change in capital expenditures included in accounts payable. ** See Regula
Slide 20: Credit, Cash Flow and Financing Plans
Credit, Cash Flow and Financing Plans 20 Credit Ratings 2024 Financing Plan No equity expected to fund the current 5-year | $2.5 billion capital plan Financing plans (targeting a FFO to Debt ratio > 14%) are expected to maintain our current credit ratings. We expect to pay minimal cash taxes into 20
Slide 21: Solid Balance Sheet
Solid Balance Sheet 21 Investment grade credit ratings, liquidity significantly greater than our $100 million target, debt to capitalization at the bottom of our targeted 50%-55% range, and a manageable schedule of debt maturities. * Liquidity target was raised to $200 million during the height of t
Slide 22: Disciplined Expense Program
22 Disciplined Expense Program Source: FERC Form 1 Reports - 2023 expenses and company filings through S&P Global IQ. Electric Non-Fuel O&M excludes fuel and steam costs for power generation, water costs for hydro operations, and purchased power cost unless identified in company disclosures. Electri
Slide 23: Generation Investment
Generation Investment 23 * See NorthWestern Energy Group’s 2023 10-K for additional detail associated with litigation challenging the Yellowstone County Generating Station air quality permit. This litigation could further delay the project and increase costs. Construction of our 175 MW Yellowstone C
Slide 24: Conclusion
Conclusion Pure Electric & Gas Utility Solid Utility Foundation Best Practices Corporate Governance Attractive Future Growth Prospects Strong Earnings & Cash Flows 24
Slide 25: Appendix
Thank youAppendix 25
Slide 26: Regulated Utility Five-Year Capital Forecast
$2.5 billion of highly-executable and low-risk capital investment Regulated Utility Five-Year Capital Forecast 26 Appendix
Slide 27: Rate case settlement and authorized returns summary
(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 separately reflect FERC authorized rate base or authorized returns. (2) The Montan
Slide 28: 2023 System Statistics
2023 System Statistics 28 Note: Statistics above are as of 12/31/2023 (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 Appendix
Slide 29: Holding Company Reorganization Completed
Holding Company Reorganization Completed 29 Stock • New name – NorthWestern Energy Group, Inc. • Same NWE stock ticker • Same shareholders • Same stock plans Governance • Same board of directors, but now at new parent NorthWestern Energy Group, Inc. • Same executive team • Same policies Appendix
Slide 30: Colstrip Transfer Overview
Colstrip Transfer 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 ownership to 444
Slide 31: January 2024 Cold Weather Event - Montana
January 2024 Cold Weather Event - Montana 31 The above charts illustrate our resource nameplate capacity, the actual resource specific contribution of energy, the capacity deficit we faced, and the market price of power during the January 2024 multi-day cold weather event in Montana. As a result of
Slide 32: Our Net-Zero Vision
Our Net-Zero Vision Over the past 100 years, NorthWestern Energy has maintained our commitment to provide customers with reliable and affordable electric and natural gas service while also being good stewards of the environment. We have responded to climate change, its implications and risks, by inc
Slide 33: Timeline of Montana Generation Portfolio
33 Timeline of Montana Generation Portfolio 33 Since 2011, we have added approximately 954 MW, both owned and long-term contracted, to our generation portfolio, all of which is from carbon-free resources. Appendix
Slide 34: Comparison of Installed Capacity
Comparison of Installed Capacity 34 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 percentage of the total). Source: EIA.gov – 2022 Form EIA-860 Data - Schedule 3 for cale
Slide 35: Earnings and Other
Thank youEarnings and Other 35
Slide 36: EPS & Dividend History
EPS & Dividend History 36 2009-2023 CAGR’s: GAAP EPS: 3.4% Non-GAAP EPS: 3.5% Dividend: 4.7% See appendix for “Non- GAAP Financial Measures” Appendix
Slide 37: 2024 Earnings Bridge
2024 Earnings Bridge This guidance range is based upon, but not limited to, the following major assumptions: • Normal weather in our service territories; • An effective income tax rate of approximately 12%-14%; and • Diluted average shares outstanding of approximately 61.3 million. We project an ann
Slide 38: First Quarter Earnings Drivers
After-tax EPS vs Prior Year First Quarter Earnings Drivers 38 1 2 Improvement in Utility Margin offset mild weather, higher OA&G expense, depreciation, interest expense, and share count dilution. 1.) Utility Margin is a non-GAAP Measure. See appendix slide titled “Reconciling Gross Margin to Utility
Slide 39: First Quarter Income Statement
(in millions except per share amounts) 2024 2023 Variance % Variance Operating Revenues 475.3$ 454.5$ 20.8$ 4.6% 174.7 165.5 9.2 5.6% Utility Margin 300.6 289.0 11.6 4.0% Operating Expenses Operating and maintenance 54.2 55.9 (1.7) (3.0%) Administrative and general 40.4 34.7 5.7 16.4% Property and o
Slide 40: First Quarter 2024 Non-GAAP Earnings
