Northwestern Energy Group, Inc. · NASDAQ:NWE
Northwestern Energy — FY2020 Earnings Presentation
41 slides from Northwestern Energy's earnings presentation, Feb 12, 2021
Slide 1: 2020 - Full Year Earnings Webcast
2020 - Full Year Earnings Webcast February 12, 2021
Slide 2: Presenting Today / Forward Looking Statements
Presenting Today 2 Bob Rowe, President & CEO Brian Bird, Chief Financial Officer 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. For
Slide 3: 2020 and Recent Highlights
• Net income for 2020 was $155.2 million. This is a $46.9 million, or 23.2%, decrease as compared to the same period in 2019. • Diluted earnings per share (EPS) were $3.06. This is a $0.92, or 23.1%, decrease as compared to 2019 o Non-GAAP Adjusted EPS were $3.35, within our guidance range of $3.30-
Slide 4: Summary Financial Results (Full Year)
Summary Financial Results 4 (1) (Full Year) (1) Gross Margin, defined as revenues less cost of sales, is a non-GAAP Measure See appendix for additional disclosure.
Slide 5: Gross Margin (Full Year)
5 Gross Margin (Full Year) (1) Gross Margin, defined as revenues less cost of sales, is a non-GAAP Measure See appendix for additional disclosure. (dollars in millions) Twelve Months Ended December 31, 2020 2019 Variance Electric $ 704.2 $ 741.6 $ (37.4) (5.0)% Natural Gas 188.3 198.3 (10.0) (5.0)%
Slide 6: Weather (Full Year)
Weather 6 (Full Year) We estimate overall unfavorable weather in 2020 resulted in a $9.8 million pretax detriment as compared to normal and a $17.1 million detriment as compared to 2019. Degrees Fahrenheit from Average
Slide 7: Operating Expenses (Full Year)
Decrease in operating, general & administrative expense due to the following factors: $ (10.1) Employee benefits (4.1) Labor (3.2) Hazard tree removal (3.0) Travel and training (1.2) Environmental costs (0.9) Generation maintenance 3.0 Uncollectible Accounts (3.2) Other miscellaneous $ (22.7) Change
Slide 8: Operating to Net Income (Full Year)
Operating to Net Income 8 (dollars in millions) Twelve Months Ended December 31, 2020 2019 Variance Operating Income $ 236.2 $ 276.9 $ (40.7) (14.7)% Interest Expense (96.8) (95.1) (1.7) (1.8)% Other Income, net 4.8 0.4 4.4 1,237.0% Income Before Taxes 144.2 182.2 (38.0) (20.8)% Income Tax Benefit 1
Slide 9: Income Tax Reconciliation (Full Year)
Income Tax Reconciliation 9 (Full Year)
Slide 10: Balance Sheet
Balance Sheet 10 Debt to Capitalization remains within our targeted 50% - 55% range. In 2020, we netted our excess deferred income taxes in regulatory liabilities. This reclassification had no effect on previously reported Net income or Shareholders Equity balance.
Slide 11: Cash Flow
Cash Flow 11 Cash from operating activities increased by $55.4M primarily due to improved collections of energy supply costs in the current period, as compared with higher procured supply costs and payments reducing cash flows in 2019, including TCJA credits to Montana customers of approximately $20
Slide 12: Net Operating Losses & Effective Tax Rates
Net Operating Losses & Effective Tax Rates 12 Cash Taxes: We anticipate NOLs to be available into 2021 with production tax and other credits to largely offset any federal cash tax obligations until 2024. Effective Tax Rate: We anticipate the effective tax rate (ETR) for 2021 to be approximately (2.5
Slide 13: Adjusted Non-GAAP Earnings
(1) As a result of the adoption of Accounting Standard Update 2017-07 in March 2018, pension and other employee benefit expense is now disaggregated on the GAAP income statement with portions now recorded in both OG&A expense and Other (Expense) Income lines. To facilitate better understanding of tr
Slide 14: Covid-19: Margin Expectations
Covid-19: Margin Expectations 14 Covid-19 impacts on gross margin continued into the fourth quarter with commercial and industrial customer classes impacted more than forecasted (residential in line with forecast). Industrial load was incrementally impacted by non-Covid related closures of a few ind
Slide 15: Covid-19: Expense Expectations
Covid-19: Expense Expectations 15 Expenses that decreased: • Distribution customer work • Contract services and material costs • Fleet fuel costs • Travel and employee education • Lower medical expense & incentive pay Covid-19 related expense reductions were generally in line with our expectations.
