Northwestern Energy Group, Inc. · NASDAQ:NWE
Northwestern Energy — Q2 2018 Earnings Presentation
36 slides from Northwestern Energy's earnings presentation, Jul 20, 2018
Slide 1: 2018 Second Quarter Earnings Webcast
Beck Hill Solar Micro-Grid near Deer Lodge, MT 2018 Second Quarter Earnings Webcast July 20, 2018
Slide 2: Presenting Today / Forward Looking Statements
Presenting Today 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 Bob Rowe, statements often address our expected fut
Slide 3: Second Quarter Highlights
Second Quarter Highlights • Net income for the quarter increased $22.0 million, or 100.6%, as compared to the same period in 2017. This increase was primarily due to a gain related to the adjustment of our Qualified Facilities liability, favorable weather, and to a lesser extent increased demand for
Slide 4: Summary Financial Results (Second Quarter)
Summary Financial Results (Second Quarter) (1) 4 (1) Gross Margin, defined as revenues less cost of sales, is a non-GAAP Measure See appendix for additional disclosure.
Slide 5: Gross Margin (Second Quarter)
Gross Margin (Second Quarter) (dollars in millions) Three Months Ended June 30, 2018 2017 Variance Operating Revenues $ 261.8 $ 283.9 ($ 22.1) (7.8%) Cost of Sales 32.2 84.0 (51.8) (61.7%) (1) Gross Margin $ 229.6 $ 199.9 $ 29.7 14.9% Increase in gross margin due to the following factors: $ 25.1 Ele
Slide 6: Qualified Facility Earnings Benefit
Qualified Facility Earnings Benefit The $25.1 million earnings improvement related to certain Qualified Facilities (QF) contracts is a result of: • A $17.5 million benefit resulting from the reduction of the estimated future liability of unrecoverable QF costs. The primary driver of the reduction is
Slide 7: Weather (Second Quarter)
Weather (Second Quarter) Mean Temperature from Normal We estimate unfavorable weather in second quarter 2018 impacted gross margin by $1.4M as compared to normal but was approximately $0.6M favorable as compared to 2017. 7
Slide 8: Operating Expenses (Second Quarter)
Operating Expenses (Second Quarter) (dollars in millions) Three Months Ended June 30, 2018 2017 Variance Operating, general & admin. $ 73.8 $ 72.6 $ 1.2 1.7% Property and other taxes 43.0 39.5 3.5 8.9% Depreciation and depletion 43.5 41.5 2.0 4.8% Operating Expenses $ 160.3 $ 153.6 $ 6.7 4.4% Increa
Slide 9: Operating to Net Income (Second Quarter)
Operating to Net Income (Second Quarter) (dollars in millions) Three Months Ended June 30, 2018 2017 Variance Operating Income $ 69.2 $ 46.3 $ 22.9 49.5% Interest Expense (23.2) (23.4) 0.2 0.9% Other Income / (Expense) 0.9 (0.5) 1.4 280.0% Income Before Taxes 46.9 22.4 24.5 109.4% Income Tax Expense
Slide 10: Income Tax Reconciliation (Second Quarter)
Income Tax Reconciliation (Second Quarter) 10
Slide 11: Balance Sheet
(dollars in millions) Cash and cash equivalents Restricted cash Accounts receivable, net Inventories Other current assets Goodwill PP&E and other non-current assets Total Assets Payables Current maturities of long-term debt & capital leases Short-term borrowings Other current liabilities Long-term d
Slide 12: Cash Flow
Cash Flow Cash from operating activities improved by $68 million primarily due to higher net income, improved collections of customer receipts and increased recovery of certain costs through supply trackers. 12
Slide 13: Adjusted Non-GAAP Earnings (Second Quarter)
Adjusted Non-GAAP Earnings (Second Quarter) (1) During the first quarter of 2018, we revised our presentation of revenues associated with being a market participant in the Southwest Power Pool to net them with the associated cost of sales. These revenues were previously recorded gross in electric re
Slide 14: 2018 Earnings Guidance
2018 Earnings Guidance $3.30$3.30-$3.45-$3.50 $3.10 - $3.30 $2.60$3.20 - $2.75-$3.40 NorthWestern reaffirms its 2018 earnings guidance range of $3.35 - $3.50 per diluted share is based upon, but not limited to, the following major assumptions and expectations: • Normal weather in our electric and na
Slide 15: Maintaining Full Year Non-GAAP Guidance
Maintaining Full Year Non-GAAP Guidance In order to meet 2018 $3.30$3.30-$3.45-$3.50 guidance,$3.10 we will- $3.30 $2.60$3.20 - $2.75-$3.40 need to deliver EPS of $1.61 - $1.76 during the second half of the year. This compares to $1.70 earned in the second half of 2017. The non-GAAP measures present
Slide 16: Looking Forward
Looking Forward Regulatory • Regulatory treatment of tax reform - determine best way Black Eagle Power House to provide long-term benefit to customers and system while keeping investors whole. $3.30$3.30-$3.45-$3.50 $3.10 - $3.30 • Working toward successful implementation of new $2.60$3.20 - $2.75-$
Slide 17: Regulatory & Legal Update
Regulatory & Legal Update Montana Property Tax Tracker Filing • On January 29th the MPSC issued an order in our 2017 property tax tracker filing by further reducing our recovery of Montana property taxes by a total of $3.5 million impacting both 2017 and 2018 (approximately $1.75 million each year).
