Northwestern Energy Group, Inc. · NASDAQ:NWE
Northwestern Energy — Q3 2023 Earnings Presentation
55 slides from Northwestern Energy's earnings presentation, Oct 27, 2023
Slide 1: 2023 Third Quarter Earnings Webcast
Western Montana 2023 Third Quarter Earnings Webcast October 27, 2023 8-K October 27, 2023
Slide 2: Vision Mission Values
NorthWestern Energy Vision Mission Values Enriching Working Safety lives through together to Excellence a safe and deliver safe, Respect sustainable reliable and Value energy affordable Integrity future. energy Community solutions. Environment 2
Slide 3: Presenting Today / Forward Looking Statements
Presenting Today Brian Bird Crystal Lail President & CEO 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. Forward-looking stateme
Slide 4: Highlights
Highlights • Initiating diluted earnings per share guidance1 2023: $3.00 - $3.10 2024: $3.42 - $3.62 • Increasing long-term (5 year) rate base and earnings per share growth rates targets to 4% - 6%2 • Unanimous approval of a constructive multi-party settlement in the Montana rate review • Electric &
Slide 5: Third Quarter 2023 Financial Results
Third Quarter 2023 Financial Results Third Quarter Net Income vs Prior Period •GAAP: $1.9 Million or +7.1% •Non-GAAP*: $4.2 Million +16.3% Third Quarter EPS vs Prior Period •GAAP: $0.01 or +2.1% •Non-GAAP*: $0.05 or 11.4% 5 *See slide 11 and “Non-GAAP Financial Measures” slide in the appendix for ad
Slide 6: Year-to-Date 2023 Financial Results
Year-to-Date 2023 Financial Results Year-to-Date Net Income vs Prior Period •GAAP: $5.3 Million (or 4.6%) •Non-GAAP*: $1.9 Million (or 1.6%) Year-to-Date EPS vs Prior Period •GAAP: $0.24 (or 11.5%) •Non-GAAP*: $0.18 (or 8.7%) 6 *See slide 47 and “Non-GAAP Financial Measures” slide in the appendix fo
Slide 7: Third Quarter Financial Results
Third Quarter Financial Results (1) (2) (1) Decrease in revenues is primarily related to pass-through supply costs and non-cash regulatory amortizations. (2) Utility Margin is a non-GAAP Measure See appendix slide titled “Explaining Utility Margin” for additional disclosure. 7
Slide 8: Third Quarter EPS Bridge
Third Quarter EPS Bridge After-tax Earnings Per Share See slide 11 and “Non-GAAP Improvement in Utility Margin Financial Measures” slide in the appendix for additional offset by higher expenses and share count dilution detail on this measure. 8
Slide 9: Third Quarter Utility Margin Bridge
Third Quarter Utility Margin Bridge Pre-tax Millions $8.5 Million or 3.8% increase in Utility Margin NOTE: Utility Margin is a non-GAAP Measure See appendix slide titled “Explaining Utility due to items that impact Net Income Margin” for additional disclosure. 9
Slide 10: Third Quarter OA&G Bridge
Third Quarter OA&G Bridge Pre-tax Millions $1.3 Million or 1.6% increase in OA&G Expense NOTE: Utility Margin is a non-GAAP Measure See appendix slide titled “Explaining Utility due to items that impact Net Income. Margin” for additional disclosure. 10
Slide 11: Third Quarter Non-GAAP Earnings
Third Quarter Non-GAAP Earnings The adjusted non-GAAP measures presented in the table are being shown to reflect significant items that are non- recurring or a variance from normal weather, however they should not be considered a substitute for financial results and measures determined or calculated
Slide 12: Cash Flow
Cash Flow Cash from Operating Activities increased by $117.7 million driven primarily by a $101.6 million increase in collection of energy supply costs from customers and Montana interim rates. Funds from Operations decreased by $4.5 million over prior period. Net Under-Collected Supply Costs (in mi
Slide 13: Montana General Rate Review
