Northwestern Energy Group, Inc. · NASDAQ:NWE
Northwestern Energy — Q2 2017 Earnings Presentation
37 slides from Northwestern Energy's earnings presentation, Jul 26, 2017
Slide 1: 2017 Second Quarter Earnings Webcast
2017 Second Quarter Earnings Webcast July 26, 2017
Slide 2: Presenting Today
Presenting Today 2 Bob Rowe, President & CEO Brian Bird, Vice President & CFO
Slide 3: Forward Looking Statements
3 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 future business and financia
Slide 4: Second quarter net income and highlights
• Net income for the second quarter was $21.8 million, or $0.44 per diluted share, as compared with net income of $35.6 million, or $0.73 per diluted share, for the same period in 2016. • This $13.8 million decrease in net income is primarily due to the recognition, in 2016, of $14.2 million of defe
Slide 5: Summary Financial Results (Second Quarter)
Summary Financial Results (Second Quarter) 5
Slide 6: Gross Margin (Second Quarter)
6 Gross Margin (Second Quarter) (dollars in millions) Three Months Ended June 30, 2017 2016 Variance Electric $ 163.8 $ 176.2 $ (12.4) (7.0%) Natural Gas 36.1 35.2 0.9 2.6% Gross Margin $ 199.9 $ 211.4 $ (11.5) (5.4%) Decrease in gross margin due to the following factors: $ (14.2) 2016 Lost revenue
Slide 7: Weather (Second Quarter)
Weather (Second Quarter) 7 Second quarter in our service territory is still primarily a heating season. Temperatures during the second quarter were warmer than normal but a little cooler than 2016. Montana cities included in the Electric Heating Degree Days calculation are Billings, Bozeman, Butte,
Slide 8: Operating Expenses (Second Quarter)
Operating Expenses (Second Quarter) 8 Increase in operating expenses due mainly to the following factors: $2.6 million Increase in OG&A $ 0.9 Labor $ 0.6 Bad debt expense $ 0.5 Maintenance costs $ 0.4 Non-employee directors deferred compensation $ 0.4 Natural gas production gathering expense $ (0.2)
Slide 9: Operating to Net Income (Second Quarter)
Operating to Net Income (Second Quarter) 9 $3.0 million decrease in interest expense was primarily due to $2.9 million of interest associated with the 2016 MPSC disallowance along with the debt refinancing of the Pollution Control Revenue Refunding Bonds during the third quarter of 2016. $0.9 millio
Slide 10: Balance Sheet
Balance Sheet 10 Total company debt to capitalization in line with targeted range of 50% - 55%.
Slide 11: Cash Flow
Cash Flow 11 Changes in working capital is largely attributed to the $30.8 million* refund to customers in 2016 associated with the DGGS/FERC ruling . * $27.3 million of deferred revenues plus accrued interest of $3.5 million.
Slide 12: Income Tax Reconciliation (Second Quarter)
Income Tax Reconciliation (Second Quarter) 12 $2.3 million decrease in income tax expense due primarily to lower pre-tax income offset by lower permanent or flow through adjustments.
Slide 13: Adjusted Earnings (Second Quarter '17 vs '16)
Adjusted Earnings (Second Quarter ‘17 vs ’16) 13 The non-GAAP measures presented in the table above are being shown to reflect significant items that were not contemplated in our original guidance, however they should not be considered a substitute for financial results and measures determined or ca
Slide 14: Summary Financial Results (YTD thru Qtr 2)
Summary Financial Results (YTD thru Qtr 2) 14
Slide 15: Weather (YTD thru Qtr 2)
Weather (YTD thru Qtr 2) 15 Favorable loads from a cold January across our service territory were mostly offset by warmer than normal temps during the remainder of the heating season. Mean Temperature from Normal Montana cities included in the Electric Heating Degree Days calculation are Billings, B
Slide 16: Non-GAAP Adjusted Earnings (YTD '17 vs '16)
Non-GAAP Adjusted Earnings (YTD ‘17 vs ’16) 16 The non- GAAP measures presented in the table to the right are being shown to reflect significant items that were not contemplated in our original guidance, however they should not be considered a substitute for financial results and measures determined
Slide 17: Maintaining Full Year Non-GAAP Guidance
Maintaining Full Year Non-GAAP Guidance 17 In order to meet estimated full- year guidance, in the second half (2H) of 2017 we anticipate these improvements over 2H 2016: • Margin improvement more commensurate with Q1 (Q2 is a ‘shoulder’ period), aided by rate relief from Montana natural gas case. •
Slide 18: 2017 Earnings Guidance