Slide 16: 2020 Non-GAAP to 2021 EPS Bridge
2020 Non-GAAP to 2021 EPS Bridge 16 Assumptions included in the 2021 Guidance includes, but not limited to, the following major assumptions: • Normal weather in our electric and natural gas service territories; • Continued Covid-19 related reduction in our commercial and industrial sales volumes, of
Slide 17: Earnings Per Share and Dividend History
Earnings Per Share and Dividend History 17 See prior page for Guidance Assumptions and see “Non-GAAP Financial Measures” slide in appendix for reconciliation of “Non-GAAP Adjusted EPS” Non-GAAP Adjusted EPS Growth Averaged 4.3% from 2013 - 2020 Annualized dividend growth rate of 6.7% from 2013 - 202
Slide 18: Capital Investment Forecast
Based on the results of the competitive solicitation process in South Dakota, approximately $100 million of incremental investment for SD generation is included in the projections above (2021-2023). This level of capital investment is anticipated to result in annualized rate base growth of 4%-5%. Th
Slide 19: Generation Portfolio Update
Generation Portfolio Update 19 Western Energy Imbalance Market Significant investment opportunities identified to address critical generation capacity shortfall, including cost- effective hydro upgrades. Montana • Initial bids from the February 2020, 280 MW, competitive solicitation were submitted i
Slide 20: Looking Forward (Regulatory)
Looking Forward (Regulatory) 20 * Of which $5.6 million related to a period in 2018 when Colstrip generation was operating intermittently to ensure it remained in compliance with environmental emission standards and $3.8 million related to the prorated application of the change in state law that eli
Slide 21: ESG Advancements
• NorthWestern has a new Environmental, Social and Governance landing page. The new page: • Consolidates existing ESG information; • Includes disclosures of 19 new and existing policies and standards necessary for a best- practices ESG program; and • Includes a new, easy reference, Sustainability St
Slide 22: Conclusion
Conclusion 22 Pure Electric & Gas Utility Solid Utility Foundation Best Practices Corporate Governance Attractive Future Growth Prospects Strong Earnings & Cash Flows
Slide 23: Appendix
Cr Appendix 23
Slide 24: Segment Results (Full Year)
24 Segment ResultsAppendix (1) (1) Gross Margin, defined as revenues less cost of sales, is a non-GAAP Measure. See appendix for additional disclosure. (1) (Full Year)
Slide 25: Electric Segment (Full Year)
25 Electric SegmentAppendix (1) (1) Gross Margin, defined as revenues less cost of sales, is a non-GAAP Measure. See appendix for additional disclosure. (Full Year)
Slide 26: Natural Gas Segment (Full Year)
26 Natural Gas SegmentAppendix (1) (1) Gross Margin, defined as revenues less cost of sales, is a non-GAAP Measure. See appendix for additional disclosure. (Full Year)
Slide 27: Summary Financial Results (Three Months Ended December 31)
Summary Financial Results 27 (1) (1) Gross Margin, defined as revenues less cost of sales, is a non-GAAP Measure. See appendix for additional disclosure. Appendix (Three Months Ended December 31)
Slide 28: Gross Margin (Three Months Ended December 31)
$ 2.8 Property taxes recovered in revenue, offset in property tax expense 1.1 Operating expenses recovered in trackers, offset in operating expense (1.0) Production tax credits reducing revenue, offset in income tax expense (0.1) Gas production taxes recovered in revenue, offset in property & other
Slide 29: Weather (Three Months Ended December 31)
Weather 29 Appendix (Three Months Ended December 31) We estimate unfavorable weather for the 4th quarter 2020 has contributed approximately $5.7M pretax detriment as compared to normal and $5.0M pretax detriment as compared to the same period in 2019. Degrees Fahrenheit from Average
Slide 30: Operating Expenses (Three Months Ended December 31)
Operating Expenses 30 Appendix (Three Months Ended December 31) (dollars in millions) Three Months Ended December 31, 2020 2019 Variance Operating, general & admin. $ 73.1 $ 79.3 $ (6.2) (7.8%) Property and other taxes 42.7 38.7 4.0 10.3% Depreciation and depletion 45.3 43.1 2.2 5.1% Operating Expen
Slide 31: Operating to Net Income (Three Months Ended December 31)
Operating to Net Income 31 Appendix (Three Months Ended December 31) $0.4 million increase in interest expenses was primarily due to higher borrowings. $6.3 million increase in other expense was due to a $2.9 million decrease in other pension expense, a $1.4 million increase in the value of deferred
Slide 32: Income Tax Reconciliation (Three Months Ended December 31)
Income Tax Reconciliation 32 Appendix (Three Months Ended December 31)
Slide 33: Adjusted Non-GAAP Earnings
Adjusted Non-GAAP Earnings 33 (1) As a result of the adoption of Accounting Standard Update 2017-07 in March 2018, pension and other employee benefit expense is now disaggregated on the GAAP income statement with portions now recorded in both OG&A expense and Other (Expense) Income lines. To facilit
Slide 34: Segment Results (Three Months Ended December 31)
34 Segment ResultsAppendix (1) (1) Gross Margin, defined as revenues less cost of sales, is a non-GAAP Measure. See appendix for additional disclosure. (1) (Three Months Ended December 31)
Slide 35: Electric Segment (Three Months Ended December 31)
35 Electric SegmentAppendix (1) (1) Gross Margin, defined as revenues less cost of sales, is a non-GAAP Measure. See appendix for additional disclosure. (Three Months Ended December 31)
Slide 36: Natural Gas Segment (Three Months Ended December 31)
36 Natural Gas SegmentAppendix (1) (1) Gross Margin, defined as revenues less cost of sales, is a non-GAAP Measure. See appendix for additional disclosure. (Three Months Ended December 31)
Slide 37: Qualified Facility Earnings Adjustment
Our electric QF liability consists of unrecoverable costs associated with contracts covered under PURPA that are part of a 2002 stipulation with the MPSC and other parties. Risks / losses associated with these contracts are born by shareholders, not customers. Therefore, any mitigation of prior loss
Slide 38: Quarterly PCCAM Impacts
Quarterly PCCAM Impacts 38 Appendix In 2017, the Montana legislature revised the statute regarding our recovery of electric supply costs. In response, the MPSC approved a new design for our electric tracker in 2018, effective July 1, 2017. The revised electric tracker, or PCCAM established a baselin
Slide 39: Rate Base & Authorized Return Summary
Rate Base & Authorized Return Summary 39 Appendix (1) The revenue requirement associated with the FERC regulated portion of Montana electric transmission and ancillary services are included as revenue credits to our MPSC jurisdictional customers. Therefore, we do not separately reflect FERC authoriz
Slide 40: 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 financi
Slide 41: Upetivering a
Upetivering a bright future