Northwestern Energy Group, Inc. · NASDAQ:NWE
Northwestern Energy — Investor Presentation (July 2015)
44 slides from Northwestern Energy's investor presentation, July 2015
Slide 1: Investor Update - Toronto
Thompson Falls Investor Update - Toronto | July 2015
Slide 2: Forward Looking Statements
Forward Looking Statements Company Information NorthWestern Corp. Forward Looking Statements dba: NorthWestern Energy During the course of this presentation, there will be forward- www.northwesternenergy.com looking statements within the meaning of the “safe harbor” Corporate Support Office provisio
Slide 3: About NorthWestern
About NorthWestern South Dakota Operations Electric 62,500 customers 3,500 miles – transmission & distribution lines 360 MW of power generation Natural Gas 45,500 customers 1,655 miles of transmission and distribution pipeline Montana Operations Electric 353,600 customers 24,300 miles – transmission
Slide 4: Recent Significant Activities
Recent Significant Activities • Net income improved $23.3 million in the second quarter of 2015 as compared with the same period in 2014 primarily due to an insurance settlement and the impact of the November 2014 hydro acquisition. • Diluted EPS of $0.65 as compared to $0.20 for the same period in
Slide 5: NWE: An Investment for the Long Term
NWE: An Investment for the Long Term • 100% Regulated electric & natural gas utility business Pure Electric • 100 year history of competitive customer rates, system reliability and customer satisfaction & Gas Utility • Solid economic indicators in service territory • Constructive regulatory relation
Slide 6: A Diversified Electric and Gas Utility
A Diversified Electric and Gas Utility Gross Margin in 2014: Gross Margin in 2014: Montana: $609M Electric: $529M South Dakota: $102M 73% Electric Natural Gas: $193M Nebraska: $ 11M 27% Natural Gas 84% Montana 83% Residential 14% South Dakota 16% Commercial 2% Nebraska 1% Industrial Above data refle
Slide 7: NorthWestern Energy Profile
NorthWestern Energy Profile (1) The FERC regulated portion of Montana electric transmission and DGGS are included as revenue credits to our MPSC jurisdiction customers. Therefore we do not separately reflect FERC authorized rate base or authorized returns. (2) For those items marked as "n/a," the re
Slide 8: Solid Economic Indicators
Solid Economic Indicators • Unemployment rates in all three of our states are meaningfully below National Average. • Customer growth rates historically exceed National Average by a good margin. Source: NorthWestern 2008-2014 Forms 10-K and Unemployment Rate: US Department of Labor via SNL Database 2
Slide 9: Strong Utility Foundation
Strong Utility Foundation JD Power - Customer Service Index Score 800 JD Power 26 Combination Electric and Natural Gas Company Average Index Score 700 600 2009 2010 2011 2012 2013 2014 Electric source: Edison Electric Institute Typical Bills and Average Rates Report, 1/1/15 NorthWestern Energy Score
Slide 10: Reaffirm 2015 Earnings Guidance
Reaffirm 2015 Earnings Guidance $3.50 Diluted Earnings Per Share GAAP Diluted EPS $3.25 $3.10 - $3.30 Initial Guidance Range $3.00 Non-GAAP "Adjusted" EPS $2.75 $2.50 $2.25 $2.00 $1.75 $2.02 $2.14 $2.53 $2.66 $2.46 $2.99 $1.50 2009 2010 2011 2012 2013 2014 $- 2015E We reaffirm our 2015 adjusted earn
Slide 11: Track Record of Delivering Results
Track Record of Delivering Results Return on Equity within 9.5% - 11.0% band over the last 5 years. Annual dividend increases since emergence in 2004. 5 Year (2010-2014) Avg. $2.00 Dividend Per Share and Payout Ratio 120% Return on Equity: 10.3% $1.90 110% $1.80 100% 5 Year (2010-2014) CAGR $1.70 90
Slide 12: Investment for Our Customers' Benefit
Investment for Our Customers’ Benefit Over the past 6 years we have been reintegrating our Montana energy supply portfolio and making additional investments across our entire service territory to enhance system safety, reliability and capacity. 2014 includes hydro assets in rate base but only 1.5 mo
Slide 13: Total Shareholder Return
Total Shareholder Return 13 * 15 member peer group: ALE, AVA, BKH, CNL, EDE, EE, GXP, IDA, MGEE, PNM, POR, STR, UIL, VVC, WR
Slide 14: Strong Cash Flows
Strong Cash Flows Components of Free Cash Flow While maintenance capex and total dividend payments have continued to grow since 2010 (8.2% and 7.3% CAGR respectively), Cash Flow from Operations has continued to outpace maintenance capex and averaged approximately $42 million of positive Free Cash Fl
