Northwestern Energy Group, Inc. · NASDAQ:NWE
Northwestern Energy — Q3 2022 Earnings Presentation
45 slides from Northwestern Energy's earnings presentation, Oct 25, 2022
Slide 1: 2022 Third Quarter Earnings Webcast
Rainbow Dam, MT 2022 Third Quarter Earnings Webcast October 25, 2022
Slide 2: Presenting Today / Forward Looking Statements
Presenting Today Bob Rowe Brian Bird Crystal Lail CEO President & COO 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
Slide 3: Recent Highlights
Recent Highlights Financial results below expectations for the quarter… • Net income of $27.4 million or $0.47 diluted earnings per share • Non-GAAP EPS of $24.3 or $0.42 diluted earning per share • Expected long-term annual EPS growth rate of 3% - 6% off 2020 base(1) Montana rate review filed o
Slide 4: Summary Financial Results
Summary Financial Results (Third Quarter) (1) 4 (1) Utility Margin is a non-GAAP Measure See appendix slide titled “Explaining Utility Margin” for additional disclosure.
Slide 5: EPS Bridge to Third Quarter 2022
EPS Bridge to Third Quarter 2022 After-tax Earnings Per Share We estimate favorable weather in the third quarter 2022 resulted in a $4.2 million pretax benefit as compared to normal and a $0.8 million benefit as compared to third quarter 2021. See slide 7 and “Non-GAAP Financial Measures” slide in t
Slide 6: Utility Margin Bridge to Q3 2022
Utility Margin Bridge to Q3 2022 Pre-tax Millions NOTE: Utility Margin is a non-GAAP Measure $3.2 Million (1.4%) decrease in Utility Margin See appendix slide titled “Explaining Utility due to items that impact Net Income. Margin” for additional disclosure. 6
Slide 7: Q3 2022 GAAP to Non-GAAP Earnings
Q3 2022 GAAP to Non-GAAP Earnings Three Months Ended September 30, Non-GAAP Adjustments Non-GAAP Adjustments Non Non-GAAP Non The adjusted non-GAAP GAAP GAAP GAAP Variance GAAP measures presented in the table are being shown to reflect Move Pension Expense to OG&A (disaggregated (1) (1) QF Liability
Slide 8: Cash Flow
Cash Flow (YTD thru 9/30) Cash from Operating Activities increased by $87.7 million primarily due to: • $76.5 million increase in collection of energy supply costs from customers, which includes costs incurred during a February 2021 prolonged cold weather event, and the under-collected position of M
Slide 9: Narrowing 2022 Earnings Guidance
Narrowing 2022 Earnings Guidance • Dividend payout ratio is expected to exceed 60%-70% targeted range for 2022. • We continue to target a long-term earnings per share growth rate of 3%-6% off a 2020 base year. • NorthWestern expects NorthWestern adjusts 2022 earnings guidance range to $3.20 to $3.35
Slide 10: Capital Investment Forecast and Funding
Capital Investment Forecast and Funding $1.7 Billion investment over last 5 years NorthWestern’s $582 million Capital Plan for 2022 remains on track… $2.4 billion of low-risk capital investment forecasted over the next five years to address generation capacity, grid modernization and renewable energ
Slide 11: Montana Rate Review
Montana Rate Review Requested base rate increase supports over a billion dollars invested in Montana critical infrastructure, while keeping operating costs below the rate of inflation, since our last rate reviews. (Test years: 2015 natural gas and 2017 electric) Approximately 42% of the requeste
Slide 12: MT Rate Review – Interim Rates / Procedural Schedule
MT Rate Review – Interim Rates / Procedural Schedule Interim Rates effective October 1, 2022 Procedural Schedule September 28th, the MPSC approved the recommendations of the staff for interim rates, Key dates are currently expected: subject to refund, which increased rates by the 12-19-22: Interveno
Slide 13: Looking Forward
Looking Forward 175 megawatt Yellowstone County generating project in Montana… • Construction began in April 2022 • Construction costs of approximately $275 million with $98.1 million invested to date • Current schedule anticipates commercial operation during 2024 Electric Supply Resource Plans So
Slide 14: 14 Years of Extraordinary Leadership
14 Years of Extraordinary Leadership During Rowe’s tenure, NorthWestern Energy has: o Increased the critical energy infrastructure dedicated to serve our customers from $2.5 billion in 2008 to more than $7 billion in 2022, and more than tripled the company’s value. o Acquired or developed energy sup
Slide 15: 14 Years of Extraordinary Leadership
14 Years of Extraordinary Leadership “Bob Rowe is passionate about NorthWestern Energy’s culture, built on collaborative interaction, mentorship and fellowship. Our outstanding employee group, demonstrating a commitment to safety, commitment to our customers, commitment to our environment, and commi
Slide 16: Conclusion
Conclusion Best Attractive Pure Strong Solid Utility Practices Future Electric & Earnings & Foundation Corporate Growth Gas Utility Cash Flows Governance Prospects 16
Slide 17: Appendix
CT Appendix 17
Slide 18: 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 19: Utility Margin
