Northwestern Energy Group, Inc. · NASDAQ:NWE
Northwestern Energy — Investor Presentation (October 2012)
36 slides from Northwestern Energy's investor presentation, October 2012
Slide 1: Investor Update
Investor Update October 2-3, 2012
Slide 2: Forward Looking Statement
2 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: About NorthWestern
3 ABOUT NORTHWESTERN Our Vision: Enriching lives through a safe, sustainable energy future Our Mission: Working together to deliver safe, reliable and innovative energy solutions Our Values: S - safety E - excellence R - respect V - value I - integrity C - community E - environment
Slide 4: NorthWestern Energy Profile
4 NORTHWESTERN ENERGY PROFILE TICKER: NWE
Slide 5: Better Than Average Economic Indicators
5 BETTER THAN AVERAGE ECONOMIC INDICATORS Top Left: Unemployment rate consistently below National Average for all states we serve. National Ranking (NE 2nd, SD 3rd & MT 10th) Top: Bad Debt/Revenue Write-off better than peer average in AGA/EEI 2011 Survey – Our customers pay their bills Left: Project
Slide 6: NWE: An Investment for the Long Term
6 NWE: AN INVESTMENT FOR THE LONG TERM We’re a fully regulated and financially solid utility; with – Diversity across states, service type and customer segments – A 100 year history of competitive customer rates, system reliability and customer satisfaction – 5 years of great earnings results and gr
Slide 7: A Diversified Electric and Gas Utility
7 A DIVERSIFIED ELECTRIC AND GAS UTILITY The “80/20” rules of NorthWestern Above data reflects full year 2011 results . Jurisdiction and service type based upon gross margin contribution. Customers based upon volumes.
Slide 8: Strong Utility Foundation
8 STRONG UTILITY FOUNDATION Electric source: Edison Electric Institute Typical Bills and Average Rates Report, 1/1/12 Natural gas source: US Dept of Energy Monthly residential supply and delivery rates as of 1/1/12 Strong utility operations: Solid system reliability (EEI 2nd quartile); SAIFI or
Slide 9: 5 Year Track Record of Delivering Results
9 5 YEAR TRACK RECORD OF DELIVERING RESULTS Return on Equity has steadily improved each year from 2007 – 2011 and Dividend per Share has increased each of the last 5 years. 5 Year (2007-11) Average Return on Equity : 9.1% 5 Year (2007-11) CAGR Dividend: 3.0%
Slide 10: Updated 2012 Earnings Guidance
10 UPDATED 2012 EARNINGS GUIDANCE Updated 2012 guidance range of $2.30-$2.40 based upon, but not limited to, the following major assumptions and expectations: • A consolidated income tax rate of approximately 16% - 18% of pre-tax income; • No scheduled maintenance at Colstrip Unit 4 and Big Stone Pl
Slide 11: Balance Sheet Strength and Liquidity
11 BALANCE SHEET STRENGTH AND LIQUIDITY
Slide 12: Strong Cash Flows
12 STRONG CASH FLOWS While maintenance capex and dividends payments have continued to grow over the past 5 years (9.2% and 2.4% CAGR respectively), Cash Flow from Operations has continued to outpace maintenance capex and provided approximately $40-60 million of positive Free Cash Flow per year. We a
Slide 13: Solid Pension Funding
SOLID PENSION FUNDING 13 We calculate our pension obligation with conservative estimates. Expected long- term rate of return for NWE is 7.00% vs peer group average of 7.78%. Discount rate for NWE is 4.40%-4.55% vs peer group average of 5.35%
Slide 14: A Strong & Well Rounded Board & Executive Team
14 A STRONG & WELL ROUNDED BOARD & EXECUTIVE TEAM
Slide 15: NWE Corporate Responsibility
15 NWE CORPORATE RESPONSIBILITY
Slide 16: Investment Opportunity Outlook
16 INVESTMENT OPPORTUNITY OUTLOOK Energy Supply – Big Stone/Neal pollution control – South Dakota natural gas peaking generation – Montana Spion Kop Wind facility – Other vertical integration opportunities in Montana including gas reserves or base load generation Transmission – Network upgrades
Slide 17: Electric Generation Opportunity
17 ELECTRIC GENERATION OPPORTUNITY Top Left: We own less than 50% of our supply needs. We are currently evaluating build, acquisition, or other market alternatives to meet forecasted supply gap. Top Right: Continued reintegration of owned electric generation assets will bring price stability back to
Slide 18: Natural Gas Needs and Supply