Slide 15: Balance Sheet Strength and Liquidity
Balance Sheet Strength and Liquidity Credit Ratings Senior Senior Secured Unsecured Commercial Rating Rating Paper Outlook Fitch A A- F2 Stable Moody's A1 A3 Prime-2 Stable S&P A- BBB A-2 Stable A security rating is not a recommendation to buy, sell or hold securities. Such ratings Annual ratio is a
Slide 16: The Hydro Facilities
The Hydro Facilities Overview of Hydro Facilities(1) NorthWestern Owned Facilities3 Net FERC 5-Yr Avg. Capacity License Capacity Plant (MW) COD River Source Expiration Factor(2) Missouri Missouri Missouri River Missouri Missouri Missouri River River River River River Black Eagle 21 1927 Missouri 204
Slide 17: Meeting Montana Customer Demands
Meeting Montana Customer Demands Light Load Hours (MWh's) 400,000 Conveyance of Kerr Dam to Confederated Salish and Kootenai Tribes 300,000 MWh's 200,000 100,000 - Hydro Contracted Owned Generation Light Load Demand Heavy Load Hours (MWh's) 500,000 Conveyance of Kerr Dam to Confederated Salish and K
Slide 18: Big Stone and Neal Air Quality Projects
Big Stone and Neal Air Quality Projects Big Stone Power Plant Neal Power Plant 18
Slide 19: South Dakota Rate Filing
South Dakota Rate Filing 34 Years of Declining ‘Real’ Rates Docket EL14-106 Three major projects alone account for 96% of the requested $26.5M increase. Big Stone/Neal……..$15.2M Aberdeen Peaker……$7.4M Yankton Substation…$2.8M All other……………...$1.1M Total $26.5M The requested $26.5 million revenue in
Slide 20: Natural Gas Reserves Opportunity
Natural Gas Reserves Opportunity We continue to pursue opportunities to secure Total Annual Need low cost gas reserves for our customers. First ~6 Bcf annual • Three acquisitions totaling approximately $100 million production acquired since September 2010: Owned for ~$100M • 84.6 Bcf of natural gas
Slide 21: Infrastructure Projects
Infrastructure Projects • In Montana, our Distribution System Infrastructure Project (DSIP) and Transmission System Infrastructure Project (TSIP), both of which are currently in process, are to maintain a safe and reliable electric and natural gas distribution and transmission system. – The primary
Slide 22: DGGS Update – Still waiting on FERC
DGGS Update – Still waiting on FERC 22
Slide 23: Capital Spending Forecast
2015 capex excludes the $143 million Beethoven Wind acquisition expected to Capital Spending Forecast close by the end of 2015. We plan to issue up to $70 million of long-term debt and up to $60 million of equity with the remainder to be funded with available cash. * Nearly $1.5 billion estimated cu
Slide 24: Beethoven Wind Acquisition
Beethoven Wind Acquisition Opportunity: We executed an agreement with BayWa r.e. Wind LLC in July 2015 to purchase two recently completed Qualified Facilities (QF) projects in South Dakota for an aggregate purchase price of approximately $143 million. The energy and renewable energy credits associat
Slide 25: Environmentally Strong Owned Generation Fleet
Environmentally Strong Owned Generation Fleet * 69% 49% renewable or renewable 18% supports or supports renewable renewable renewable Graphs above are based on owned name-plate MW’s. Renewables or assets supporting renewables are highlighted in green * DGGS is a 150 MW regulating facility constructe
Slide 26: 'Clean' Owned & Contracted Supply Portfolio
‘Clean’ Owned & Contracted Supply Portfolio 54% 25% Renewable Renewable 67% Renewable Charts above are calculated using nameplate megawatts and include long-term contracts extending beyond 5 years. * DGGS is a 150 MW regulating facility constructed to support the integration of wind generations vari
Slide 27: Conclusion
Conclusion Pure Electric Strong Attractive Best Practices Solid Utility and Gas Utility Earnings and Future Growth Corporate Foundation Cash Flows Prospects Governance Madison Morony Thompson Falls Hauser Holter Rainbow Hydro Transaction Transaction Announced Closed 9/26/2013 11/18/2014 Cochrane Rya
Slide 28: Appendix
Appendix 28
Slide 29: Summary Financial Results (Qtr 2 & YTD)
Summary Financial Results (Qtr 2 & YTD) 29
Slide 30: Second Quarter Weather
Second Quarter Weather Maximum Temperature from Normal Minimum Temperature from Normal For our service territory, 2nd quarter is still typically a heating quarter (very few cooling degree days). 30 Q2 was over 12% warmer than last year and historical average in all three states we service.
