Northwestern Energy Group, Inc. · NASDAQ:NWE
Northwestern Energy — Wells Fargo 22nd Annual Utilities Symposium 2023
77 slides from Northwestern Energy's conference presentation, Dec 6, 2023
Slide 1: Wells Fargo 22nd Annual Utilities Symposium
Wells Fargo 22nd Annual Utilities Symposium New York | December 6, 2023 8-K December 06, 2023
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 f
Slide 3: Mission, Vision and Values
3 Mission Working together to deliver safe, reliable and affordable energy solutions. Vision Enriching lives through a safe and sustainable energy future. Values Safety Excellence Respect Value Integrity Community Environment NorthWestern Energy
Slide 4: Company Overview
Company Overview Oedvering @ Bright Fwture
Slide 5: NWE - An Investment for the Long Term
• Pending Montana electric and natural gas rate review to reduce regulatory lag, aid earnings and cash flow and improve balance sheet strength • History of consistent annual dividend growth NWE - An Investment for the Long Term 5 • 100% pure electric & natural gas utility business with over 100 year
Slide 6: About NorthWestern
About NorthWestern 6 Montana Operations Electric 398,200 customers 25,131 miles – transmission & distribution lines 882 MW maximum capacity owned power generation Natural Gas 209,100 customers 7,334 miles of transmission and distribution pipeline 17.75 Bcf of gas storage capacity Own 35.1 Bcf of pro
Slide 7: NorthWestern's Combo-Advantage
Combination electric & natural gas provider in Montana & South Dakota • Targeting best-in-class Customer Experience • Opportunity to invest in critical Capacity expansion (supply & transmission) • Continued Grid Evolution to improve resiliency and enhance wildfire mitigation efforts • Transforming
Slide 8: Natural Gas LDC - AECO Advantage to Customers
Natural Gas LDC - AECO Advantage to Customers 8 NWE has access to some of the lowest and stable natural gas prices in the nation, through the Alberta Energy Company (AECO) trading hub. Source: S&P Global
Slide 9: Montana Enhanced Wildfire Mitigation Plan
Montana Enhanced Wildfire Mitigation Plan 9 Reduction of Ignition Potential System and Environmental Monitoring Enhanced Vegetation Maintenance Enriched Public Communication and Outreach Filed in August 2022 with Montana general rate review Approved settlement provides for deferral of fire mitig
Slide 10: A Diversified Electric and Gas Utility
A Diversified Electric and Gas Utility 10 NorthWestern’s ‘80/20’ rules: Approximately 80% Electric and 80% Montana. Over $4.5 billion of rate base investment to serve our customers Data as reported in our 2022 10-K (1) Utility Margin is a non-GAAP Measure. See appendix for additional disclosure. (1)
Slide 11: Highly Carbon-Free Supply Portfolio
11 Highly Carbon-Free Supply Portfolio Based upon 2022 MWH’s of owned and long-term contracted resources. Approximately 55% of our total company owned and contracted supply is carbon-free – better than the national average of ~40% (2022 eia.gov table 7.2b) NorthWestern does not own all the renewable
Slide 12: Strong Utility Foundation
Strong Utility Foundation 12 Solid and generally improving JD Power Overall Customer Satisfaction Scores Residential electric and natural gas rates below national average * Solid electric system reliability Better than average natural gas leaks per mile * NE bills temporarily impacted by ong
Slide 13: Solid Economic Indicators
Solid Economic Indicators 13 • Customer growth rates historically exceed National Averages. • Projected population growth in our service territories in-line or better than the National Average. Source: NorthWestern customer growth - 2008-2016 Forms 10-K Unemployment Rate: US Department of Labor via
Slide 14: Corporate Sustainability
Corporate Sustainability 14 Environmental Social Governance These eight publications provide valuable insight into NorthWestern Energy’s Environmental, Social and Governance (ESG) Sustainability practices. Sustainability Report includes Sustainability Accounting Standards Board (SASB) and Task Force
Slide 15: Best Practices Governance
EO Best Practices Governance 15 America’s Most Responsible Companies Recognized by Newsweek as one of the most responsible companies in 2023. One of only eleven EEI member utilities selected. Board of Directors Executive Team5th Best Score Among 50 Publicly Traded North American Utility and Power Co
Slide 16: Financial & Regulatory Update
16 Financial & Regulatory Update
Slide 17: Strong Outlook & 2024 Earnings Guidance