Montana General Rate Review Unanimous approval from the Montana Public Service Commission of a constructive multi-party settlement • We expect final settlement rates to be effective November 1, 2023 • We do not expect a true-up in rates from interim to final rates for the period from October 1, 20
Slide 14: South Dakota General Rate Review
South Dakota General Rate Review Request to update our rates to reflect the current cost to provide safe and reliable service • First rate review since 2015. Seeking recovery of nearly 30 percent of rate base that is not included in South Dakota electric rates today. • Requested base rate increase
Slide 15: Strong Outlook & 2024 Earnings Guidance
Strong Outlook & 2024 Earnings Guidance Initiating non-GAAP EPS guidance 2023: $3.00 - $3.10 2024: $3.42 - $3.62 Increasing long-term (5 Year) expected growth rates • EPS growth of 4% to 6% (from 3% to 6%) from 2022 base year of $3.18 Non-GAAP • Rate base growth of 4% - 6% (from 4% to 5%) from 202
Slide 16: Capital Investment
Capital Investment ($millions, unless stated otherwise) 5 Year History of Capital Investment 5 Year Forecast of Capital Investment Yellowstone County Generating Station Over $2.1 Billion investment* over last 5 years $2.4 billion of forecasted low-risk capital investment opportunity… • Capital inves
Slide 17: Holding Company Reorganization
Holding Company Reorganization 17
Slide 18: Conclusion
Conclusion Best Attractive Pure Strong Solid Utility Practices Future Electric & Earnings & Foundation Corporate Growth Gas Utility Cash Flows Governance Prospects 18
Slide 19: Appendix
CT Appendix 19
Slide 20: Regulated Utility Five-Year Capital Forecast
Appendix Regulated Utility Five-Year Capital Forecast Electric Supply Resource Plans - Our energy resource plans identify portfolio resource requirements including potential investments. Included within our projections is approximately $120.0 million (in 2023 and 2024) of capital to complete constru
Slide 21: Rate Base & Authorized Return Summary
Appendix Rate Base & Authorized Return Summary (1) The revenue requirement associated with the FERC regulated portion of Montana electric transmission and ancillary services are included as revenue credits to our MPSC jurisdictional customers. Therefore, we do not separately reflect FERC authorized
Slide 22: South Dakota Rate Review
Appendix South Dakota Rate Review 22
Slide 23: South Dakota Rate Review
Appendix South Dakota Rate Review Infrastructure investment drives nearly 99%* of the requested base rate adjustment 23 * $19.0 million Cost of Capital plus $17.2 million Infrastructure Investment as a percent of $36.6 million Total Change in Cost of Service.
Slide 24: South Dakota Rate Review: Electric
Appendix South Dakota Rate Review Electric $19.14 Per month Increase for an average residential electric customer that uses 750 kWh if our requested rate increase is approved. 24
Slide 25: South Dakota Rate Review
Appendix South Dakota Rate Review Since our last rate adjustment, NorthWestern’s typical residential electric customer bills have maintained a pace well below inflation. This request, if granted in full, would still result in customer bills in line with inflation. 25
Slide 26: Colstrip Transfer
Appendix Colstrip Transfer 26
Slide 27: Colstrip Transaction Overview
Appendix Colstrip Transaction Overview NorthWestern Energy executed an agreement with Avista Corporation (Exit Agreement) for the transfer of Avista’s ownership interests in Colstrip Units 3 and 4. • Effective date of transfer: December 31, 2025 • Generating capacity: 222 MW (bringing our total owne
Slide 28: Facility Ownership Overview
Appendix Facility Ownership Overview NorthWestern is actively working with the other owners to resolve outstanding issues, including the associated pending legal proceedings. Additionally, the owners intend to pursue a mutually beneficial reallocation (swap) of megawatts between the two units that w
Slide 29: Why Colstrip?
