Northwestern Energy Group, Inc. · NASDAQ:NWE
Northwestern Energy — South Dakota Investment Society (April 2016)
32 slides from Northwestern Energy's conference presentation, Apr 28, 2016
Slide 1: South Dakota Investment Society
South Dakota Investment Society April 28, 2016 Beethoven Wind Farm, near Tripp, SD
Slide 2: Forward Looking Statements
2 Forward Looking Statements 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. Forward-looking statements often address our expected
Slide 3: About NorthWestern
About NorthWestern 3 701,000 Customers 27,900 Miles of electric transmission & distribution lines 9,630 Miles of natural gas transmission & distribution lines 3 States served & one national park 1,294 MW Nameplate owned Power generation 84 Bcf Gas storage & owned natural gas reserves
Slide 4: Year-end Service Territory
r Yeorend Service territory > Basic Earnings Per Share > > a) o> > Dividends Ez... Per Share > nm E> WYOMING > — Electric aC) = Natural Gas Serer pene 7 Wind Farm ® Hydro Facilities > Electric: -
Slide 5: South Dakota Operations
South Dakota Operations 5 Nebraska Neal 4 Big Stone Coyote 1 Coal Plants Wind Farm Peaking Plant Electric Service Territory Natural Gas Service Territory Electric Transmission Lines Beethoven Wind Farm Aberdeen Peaker Plant Electric Operations – South Dakota • 62,800 customers in 110 communities & 2
Slide 6: NorthWestern Energy – South Dakota
NorthWestern Energy – South Dakota 6 • NorthWestern Energy is headquartered in Sioux Falls • Traded on New York Stock Exchange as: NWE • Largest publicly traded company in SD by market cap (as of 12/31/15) (1) (2) (5) (3) (4) (6) (1) Number of jobs generated (FT & PT) – including sole proprietors (2
Slide 7: NWE's Investment in South Dakota
NWE’s Investment in South Dakota 7 Over the last 10 years, NorthWestern Energy has invested over $1 Billion in the South Dakota economy in both operating expenses (operations, maintenance, administrative & property taxes) and capital expenses. 2015 includes $144 million investment in Beethoven wind
Slide 8: NWE: An Investment for the Long Term
NWE: An Investment for the Long Term 8 • 100% Regulated electric & natural gas utility business • 100 year history of competitive customer rates, system reliability and customer satisfaction • Solid economic indicators in service territory • A diverse electric supply portfolio that is approximately
Slide 9: A Diversified Electric and Gas Utility
A Diversified Electric and Gas Utility 9 Gross Margin in 2015: Electric: $663M Natural Gas: $178M Gross Margin in 2015: Montana: $729M South Dakota: $102M Nebraska: $ 10M Average Customers in 2015: Residential: 579k Commercial: 111k Industrial: 7k NorthWestern’s ‘80/20’ rules: Approximately 80% Elec
Slide 10: NorthWestern Energy Profile
NorthWestern Energy Profile 10 Financial and Company Statistics See “Non-GAAP Financial Measure” slide in appendix for Net Debt and EBITDA reconciliation
Slide 11: Experienced & Engaged Board of Directors
Experienced & Engaged Board of Directors 11 Dr. E. Linn Draper Jr. • Chairman of the Board • Independent • Director since November 1, 2004 Stephan P. Adik • Committees: Audit (chair), Human Resources • Independent • Director since November 1, 2004 Dorothy M. Bradley • Committees: Human Resources, Go
Slide 12: Strong Executive Team
Strong Executive Team 12 Robert C. Rowe • President and Chief Executive Officer • Current position since 2008 Brian B. Bird • Vice President and Chief Financial Officer • Current position since 2003 Michael R. Cashell • Vice President - Transmission • Current Position since 2011 Patrick R. Corcoran
Slide 13: Solid Economic Indicators
Solid Economic Indicators 13 • Unemployment rates in all three of our states are meaningfully below National Average. • Customer growth rates historically exceed National Averages. Source: NorthWestern customer growth - 2008-2015 Forms 10-K Unemployment Rate: US Department of Labor via SNL Database
Slide 14: Strong Utility Foundation
Strong Utility Foundation 14 Electric source: Edison Electric Institute Typical Bills and Average Rates Report, 1/1/16 Natural gas source: US EIA - Monthly residential supply and delivery rates as of 1/29/16 Customer service satisfaction scores in line or better than survey average (JD Powers) R
Slide 15: Track Record of Delivering Results
Track Record of Delivering Results 15 Notes: - ROE in 2011, 2012 , 2013, 2014 & 2015 on a Non-GAAP Adjusted basis, would be 10.5%, 9.8%, 9.6% ,9.4% & 9.9% respectively. - 2016 ROAE and 2016 Dividend payout ratio estimate based on midpoint of our updated guidance range of $3.20-$3.35. - Details regar