18 NATURAL GAS NEEDS AND SUPPLY Top Left: Approximately 11% of our total natural gas needs go toward electric generation and the remaining 89% is sold to our retail customers. Top: We own approximately 10% of our total retail needs in Montana. Left: As we continue to add natural gas reserves to our
Slide 19: 2012 Montana Natural Gas Rate Filing
19 2012 MONTANA NATURAL GAS RATE FILING We are dedicated to operating a safe, reliable natural gas system and that requires ongoing investment in infrastructure replacements. If approved by the MPSC, on average this request would result in a monthly increase of $5.69 or 7.17% for a residential custo
Slide 20: Hard Assets Providing Real Value
20 HARD ASSETS PROVIDING REAL VALUE (Left) We believe continued investment in our system to provide an even more safe, reliable, environmentally responsible and cost- effective service for our customers will produce additional value for our shareholders. (Below) NWE Total Shareholder Return for the
Slide 21: Investment Project Summary
21 INVESTMENT PROJECT SUMMARY Note: Color / label indicate NorthWestern Energy's current probability of execution and timing of expenditures. Please refer to Risk Factors included in our most recent Form 10-Q. Several opportunities exist to further increase and diversify earnings as compared to our
Slide 22: Conclusion
22 CONCLUSION We’re a fully- regulated and Best practices Attractive future financially sound corporate growth prospects utility; with governance and - Diversity across states, - Reintegrating energy service type and customer supply portfolio (natural gas -A strong and well rounded and electric) seg
Slide 23: Appendix
23 APPENDIX NorthWesterni Energy 2 3 Delivering a Bright Future
Slide 24: Earnings Reconciliation
24 EARNINGS RECONCILIATION Six Months Ended June 30, 2012 (Smillions, except EPS) 3 a 3 2 s & 2 8 g 5 8 2s 2 ¥ 2 £€ 8 2 3 € = . ¢ 38 Es 5 z 3: 2-3 § 2 3s s 2 2 3 82 388 3 5 | $e ES 5 $= &S§ g¢@ s = £2 € 8s 8 Zezi sos 2/685 we o s 2£¢ = &® 2 &@ § € FF &B £ BS#E = [ws 26183 ; £ & © &€@ ® 8 = = & 8 SF
Slide 25: Adjusted EPS Schedule
ADJUSTED EPS SCHEDULE 25 Estimated 2012 Actual Actual 2nd Half 2012 Q1 2012 Q2 2012 2012 Estimate Reported GAAP EPS $0.88 $0.31 $1.00 $2.19 Non-GAAP Adjustments: Weather 0.09 0.05 0.14 Release of prior year DGGS deferral (MPSC) (0.05) (0.05) Lost revenue recovery related to 2010/2011 (0.05) (0.05) I
Slide 26: Consolidated Statement of Income
26 CONSOLIDATED STATEMENT OF INCOME
Slide 27: Consolidated Statement of Cash Flows
27 CONSOLIDATED STATEMENT OF CASH FLOWS
Slide 28: Consolidated Balance Sheet
28 CONSOLIDATED BALANCE SHEET
Slide 29: Effective Tax Rate Reconciliation
29 EFFECTIVE TAX RATE RECONCILIATION
Slide 30: 2011 System Statistics
30 2011 SYSTEM STATISTICS Energy Supply Transmission Distribution (1) Electric (MW) MT SD Total 2011 Tx for Others MT SD Total Demand MT SD / NE Total Base load coal 222 210 432 Electric (GWh) 9,100 100 9,200 Daily MWs 750 172 922 Other resources 150 106 256 Natural Gas (Bcf) 18.3 - 18.3 Peak MWs 1,
Slide 31: Environmental Controls
31 ENVIRONMENTAL CONTROLS Primary Pollutant Controlled Plant Name Colstrip 3 & 4 Big Stone nis x DGGS (Natural Gas) x Coyote x x Neal #4 x x Primary Pollutant Controlled Plant Name Colstrip 3 & 4 Big Stone x x x x x DGGS (Natural Gas) Coyote x x Neal #4 x x x x x Controls Acronyms Selective Catalyti
Slide 32: Our Commissioners
32 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 Bill Gallagher R Jan-11 J
Slide 33: One Hundred Years Later...
33 ONE HUNDRED YEARS LATER. . . . After One Hundred Years, Electricity is still a great value
Slide 34: FERC's ALJ Initial Decision
34 FERC’S ALJ INITIAL DECISION NorthWestern as Filed FERC ALJ’s Initial Decision 34
Slide 35: The Back Story on DGGS
35 THE BACK STORY ON DGGS Background NorthWestern Energy operates a transmission system and balancing authority within Montana and is charged with the responsibility of providing safe and reliable electric service to all of its customers. This includes retail and wholesale customers. Part of Nor
Slide 36: The Back Story on DGGS (Continued)
36 THE BACK STORY ON DGGS (CONTINUED) The Initial Decision from the Administrative Law Judge doesn’t support FERC’s previous position The Initial Decision from the FERC Administrative Law Judge: Does not challenge the prudency or costs of the DGGS. In fact, the parties agreed, through stipulation