Slide 1: Second Quarter 2014 Earnings Webcast
Second Quarter 2014 Earnings Webcast 7/24/2014
Slide 2: On the Call Today
On the Call Today 2 • Bob Rowe, President & CEO • Brian Bird, VP & CFO • Mike Cashell, VP Transmission • Heather Grahame, VP & General Counsel • John Hines, VP Energy Supply • Kendall Kliewer, VP & Controller • 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: Recent Significant Activities
• 3% improvement in gross margin, despite slightly milder weather, as compared to the same quarter last year. • In April 2014, the FERC issued an order affirming a FERC Administrative Law Judge’s initial decision in September 2012, regarding cost allocation at DGGS between retail and wholesale custo
Slide 5: Summary Financial Results
Summary Financial Results 5 (in millions, except per share) 2014 2013 2014 2013 Operating Revenues $270.3 $260.2 $640.0 $573.2 Cost of Sales 112.5 106.9 279.9 239.1 Gross Margin 157.8 153.2 360.1 334.1 Operating Expenses Operating, general & administrative 74.4 67.4 146.4 136.2 Property and other ta
Slide 6: Second Quarter Financial Results
Second Quarter Financial Results 6 (in millions except per share amounts) 2014 2013 Variance Operating Revenues $270.3 $260.2 $10.1 Cost of Sales 112.5 106.9 5.6 Gross Margin 157.8 153.2 4.6 Operating Expenses Operating, general & administrative 74.4 67.4 7.0 Property and other taxes 28.0 25.8 2.2 D
Slide 7: Gross Margin
7 Gross Margin (dollars in millions) Three Months Ended June 30, 2014 2013 Variance Electric $118.6 $118.0 $0.6 0.5% Natural gas 39.3 35.0 4.3 12.3% Other - 0.3 (0.3) (100.0%) Gross Margin $157.9 $153.3 4.6 3.0% Increase in gross margin due to the following factors: $ 5.1 Natural gas production $ 1.
Slide 8: Operating Expenses
Operating Expenses 8 Increase in operating expenses due mainly to the following factors: $7.0 million increase in OG&A $ 2.9 Natural gas production $ 2.2 Bad debt expense $ 1.5 Nonemployee directors deferred compensation $ 0.9 Hydro Transaction costs $ (0.5) Other $2.2 million increase in property a
Slide 9: Operating Income to Net Income
Operating Income to Net Income 9 (dollars in millions) 2014 2013 Variance Primarily due to: Operating Income $25.1 $32.7 ($7.6) Items discussed previously Interest Expense (19.1) (17.1) (2.0) Interest expense increase includes $1.9 million of expense associated with bridge credit facility related to
Slide 10: Balance Sheet and Capitalization
(dollars in millions) As of June 30, As of December 31, 2014 2013 Cash 16.9$ 16.6$ Restricted cash 15.6 6.9 Accounts receivable, net 130.3 174.9 Inventories 52.9 55.6 Other current assets 74.9 67.0 Goodwill 355.1 355.1 PP&E and other non-current assets 3,146.0 3,039.2 Total Assets 3,791.8$ 3,715.3$
Slide 11: Cash Flow
Cash Flow 11 (dollars in millions) 2014 2013 Operating Activities Net Income 53.3$ 52.2$ Non-Cash adjustments to net income 95.4 87.6 Changes in working capital (6.4) 4.6 Other (17.8) (14.6) Cash provided by operating activities 124.6 129.8 Investing Activities PP&E additions (112.0) (88.5) Asset ac
Slide 12: Adjusted EPS Schedule
Adjusted EPS Schedule 12 The first half of the year typically provides approximately 50% of our annual EPS contribution (with the second quarter only representing about 13%). Based upon midpoint of our $2.60 - $2.75 guidance range, our first half 2014 adjusted earnings of $1.41 represents approximat
Slide 13: Reaffirmed 2014 Earnings Guidance
Reaffirmed 2014 Earnings Guidance 13 We are reaffirming our 2014 guidance range of $2.60-$2.75 based upon, but not limited to, the following major assumptions and expectations: • Normal weather in our electric and natural gas service territories for 2014; • Excludes any hydro related transaction fee
Slide 14: Dave Gates Generating Station Update (DGGS)
Dave Gates Generating Station Update (DGGS) 14 • We operate a transmission system and balancing authority within Montana and are responsible for providing safe and reliable electric services to both retail and wholesale customers, or face stiff penalties for non-compliance. • DGGS was designed and c
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: Natural Gas Reserves Opportunity
Natural Gas Reserves Opportunity 16 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% (or 3-4 Bcf of natural gas ann
