NorthWestern Energy Group, Inc. · NASDAQ:NWE
NorthWestern Energy — Investor Presentation (March 2010)
30 slides from NorthWestern Energy's investor presentation, Mar 3, 2010
Slide 1: Investor Update
Investor Update San Francisco, CA March 3 - 4, 2010
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 » 396,000 electric » 265,000 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 Total generation (m
Slide 4: NorthWestern's attributes
NorthWestern’s attributes… Solid operations » Cost competitive » Above-average reliability » Award-winning customer service Improving credit ratings and strong balance sheet and liquidity » Secured and unsecured investment grade ratings » Moody’s has us on “positive” outlook Positive earnings
Slide 5: Improving credit ratings
improving credit ratings… SECURED CREDIT RATINGS S&P Moody's A-/A3/A- Fitch BBB+/Baa1/BBB BBB/Baa2/BBB Investment Grade BBB-/Baa3/BBB- BB+/Ba1/BB+ 2005 2006 2007 2008 2009 December 31, 2009 Agency Secured Unsecured Outlook Standard & Poor's A- (MT) BBB Stable BBB+ (SD) Moody's Investor Services A3 B
Slide 6: Strong balance sheet and liquidity
strong balance sheet and liquidity… Debt / Total capitalization of 55.6% (12/31/09) October 2009 » $55 million, 30 year First Mortgage Bonds issued at 5.71% June 2009 » Extended unsecured revolver maturity to June 30, 2012 » Increased size from $200 million to $250 million March 2009 » $250
Slide 7: Positive earnings and ROE trend
positive earnings and ROE trend… 12.0% $100 Authorized ROE's in Utility Industry 11.0% $90 10.0% $80 9.0% $73.4 $70 Net Income (millions) 8.0% $67.6 Return on Equity 7.0% $60 $59.5 6.0% $50 $53.2 5.0% $40 4.0% $37.9 $30 3.0% $20 2.0% 1.0% $10 0.0% $- 2005 2006 2007 2008 2009 NWE Return on (average)
Slide 8: Strong cash flows
strong cash flows… $250 $200 $150 $100 $57M (millions) $50 $47M $30M $23M $43M $- $(41M) $(50) $(100) $(150) $(200) 2005 2006 2007 2008 2009 2009 Adj.(2) CFO Capex (1) Dividends CFO less capex(1) & dividends (1) Utility maintenance capex only, excludes investment growth projects. (2) 2009 Cash Flow
Slide 9: Pension funding and expense
pension funding and expense… $100 Pension Expense $90 Pension Funding $80 $70 $60 (millions) $50 $40 $30 $20 $10 $- 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 |--------------Estimates-------------------| Note: Expense and funding estimates are revised annually based upon actuarial assumptions
Slide 10: Competitive dividend
competitive 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 Dividend P
Slide 11: Regulatory update
regulatory update… Montana » Rate cases filed October 2009 requesting $17.5 million revenue increase ♦ November 2009 the MPSC determined the initial filing failed to comply with MPSC applicable minimum filing requirements, primarily related to allocated cost of service and rate design ♦ On Februar
Slide 12: Near-term potential earnings drivers
near-term potential earnings drivers… 2010 » Expecting modest growth in volumes and economic activity ♦ Due to higher mix of residential/commercial vs. industrial customers as compared to other utilities ● Electric: 69% Residential & Commercial, 31% Industrial ● Natural Gas: 99% Residential & Comm
Slide 13: Longer-term potential earnings drivers
longer-term potential earnings drivers… Distribution system enhancements » Exploring incremental rate based investment (early stages) Energy supply » Mill Creek Generation Station » South Dakota peaking generation » Natural gas reserves (early stages) » Wind projects and other renewable projects
Slide 14: Great wind potential in our service territory
great wind potential in our service territory… 14
Slide 15: Service territory is a link between supply and demand
service territory is a link between supply… 15
Slide 16: And demand: incremental electricity demand and RPS
and demand... Incremental Electricity Demand 2007-2020 and 2007-2030 (GWh/yr) Demand 2007 - 2030 (GWh) Califomia 92,108 Mi ; Arizona 79,396 Ml Renewable Portfolio Standards inthe West Washington 40,421 Ml [Estate clean Energy Standard Colorado 25,017 © WA 15% by 2020 Utah 22,749 © MT 15% by 2015 Ore