Slide 31: Adjusted Earnings (Second Quarter '15 vs '14)
Adjusted Earnings (Second Quarter ‘15 vs ’14) As anticipated we have realized a majority of the expected accretion benefit of the hydro acquisition in the 2nd quarter and should continue in the 3rd quarter of 2015. Non-GAAP adjusted Net Income increased 31 134.7% over same period prior year. However
Slide 32: Adjusted Earnings (YTD '15 vs '14)
Adjusted Earnings (YTD ‘15 vs ’14) Non-GAAP adjusted Net Income increased 42.8% over same period prior year. However, due to $400 32 million equity issuance in November 2014, our adjusted diluted EPS increased by a lesser 18.1%.
Slide 33: Hypothetical Accretion Illustration
Hypothetical Accretion Illustration As shown in the example above, a company making an acquisition that would contribute relatively consistent net income over each of the four quarters could anticipate the most earnings per share benefit in the quarters with the ‘lightest’ earnings. 33 (Illustrative
Slide 34: 2014 to 2015 Reconciliation (2nd Qtr & YTD)
2014 to 2015 Reconciliation (2nd Qtr & YTD) 34
Slide 35: Balance Sheet
35 (dollars in millions) Cash 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 debt & capital leas
Slide 36: Cash Flow
(dollars in millions) Operating Activities Net Income Non-Cash adjustments to net income Changes in working capital Other non-current assets & liabilities Cash provided by operating activities Investing Activities PP&E additions Other Cash used in investing activities Financing Activities Proceeds f
Slide 37: Income Tax Reconciliation (Qtr 2 & YTD)
Income Tax Reconciliation (Qtr 2 & YTD) 37
Slide 38: 2014 to 2015 EPS & Dividend Bridge
2014 to 2015 EPS & Dividend Bridge 2014 Non-GAAP Adjusted Diluted EPS $2.68 2015 ESTIMATES Low Midpoint High $2.68 $2.68 Basic assumptions include, 2015 Earnings Drivers (after-tax and per share) but are not limited to: Gross margin improvements 2.75 - 2.83 • Normal weather in our electric and OG&A
Slide 39: 2014 System Statistics
2014 System Statistics (1) Note: Statistics above are as of 12/31/2014 (1) Nebraska is a natural gas only jurisdiction 39
Slide 40: Experienced & Engaged Board of Directors
Experienced & Engaged Board of Directors Dana J. Dykhouse - Chief Executive Officer of First PREMIER Bank. Director since 2009 Dorothy M. Bradley - Retired District Court Administrator for the 18th Judicial Court of Montana. Director since 2009 E. Linn Draper Jr. - Chairman of the Board - Retired Ch
Slide 41: Strong Executive Team
Strong Executive Team From the left: Patrick R. Corcoran - VP of Government and Regulatory Affairs. 35 years utility industry experience; current position since 2001 John D. Hines - VP of Supply. 25 years utility industry experience; current position since 2011 Kendall G. Kliewer - VP and Controller
Slide 42: Our Commissioners
Our Commissioners Montana Public Service Commission Commissioners are elected in statewide elections from each of five districts. Chairperson is elected by fellow Commissioners. Commissioner term is 4 years, Chairperson term is 2 years. Began Term Name Party Serving Ends Kirk Bushman R Jan-13 Jan-17
Slide 43: Non-GAAP Financial Measures
Non-GAAP Financial Measures The data presented above includes financial information prepared in accordance with GAAP, as well as another financial measure, Gross Margin, Free Cash Flows, Net Debt and EBITDA, but is considered a “Non-GAAP financial measure.” Generally, a Non-GAAP financial measure is
Slide 44: Delivering a bright future
Upetivering a bright future
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