Strong Outlook & 2024 Earnings Guidance 17 This guidance range is based upon, but not limited to, the following major assumptions: • Final approval of all material aspects of the Montana general rate review settlement agreement • Constructive outcomes in our current South Dakota rate review and regu
Slide 18: Earnings Bridge to 2024
Earnings Bridge to 2024 18 This guidance range is based upon, but not limited to, the following major assumptions: • Final approval of all material aspects of the Montana general rate review settlement agreement • Constructive outcomes in our current South Dakota rate review and regulatory proceedin
Slide 19: Disciplined Electric O&M Program
Disciplined Electric O&M Program 19 Source: FERC Form 1 Reports - 2022 expenses and company filings through S&P Global IQ Electric Non-Fuel O&M excludes fuel and steam costs for power generation, water costs for hydro operations and purchased power cost unless identified in company disclosures, elec
Slide 20: Track Record of Growing Capital Investment
Track Record of Growing Capital Investment 2018-2022 Invested over the last 5 years* * Historical Capital Investment includes property, plant and equipment additions from our cash flow statement and capital expenditures included in accounts payable. ** See Regulated Utility Five-Year Capital Forecas
Slide 21: Highly Executable Pipeline of Capital Investment
Highly Executable Pipeline of Capital Investment 21 Nearly $2.5 billion of low-risk capital investment forecasted over the next five years is expected to drive annualized rate base growth of approximately 4% - 6%. We expect to finance this capital with a combination of cash flows from operations and
Slide 22: Solid Balance Sheet
Solid Balance Sheet 22 Investment grade credit ratings, liquidity significantly greater than our $100 million target, debt to capitalization at the bottom our targeted 50%-55% range and a manageable schedule of debt maturities.
Slide 23: Montana General Rate Review
Final settlement rates effective November 1, 2023 We do not expect a true-up in rates from interim to final rates for the period from October 1, 2022 to October 31, 2023 Settlement resulted in 74% of the electric and 63% of the natural gas rebuttal base rate request. Montana General Rate Revie
Slide 24: South Dakota Rate Review
South Dakota Rate Review 24 • 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 driven by more than $267 million invested in South Dakota critical electric infrastructure, while k
Slide 25: South Dakota Rate Review
South Dakota Rate Review 25 Infrastructure investment drives nearly 99%* of the requested base rate adjustment * $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 26: Holding Company Reorganization
Holding Company Reorganization 26
Slide 27: Supply Update
Supply Update 27 Montana: • 175 MW Yellowstone County Generating Station Construction began in April 2022 with costs of approximately $275 million with $217.5 million invested to date (thru 9/30/23). Current schedule anticipates commercial operation during third quarter 2024* • Anticipated acquisit
Slide 28: Conclusion
Conclusion 28 Pure Electric & Gas Utility Solid Utility Foundation Best Practices Corporate Governance Attractive Future Growth Prospects Improving Earnings & Cash Flows (rate reviews pending)
Slide 29: Delivering a Bright Future
bright future 4 Delivering a
Slide 30: Regulated Utility Five-Year Capital Forecast
Regulated Utility Five-Year Capital Forecast 30 Distribution and Transmission Modernization and Maintenance - The primary goals of our infrastructure investments are to reverse the trend in aging infrastructure, maintain reliability, proactively manage safety, build capacity into the system, and pre
Slide 31: Detailed Earnings Bridge to 2024
Detailed Earnings Bridge to 2024 31 This guidance range is based upon, but not limited to, the following major assumptions: • Final approval of all material aspects of the Montana general rate review settlement agreement • Constructive outcomes in our current South Dakota rate review and regulatory
Slide 32: NWE Rate Base and Earnings Profile
NWE Rate Base and Earnings Profile Coal Generation Rate Base as a percentage of Total Rate Base (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. Therefo
Slide 33: 2022 System Statistics
2022 System Statistics Note: Statistics above are as of 12/31/2022 (1) Nebraska is a natural gas only jurisdiction (2) Dave Gates Generating Station (DGGS) in Montana is a 150 MW nameplate facility but consider it a 105 MW (60 MW FERC & 45MW MPSC jurisdictions) peaker (1) (2) 33 Appendix