Slide 17: Distribution System Infrastructure Project
Distribution System Infrastructure Project 17 • 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 18: 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. With the addition of these assets, we anticipate over 50% of our owned and contracted generation in Mo
Slide 19: Anticipated Hydro - Process and Timeline
Anticipated Hydro - Process and Timeline 19 • July 8-18, 2014 regulatory hearing with the Montana Public Service Commission (MPSC). • Post-hearing briefs due August 1st for NorthWestern and August 15th for intervenors • NorthWestern’s post-hearing reply brief due August 25th • September 16th, 2004 f
Slide 20: Appendix
20 Appendix
Slide 21: Second Quarter - Reconciliation
21 Second Quarter - Reconciliation ($millions, except EPS) Th re e M on th s En de d, Ju ne 3 0, 2 01 3 N at ur al g as p ro du ct io n M ar gi n D SM lo st re ve nu e re co ve rie s N at ur al g as re ta il v ol um es N at ur al g as p ro du ct io n ex pe ns e Ba d de bt e xp en se N on em pl oy ee
Slide 22: Year-to-Date - Reconciliation
22 Year-to-Date - Reconciliation ($millions, except EPS) S ix M on th s E nd ed , Ju ne 3 0, 2 01 3 N at ur al g as p ro du ct io n N at ur al g as a nd e le ct ric re ta il vo lu m es M on ta na n at ur al g as ra te in cr ea se D S M lo st re ve nu e re co ve rie s N at ur al g as p ro du ct io n
Slide 23: Effective Tax Reconciliation
Effective Tax Reconciliation 23 (in millions) 2014 2013 Variance 2014 2013 Variance Income Before Income Taxes $9.0 $16.4 ($7.5) $62.5 $59.4 $3.1 Income tax calculated at 35% federal statutory rate 3.1 5.8 (2.7) 21.9 20.8 1.1 Permanent or flow through adjustments: State income, net of federal provis
Slide 24: Second Quarter - Electric Segment
24 Second Quarter - Electric Segment (dollars in millions) 2014 2013 Change % Change Retail revenues 176.4$ 179.9$ (3.5)$ -1.9% Regulatory amortization 14.6 5.9 8.7 147.5 Total retail revenue 191.0 185.8 5.2 2.8 Transmission 12.7 12.5 0.2 1.6 Ancillary services 0.5 0.4 0.1 25.0 Wholesale 0.8 0.7 0.1
Slide 25: Year-to-Date - Electric Segment
25 Year-to-Date - Electric Segment (dollars in millions) 2014 2013 Change % Change Retail revenues 385.8$ 379.9$ 5.9$ 1.6% Regulatory amortization 23.9 0.1 23.8 23,800.0 Total retail revenue 409.7 380.0 29.7 7.8 Transmission 26.1 26.1 — — Ancillary services 0.9 0.8 0.1 12.5 Wholesale 1.0 1.2 (0.2) (
Slide 26: Second Quarter - Natural Gas Segment
26 Second Quarter - Natural Gas Segment (dollars in millions) 2014 2013 Change % Change Retail revenues 55.6$ 49.1$ 6.5$ 13.2% Regulatory amortization (1.9) 1.0 (2.9) (290.0) Total retail revenue 53.7 50.1 3.6 7.2 Wholesale and other 10.6 9.3 1.3 14.0 Total Revenues 64.3 59.4 4.9 8.2 Total Cost of S
Slide 27: Year-to-Date - Natural Gas Segment
27 Year-to-Date - Natural Gas Segment (dollars in millions) 2014 2013 Change % Change Retail revenues 177.3$ 150.7$ 26.6$ 17.7% Regulatory amortization (0.3) (9.5) 9.2 (96.8) Total retail revenue 177.0 141.2 35.8 25.4 Wholesale and other 22.5 20.7 1.8 8.7 Total Revenues 199.5 161.9 37.6 23.2 Total C
Slide 28: Heating and Cooling Degree Days
28 Heating and Cooling Degree Days 3 Months ending June 30 2014 Cooling Degree-Days 2014 2013 Historic Average 2013 Historic Average M ntana 8 45 41 82% cooler 80% cooler South Dakota 77 50 63 54% warm r 22% warm r Degree Days 4 as compared with: Heating Degree-Days 2014 2013 Historic Average 2013 H
Slide 29: Second Quarter - Segment Results (Unaudited)
29 Second Quarter - Segment Results (Unaudited) (in thousands) Three Months Ending June 30, 2014 Electric Gas Other Total Operating revenues 206,010$ 64,271$ -$ 270,281$ Cost of sales 87,438 25,036 - 112,474 Gross margin 118,572 39,235 - 157,807 Operating, general and administrative 49,269 22,653 2,
Slide 30: Year-to-Date - Segment Results (Unaudited)
30 Year-to-Date - Segment Results (Unaudited) (in thousands) Six Months Ending June 30, 2014 Electric Gas Other Total Operating revenues 440,521$ 199,483$ -$ 640,004$ Cost of sales 189,034 90,868 - 279,902 Gross margin 251,487 108,615 - 360,102 Operating, general and administrative 96,405 45,249 4,7
Slide 31: 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
Slide 32: Upelivering a
Upelivering a bright future