Northwestern Energy Group, Inc. · NASDAQ:NWE
Northwestern Energy — Q3 2017 Earnings Presentation
37 slides from Northwestern Energy's earnings presentation, Nov 2, 2017
Slide 1: 2017 Third Quarter Earnings Webcast
2017 Third Quarter Earnings Webcast November 2, 2017 Madison Dam
Slide 2: Presenting Today / Forward Looking Statements
Presenting Today 2 Bob Rowe, President & CEO Brian Bird, Vice President & CFO 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. Forwar
Slide 3: Third Quarter Highlights
• Net income for the third quarter was $36.4 million, or $0.75 per diluted share, as compared with net income of $44.6 million, or $0.92 per diluted share, for the same period in 2016. • This $8.2 million decrease in net income is primarily due to the inclusion in our 2016 results of a $15.5 million
Slide 4: Summary Financial Results (Third Quarter)
Summary Financial Results (Third Quarter) 4 (1) Gross Margin is a non-GAAP Measure. See appendix for additional disclosure. (1)
Slide 5: Gross Margin (Third Quarter)
5 Gross Margin (Third Quarter) (dollars in millions) Three Months Ended September 30, 2017 2016 Variance Electric $ 183.5 $ 176.9 $ 6.6 3.7% Natural Gas 28.9 27.9 1.0 3.6% Gross Margin $ 212.4 $ 204.8 $ 7.6 3.7% Increase in gross margin due to the following factors: $ 5.1 Electric retail volumes 0.7
Slide 6: Weather (Third Quarter)
Weather (Third Quarter) 6 Mean Temperature from Normal July-Sept. 2017 Favorable weather has contributed approximately $0.4 million pretax benefit for the quarter as compared to normal, and $1.8 million pretax benefit as compared to same period in the prior year.
Slide 7: Operating Expenses (Third Quarter)
Operating Expenses (Third Quarter) 7 Increase in operating expenses due mainly to the following factors: $1.9 million increase in OG&A $ 1.8 Employee benefits $ 0.6 Operating expenses recovered in trackers $ 0.4 Bad debt expense $ 0.3 Non-employee directors deferred compensation $ (0.6) Maintenance
Slide 8: Operating to Net Income (Third Quarter)
Operating to Net Income (Third Quarter) 8 $2.1 million increase in interest expense was primarily due to lower interest expense in the third quarter of 2016 as a result of a benefit related to a debt refinancing transaction, which reduced interest expense. $0.9 million increase in other income due p
Slide 9: Income Tax Reconciliation (Third Quarter)
Income Tax Reconciliation (Third Quarter) 9 During the third quarter of 2016, we filed a tax accounting method change with the IRS related to costs to repair generation property. This resulted in an income tax benefit of approximately $15.5 million during the three months ended September 30, 2016, o
Slide 10: Balance Sheet
Balance Sheet 10 Total company debt to capitalization in line with targeted range of 50% - 55%.
Slide 11: Cash Flow
Cash Flow 11 The $42 million improvement in Cash provided by Operating Activities is largely attributed to refunds associated with the DGGS FERC ruling and the South Dakota electric rate case of approximately $30.8 million* and $7.2 million respectively, to customers during the first nine months of
Slide 12: Adjusted Earnings (Third Quarter '17 vs '16)
Adjusted Earnings (Third Quarter „17 vs ‟16) 12 The non-GAAP measures presented in the table are being shown to reflect significant items that were not contemplated in our original guidance, however they should not be considered a substitute for financial results and measures determined or calculate
Slide 13: Summary Financial Results (YTD thru Qtr 3)
Summary Financial Results (YTD thru Qtr 3) 13 (1) Gross Margin is a non-GAAP Measure. See appendix for additional disclosure. (1)
Slide 14: Weather - 2017 versus Normal (YTD Qtr 3)
Weather- 2017 versus Normal (YTD Qtr 3) 14 Heating Degree Day Months Cooling Degree Day Months Mean Temperature Departures from Average Year-to-date, favorable weather has contributed approximately $1.6 million pretax benefit as compared to normal, and $15.8 million pretax benefit as compared to sam
Slide 15: Non-GAAP Adjusted Earnings (YTD '17 vs '16)
Non-GAAP Adjusted Earnings (YTD „17 vs ‟16) 15 The non- GAAP measures presented in the table are being shown to reflect significant items that were not contemplated in our original guidance, however they should not be considered a substitute for financial results and measures determined or calculate
Slide 16: Updated 2017 Earnings Guidance
Updated 2017 Earnings Guidance 16 NorthWestern updates our 2017 earnings guidance range to $3.30 - $3.45 (previously $3.30 - $3.50) per diluted share and is based upon, but not limited to, the following major assumptions and expectations: • Normal weather in our electric and natural gas service terr
Slide 17: Full Year Adjusted Non-GAAP Guidance
Full Year Adjusted Non-GAAP Guidance 17 In order to meet our adjusted Non-GAAP full-year guidance, in the range of $3.30 to $3.45 per share, in 2017 we anticipate these improvements over Q4 2016: • Margin improvement more commensurate with Q1, aided by rate relief from Montana natural gas case. • Ti
Slide 18: Financing Activities
Financing Activities 18 Long-Term Debt Refinancing • In October 2017, we priced $250 million principal, 4.03% - 30 year Montana First Mortgage Bonds • We expect to close the transaction in early November 2017. • Proceeds used to redeem existing $250 million – 6.34% Montana First Mortgage Bonds due i
Slide 19: Regulatory / Legal Update
19 Regulatory / Legal Update Property Tax Tracker Rules Filing – In March 2017, the MPSC proposed new rules to establish minimum filing requirements for property tax trackers. • Current MT Property tax tracker rules allows recovery of 60 percent of the change in state and local taxes and fees. • In
Slide 20: Regulatory Update (continued)
20 Regulatory Update (continued) Qualified Facilities (QF) Decision: Under the Public Utility Regulatory Policies Act (PURPA), electric utilities are required, with exceptions, to purchase energy and capacity from independent power producers that are QF‟s. • In July 2017, the MPSC issued a final ord
Slide 21: Montana - Implementation of HB PCCAM
Montana - Implementation of HB 193 21 PCCAM - as proposed by NorthWestern Procedural Timeline: May 2017 MPSC issued Notice of Commission Action (NCA) initiating process July 7, 2017 MPSC issued additional NCA addressing arguments in our motion to reconsider the original NCA. (July 7, 2017 – D2017.5.