Slide 34: Transmission System Update
Transmission System Update 34 Electric Transmission: • In June 2021, we joined the Western Energy Imbalance Market (WEIM). This real-time, within-hour energy market will provide the company’s Montana customers with economically efficient energy to resolve imbalances and variations in load and genera
Slide 35: Rate Reviews
Rate Reviews Oedvering @ Bright Fwture
Slide 36: South Dakota Rate Review
South Dakota Rate Review 36 $19.14 Per month Increase for an average residential electric customer that uses 750 kWh if our requested rate increase is approved. Appendix
Slide 37: South Dakota Rate Review
South Dakota Rate Review 37 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. Appendix
Slide 38: Montana Rate Review
Montana Rate Review 38 Appendix Reliable, Sustainable and still Affordable service for our customers. While still significant – the resulting increase in customer bills, from current rates, amounts to pennies a day (Electric: $8.24 per month or 27 cents per day | Natural Gas $3.94 per month or 13 ce
Slide 39: Colstrip Transfer Agreement
Appendix 39 Colstrip Transfer Agreement
Slide 40: Colstrip Transaction Overview
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 ownership to
Slide 41: Colstrip Transfer
Colstrip Transfer 41 Reliable Existing resource, ready to serve our Montana customers. Avoids lengthy planning, permitting and construction of a new facility that would stretch in-service beyond 2026. Reduces reliance on imported power and volatile markets, providing increased energy independenc
Slide 42: Why Colstrip?
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 past 202
Slide 43: December 2022 Polar Vortex
December 2022 Polar Vortex 43 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 the h
Slide 44: Facility Ownership Overview
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 would idea
Slide 45: Timeline of Montana Generation Portfolio
Timeline of Montana Generation Portfolio Since 2011, we have added approximately 870 MW, both owned and long- term contract, to our generation portfolio, all of which is from carbon-free resources. Owned and Long-Term Resource Portfolio Timeline 45 Appendix
Slide 46: Comparison of Installed Capacity
Comparison of Installed Capacity California is dealing with significant capacity issues DESPITE having a greater amount of dispachable generation and fewer renewables than NorthWestern Energy in Montana (as a percentage of the total). Source: EIA.gov – 2022 Form EIA-860 Data - Schedule 3 for calenda
Slide 47: EPS & Dividend History
EPS & Dividend History 2013-2022 CAGR’s: GAAP EPS: 3.1% - Non-GAAP EPS: 2.7% - Dividend: 5.8% See appendix for “Non-GAAP Financial Measures” $2.60 - $2.75 $3.10 - $3.30 $3. 0-$3.40 $3.30-$3.50 47 Appendix
Slide 48: Investment for Our Customers' Benefit
Investment for Our Customers’ Benefit Over the past decade 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 to c
Slide 49: Experienced & Engaged Board of Directors
Experienced & Engaged Board of Directors 49 Appendix Britt E. Ide • Nominating & Governance, HR • Independent • Since April 2017 Anthony T. Clark • Nominating & Governance., HR • Independent • Since Dec. 2016 Dana J. Dykhouse • Chairman • Independent • Since Jan. 2009 Jan R. Horsfall • SETO (chair),
Slide 50: Strong Executive Team
Strong Executive Team 50 Appendix Brian B. Bird • President & Chief Executive Officer • Current position since 2023 (formerly President & Chief Operating Officer ’21-’22 and Chief Financial Officer ’03-’21) Crystal D. Lail • Vice President and Chief Financial Officer • Current position since 2021 (f
Slide 51: Our Commissioners
Our Commissioners 51 Appendix
Slide 52: Earnings & Other
Earnings & Other Oedvering @ Bright Fwture
Slide 53: Q3 2023 Financial Results
Q3 2023 Financial Results 53 *See slide 56 and “Non-GAAP Financial Measures” slide in the appendix for additional detail on this measure. Appendix 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 +
Slide 54: Q3 2023 Financial Results
Q3 2023 Financial Results 54 (1) ( ) Appendix (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. (2)
Slide 55: Q3 2023 EPS Bridge
Q3 2023 EPS Bridge After-tax Earnings Per Share 55 Appendix Improvement in Utility Margin offset by higher expenses and share count dilution See slide 56 and “Non-GAAP Financial Measures” slide in the appendix for additional detail on this measure.
