Northwestern Energy Group, Inc. · NASDAQ:NWE
Northwestern Energy — FY2014 Earnings Presentation
35 slides from Northwestern Energy's earnings presentation, Feb 12, 2015
Slide 1: 2014 Earnings Webcast
2014 Earnings Webcast February 12, 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: 2014 Highlights
• In November 2014, we completed the purchase of eleven hydroelectric generating facilities in Montana with 633 megawatts of generation capacity and one storage reservoir, for an adjusted purchase price of $904 million. To help finance the transaction we accessed the capital markets and issued: • $4
Slide 5: Summary Financial Results
Summary Financial Results 5 (in millions except per share amounts) 2014 2013 Variance Operating Revenues 1,204.9$ 1,154.5$ 50.4$ Cost of Sales 482.6 479.6 3.0 Gross Margin 722.3 674.9 47.4 Operating Expenses Operating, general & administrative 305.9 285.6 20.3 Property and other taxes 114.6 105.5 9.
Slide 6: Gross Margin
6 Gross Margin (dollars in millions) Twelve Months Ended December 31, 2014 2013 Variance Electric $ 529.4 $ 506.5 $ 22.9 4.5% Natural gas 192.9 166.7 26.2 15.7% Other - 1.7 (1.7) (100.0%) Gross Margin $ 722.3 $ 674.9 $ 47.4 7.0% $ 21.4 Natural gas production $ 20.5 Hydro operations $ 5.9 Electric tr
Slide 7: Operating Expenses
Operating Expenses 7 (dollars in millions) Twelve Months Ended December 31, 2014 2013 Variance Operating, general & admin. $ 305.9 $ 285.6 $ 20.3 7.1% Property and other taxes 114.6 105.5 9.1 8.6% Depreciation and depletion 123.8 112.8 11.0 9.8% Operating Expenses $ 544.3 $ 503.9 $ 40.4 8.0% Increas
Slide 8: Operating to Net Income
Operating to Net Income (dollars in millions) Twelve Months Ended December 31, 2014 2013 Variance Operating Income $178.0 $174.0 $7.0 _ Items as discussed previously hopes {in millions) due to: for bridge credit facility for hydro Interest Expense (778) (70.5) (7.3) _ $4.4 December 2013 issue of $10
Slide 9: Balance Sheet
Balance Sheet 9 34% increase in total assets in 2014 due to hydro transaction and continued investment to improve system safety, reliability and capacity. 56% Debt to capitalization slightly above our targeted 50-55% due to seasonality of cash flows. Average debt to capitalization in 2014 was 54.6%
Slide 10: Cash Flow
Cash Flow 10 $56.3 million improvement in cash flow provided by operating activities driven by higher net income and improved collections of customer receivables*. * Cash flow in 2013 was affected by billing delays resulting from the implementation of our new customer information system in September
Slide 11: Non-GAAP Adjusted EPS
Non-GAAP Adjusted EPS 11 2014 Non-GAAP Adjusted EPS of $2.68. This reflects an $0.18, or 7%, improvement over 2013 non-GAAP earnings.
Slide 12: Non-GAAP Adjusted Results Reconciliation (Twelve Months Ended December 2014)
(in millions) Twelve Months Ended December 30, 2014 Hy dr o Eq ui ty D ilu tio n (1 ) Hy dr o Tr an sa ct io n Ex pe ns e Hy dr o Op er at io ns (N ov . 1 8 - D ec . 3 1) Fa vo ra bl e W ea th er No n- em pl oy ee D ef er re d Co m pe ns at io n In co m e Ta x Ad ju st m en t ( 2) Twelve Months Ende
Slide 13: Non-GAAP Effective Tax Rate
Non-GAAP Effective Tax Rate 13 Non-GAAP effective tax rate of 8.9% lower than 12%-14% as previously included in guidance. This difference is due primarily to slightly lower pretax income and higher than anticipated ongoing repairs / meters flow through tax benefits. We anticipate flow through tax be
Slide 14: 2015 Earnings Guidance
2015 Earnings Guidance 14 Our 2015 guidance range of $3.10 - $3.30 based upon, but not limited to, the following major assumptions and expectations: • Normal weather in our electric and natural gas service territories; • Successful integration and a full year earnings contribution from the recently
Slide 15: 2014 to 2015 Earnings & Dividend Bridge
2014 to 2015 Earnings & Dividend Bridge 2015 ESTIMATES Basic assumptions include, but are not limited to: • Normal weather in our electric and natural gas service territories; • Successful integration and a full year earnings contribution from the recently acquired hydro assets; • Excludes any poten