Slide 17: Our proposed transmission projects
our proposed transmission projects… 17
Slide 18: Capex spending – next few years
capex spending – next few years… $700 MSTI ($1,080M) Utility Maintenance Colstrip 500 kV Upgrade ($40M) Capex is funded 100% $600 First 230 kV Collector - ($211M) by free cash flow. South Dakota peaking generator ($55M) Mill Creek Generation Station ($202M) $500 MSTI project is now slated for Utilit
Slide 19: Growth project potential
growth project potential… (millions) Annual Earnings Project Cost Estimate Opportunity * Timeline Energy supply Mill Creek Generation Station $202 to $202 $10 to $10 Q1 2011 South Dakota peaking generator $50 to $60 $3 to $3 Q4 2012 Transmission projects Colstrip 500 kV Upgrade $40 to $75 $2 to $4 Q
Slide 20: Growth project milestones '10 & '11
growth project milestones ’10 & ’11… 2010 2011 Mill Creek Mill Creek Test “fire” the turbines Q3 Providing regulating services Q1 Periodic filings with MPSC Qtrly Tariffs filed for rates Q1 Complete Construction Q4 MPSC prudence review filing Q1 Commercial operation date Q4 500 kV Upgrade 500
Slide 21: In summary
in summary… Solid operations Improving credit ratings and strong balance sheet and liquidity Positive earnings and ROE trend Strong cash flows Competitive dividend Improving regulatory environment Realistic growth prospects 21
Slide 22: Appendix
Appendix NorthWestern Energy 22 Delivering a Bright Future ee PPP! eee
Slide 23: Income statement
Appendix income statement… (in thousands, except per share amounts) Year Ended December 31, 2009 2008 Variance Operating Revenues $ 1,141,910 $ 1,260,793 $ (118,883) Cost of Sales 573,686 698,740 (125,054) Gross Margin 568,224 562,053 6,171 Operating Expenses Operating, general & administrative 245,
Slide 24: 2008 - 2009 earnings bridge
Appendix 2008 - 2009 earnings bridge… Fully ($millions, except EPS) Pre-tax Net Incom e Diluted EPS 2008 reported $ 107.8 $ 67.6 $ 1.77 Deduct Insurance recoveries and settlements (10.9) (6.7) (0.18) Deduct Increase in insurance reserves (6.3) (3.9) (0.10) Deduct Regulated electric w holesale (4.6)
Slide 25: 2009 - 2010 earnings bridge
Appendix 2009 - 2010 earnings bridge… Low High 2009 Fully Diluted Earnings Per Share $2.02 $2.02 Increased AFUDC (Mill Creek) 0.08 to 0.10 Increasing loads - economy and w eather 0.05 to 0.07 Montana transmission recovery 0.03 to 0.05 Colstrip Unit 4 rotor repair costs in 2009 0.03 to 0.03 South Dak
Slide 26: Balance sheet
Appendix balance sheet… (in thousands) December 31, 2009 2008 Cash 4,344 11,292 Restricted cash 13,608 14,727 Accounts receivable, net 143,759 155,672 Inventories 47,305 70,741 Other current assets 55,811 60,985 Goodwill 355,128 355,128 PP&E and ther non-current assets 2,175,177 2,093,492 Total Asse
Slide 27: Cash flow
Appendix cash flow… Year Ended December 31, (in thousands) 2009 2008 Net Income $ 73,420 $ 67,601 Depreciation 89,039 85,071 Amort. of debt issue costs, discount, deferred hedge gain and restricted stock 3,795 5,532 Equity portion of allowance for funds used during construction (2,113) (641) (Gain)
Slide 28: MPSC rate request
Appendix MPSC rate request… Requested revenue increase of $17.5 million » Electric T&D = $15.5 million (6.98%) » Natural gas T&D = $2.0 million (1.89%) » Expect decision by October 11, 2010 » Interim rates requested » Increase primarily due to pension and wage increases Requested for both Electr
Slide 29: Repairs tax deduction impact
Appendix repairs tax deduction impact… Sample calculation Estimated Annual capex eligible for repairs tax deduction $20,780 Assumed effective tax rate 38.5% Income tax benefit due to repairs tax deduction $8,000 Future Year 0 Year 1 Year Pre-tax Income $100,000 $100,000 $200,000 Income tax expense (
Slide 30: Montana rate filing
Appendix Montana rate filing… Revenue Request Pre - Repairs Tax Deduction Post - Repairs Tax Deduction Montana Revised Requested Proforma Repairs Requested Proforma (000's) 2008 Increase 2008 2008 Tax Benefit Increase 2008 Revenue $1,260,793 $29,439 $1,290,232 $1,260,793 $17,484 $1,278,277 Cost of S