Slide 16: Investment for Our Customers' Benefit
Investment for Our Customers’ Benefit 16 Over the past 7 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. We have made these enhancements with minimal impact
Slide 17: Total Shareholder Return
Total Shareholder Return 17 • 13 member peer group: ALE (Allete), AVA (Avista), BKH (Black Hills), EE (El Paso Electric), GXP (Great Plains), IDA (IDA Corp), MGEE (Madison Gas & Electric), OGE (OGE Energy), OTTR (Otter Tail Power), PNM (PNM Resources), POR (Portland Electric),, VVC (Vectren), WR (We
Slide 18: Strong Cash Flows
While maintenance capex and total dividend payments have continued to grow since 2011 (16.6% and 14.8% CAGR respectively), Cash Flow from Operations has continued to outpace maintenance capex and averaged approximately $38 million of positive Free Cash Flow per year. With the addition of production
Slide 19: Balance Sheet and Credit Ratings Strength
Balance Sheet and Credit Ratings Strength 19 Credit ratings went from junk bond to Single A ratings since emergence from bankruptcy. Target: 50% - 55% Annual ratio is average of each quarter end debt/cap ratio Excludes Basin Creek capital lease and New Market Credit Financing
Slide 20: 2016 Updated Earnings Guidance
2016 Updated Earnings Guidance 20 Our recently updated 2016 guidance range of $3.20 - $3.35 (originally $3.20 - $3.40) per diluted share is based upon, but not limited to, the following major assumptions and expectations: • Normal weather in our electric and natural gas service territories; • Exclud
Slide 21: The Hydro Facilities
The Hydro Facilities 21 Overview of Hydro Facilities Black Eagle Hydro Asset Integration • Montana Asset Optimization Study: As part of reintegrating the hydro facilities into our generation portfolio, we initiated an asset optimization study to maximize the value of our diverse generation portfolio
Slide 22: 'Clean' Owned & Contracted Supply Portfolio
22 ‘Clean’ Owned & Contracted Supply Portfolio Based upon 2015 delivered electric portfolio, approximately 54% of our total company owned and contracted supply is renewable or supports renewables. * Wind Owned delivered in 2015 includes a partial year of production from the Beethoven wind farm, whic
Slide 23: South Dakota Electric Operations
23 South Dakota Electric Operations The owned and rate-based cost of energy from the Beethoven wind project over the next 20 years is expected to be $44 million ($25 million net present value) less than the PPA alternative, thus benefitting our customers’ bills over the long-term. Beethoven Wind Pro
Slide 24: Big Stone and Neal Air Quality Projects
Big Stone and Neal Air Quality Projects 24 Big Stone Power Plant Neal Power Plant
Slide 25: Capital Spending Forecast
Capital Spending Forecast 25 Current estimated cumulative capital spending for 2016 through 2020 is $1.66 billion. This reflects a $187 million increase from the capital plan included in our 2015 10-K; approximately $122 million increase for internal combustion units in Montana and $65 million incre
Slide 26: Conclusion
Conclusion 26 Pure Electric and Gas Utility Solid Utility Foundation Strong Earnings and Cash Flows Attractive Future Growth Prospects Best Practices Corporate Governance
Slide 27: Appendix
Appendix 27
Slide 28: Big Stone Air Quality Control System
Big Stone Air Quality Control System 28 NorthWestern’s $98 million investment in Big Stone’s federally required Air Quality Control System is nearly twice our initial investment in the facilities in 1975 and and nearly 7x its current depreciated net book value. $98 million investment for federally r
Slide 29: Neal Pollution Control Equipment
Neal Pollution Control Equipment 29 Similarly, NorthWestern’s now completed $25 million investment in Neal’s federally required baghouse and scrubber equipment brings our net investment in the plant back to up the 1979 level when the plant was first constructed.
Slide 30: South Dakota Rate Filing
South Dakota Rate Filing 30 34 Years of Declining ‘Real’ Rates Docket EL14-106 The requested $26.5 million revenue increase was primarily due to investments made to meet federal environmental mandates and to maintain our high-level of system reliability in South Dakota. Of the $26.5 million requeste
Slide 31: Non-GAAP Financial Measures
Non-GAAP Financial Measures 31 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
Slide 32: Upelivering a
Upelivering a bright future Energy
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