Appendix Utility Margin (Third Quarter) (dollars in millions) Three Months Ended September 30, 2022 2021 Variance Electric $ 196.7 $ 198.1 $ (1.4) (0.7%) Natural Gas 29.4 29.2 0.2 0.7% (1) Total Utility Margin $ 226.1 $ 227.3 $ (1.2) (0.5%) Decrease in utility margin due to the following factors: $
Slide 20: Operating Expenses
Appendix Operating Expenses (Third Quarter) (dollars in millions) (1) We have included Three Months Ended September 30, the change in the non- service cost component 2022 2021 Variance of our pension and other postretirement benefits, which is Operating & maintenance $ 54.7 $ 56.0 ($ 1.3) (2.3%) rec
Slide 21: Operating to Net Income
Appendix Operating to Net Income (Third Quarter) (dollars in millions) Three Months Ended September 30, 2022 2021 Variance Operating Income $ 48.2 $ 55.7 $ (7.5) (13.5%) Interest expense (25.3) (23.3) (2.0) (8.6%) Other income, net 4.2 5.3 (1.1) (20.8%) Income Before Taxes 27.1 37.7 (10.6) (28.1%) I
Slide 22: Tax Reconciliation
Appendix Tax Reconciliation (Third Quarter) 22
Slide 23: EPS Range to Meet Guidance
Appendix EPS Range to Meet Guidance 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 calcu
Slide 24: 2022 YTD GAAP to Non-GAAP Earnings
Appendix 2022 YTD GAAP to 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 o
Slide 25: Weather / Hydro Conditions
Appendix Weather / Hydro Conditions We estimated a $4.2 million pre-tax benefit as compared to normal and a $0.8 million benefit as compared to Q3 2021 with a higher temps from July-September. Stream flows in the basins that house our hydro dams are at normal or below normal and in a few cases much
Slide 26: 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 27: 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 28: Balance Sheet
Appendix Balance Sheet Debt to Total Capitalization down from last year and remains within our targeted 50% - 55% range. 28
Slide 29: Segment Results
Appendix Segment Results (Third Quarter) (1) (1) 29 (1) Utility Margin is a non-GAAP Measure See appendix slide titled “Explaining Utility Margin” for additional disclosure.
Slide 30: Electric Segment
Appendix Electric Segment (Third Quarter) (1) 30 (1) Utility Margin is a non-GAAP Measure See appendix slide titled “Explaining Utility Margin” for additional disclosure.
Slide 31: Natural Gas Segment
Appendix Natural Gas Segment (Third Quarter) (1) 31 (1) Utility Margin is a non-GAAP Measure See appendix slide titled “Explaining Utility Margin” for additional disclosure.
Slide 32: Utility Margin
Appendix Utility Margin (YTD Through 9/30) (dollars in millions) Nine Months Ended September 30, 2022 2021 Variance Electric $ 576.5 $ 580.2 ($ 3.7) (0.6%) Natural Gas 137.1 133.7 3.4 2.5% (1) Total Utility Margin $ 713.6 $ 713.9 ($ 0.3) 0.0% Decrease in utility margin due to the following factors:
Slide 33: Operating Expenses
Appendix Operating Expenses (YTD Through 9/30) (dollars in millions) (1) We have included Nine Months Ended September 30, the change in the non- service cost component 2022 2021 Variance of our pension and other postretirement benefits, which is Operating & maintenance $ 160.8 $ 159.3 $ 1.5 0.9% rec
Slide 34: Operating to Net Income
Appendix Operating to Net Income (YTD Through 9/30) (dollars in millions) Nine Months Ended September 30, 2022 2021 Variance Operating Income $ 179.9 $ 195.7 $ (15.8) (8.1%) Interest expense (73.1) (70.3) (2.8) (4.0%) Other income, net 11.8 13.9 (2.1) (15.1%) Income Before Taxes 118.6 139.4 (20.8) (
Slide 35: Tax Reconciliation
Appendix Tax Reconciliation (YTD Through 9/30) 35
Slide 36: Segment Results
Appendix Segment Results (YTD Through 9/30) (1) (1) 36 (1) Utility Margin is a non-GAAP Measure See appendix slide titled “Explaining Utility Margin” for additional disclosure.
Slide 37: Electric Segment
Appendix Electric Segment (YTD Through 9/30) (1) 37 (1) Utility Margin is a non-GAAP Measure See appendix slide titled “Explaining Utility Margin” for additional disclosure.
Slide 38: Natural Gas Segment
Appendix Natural Gas Segment (YTD Through 9/30) (1) 38 (1) Utility Margin is a non-GAAP Measure See appendix slide titled “Explaining Utility Margin” for additional disclosure.
Slide 39: De-risking the Montana Capacity Deficit
Appendix De-risking the Montana Capacity Deficit NorthWestern has made significant progress to de-risk the capacity deficit between now and 2025. These near term capacity solutions allow time for clarity on Colstrip arbitration, further development in the western markets, and ongoing technological a
Slide 40: Alternative Capacity Considerations
Appendix Alternative Capacity Considerations We expect to build the 175MW nameplate Yellowstone County Reciprocating Internal Combustion Engine (RICE) generation facility for approximately $275 million with capacity generation output of roughly 160 MW*. If we were to build wind or solar to provide t
Slide 41: 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 42: 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 43: Non-GAAP Financial Measures
Appendix Non-GAAP Financial Measures 43
Slide 44: 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 45: Upetivering a bright future
Upetivering a bright future
NorthWestern Energy Group — Q3 2022 Earnings Presentation on 6ix