Slide 16: Montana Hydro Acquisition Complete
Montana Hydro Acquisition Complete 16 • On September 26, 2014, after a yearlong process, the Montana Public Service Commission issued a final order approving our application to purchase eleven hydroelectric generating facilities (633 MW) from PPL Montana, subject to certain conditions, including the
Slide 17: Shareholder Incurred Hydro Costs
Shareholder Incurred Hydro Costs 17 From the announcement in September 2013, the due diligence, regulatory approval, and financing process took just under 14 months and nearly $50 million of shareholder incurred costs to consummate the transaction. While prudently incurred, the costs were significan
Slide 18: South Dakota Rate Filing
South Dakota Rate Filing 18 34 Years of Declining ‘Real’ Rates Docket EL14-106 Requested $26.5 million revenue increase is primarily due to investments made to meet federal environmental mandates and to maintain our high-level of system reliability in South Dakota. Interim rates anticipated by mid 2
Slide 19: Other Activity
Other Activity 19 • Big Stone Air Quality Projects • Coal Plant is subject to BART requirements of the Regional Haze Rule • Must install and operate new system to reduce SO2, NOx and particulate emissions • Our 23.4% portion of the project cost is $95-$105 million with $71.8 million capitalized thro
Slide 20: Other Significant Achievements in 2014
Other Significant Achievements in 2014 20 • Best ever 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 2014. • Cost effectively
Slide 21: Capital Spending Forecast
Capital Spending Forecast 21 Current estimated cumulative capital spending for 2015 through 2019 is $1.45 billion. We anticipate funding the capital projects with a combination of cash flows (aided by NOLs) and long-term debt. If other opportunities arise that are not in the above projections (natur
Slide 22: Appendix
22 Appendix
Slide 23: 2013 to 2014 Full Year - Reconciliation
23 2013 to 2014 Full Year - Reconciliation ($millions, except EPS) Tw el ve M on th s En de d, De ce m be r 3 1, 2 01 3 Na tu ra l g as p ro du ct ion Hy dr o op er at ion s El ec tri c tra ns m iss ion M on ta na n at ur al ga s ra te in cr ea se El ec tri c re ta il v olu m es Na tu ra l g as re t
Slide 24: Full Year - Electric Segment
24 Full Year - Electric Segment
Slide 25: Full Year - Natural Gas Segment
25 Full Year - Natural Gas Segment
Slide 26: Heating and Cooling Degree Days
26 Heating and Cooling Degree Days
Slide 27: Full Year - Segment Results
27 Full Year - Segment Results
Slide 28: Income Tax Reconciliation
(in millions) Variance Income Before Income Taxes $110.4 $108.3 $2.1 Income tax calculated at 35% federal statutory rate 38.6 35.0% 37.9 35.0% 0.7 Permanent or flow through adjustments: State income, net of federal provisions (2.0) -1.8% (3.1) -2.8% 1.1 Flow through repairs deduction (25.3) -22.9% (
Slide 29: Fourth Quarter - Summary Financial Results
Fourth Quarter - Summary Financial Results 29
Slide 30: Fourth Quarter - Gross Margin
30 Fourth Quarter - Gross Margin (dollars in millions) Three Months Ended December 31, 2014 2013 Variance Electric $ 150.1 $ 129.7 $ 20.4 15.8% Natural gas 54.7 52.5 2.2 4.2% Other - 0.8 (0.8) (100.0%) Gross Margin $ 204.8 $ 183.0 $ 21.8 11.9% Increase in gross margin due to the following factors: $
Slide 31: Fourth Quarter - Operating Expenses
Fourth Quarter - Operating Expenses 31 Increase in operating expenses due mainly to the following factors: $14.5 million increase in OG&A $ 5.6 Hydro Transaction legal and professional fees $ 5.5 Hydro operations $ 3.9 Non-employee directors deferred compensation $ 1.3 Natural gas production $ (2.8)
Slide 32: Fourth Quarter - Operating to Net Income
Fourth Quarter - Operating to Net Income 32
Slide 33: Fourth Quarter - Non-GAAP Adjusted P&L
Fourth Quarter - Non-GAAP Adjusted P&L 33
Slide 34: 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 financ
Slide 35: Delivering a bright future
Upelivering a bright future