Slide 1: Second Quarter 2015 Earnings Webcast
Second Quarter 2015 Earnings Webcast July 23, 2015 Thompson Falls
Slide 2: Presenting Today
Presenting Today 2 Bob Rowe, President & CEO Brian Bird, Vice President & CFO
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
Recent Significant Activities 4 • Net income improved $23.3 million in the second quarter of 2015 as compared with the same period in 2014 primarily due to an insurance settlement and the impact of the November 2014 hydro acquisition. • Diluted EPS of $0.65 as compared to $0.20 for the same period i
Slide 5: Summary Financial Results (Second Quarter)
Summary Financial Results (Second Quarter) 5
Slide 6: Gross Margin (Second Quarter)
6 Gross Margin (Second Quarter) (dollars in millions) Three Months Ended June 30, 2015 2014 Variance Electric $ 155.5 $ 118.6 $ 36.9 31.1% Natural Gas 35.6 39.3 (3.7) (9.4%) Gross Margin $ 191.1 $ 157.9 $ 33.2 21.0% Increase in gross margin due to the following factors: $ 38.3 Hydro operations $ 1.6
Slide 7: Second Quarter Weather
Second Quarter Weather 7 Maximum Temperature from Normal Minimum Temperature from Normal For our service territory, 2nd quarter is still typically a heating quarter (very few cooling degree days). Q2 was over 12% warmer than last year and historical average in all three states we service.
Slide 8: Operating Expenses (Second Quarter)
Operating Expenses (Second Quarter) 8 Decrease in operating expenses due mainly to the following factors: $12.7 million decrease in OG&A $(20.8) Insurance recovery, net $ (2.9) Non-employee directors deferred compensation $ (1.7) Bad debt expenses $ (0.9) Hydro transaction costs $ 11.2 Hydro operati
Slide 9: Operating to Net Income (Second Quarter)
Operating to Net Income (Second Quarter) 9 $3.8 million increase in interest expenses was primarily due to increased debt outstanding associated with the hydro transaction. $2.0 million decrease in other income due primarily to a $2.9 million reduction in the value of deferred shares held in trust f
Slide 10: Adjusted Earnings (Second Quarter '15 vs '14)
Adjusted Earnings (Second Quarter ‘15 vs ’14) 10 As anticipated we did realize the expected accretion benefit of the hydro acquisition in the 2nd quarter and should continue in the 3rd quarter of 2015. Non-GAAP adjusted net income increased 134.7% over same period prior year. However, due to $400 mi
Slide 11: Adjusted Earnings (YTD '15 vs '14)
Adjusted Earnings (YTD ‘15 vs ’14) 11 Non-GAAP adjusted Net Income increased 42.8% over same period prior year. However, due to $400 million equity issuance in November 2014, our adjusted diluted EPS increased by a lesser 18.1%.
Slide 12: Balance Sheet
Balance Sheet As of June 30, 2015, Cash $ Restricted cash Accounts receivable, net Inventories Other current assets Goodwill PPE and other non-current assets Total Assets: Payables Current maturities of aii debt & capital leases Short-term borrowin, Other curentlabiies Long-term debt & capital lease
Slide 13: Cash Flow (dollars in millions)
(dollars in millions) perating Activities Net Income Non-Cash adjustments ee te income Changes in working capi Other non-current Lae Z liabilities Cash provided by operating activities Investing Activities PP8E additions Other Cash used in investing activities Financing Activities Proceeds from issu
Slide 14: Reaffirm 2015 Earnings Guidance
Reaffirm 2015 Earnings Guidance 14 We reaffirm the 2015 adjusted earnings guidance range of $3.10 - $3.30 per diluted shares based upon, but not limited to, the following major assumptions and expectations: • Normal weather in our electric and natural gas service territories for 2015; • Successful i
Slide 15: South Dakota Rate Filing
South Dakota Rate Filing 15 34 Years of Declining ‘Real’ Rates Docket EL14-106 In December 2014, we filed a request with SDPUC for an annual increase of $26.5 million revenue. This increase is primarily due to investments made to meet federal environmental mandates and to maintain our high-level of
Slide 16: Beethoven Wind Acquisition
16 Beethoven Wind Acquisition The acquisition will result in significantly lower costs to customers over the long-term and is expected to be accretive to earnings but cannot be quantified until the South Dakota Public Utility Commission makes a final determination on our general rate case, which is
Slide 17: Environmentally Strong Owned Generation Fleet
17 Environmentally Strong Owned Generation Fleet Since 2007 including the Beethoven acquisition, NWE will have invested over $1.5 billion in generation assets, of which, nearly $1.3 billion are renewable assets, adding 566 name-plate MW of renewable generation to its portfolio and, with Beethoven, 4
Slide 18: 'Clean' Owned & Contracted Supply Portfolio
18 ‘Clean’ Owned & Contracted Supply Portfolio Base upon nameplate capacity, except for DGGS, approximately 54% of our total company owned and contracted supply portfolio is renewable or support renewables (pro forma for Beethoven wind addition). Charts above are calculated using nameplate megawatts
Slide 19: Other Activity
Other Activity 19 • Hydro Asset Integration • Asset Optimization Study: Through a detailed scenario modeling effect currently underway, we will be optimizing the way we operate our fleet of assets, made possible with the acquisition of the Hydros. The study will clarify how to best integrate our gen
Slide 20: Delivering a bright future
Upelivering a bright future
Slide 21: 2014 to 2015 Reconciliation (2nd Qtr & YTD)
21 2014 to 2015 Reconciliation (2nd Qtr & YTD) Appendix
Slide 22: Heating and Cooling Degree Days
22 Heating and Cooling Degree Days Appendix
Slide 23: Electric Segment (Second Quarter)
23 Electric Segment (Second Quarter) Appendix
Slide 24: Natural Gas Segment (Second Quarter)
24 Natural Gas Segment (Second Quarter) Appendix
Slide 25: Segment Results (Second Quarter)
25 Segment Results (Second Quarter) Appendix
Slide 26: Income Tax Reconciliation (Second Quarter)
Income Tax Reconciliation (Second Quarter) 26 Appendix
Slide 27: Electric Segment (YTD thru Qtr 2)
27 Electric Segment (YTD thru Qtr 2) Appendix
Slide 28: Natural Gas Segment (YTD thru Qtr 2)
28 Natural Gas Segment (YTD thru Qtr 2) Appendix
Slide 29: Segment Results (YTD thru Qtr 2)
29 Segment Results (YTD thru Qtr 2) Appendix
Slide 30: Income Tax Reconciliation (YTD thru Qtr 2)
Income Tax Reconciliation (YTD thru Qtr 2) 30 Appendix
Slide 31: Capital Spending Forecast
Capital Spending Forecast 31 Current estimated cumulative capital spending for 2015 through 2019 is $1.45 billion. We anticipate funding the capital projects with a combination of cash flows (aided by NOLs) and long-term debt. If other opportunities arise that are not in the above projections (natur
Slide 32: Hypothetical Accretion Illustration
Hypothetical Accretion Illustration 32 As shown in the example above, a company making an acquisition that would contribute relatively consistent net income over each of the four quarters could anticipate the most earnings per share benefit in the quarters with the ‘lightest’ earnings. (Illustrative
Slide 33: Non-GAAP financial measures notice
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 financ