2017 Earnings Guidance 18 NorthWestern reaffirms 2017 earnings guidance range of $3.30 - $3.50 per diluted share is based upon, but not limited to, the following major assumptions and expectations: • Normal weather in our electric and natural gas service territories; • A consolidated income tax rate
Slide 19: Montana Natural Gas Rate Filing
Montana Natural Gas Rate Filing 19 Montana PSC Docket D2016.9.68 Derivation of Rate Increase ($Millions) Revenue Request in Initial Application ..... $10.9 Property Tax (adjustment to actual) ….….. ($2.0) Income Tax correction and other misc. ..... 0.5 Rebuttal Revenue Request …………….. $9.4 1st Stipu
Slide 20: Montana - Implementation of HB 25
Montana - Implementation of HB 193 20 Three Filing Alternatives Proposed by Commission: A tracker that provides for NorthWestern to continue to recover its fixed costs without any update to them, and allows the company to track its variable costs, such as fuel and purchased power costs, with a shari
Slide 21: Other Regulatory Items
21 Other Regulatory Items Regulatory Item Current / Anticipated Action FERC / DGGS: April 2014 order regarding cost allocation at DGGS between retail and wholesale customers that resulted in a $27.3M refund. • FERC denied our request for rehearing and required us to make refunds in June 2016. • We f
Slide 22: Property Tax Tracker Rules and QF Decision
22 Property Tax Tracker Rules: In June 2017, the MPSC adopted new rules establishing minimum filing requirements. • Current MT Property tax tracker rules allows recovery of 60 percent of the change in state and local taxes and fees (leaving $30 million unrecovered over last 5 years to be funded by s
Slide 23: Capital Spending Forecast
Capital Spending Forecast 23 The current estimated cumulative capital spending for 2017 through 2021 is $1.58 billion. Approximately $100 million of this capital spend is earmarked for Montana generation capacity that could be subject to the recent 10 year contract limitations being proposed by the
Slide 24: Conclusion
Conclusion 24 Pure Electric and Gas Utility Solid Utility Foundation Strong Earnings and Cash Flows Attractive Long Term Growth Prospects Best Practices Corporate Governance
Slide 25: Appendix
25 Appendix
Slide 26: Segment Results (Second Quarter)
26 Segment Results (Second Quarter) Appendix
Slide 27: Electric Segment (Second Quarter)
27 Electric Segment (Second Quarter) Appendix
Slide 28: Natural Gas Segment (Second Quarter)
28 Natural Gas Segment (Second Quarter) Appendix
Slide 29: Gross Margin (YTD thru Qtr 2)
29 Gross Margin (YTD thru Qtr 2) (dollars in millions) Six Months Ended June 30, 2017 2016 Variance Electric $ 344.6 $ 333.9 $ 10.7 3.2% Natural Gas 102.8 94.6 8.2 8.7% Gross Margin $ 447.4 $ 428.5 $ 18.9 4.4% Increase in gross margin due to the following factors: $ 9.5 MPSC 2016 disallowance 7.3 Na
Slide 30: Operating Expenses (YTD thru Qtr 2)
Operating Expenses (YTD thru Qtr 2) 30 Increase in operating expenses due mainly to the following factors: $3.8 million increase in OG&A $ 2.0 Maintenance costs 1.9 Bad debt expense 1.4 Labor 0.4 Natural gas production gathering expense (1.3) Non-employee directors deferred compensation (1.0) Insura
Slide 31: Operating to Net Income (YTD thru Qtr 2)
Operating to Net Income (YTD thru Qtr 2) 31 $4.1 million decrease in interest expense was primarily due to $2.9 million of interest associated with the 2016 MPSC disallowance and debt refinancing of the Pollution Control Revenue Refunding Bonds during the third quarter of 2016. $0.7 million decrease
Slide 32: Income Tax Reconciliation (YTD thru Qtr 2)
Income Tax Reconciliation (YTD thru Qtr 2) 32 Income taxes are higher year-to-date through second quarter 2016 versus the prior year largely due to higher pre-tax income. Appendix
Slide 33: Segment Results (YTD thru 2nd Quarter)
33 Segment Results (YTD thru 2nd Quarter ) Appendix
Slide 34: Electric Segment (YTD thru 2nd Quarter)
34 Electric Segment (YTD thru 2nd Quarter) Appendix
Slide 35: Natural Gas Segment (YTD thru 2nd Quarter)
35 Natural Gas Segment (YTD thru 2nd Quarter) Appendix
Slide 36: Non-GAAP Financial Measures
These materials include financial information prepared in accordance with GAAP, as well as other financial measures, such as Gross Margin and Adjusted Diluted EPS, that are considered “non-GAAP financial measures.” Generally, a non- GAAP financial measure is a numerical measure of a company's financ
Slide 37: Delivering a bright future
Upelivering a bright future Energy