Slide 22: Capital Spending
Capital Spending 22 * Approximately $100 million of this capital spend is earmarked for Montana generation capacity and could be impacted by the recent 15 year contract limitations implemented by the MPSC. We suspended a competitive solicitation process for addressing capacity needs in Montana and a
Slide 23: Conclusion
Conclusion Best Practices Corporate Governance Pure Electric & Gas Utility Solid Utility Foundation Strong Earnings & Cash Flows Attractive Future Growth Prospects
Slide 24: Appendix
24 Appendix
Slide 25: Segment Results (Third Quarter)
25 Segment Results (Third Quarter) Appendix (1) Gross Margin is a non-GAAP Measure. See appendix for additional disclosure. (1) (1)
Slide 26: Electric Segment (Third Quarter)
26 Electric Segment (Third Quarter) Appendix (1) (1) Gross Margin is a non-GAAP Measure. See appendix for additional disclosure.
Slide 27: Natural Gas Segment (Third Quarter)
27 Natural Gas Segment (Third Quarter) Appendix (1) (1) Gross Margin is a non-GAAP Measure. See appendix for additional disclosure.
Slide 28: Gross Margin (YTD thru Qtr 3)
28 Gross Margin (YTD thru Qtr 3) (dollars in millions) Nine Months Ended September 30, 2017 2016 Variance Electric $ 528.0 $ 510.9 $ 17.1 3.3% Natural Gas 131.8 122.5 9.3 7.6% Gross Margin $ 659.8 $ 633.4 $ 26.4 4.2% Increase in gross margin due to the following factors: $ 12.3 Electric retail volum
Slide 29: Operating Expenses (YTD thru Qtr 3)
Operating Expenses (YTD thru Qtr 3) 29 Increase in operating expenses due mainly to the following factors: $5.7 million increase in OG&A $ 2.3 Bad debt expense 1.4 Labor 1.4 Maintenance costs 1.0 Operating expenses recovered in trackers 0.8 Employee benefits 0.2 Natural gas production gathering expe
Slide 30: Operating to Net Income (YTD thru Qtr 3)
Operating to Net Income (YTD thru Qtr 3) 30 $2.0 million decrease in interest expense was primarily due to a debt refinancing transaction in 2016. $0.2 million increase in other income due primarily to higher capitalization of AFUDC and was offset in part by a $1.0 million decrease in the value of d
Slide 31: Income Tax Reconciliation (YTD thru Qtr 3)
Income Tax Reconciliation (YTD thru Qtr 3) 31 The increase in income tax expense was primarily due to the inclusion in our 2016 results of a $15.5 million income tax benefit due to the adoption of a tax accounting method change related to the costs to repair generation assets, and higher pre-tax inc
Slide 32: Segment Results (YTD thru 3rd Quarter)
32 Segment Results (YTD thru 3rd Quarter ) Appendix (1) (1) Gross Margin is a non-GAAP Measure. See appendix for additional disclosure. (1)
Slide 33: Electric Segment (YTD thru 3rd Quarter)
33 Electric Segment (YTD thru 3rd Quarter) Appendix (1) (1) Gross Margin is a non-GAAP Measure. See appendix for additional disclosure.
Slide 34: Natural Gas Segment (YTD thru 3rd Quarter)
34 Natural Gas Segment (YTD thru 3rd Quarter) Appendix (1) (1) Gross Margin is a non-GAAP Measure. See appendix for additional disclosure.
Slide 35: Montana Natural Gas Rate Filing
Montana Natural Gas Rate Filing 35 Montana PSC Docket D2016.9.68 $5.1M 6.96% $430.2M 9.55% 4.47% * Parties will have 10 days from the date of a final order to object. Derivation of Rate Increase ($Millions) Revenue Request in Initial Application ..... $10.9 Property Tax (adjustment to actual) ….…..
Slide 36: 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 financ
Slide 37: Delivering a bright future
Upelivering a bright future