Northwestern Energy Group, Inc. · NASDAQ:NWE
Northwestern Energy — Shareholder Meeting (August 2007)
24 slides from Northwestern Energy's shareholder meeting presentation, Aug 8, 2007
Slide 1: Annual Stockholder Meeting
Annual Stockholder Meeting August 8, 2007
Slide 2: Forward-looking statement
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: Agenda
agenda… Termination of proposed BBI transaction Overview of NorthWestern Energy The future for NorthWestern Energy 3
Slide 4: Termination of BBI merger
termination of BBI merger… Stockholders approved a merger of NorthWestern with Babcock & Brown Infrastructure Limited at last year’s annual meeting The necessary clearances had been received from: Department of Justice Committee on Foreign Investment in the United States Federal Energy Regulatory Co
Slide 5: Reasons for MPSC denial
reasons for MPSC denial… Too much debt as part of the purchase price Assumed additional costs could ultimately be passed on to ratepayers Premium to be paid was too large Concerned the premium eventually would get reflected in rates Concern that BBI would deplete future cash and equity of the utilit
Slide 6: Who we are
who we are… 640,000 customers 382,000 electric 258,000 natural gas Approximately 123,000 square miles of service territory in Montana, Nebraska and South Dakota Total Assets: (1)$2,340 MM Total Capitalization: (1)(2)$1,445 MM Electric transmission lines Natural gas distribution lines Supplier-owned
Slide 7: Business overview
business overview… Regulated Operations One of the largest providers of electricity and natural gas in the Upper Midwest and Northwest, serving approximately 640,000 customers in Montana, South Dakota and Nebraska Electric Operations Gas Operations Montana Montana 322,000 customers (transmission/dis
Slide 8: Senior leadership
senior leadership… More than 20 years utility experience on average. Michael J. Hanson, President & Chief Executive Officer Board member since May 2005 26 years utility experience Brian B. Bird, VP & Chief Financial Officer 21 years financial management experience; 10 years energy experience Thomas
Slide 9: Contribution of segments
contribution of segments… Gross Revenue (MM) - 2006 Gross Margin (MM) - 2006 $6 77 83 $66 $119 $329 $359 $662 Total $1.1 billion Total $519 million Note: Revenue and Gross Margin exclude $48 million and $1 million of intercompany eliminations, respectively. Revenue and Gross Margin reported in North
Slide 10: Current operations
current operations… Reliability South Dakota is in the first quartile as ranked by IEEE benchmarking Montana is in the second quartile as ranked by IEEE EEI Emergency Recovery Award for 2005 Recognized for outstanding efforts to restore service following ice storm in SD One of six utilities nationwi
Slide 11: Historical growth – regulated electric
historical growth – regulated electric… Volume growth rates have exceeded customer growth rates over the last few years. Customers (000) Volume (MWh 000) (1) (1) 2002 data is pro forma for full year results of Montana operations. Actual revenues reported in 10-K included Montana results from Februar
Slide 12: Historical growth – regulated natural gas
historical growth – regulated natural gas… Gas volumes have decreased over the last few years as homes become more efficient. Customers (000) Therms Sales (MM MMBtu) (1) (1) 2002 data is pro forma for full year results of Montana operations. Actual revenues reported in 10-K included Montana results
Slide 13: Financial highlights
financial highlights… EBITDA(1) Total Capital Expenditures ($ in millions) ($ in millions) Gross Margin Cash Flow from Operations ($ in millions) ($ in millions) Source: Company reports and SEC filings. Note: Full year 2004 results show combined results for NWEC’s predecessor company from January 1,
Slide 14: NorthWestern's future
NorthWestern’s future… Operationally strong Above average reliability Award winning customer service Becoming financially stronger Earnings and cash flow continue to grow Approximately a 50/50 debt to total capitalization ratio Investment grade ratings on senior secured basis Increased September 30
Slide 15: Near term strategic focus
near term strategic focus… Operational effectiveness and cost control Continue to enhance reliability Continue to improve customer satisfaction Strengthen cost effectiveness and efficiency Proactively invest in infrastructure-related regulated utility assets Transmission and distribution upgrades El
Slide 16: Investment opportunities
investment opportunities… Company in strategic location in U.S. for transmission expansion Existing transmission opportunities Montana States Intertie Transmission Line ($800 million planned) Colstrip 500 kV upgrade with partners ($250 million is total project; our portion $75 million) Other potenti
Slide 17: Montana States Intertie Transmission Line
Montana States Intertie Transmission Line… 500 kV AC Line Option Southwestern Montana to Southeastern Idaho Length: Approx. 400 miles Capacity: 1,500 MW Capital Cost: $808 million Assumed ROE of 13%: ROE range on recent FERC-regulated projects of 9%-13.5% 17
Slide 18: Next steps on MSTI
next steps on MSTI… Open Season –study process ongoing; more than 50% capacity interest through transmission deposits FERC “Enhanced Or” rate approval Dec. 2006 Regional Planning Process Ongoing MFSA Application process Through Dec. 2009 NEPA/MEPA Scoping Through Dec. 2009 EIS 2009 through 2010 Righ
Slide 19: Colstrip 500 kV upgrade
Colstrip 500 kV upgrade… “Traditional” pathway to West Coast and California markets New substations near Townsend and Missoula, MT Upgrade to existing stations No new line construction necessary Capacity increase: 500-700 MW Working with other Colstrip transmission owners NWEC’s current ownership sh
Slide 20: Next steps on Colstrip 500 kV upgrade
next steps on Colstrip 500 kV upgrade… Complete Coordinated Studies with BPA Summer 2007 Regional Planning Process Begin Q3 2007 Staged Development Analysis Q3 2007 Identify Ownership and Investment Options Q4 2007 Final Engineering, Siting and Permitting 2008 Incremental upgrade construction timed
Slide 21: Transmission growth projects capital spending
transmission growth projects capital spending… More than $875 million of identified growth projects. 21
Slide 22: Rate case filings
rate case filings… Total revenue requests are approximately $57 million annually. (All ’06 test years) Rate Base Requested Requested Requested Existing 2006 in millions ROE Equity ROR ROE ROR MT Electric 667.4 12.00% 51.46% 8.98% 10.75% 6.14% MT Natural Gas 264.5 11.75% 51.46% 8.85% 10.75% 6.45% SD
Slide 23: Financial objectives
financial objectives… Investment grade capital structure Currently investment grade on secured debt Striving to achieve investment grade on unsecured debt / corporate rating Long-term dividend payout of 60–70% Quarterly dividend increase to $.33/share for September 30, 2007 Grow earnings per share U
Slide 24: Investment highlights
investment highlights… Attractive Transmission and Distribution Business Strong, Predictable Earnings Increasing Gross Margin, Earnings and Free Cash Flow (Increased Dividend in Q3 ‘07) Significant Investment Potential Experienced Management 24