NorthWestern Energy Group, Inc. · NASDAQ:NWE
NorthWestern Energy — Investor Day (December 2010)
38 slides from NorthWestern Energy's investor day presentation, Dec 9, 2010
Slide 1: 2011 Analyst Day
2011 Analyst Day December 9, 2010 Omni Berkshire Place New York
Slide 2: Forward-looking statement
forward-looking statement… 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 financial
Slide 3: Who we are
who we are… 661,000 customers » 399,000 electric » 262,000 natural gas Approximately 123,000 square miles of service territory in Montana, South Dakota, and Nebraska » 32,000 miles of electric T&D lines » 8,400 miles of natural gas T&D pipelines » 18 Bcf natural gas storage » 8 Bcf natural gas p
Slide 4: NorthWestern's attributes
NorthWestern’s attributes… Solid operations » Cost competitive » Above-average reliability » Award-winning customer service Low single A secured credit ratings with a strong balance sheet and liquidity » April 15, 2010 Fitch upgraded secured and unsecured ratings to A- and BBB+ respectively Po
Slide 5: Brian Bird, Chief Financial Officer
Brian Bird Chief Financial Officer
Slide 6: Strong credit ratings
strong credit ratings… SECURED CREDIT RATINGS S&P Moody's Fitch A-/A3/A- BBB+/Baa1/BBB+ BBB/Baa2/BBB Investment Grade BBB-/Baa3/BBB- BB+/Ba1/BB+ 2005 2006 2007 2008 2009 2010 Agency Secured Unsecured Outlook Standard & Poor's A- BBB Stable Moody's Investor Services A3 Baa2 Positive Fitch Ratings A-
Slide 7: Strong balance sheet and liquidity
strong balance sheet and liquidity… Total liquidity approximately $145 million Total Debt / Total capitalization of 55.8%(1) In past two years refinanced nearly all outstanding debt » In May 2010 we refinanced existing $225 million, 5.875% Senior Secured Notes due 2014 with 5.01% First Mortgag
Slide 8: Strong cash flows
strong cash flows… Earnings trend and NOLs provide strong cash flows to fund future investment. 8
Slide 9: Solid pension funding position
solid pension funding position… As a result of the significant contribution of $93 million to our pension plan and solid market returns in 2009, we are better positioned than our peers at December 31, 2009 Data source: SNL Financial 9
Slide 10: Sustainable dividend
and sustainable dividend… $1.40 130% 120% $1.20 110% Dividend Payout Ratio 100% Dividend Per Share $1.00 90% 80% $0.80 70% Targeted payout range 60% $0.60 50% $0.40 40% 30% $0.20 20% $1.00 $1.24 $1.28 $1.32 $1.34 $1.36 10% $- 0% 2005 2006 2007 2008 2009 2010 Est. (1) Annual Dividend Per Share Divide
Slide 11: Reaffirming 2010 EPS guidance
reaffirming 2010 EPS guidance… $2.15 $2.10 $2.02 $1.95 $1.95 $1.75 $1.77 $1.65 $1.55 $1.44 $1.35 $1.15 High $1.01 Low $0.95 $0.75 2005 2006 2007 2008 2009 2010 Est. The major assumptions include, but are not limited to, the following expectations: » Excludes approximately $.06/share for the 2010 e
Slide 12: 2009 to 2010 earnings bridge
2009 to 2010 earnings bridge… Original Updated Low High Low High 2009 Fully Diluted Earnings Per Share $2.02 $2.02 $2.02 $2.02 Increased equity AFUDC (Mill Creek) 0.08 to 0.10 0.08 to 0.10 Increasing loads - economy and w eather 0.05 to 0.07 0.03 to 0.04 Montana transmission recovery 0.03 to 0.05 0.
Slide 13: Near-term potential earnings drivers
near-term potential earnings drivers… 2011 expectations/assumptions: » Mill Creek in rate base in 2011 adding about $.20/share ♦ $7.5 million incremental post-tax contribution compared to 2010 ♦ MCGS rates pick up full interest costs & equity return in 2011 » Full year effect of Montana rate adjus
Slide 14: Bob Rowe, President and CEO
Bob Rowe President and CEO NorthWestern Energy Delivering a Bright Future
Slide 15: Constructive regulatory environment
constructive regulatory environment… Montana » Rate case ♦ MPSC reached a decision on the rate case at a recent work session; decision and approval is subject to MPSC issuance of a final order ● MPSC approved the Stipulated settlement with Consumer Counsel for a $6.7 million rate increase ● MPSC a
Slide 16: Regulatory environment con't
regulatory environment con’t… South Dakota » Expect to file natural gas rate cases during 2011 pending 2010 results » Expect to file on environmental rider on the Neal plant for emissions compliance » Election results ♦ Current Chairman Dusty Johnson re-elected but appointed by new Governor to be
Slide 17: Regulatory milestones in 2011
regulatory milestones in 2011… Montana South Dakota Distribution Infrastructure Natural Gas Rate Case Accounting Order (in 2010) Q4 File rate case pending 2010 results Q2 Make filing Q2 Prudency Review for Mill Creek Environmental riders for Big Stone & Neal Interim filing (in 2010) Q4 Environm
Slide 18: Longer term investment opportunities
longer term investment opportunities… Distribution system enhancements » Incremental rate based investment to enhance reliability and capacity, improve rural service, and prepare the system for potential smart grid applications Energy supply » Big Stone and Neal plants’ pollution control equipme
Slide 19: Curt Pohl, VP Retail Operations
Curt Pohl Vice President – Retail Operations
Slide 20: Distribution infrastructure project