Appendix Why Colstrip? Reliable Existing resource, ready to serve our Montana customers. Avoids NorthWestern Energy executed lengthy planning, permitting and construction of a new facility that would an agreement with Avista stretch in-service beyond 2026. Corporation for the transfer of Reduces
Slide 30: Why Colstrip?
Appendix Why Colstrip? Reduces Risk We are in a supply capacity crisis due to lack of resource adequacy, with approx. 40% of our customers’ peak needs on the market. This transaction will reduce our need to import expensive capacity during critical times. Establishes clarity regarding operations
Slide 31: December 2022 Polar Vortex
Appendix December 2022 Polar Vortex The chart illustrates the actual resource specific contribution of energy, the capacity deficit we faced, and the market price of power during the late December 2022 multi-day cold weather event in Montana. As a result of our capacity deficit, we were reliant upon
Slide 32: Our Net-Zero Vision
Appendix Our Net-Zero Vision Over the past 100 years, NorthWestern Energy has maintained our commitment to provide customers with reliable and affordable electric and natural gas service while also being good stewards of the environment. We have responded to climate change, its implications and risk
Slide 33: Third Quarter and Year-to-Date Financial Information
Appendix Third Quarter and Year-to-Date Financial Information 33
Slide 34: Utility Margin (3rd Quarter)
Appendix Utility Margin (3rd Quarter) (dollars in millions) Three Months Ended September 30, 2023 2022 Variance Electric $ 202.0 $ 196.7 $ 5.3 2.7% Natural Gas 30.2 29.5 0.7 2.4% (1) Total Utility Margin $ 232.2 $ 226.2 $ 6.0 2.7% Increase in utility margin due to the following factors: $ 7.8 Montan
Slide 35: Operating Expenses (3rd Quarter)
Appendix Operating Expenses (3rd Quarter) (dollars in millions) (1) In order to present Three Months Ended September 30, the total change in labor and benefits, we 2023 2022 Variance have included the change in the non- service cost component Operating & maintenance $ 53.2 $ 54.7 $ (1.5) (2.7)% of o
Slide 36: Operating to Net Income (3rd Quarter)
Appendix Operating to Net Income (3rd Quarter) (dollars in millions) Three Months Ended September 30, 2023 2022 Variance Operating Income $ 55.6 $ 48.2 $ 7.4 15.4% Interest expense (28.7) (25.3) (3.4) (13.4)% Other income, net 4.1 4.2 (0.1) (2.4)% Income Before Taxes 31.0 27.1 3.9 14.4% Income tax (
Slide 37: Tax Reconciliation (3rd Quarter)
Appendix Tax Reconciliation (3rd Quarter) 37
Slide 38: Segment Results (3rd Quarter)
Appendix Segment Results (3rd Quarter) (1) (1) 38 (1) Utility Margin is a non-GAAP Measure See appendix slide titled “Explaining Utility Margin” for additional disclosure.
Slide 39: Weather / Hydro Conditions
Appendix Weather / Hydro Conditions (3rd Quarter) We estimated a $0.9 million pre-tax detriment as compared to normal and a $3.0 million detriment as compared to Q3 2022. Real-Time Streamflows versus 30-Year Normal Snow water equivalents generally in line with the 30-year medians. (Missouri, Madison
Slide 40: Electric Segment (3rd Quarter)
Appendix Electric Segment (3rd Quarter) (1) 40 (1) Utility Margin is a non-GAAP Measure See appendix slide titled “Explaining Utility Margin” for additional disclosure.
Slide 41: Natural Gas Segment (3rd Quarter)
Appendix Natural Gas Segment (3rd Quarter) (1) 41 (1) Utility Margin is a non-GAAP Measure See appendix slide titled “Explaining Utility Margin” for additional disclosure.