Slide 56: Q3 2023 Utility Margin Bridge
Q3 2023 Utility Margin Bridge $8.5 Million or 3.8% increase in Utility Margin due to items that impact Net Income. NOTE: Utility Margin is a non-GAAP Measure See appendix slide titled “Explaining Utility Margin” for additional disclosure. Pre-tax Millions 56 Appendix
Slide 57: Q3 2023 OA&G Expense Bridge
Q3 2023 OA&G Expense Bridge $1.3 Million or 1.6% increase in Operating, Administrative, and General Expenses due to items that impact Net Income. NOTE: Utility Margin is a non-GAAP Measure See appendix slide titled “Explaining Utility Margin” for additional disclosure. Pre-tax Millions 57 Appendix
Slide 58: Q3 2023 Tax Reconciliation
Q3 2023 Tax Reconciliation 58 Appendix
Slide 59: Q3 2023 GAAP to Non-GAAP Earnings
Q3 2023 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 or calculat
Slide 60: Weather and Hydro Conditions
Weather and Hydro Conditions 60 Appendix Snow water equivalents generally in line with the 30-year medians. (Missouri, Madison & Clark Fork Rivers and West Rosebud Creek basins) Real-Time Streamflows versus 30-Year Normal For Q3 – we estimated a $0.9 million pre-tax detriment as compared to normal a
Slide 61: Year-to-Date 2023 Financial Results
*See slide 63 and “Non-GAAP Financial Measures” slide in the appendix for additional detail on this measure. Year-to-Date 2023 Financial Results 61 (through Q3) Appendix 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
Slide 62: Year-to-Date Financial Results
62 (through Q3) Year-to-Date Financial ResultsAppendix (1) (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. (2)
Slide 63: Utility Margin (YTD thru 3rd Quarter)
Increase in utility margin due to the following factors: $ 23.4 Montana interim rates 8.3 Lower non-recoverable Montana electric supply costs 4.8 Montana property tax tracker collections 2.0 Higher electric retail volumes 1.8 Higher Montana natural gas transportation (1.0) Lower natural gas retail v
Slide 64: Operating Expenses (YTD thru 3rd Quarter)
Increase in operating expenses due to the following factors: $ 12.1 Higher depreciation due to plant additions 7.5 Higher labor and benefits (1) 2.9 Higher expenses at our electric generation facilities 1.5 Higher insurance expense 1.4 Increase in uncollectible accounts 0.6 Higher cost of materials
Slide 65: Operating to Net Income
Operating to Net Income 65 (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% Income tax expense (14.1) (2.3)
Slide 66: Year-to-Date Tax Reconciliation
Year-to-Date Tax Reconciliation 66 Appendix (through Q3)
Slide 67: Year-to-Date GAAP to Non-GAAP Earnings
Year-to-Date GAAP to Non-GAAP Earnings (1) As a result of the adoption of Accounting Standard Update 2017-07 in March 2018, pension and other employee benefit expense is now disaggregated on the GAAP income statement with portions now recorded in both OG&A expense and Other (Expense) Income lines. T
Slide 68: Cash Flow
Cash Flow 68 Appendix (through Q3) 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-Coll
Slide 69: Balance Sheet
Balance Sheet 69 Appendix Debt to Total Capitalization slightly below our targeted 50% - 55% range.
Slide 70: Quarterly PCCAM Impacts
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 established a ba
Slide 71: Qualified Facility Earnings Adjustment
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 customers.
Slide 72: Non-GAAP Financial Measures (1 of 5)
Non-GAAP Financial Measures (1 of 5) 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 73: Utility Margin is a non-GAAP Measure
(1) Utility Margin is a non-GAAP Measure. 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 regu
Slide 74: Utility Margin is a non-GAAP Measure
(1) Utility Margin is a non-GAAP Measure. 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 regu
Slide 75: Non-GAAP Earnings (4 of 5)
Non-GAAP Earnings (4 of 5) 75 Appendix
Slide 76: Non-GAAP Ratios and Metrics (5 of 5)
Non-GAAP Ratios and Metrics (5 of 5) The data presented in this presentation includes financial information prepared in accordance with GAAP, as well as other Non-GAAP financial measures such as Utility Margin (Revenues less Fuel, purchased supply and direct transmission expense (exclusive of deprec
Slide 77: Delivering a Bright Future
bright future 4 Delivering a
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