distribution infrastructure project … Project Scope: » Electric $222M CAPEX $55M O&M » Gas $50M CAPEX $16M O&M Project Goals: » Electric System ♦ Arrest or reverse the trend in aging infrastructure ♦ Build margin (capacity) back into the system ♦ Maintain reliability over the long-term, and impr
Slide 21: Proactive vs. reactive
proactive vs. reactive… (what is the least cost replacement rate?) Prohibitively Unacceptable Expensive Operations Very frequent Frequency of asset replacement Replace only at failure replacement 21
Slide 22: Electric plan components
electric plan components… 100 Poles TOTAL est. = $222M Capex & $55M O&M Accelerated inspection and replacement 5 Year cycle 5 year $90M Capex $8M O&M Substations & costs (millions) Automation Accelerated inspection and replace U/G Cable Install communications Accelerated replacement $57M Capex $5M O
Slide 23: Gas plan components
gas plan components… Mitigation of Safety Threats DIMP-guided threat 5 Projects NWE’s Gas analysis of system $45M Capex $1.5M O&M components Evaluation and ranking of components Distribution (5 projects) for leak potential Infrastructure Plan Operational and Damage Prevention administrative initiati
Slide 24: Dave Gates, VP Wholesale Operations
Dave Gates Vice President – Wholesale Operations
Slide 25: Generation growth highlights: Mill Creek
generation growth highlights… Mill Creek Generating Unit in Montana What: 120-150 MW plant near Anaconda, MT » Built for regulation services to balance supply and load for NWE’s Balancing Area » Rate based cost of service investment » Final costs right at $200 million Why: Existing services beca
Slide 26: Mill Creek project milestones
Mill Creek project milestones… 2010 and Prior 2011 Mill Creek Mill Creek Pre-approved for public interest by the MPSC 2009 Final Prudency filed with MPSC Q1 Begin construction 2009 FERC rate settlement Q2 Construction completed 2010 Expected decision on prudency from MPSC Q3 Plant ‘tes
Slide 27: Generation growth highlights: Renewable generation in Montana
generation growth highlights… Renewable Generation in Montana What: 25-50 MW’s of Wind Generation » Could be PPA or rate based asset » Estimated construction cost between $40 - $100 million Why: Needed to meet the Montana RPS standard of 10% by 2012 and 15% by 2015. Needs to be added to meet Mon
Slide 28: Generation investments: Peaking plant in South Dakota
generation investments… Peaking Plant in South Dakota What: 60 MW peaking plant near Aberdeen, SD » Current contract expires December 2012 » Rate based cost of service investment » Estimated to cost around $60 million Why: » Existing regional services are becoming scarce » Current capacity marke
Slide 29: Pollution control: Big Stone Plant
pollution control investments… Pollution Control – Big Stone Plant (SD) What: Emissions reduction to Big Stone 454 MW plant located in NE SD » Compliance with Clean Air Visibility Rule » Estimated to cost between $130 - $150 million for our portion (23.4%) » Emissions tracker mechanism exists with
Slide 30: Pollution control: Neal Plant
pollution control investments… Pollution Control – Neal Plant (SD) What: Scrubber installation to 655 MW Neal plant located in NW Iowa » Compliance with Clean Air Visibility Rule » Estimated to cost between $15 - $25 million for our portion (8.7%) » Emissions tracker mechanism exists with SDPUC
Slide 31: Natural gas supply: Battle Creek acquisition
natural gas supply… Battle Creek acquisition Purchase of proven natural gas reserves located proximate to our MT system Battle Creek Metrics » ½ bcf annual production (8.7 bcf total) » Represents 2.4% of MT retail usage Ownership Annual Annual Amount paid % of fields Production MT Usage » Interim
Slide 32: Wind - a new cash crop?
wind - a new cash crop?… Need more be said….. 32
Slide 33: Our proposed transmission projects
our proposed transmission projects… 33
Slide 34: Extended open seasons
extended open seasons… MSTI siting delays: » Draft EIS delayed by Jefferson County, MT litigation against MDEQ General economic conditions: » Slow down in economy making developers cautious on LT commitments » Low natural gas prices making renewables less cost effective Market confusion: » Con
Slide 35: Electric Transmission America study
Electric Transmission America study … 1. Phase 2 of study just released 2. Summarizes two overlay paths to consider 3. Transmission supporting integration of about 55 GW of wind generation 4. Estimated overlay cost range between $20 - $25 Billion 5. South Dakota would have over 4,000 MW wind generat
Slide 36: Green Power Express
Green Power Express … 1. Transfer capacity of 10 -12 GW of power supporting up to 22 GW of new wind generation 2. Crosses 7 states, numerous utility areas and two RTO’s 3. Estimated cost of project $10 - $12 Billion 4. Investment in SD would be significant Headed by ITC Holdings 36
Slide 37: Potential project summary
potential project summary… Opportunity to increase and diversify earnings as compared with our existing $1.8 billion rate base (including Mill Creek). 37
Slide 38: In summary
in summary… Solid operations Low single A secured credit ratings with a strong balance sheet and liquidity Positive earnings and ROE trend Strong cash flows Competitive total shareholder return and dividend that has increased every year since 2005 Constructive regulatory environment Fo
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