Slide 42: Utility Margin (YTD thru 3rd Quarter)
Appendix Utility Margin (YTD thru 3rd Quarter) (dollars in millions) Nine Months Ended September 30, 2023 2022 Variance Electric $ 606.1 $ 576.5 $ 29.6 5.1% Natural Gas 138.0 137.0 1.0 0.7% (1) Total Utility Margin $ 744.1 $ 713.5 $ 30.6 4.3% Increase in utility margin due to the following factors:
Slide 43: Operating Expenses (YTD thru 3rd Quarter)
Appendix Operating Expenses (YTD thru 3rd Quarter) (dollars in millions) (1) In order to present Nine Months Ended September 30, the total change in labor and benefits, we 2023 2022 Variance have included the change in the non- service cost component Operating & maintenance $ 163.9 $ 160.8 $ 3.1 1.9
Slide 44: Operating to Net Income (YTD thru 3rd Quarter)
Appendix Operating to Net Income (YTD thru 3rd Quarter) (dollars in millions) Nine Months Ended September 30, 2023 2022 Variance Operating Income $ 197.3 $ 179.9 $ 17.4 9.7% Interest expense (85.1) (73.1) (12.0) (16.4)% Other income, net 12.9 11.8 1.1 9.3% Income Before Taxes 125.1 118.6 6.5 5.5% In
Slide 45: Tax Reconciliation (YTD thru 3rd Quarter)
Appendix Tax Reconciliation (YTD thru 3rd Quarter) 45
Slide 46: Year-to-Date Non-GAAP Earnings
Appendix Year-to-Date Non-GAAP Earnings (YTD thru 3rd Quarter) The adjusted non-GAAP measures presented in the table are being shown to reflect significant items that are non- recurring or a variance from normal weather, however they should not be considered a substitute for financial results and me
Slide 47: Electric Segment (YTD thru 3rd Quarter)
Appendix Electric Segment (YTD thru 3rd Quarter) (1) 47 (1) Utility Margin is a non-GAAP Measure See appendix slide titled “Explaining Utility Margin” for additional disclosure.
Slide 48: Natural Gas Segment (YTD thru 3rd Quarter)
Appendix Natural Gas Segment (YTD thru 3rd Quarter) (1) 48 (1) Utility Margin is a non-GAAP Measure See appendix slide titled “Explaining Utility Margin” for additional disclosure.
Slide 49: Quarterly PCCAM Impacts
Appendix Quarterly PCCAM Impacts Pre-tax Millions In 2017, the Montana legislature revised the statute regarding our recovery of electric supply costs. In response, the MPSC approved a new design for our electric tracker in 2018, effective July 1, 2017. The revised electric tracker, or PCCAM establi
Slide 50: Qualified Facility Earnings Adjustment
Appendix Qualified Facility Earnings Adjustment Our electric QF liability consists of unrecoverable costs associated with contracts covered under PURPA that are part of a 2002 stipulation with the MPSC and other parties. Risks / losses associated with these contracts are born by shareholders, not cu
Slide 51: Balance Sheet
Appendix Balance Sheet Debt to Total Capitalization slightly below our targeted 50% - 55% range. 51
Slide 52: Explaining Utility Margin
Appendix Explaining Utility Margin Management believes that Utility Margin provides a useful measure for investors and other financial statement users to analyze our financial performance in that it excludes the effect on total revenues caused by volatility in energy costs and associated regulatory
Slide 53: Non-GAAP Financial Measures
Appendix Non-GAAP Financial Measures 53
Slide 54: Non-GAAP Financial Measures
Appendix Non-GAAP Financial Measures This presentation includes financial information prepared in accordance with GAAP, as well as other financial measures, such as Utility Margin, Adjusted Non-GAAP pretax income, Adjusted Non-GAAP net income and Adjusted Non-GAAP Diluted EPS that are considered “no
Slide 55: Upetivering a
Upetivering a bright future
NorthWestern Energy Group — Q3 2023 Earnings Presentation on 6ix