Slide 18: Estimated Impacts of the Tax Cuts & Jobs Act
Estimated Impacts of the Tax Cuts & Jobs Act • Dockets have been initiated in each of our jurisdictions to address the impact from the change in tax law and to provide any benefits to customers effective January 1st. We have made filings in each jurisdiction. We do not expect the FERC or Nebraska fi
Slide 19: Capital Spending Forecast
Capital Spending Forecast 2018 Significant Updates Out: Approximately $123 million of previously included investment in capacity generation has been removed pending update of Integrated Resource Plans in both Montana and South Dakota (expected to be completed by year-end 2018). In: Approximately $12
Slide 20: Conclusion
Conclusion Best Practices Corporate Governance Attractive Future Pure Electric Growth & Gas Utility Prospects Strong Solid Utility Earnings & Foundation Cash Flows 20
Slide 21: Appendix 21
Appendix 21
Slide 22: Segment Results (Second Quarter)
Appendix Segment Results (Second Quarter) (1) (1) (1) Gross Margin, defined as revenues less cost of sales, is a non-GAAP Measure. 22 See appendix for additional disclosure.
Slide 23: Electric Segment (Second Quarter)
Appendix Electric Segment (Second Quarter) (1) (1) Gross Margin, defined as revenues less cost of sales, is a non-GAAP Measure. See appendix for additional disclosure. 23
Slide 24: Natural Gas Segment (Second Quarter)
Appendix Natural Gas Segment (Second Quarter) (1) (1) Gross Margin, defined as revenues less cost of sales, is a non-GAAP Measure. See appendix for additional disclosure. 24
Slide 25: Summary Financial Results (Six Months)
Appendix Summary Financial Results (Six Months Ended June 30) (1) (1) Gross Margin, defined as revenues less cost of sales, is a non-GAAP Measure. See appendix for additional disclosure. 25
Slide 26: Gross Margin (Six Months)
Appendix Gross Margin (Six Months Ended June 30) (dollars in millions) Six Months Ended June 30, 2018 2017 Variance(1) Operating Revenues $ 603.3 $ 651.2 ($ 47.9) (7.4%) Cost of Sales 128.3 203.8 (75.5) (37.0%) Gross Margin $ 475.0 $ 447.4 $ 27.6 6.2% Increase in gross margin due to the following fa
Slide 27: Weather (Six Months)
Appendix Weather (Six Months Ended June 30) Mean Temperature from Normal We estimate favorable weather in in the first half of 2018 contributed approximately $3.4M pretax benefit as 27 compared to normal and $2.2M pretax benefit as compared to the same period in 2017.
Slide 28: Operating Expenses (Six Months)
Appendix Operating Expenses (Six Months Ended June 30) (dollars in millions) Six Months Ended June 30, 2018 2017 Variance Operating, general & admin. $ 148.2 $ 150.9 ($ 2.7) (1.8%) Property and other taxes 85.9 79.4 6.5 8.2% Depreciation and depletion 87.3 83.0 4.3 5.2% Operating Expenses $ 321.4 $
Slide 29: Operating to Net Income (Six Months)
Appendix Operating to Net Income (Six Months Ended June 30) (dollars in millions) Six Months Ended June 30, 2018 2017 Variance Operating Income $ 153.7 $ 134.1 $ 19.6 14.6% Interest Expense (46.2) (46.8) 0.6 1.3% Other Expense (0.3) (1.6) 1.3 81.3% Income Before Taxes 107.3 85.7 21.6 25.2% Income Ta
Slide 30: Income Tax Reconciliation (Six Months)
Appendix Income Tax Reconciliation (Six Months Ended June 30) 30
Slide 31: Adjusted Non-GAAP Earnings (Six Months)
Appendix Adjusted Non-GAAP Earnings (Six Months Ended June 30) (1) During the first quarter of 2018, we revised our presentation of revenues associated with being a market participant in the Southwest Power Pool to net them with the associated cost of sales. These revenues were previously recorded g
Slide 32: Segment Results (Six Months)
Appendix Segment Results (Six Months Ended June 30) (1) (1) (1) Gross Margin, defined as revenues less cost of sales, is a non-GAAP Measure. See appendix for additional disclosure. 32
Slide 33: Electric Segment (Six Months)
Appendix Electric Segment (Six Months Ended June 30) (1) (1) Gross Margin, defined as revenues less cost of sales, is a non-GAAP Measure. See appendix for additional disclosure. 33
Slide 34: Natural Gas Segment (Six Months)
Appendix Natural Gas Segment (Six Months Ended June 30) (1) (1) Gross Margin, defined as revenues less cost of sales, is a non-GAAP Measure. See appendix for additional disclosure. 34
Slide 35: Non-GAAP Financial Measures
Appendix 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 num
Slide 36: Delivering a bright future
Upelivering a bright future