Slide 1: First Quarter 2005 Update
NorthWestern Energy First Quarter 2005 Update May 2005
Slide 2: Mike Hanson, President & CEO
Mike Hanson President & CEO NorthWestern ny
Slide 3: Forward-Looking Statement
Forward-Looking Statement During the course of this presentation today, we will be discussing certain subjects including those pertaining to our strategy, and our discussions may contain forward-looking information. Although our expectations and beliefs are based on reasonable assumptions, actual re
Slide 4: Introduction
introduction «Following emergence, NorthWestern is a much stronger company « Significantly reduced debt, strong balance sheet, significant excess free cash flow « Focused on our transmission and distribution utility operations «Better positioned to serve our customers «Able to grow with the communit
Slide 5: Company Overview
Company Overview + NorthWestern Corporation, headquartered in Sioux Falls, $.D., is an investor-owned utility and one of the largest providers of electricity and natural gas in the northwest quadrant of the United States + We serve approximately 617,100 customers — 368,200 electric and 248,900 natur
Slide 6: Service Territory
Service Territory LEGEND © Electric Only ‘A Gas Only Gas and Electric — Electric Transmission Lines — casPipatne (omg ‘ed ard upper owned) Eecrc Generating Pant Ds eect Gonerating Plant font cata
Slide 7: Montana and South Dakota load and generation
Montana South Dakota Peak (systemwide) 1,500 MW 275 MW Ave. Daily Load (systemwide) 1,100 MW 135 MW South Dakota Company-owned regulated generation 100% Unregulated Colstrip Unit 4 PPL Qualifying Facilities (QF) Market Purchases Other Small Contracts NorthWester n
Slide 8: Montana Regulated Electric Portfolio
Montana Regulated Electric Portfolio Resource Mix (6 million MWh) Colstrip Unit 4 12% Yearly Resource Cost ($249 million) Other 3% PPL $22) a7% sitmmy OF 11% (628m) Colstrip Unit 4 17% sai) 84% of the forecasted energy requirement is under contract through 6/30/07 NorthWeste ql
Slide 9: Significant Events Since End of Q1 2005
Significant Events Since End of Q7 2005 Regulatory + Stipulation reached with MPSC to recover $4.6 million in natural gas previously disallowed = MPSC had disallowed $10.4 million in natural gas purchases from November 2002 to June 2004 = Will record on income statement upon final approval + NorthWe
Slide 10: Value Drivers
Value Drivers * T&D business focus = Solid and reliable operations = Complete default supply portfolio procurement = Continue to improve regulatory environment = Efficiency improvement and cost control : Asset sales - Attain investment grade rating «Resolve outstanding bankruptcy claims = Intercredi
Slide 11: NorthWestern's Value Creation Strategy – Grow the Business
NorthWestern’s Value Creation Strategy — Grow the Business + NorthWestern is looking to take advantage of its strategically located position + Opportunities may exist to expand electric and gas transmission infrastructure to meet increased needs + Evaluate strategic opportunities in northwestern U.S
Slide 12: Brian Bird, Chief Financial Officer
Brian Bird Chief Financial Officer North Wes m xy
Slide 13: 2004 P&L Summary
2004 P&L Summary (inmitiore) OPERATING REVENUES COST OF SALES GROSS MARGIN OPERATING EXPENSES Operating, qeneral and administrative Property and othertaxes, Depreciation Reorganization items Impairment on assets held for sale Total Operating Expenses OPERATING INCOME Interest Expense Gain (Loss) on
Slide 14: 2005 Outlook
2005 Outlook «Projecting earnings from continuing operations of $1.30 to $1.45 per share (basic) = Absent any unusual weather « Bridge from 2004 to 2005 = Significant reduction in interest expense = Reduced G&A expense = Modest increase in margins due to organic growth
Slide 15: Capital investment and asset sales plan
+ Transmission Investment + Territory Expansion + Energy-telated Businesses $30-§35 million Asset sales = $65-$70 million * Optimize operations + Improve regulatory environment * Train and retan employees + Maintenance Cap Ex + Service Terrkory Growth $75-$80 million $70-$75 million NorthWestern
Slide 16: First Quarter 2005 – Financial Overview
First Quarter 2005 — Financial Overview Consolidated Operations (millions) @12005 @12004 Increase > Gross Margin $144.7 $132.7 9.0% = Increase due to a gain on amendment to a Montana Qualifying Facility of approximately $4.9 million + Unregulated electric segment (Colstrip 4) margins increased appro
Slide 17: First Quarter 2005 – P&L Summary
First Quarter 2005 — P&L Summary Successor Predecessor Company Company ‘Three Months Ended March 31 (000's) 2005 2004 Operating Revenues $ 335,093 $ 305,627 Cost of Sales 190,381 172,918 Gross Marain dz 12 132,709 Operating Expenses Operating, aeneral and administrative 56.855 56.805 Property and ot
Slide 18: Q1 2005 Electric and Natural Gas Operations
Juarter 2005 — ctric and Natural Gas Operations Q1 2005 Revenues (millions) Q1 2005 Gross Margin (millions) $25 $18.0 Regulated Electric © Regulated Gas Unregulated Electric |= Unregulated Natural Gas NorthWestern
Slide 19: First Quarter 2005 – Segment Information
First Quarter 2005 — Segment Information Gross Margin Operating Income ‘Volumes (000's) Three Months Ended March 31, 2005 (thousands) Regulated Unregulated Electric NaturaGas — Electric NaturalGas Other Total 84,295 © $ 40,190 $ 18,066 $§ 2576 $ (416) 27,333 «$ «16581 «$ «7,519 «$ 1,606 © $ (6,240
Slide 20: Cash Flow – First Quarter 2005
Cash Flow — First Quarter 2005 Successor Predecessor Company Company Three Months Ended March 31, (000's) 2005, 2004 Net Income 18.918 = $16,981 Depreciation 18,690 18,176 (Gain) Loss on QF Contract Restructuring 4,888) 5 Deferred Income Taxes 13,387 @16) (Income) Loss on Disco. Ops., Net (624) 4,92
Slide 21: First Quarter 2005 – Balance Sheet
First Quarter 2005 — Balance Sheet Successor Company (000's) Mar. 31, Dec. 31, 2005 2004 ASSETS Cash $ 77314 $ 17958 Other Current Assets 294,518 330,620 Property, Plant and Equipment, Net 1,378,468 1,379,060 Goodwill 495,076 435,076 Regulatory Assets 218,964 224,192 Other Noncurrent Assets 29,426 2
Slide 22: Rating Agency Update
Rating Agency Update Rating Outlook Rating Outlook Fitch BB+ Positive N/A N/A Moody’s Bat Stable Ba2 Stable S&P BB Positive BB- Positive Steps necessary for investment grade rating 4. Financial performance track record 2. Asset sales proceeds received 3. Progress on outstanding litigation 4. Pay dow
Slide 23: Solid first quarter 2005 financial results
« Solid first quarter 2005 financial results «Reaffirming guidance on basic earnings from continuing operations of $1.30 to $1.45 per share = Absent any unusual weather * Taking steps to attain investment grade rating «Developing strategy to redeploy excess free cash flow NorthWestern
Slide 24: Searchable text section of graphics shown above
Searchable text section of graphics shown above [ GRA PHIC] [LOGO] First Quarter 2005 Update May 2005 Mik e Hanson President & CEO [LOGO] For ward-Looking Statement During the course of this presentation today, we will be discussing certain subjects including those pertaining to our strategy, and ou