Slide 1: 2013 Earnings Webcast
1 2013 Earnings Webcast 2/19/2014
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: 2013 Highlights and Accomplishments
• Proposed hydro acquisition announcement in September 2013 – $900 million purchase of 11 hydro facilities and a storage reservoir • Natural gas acquisition in December 2013 – Acquired additional natural gas production interest in Montana for $68.7 million • Placed Aberdeen Generating Station into s
Slide 5: Summary Financial Results
Summary Financial Results 5 (in millions except EPS) 2013 2012 Variance Operating Revenues 1,154.5$ 1,070.3$ 84.2$ Cost of Sales (Gain on CELP arbitration decision) - (47.9) 47.9 Cost of Sales (Other) 479.6 443.3 36.3 Gross Margin 674.9 674.9 0.0 Operating Expenses Operating, general & administrativ
Slide 6: Gross Margin
_______________________________________ 6 $ 11.9 Natural gas and electric retail volumes $ 8.1 Natural gas production $ 6.6 Montana natural gas rate increase $ 5.6 Spion Kop revenue $ 5.1 DGGS revenues $ 3.8 Property tax trackers $ 3.7 Electric transmission $ 1.3 Natural gas transportation $ 1.0 Ele
Slide 7: Operating Expenses
___________________________________ Operating Expenses 7 Twelve Months Ended December 31, ($millions) 2013 2012 Variance MTSI $ 0.0 $ 24.0 $(24.0) Operating, General & Administrative 285.6 270.0 15.6 5.8% Prop. & other taxes 105.5 97.7 7.8 8.0% Depreciation 112.8 106.0 6.8 6.4% Operating Expenses $5
Slide 8: Operating to Net Income
Operating to Net Income 8 (in millions) 2013 2012 Variance Primarily due to: Operating Income $171.0 $177.2 ($6.2) Items discussed previously Interest Expense (70.5) (65.1) (5.4) Interest expense increase in 2013 due to $1.9 million expenses associated with bridge credit facility related to the Hydr
Slide 9: Balance Sheet
Balance Sheet 9 (in millions) 2013 2012 Cash 16.6$ 9.8$ Restricted cash 6.9 6.7 Accounts receivable, net 174.9 143.7 Inventories 55.6 54.2 Other current assets 67.0 88.8 Goodwill 355.1 355.1 PP&E and other non-current assets 3,039.2 2,827.3 Total Assets 3,715.3$ 3,485.5$ Payables 93.0 83.7 Current m
Slide 10: Cash Flow
Cash Flow 10 This $57.5 million decrease in operating cash flows is primarily due to a decrease in collection of receivables from customers of approximately $34.2 million, which includes approximately $20 million associated with billing delays as a result of a new customer information system impleme
Slide 11: Adjusted EPS Schedule
Adjusted EPS Schedule 11 Q1 Q2 Q3 Q4 2013 2013 Reported GAAP diluted EPS $1.01 $0.37 $0.40 $0.68 $2.46 Non-GAAP Adjustments: Weather (0.02) (0.02) (0.01) (0.05)$ Hydro Transaction professional fees and bridge financing 0.05 0.06 0.11$ Prior period DSM lost revenue (including accrued interest) (0.04)
Slide 12: 2014 Earnings Guidance
2014 Earnings Guidance 12 Continued investment in our system to serve our customers and communities is expected to provide a targeted 7-10% total return to our investors through a combination of earnings growth and dividend yield. 2014 guidance range of $2.60-$2.75 and a midpoint of $2.68 based upon
Slide 13: Investment for our Customers' Benefit
Investment for our Customers’ Benefit Over the past 5 years, we have been adding to our Montana energy supply portfolio and making additional investments to enhance system safety, reliability and capacity. We have made these enhancements with minimal impact to customers’ bills while delivering solid
Slide 14: FERC / DGGS
FERC / DGGS 14 • 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 the ALJ’
Slide 15: Big Stone and Neal Air Quality Projects
Big Stone and Neal Air Quality Projects 15 Big Stone Power Plant Neal Power Plant Big Stone Neal Location Northeast South Dakota Northwest Iowa Ownership 23.4% of 475 MW coal plant 8.7% of 644 MW coal plant Project Subject to Best Available Retrofit Technology (BART) requirements of the Regional Haz
Slide 16: Southern Bear Paw Transaction
Southern Bear Paw Transaction 16 • Finalized acquisition of Bear Paw South – On December 2, 2013, we finalized the purchase of 63 Bcf proven reserves and 82% interest in Havre Pipeline Company for $68.7 million. – Our largest natural gas reserves acquisition to date adding 29 employees to our 14 exi
Slide 17: Natural Gas Reserves Opportunity
Natural Gas Reserves Opportunity 17 We continue to pursue opportunities to secure low cost gas reserves for our customers. • Remaining 18% unfilled position to reach our targeted 50% owned supply. • Other potential opportunities to procure reserves to provide up to 50% (3-4 Bcf of natural gas annual
Slide 18: Distribution System Infrastructure Project
Distribution System Infrastructure Project 18 • 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, bui
Slide 19: 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 20: Hydro Financing Strategy
• Financing Plans – Plan to close into permanent financing up to $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 Credit Suisse and B
Slide 21: Hydro Transaction Approval Timeline
• Announced the transaction on September 26, 2013 • Pre-filing informational meeting with the Montana PSC on October 18, 2013 • Bridge facility – entered into a $900 million 364-day senior bridge credit facility on November 12, 2013 • Filed Application for Approval to Purchase and Operate the Hydro
Slide 22: Other Significant Achievements in 2013
Other Significant Achievements in 2013 22 • Record best year for safety at NorthWestern – Fewest lost time incidents and OSHA recordable events of any year on record. • Record best customer satisfaction scores – Received our best JD Powers overall satisfaction survey score in 2013. • Continue to pro
Slide 23: Delivering a bright future
Upelivering a bright future
Slide 24: Appendix: Fourth Quarter Results
24 APPENDIX Consolidated pretax income for the quarter ended December 31, 2013 was $31.4 million as compared to $74.8 million for the same period in 2012. This $43.4 million decrease in pretax income is due primarily to a $47.9 million gain on an arbitration decision recorded in the fourth quarter o
Slide 25: Appendix: Twelve Month Variance Detail
25 APPENDIX NORTHWESTERN CORPORATION Twelve Months Ended December 31, 2013 ($millions, except EPS) Tw elv e M on ths En de d, De c 3 1, 201 2 Na tur al g as pro duc tion Mo nta na nat ura l ga s r ate inc rea se Na tur al g as ret ail vol um es Sp ion Ko p r eve nue Ele ctr ic r eta il v olu me s DG
Slide 26: Appendix: Income Tax Reconciliation
APPENDIX 26 (in millions) 2013 2012 Variance Income Before Income Taxes $108.3 $116.5 ($8.2) Income tax calculated at 35% federal statutory rate 37.9 40.8 (2.9) Permanent or flow through adjustments: State income, net of federal provisions (3.1) 1.1 (4.2) Flow through repairs deductions (17.8) (16.4
Slide 27: 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