Northwestern Energy Group, Inc. · NASDAQ:NWE
Northwestern Energy — FY2020 Earnings Presentation
41 slides from Northwestern Energy's earnings presentation, Feb 12, 2021
Slide 1: 2020 - Full Year Earnings Webcast
2020 - Full Year Earnings Webcast February 12, 2021
Slide 2: Presenting Today / Forward Looking Statements
Presenting Today 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 Bob Rowe, Litigation Reform Act of 1995. Forward-looking statements often address our expected fut
Slide 3: 2020 and Recent Highlights
2020 and Recent Highlights • Net income for 2020 was $155.2 million. This is a $46.9 million, or 23.2%, decrease as compared to the same period in 2019. • Diluted earnings per share (EPS) were $3.06. This is a $0.92, or 23.1%, decrease as compared to 2019 o Non-GAAP Adjusted EPS were $3.35, within o
Slide 4: Summary Financial Results
Summary Financial Results (Full Year) (1) 4 (1) Gross Margin, defined as revenues less cost of sales, is a non-GAAP Measure See appendix for additional disclosure.
Slide 5: Gross Margin
Gross Margin (Full Year) (dollars in millions) Twelve Months Ended December 31, 2020 2019 Variance Electric $ 704.2 $ 741.6 $ (37.4) (5.0)% Natural Gas 188.3 198.3 (10.0) (5.0)% (1) Total Gross Margin $ 892.5 $ 939.9 $ (47.4) (5.0)% Decrease in gross margin due to the following factors: $ (11.0) Ele
Slide 6: Weather
Weather (Full Year) We estimate overall unfavorable weather in 2020 resulted in a $9.8 million pretax detriment as compared to normal and a $17.1 million detriment as compared to 2019. 6 Degrees Fahrenheit from Average
Slide 7: Operating Expenses
Operating Expenses (Full Year) (dollars in millions) Twelve Months Ended December 31, 2020 2019 Variance Operating, general & admin. $ 297.1 $ 318.2 $ (21.1) (6.6)% Property and other taxes 179.5 171.9 7.6 4.4% Depreciation and depletion 179.6 172.9 6.7 3.9% Operating Expenses $ 656.2 $ 663.0 $ (6.8
Slide 8: Operating to Net Income
Operating to Net Income (Full Year) (dollars in millions) Twelve Months Ended December 31, 2020 2019 Variance Operating Income $ 236.2 $ 276.9 $ (40.7) (14.7)% Interest Expense (96.8) (95.1) (1.7) (1.8)% Other Income, net 4.8 0.4 4.4 1,237.0% Income Before Taxes 144.2 182.2 (38.0) (20.8)% Income Tax
Slide 9: Income Tax Reconciliation
Income Tax Reconciliation (Full Year) 9
Slide 10: Balance Sheet
Balance Sheet Debt to Capitalization remains within our targeted 50% - 55% range. In 2020, we netted our excess deferred income taxes in regulatory liabilities. This reclassification had no effect on previously reported Net income or Shareholders Equity balance. 10
Slide 11: Cash Flow
Cash Flow Cash from operating activities increased by $55.4M primarily due to improved collections of energy supply costs in the current period, as compared with higher procured supply costs and payments reducing cash flows in 2019, including TCJA credits to Montana customers of approximately $20.5
Slide 12: Net Operating Losses & Effective Tax Rates
Net Operating Losses & Effective Tax Rates Cash Taxes: We anticipate NOLs to be available into 2021 with production tax and other credits to largely offset any federal cash tax obligations until 2024. Effective Tax Rate: We anticipate the effective tax rate (ETR) for 2021 to be approximately (2.5%)
Slide 13: Adjusted Non-GAAP Earnings
Adjusted Non-GAAP Earnings (Full Year) The adjusted non-GAAP measures presented in the table are being shown to reflect significant items that are non-recurring or variance from normal weather, however they should not be considered a substitute for financial results and measures determined or calcul
Slide 14: Covid-19: Margin Expectations
Covid-19: Margin Expectations Covid-19 impacts on gross margin continued into the fourth quarter with commercial and industrial customer classes impacted more than forecasted (residential in line with forecast). Industrial load was incrementally impacted by non-Covid related closures of a few indust
Slide 15: Covid-19: Expense Expectations
Covid-19: Expense Expectations Expenses that decreased: Covid-19 related expense Expenses that increased: • Bad debt expense • Distribution customer work reductions were generally in • Regulatory recovery in SD only • Contract services and material costs line with our expectations. • Covid-19 relate
Slide 16: 2020 Non-GAAP to 2021 EPS Bridge
2020 Non-GAAP to 2021 EPS Bridge The 20 cent EPS guidance range slightly wider than normal primarily due to Covid-19 uncertainties. Guidance range will likely be narrowed in the 2nd or 3rd quarter when we have a better sense of its impact to our margins. Non-GAAP 2020 to 2021 midpoint EPS growth rat
Slide 17: Earnings Per Share and Dividend History
Earnings Per Share and Dividend History Earnings Per Share vs Guidance Non-GAAP Adjusted EPS Growth Averaged 4.3% from 2013 - 2020 Dividend and Payout Ratio Annualized dividend growth rate of 6.7% from 2013 - 2020 Continued investment in our system to serve our customers and communities is expected
Slide 18: Capital Investment Forecast
Capital Investment Forecast • $2.1 billion of total capital investment over the five year period. • We expect to finance this capital with a combination of cash flows from operations, first mortgage bonds and equity issuances. We anticipate initiating a 3-year $200 million At-the-Market (ATM) offeri