(1) As a result of the adoption of Accounting Standard Update 2017-07 in March 2018, pension and other employee benefit expense is now disaggregated on the GAAP income statement with portions now recorded in both OG&A expense and Other (Expense) Income lines. To facilitate better understanding of tr
Slide 41: First Quarter Utility Margin Bridge
First Quarter Utility Margin Bridge Pre-tax Millions vs. Prior Year $11.6 million or 4.0% increase in Utility Margin NOTE: Utility Margin is a non- GAAP Measure. See appendix slide titled “Reconciling Gross Margin to Utility Margin” for additional disclosure. 41 Appendix
Slide 42: Utility Margin (Q1)
Utility Margin (Q1) (dollars in millions) Three Months Ended March 31, 2024 2023 Variance Electric $ 227.9 $ 217.2 $ 10.7 4.9% Natural Gas 72.7 71.8 0.9 1.3% Total Utility Margin $ 300.6 $ 289.0 $ 11.6 4.0% (1) Utility Margin is a non-GAAP Measure. See appendix slide titled “Reconciling Gross Margin
Slide 43: Operating Expenses (Q1)
Operating Expenses (Q1) Increase in operating expenses due to the following factors: $ 3.5 Higher depreciation expense due to plant additions and higher depreciation rates 2.4 Litigation outcome (Pacific Northwest Solar) 2.2 Non-cash impairment of alternative energy storage investment 1.6 Higher lab
Slide 44: Operating to Net Income (Q1)
Operating to Net Income (Q1) (dollars in millions) Three Months Ended March 31, 2024 2023 Variance Operating Income $ 102.1 $ 96.0 $ 6.1 6.4% Interest expense (31.0) (28.0) (3.0) (10.7)% Other income, net 4.3 4.7 (0.4) (8.5)% Income Before Taxes 75.4 72.7 2.7 3.7% Income tax expense (10.3) (10.2) (0
Slide 45: Tax Reconciliation (Q1)
Tax Reconciliation (Q1) 45 Appendix
Slide 46: Reconciling Gross Margin to Utility Margin
Reconciling Gross Margin to Utility Margin 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 and associated reg
Slide 47: Segment Results (Q1)
Segment Results (Q1) (1) Utility Margin is a non-GAAP Measure. See appendix slide titled “Reconciling Gross Margin to Utility Margin” for additional disclosure. 47 Appendix Three Months Ended March 31, 2024 Electric Gas Other Total Operating revenues 343,186$ 132,156$ -$ 475,342$ Fuel, purchased sup
Slide 48: Electric Segment (Q1)
Electric Segment (Q1) (1) Utility Margin is a non-GAAP Measure. See appendix slide titled “Reconciling Gross Margin to Utility Margin” for additional disclosure. 48 Appendix
Slide 49: Natural Gas Segment (Q1)
Natural Gas Segment (Q1) 49 Appendix (1) Utility Margin is a non-GAAP Measure. See appendix slide titled “Reconciling Gross Margin to Utility Margin” for additional disclosure.
Slide 50: Cash from Operating Activities and Financing
Cash from Operating Activities decreased by $52.0 million driven primarily by a $81.5 million decrease in collection of energy supply costs from customers. Funds from Operations increased by $22.4 million over prior period. Net Under-Collected Supply Costs (in millions) Beginning (Jan. 1) Ending (Ma
Slide 51: Balance Sheet
(dollars in millions) As of March 31, As of December 31, 2024 2023 Cash and cash equivalents 4.2$ 9.2$ Restricted cash 16.2 16.0$ Accounts receivable, net 186.9 212.3$ Inventories 103.8 114.5$ Other current assets 85.7 55.0$ Goodwill 357.6 357.6$ PP&E and other non-current assets 6,879.0 6,836.1$ To
Slide 52: PCCAM Impact by Quarter
PCCAM Impact by Quarter 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 share
Slide 53: Electric Wallet Share
Electric Wallet Share Appendix 53
Slide 54: Natural Gas Wallet Share
Natural Gas Wallet Share Appendix 54 Note: Montana typical bill is based on 65 therms which translates to ~0.32% lower wallet share than pictured. For consistency with South Dakota and Nebraska, 100 therms is used for Montana in this illustration. Oct. - Sept. Fiscal Year *2023 - 2024 is partial per
Slide 55: Experienced & Engaged Board of Directors
Experienced & Engaged Board of Directors 55 Britt E. Ide • Nominating & Governance, HR • Independent • Since April 2017 Anthony T. Clark • Nominating & Governance, HR • Independent • Since Dec. 2016 Jan R. Horsfall • SETO (chair), Audit • Independent • Since April 2015 Brian B. Bird • President & Ch
Slide 56: Strong Executive Team
Strong Executive Team 56 Brian B. Bird • President & Chief Executive Officer • Current position since 2023 (formerly President & Chief Operating Officer ’21-’22 and Chief Financial Officer ’03-’21) Crystal D. Lail • Vice President and Chief Financial Officer • Current position since 2021 (formerly V
Slide 57: Our Commissioners
Our Commissioners 57 Appendix There will be at least two new commissioners in Montana after November’s election. Commissioners Brown (not running) and O’Donnell (termed out) will be leaving while commissioner Fielder is running for reelection unchallenged.
Slide 58: Non-GAAP Financial Measures
Non-GAAP Financial Measures 58 Appendix
Slide 59: Non-GAAP Financial Measures
Non-GAAP Financial Measures 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 considered “non-GAAP fi
Slide 60: Thank you
Thank youDelivering a bright future 60
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