Slide 19: Generation Portfolio Update
Generation Portfolio Update Montana • Initial bids from the February 2020, 280 MW, competitive solicitation were Western Energy Imbalance Market submitted in July 2020. Bid submissions were evaluated by an independent party. We are reviewing the analyses from the administrator and expect to announce
Slide 20: Looking Forward (Regulatory)
Looking Forward (Regulatory) • The MPSC recently approved a pilot Fixed Cost Recovery Mechanism (FCRM) effective July 1, 2020. We asked the MPSC to delay the start of the pilot for one year until July 1, 2021 due to the uncertainty created by the Covid-19 pandemic. The MPSC granted the requested one
Slide 21: ESG Advancements
ESG Advancements • NorthWestern has a new Environmental, Social and Governance landing page. The new page: • Consolidates existing ESG information; • Includes disclosures of 19 new and existing policies and standards necessary for a best- practices ESG program; and • Includes a new, easy reference,
Slide 22: Conclusion
Conclusion Best Attractive Pure Strong Solid Utility Practices Future Electric & Earnings & Foundation Corporate Growth Gas Utility Cash Flows Governance Prospects 22
Slide 23: Appendix
Cr Appendix 23
Slide 24: Segment Results
Appendix Segment Results (Full Year) (1) (1) (1) Gross Margin, defined as revenues less cost of sales, is a non-GAAP Measure. See appendix for additional disclosure. 24
Slide 25: Electric Segment
Appendix Electric Segment (Full Year) (1) (1) Gross Margin, defined as revenues less cost of sales, is a non-GAAP Measure. 25 See appendix for additional disclosure.
Slide 26: Natural Gas Segment
Appendix Natural Gas Segment (Full Year) (1) (1) Gross Margin, defined as revenues less cost of sales, is a non-GAAP Measure. 26 See appendix for additional disclosure.
Slide 27: Summary Financial Results
Appendix Summary Financial Results (Three Months Ended December 31) (1) (1) Gross Margin, defined as revenues less cost of sales, is a non-GAAP Measure. 27 See appendix for additional disclosure.
Slide 28: Gross Margin
Appendix Gross Margin (Three Months Ended December 31) (dollars in millions) Three Months Ended December 31, 2020 2019 Variance(1) Electric $ 170.8 $ 186.1 $ (15.3) (8.2)% Natural Gas 56.8 59.7 (2.9) (4.8)% Total Gross Margin $ 227.6 $ 245.8 $ (18.2) (7.4)% Decrease in gross margin due to the follow
Slide 29: Weather
Appendix Weather (Three Months Ended December 31) We estimate unfavorable weather for the 4th quarter 2020 has contributed approximately $5.7M pretax detriment as compared to normal and $5.0M pretax detriment as compared to the same period in 2019. 29 Degrees Fahrenheit from Average
Slide 30: Operating Expenses
Appendix Operating Expenses (Three Months Ended December 31) (dollars in millions) Three Months Ended December 31, 2020 2019 Variance Operating, general & admin. $ 73.1 $ 79.3 $ (6.2) (7.8%) Property and other taxes 42.7 38.7 4.0 10.3% Depreciation and depletion 45.3 43.1 2.2 5.1% Operating Expenses
Slide 31: Operating to Net Income
Appendix Operating to Net Income (Three Months Ended December 31) (dollars in millions) Three Months Ended December 31, 2020 2019 Variance Operating Income $ 66.5 $ 84.7 $ (18.2) (21.5)% Interest Expense (24.5) (24.1) (0.4) (1.7)% Other Income / (Expense) 5.8 (0.5) 6.3 1,386.0% Income Before Taxes 4
Slide 32: Income Tax Reconciliation
Appendix Income Tax Reconciliation (Three Months Ended December 31) 32
Slide 33: Adjusted Non-GAAP Earnings
Appendix Adjusted Non-GAAP Earnings (Three Months Ended December 31) The adjusted non-GAAP measures presented in the table are being shown to reflect significant items that were non- recurring or variance from normal weather, however they should not be considered a substitute for financial results a
Slide 34: Segment Results
Appendix Segment Results (Three Months Ended December 31) (1) (1) (1) Gross Margin, defined as revenues less cost of sales, is a non-GAAP Measure. 34 See appendix for additional disclosure.
Slide 35: Electric Segment
Appendix Electric Segment (Three Months Ended December 31) (1) (1) Gross Margin, defined as revenues less cost of sales, is a non-GAAP Measure. 35 See appendix for additional disclosure.
Slide 36: Natural Gas Segment
Appendix Natural Gas Segment (Three Months Ended December 31) (1) (1) Gross Margin, defined as revenues less cost of sales, is a non-GAAP Measure. 36 See appendix for additional disclosure.
Slide 37: Qualified Facility Earnings Adjustment
Appendix Qualified Facility Earnings Adjustment The gain in 2020 for our QF liability was $3.1 million in total, it was comprised of $2.2 million adjustment to the liability and $0.9 million lower actual costs over last 12 months (QF contract year). This $3.1 million benefit is $3.3 million less tha
Slide 38: Quarterly PCCAM Impacts
Appendix Quarterly PCCAM Impacts 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 baseline o
Slide 39: 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 40: Non-GAAP Financial Measures
Appendix 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 num
Slide 41: Delivering a bright future
Upetivering a bright future NorthWestern Energy
NorthWestern Energy Group — FY2020 Earnings Presentation on 6ix