NorthWestern Energy Group, Inc. · NASDAQ:NWE
NorthWestern Energy — Investor Presentation (March 2016)
44 slides from NorthWestern Energy's investor presentation, March 2016
Slide 1: Investor Update March 2016
Madison River at Three Forks, MT Investor Update March 2016
Slide 2: Forward Looking Statements
Forward Looking Statements Company Information NorthWestern Corporation Forward Looking Statements dba: NorthWestern Energy During the course of this presentation, there will be forward- www.northwesternenergy.com looking statements within the meaning of the “safe harbor” Corporate Support Office pr
Slide 3: About NorthWestern
About NorthWestern South Dakota Operations Electric 62,800 customers 3,550 miles – transmission & distribution lines 440 MW nameplate owned power generation Natural Gas 45,700 customers 1,625 miles of transmission and distribution pipeline Montana Operations Beethoven Electric 359,000 customers 24,3
Slide 4: NWE: An Investment for the Long Term
NWE: An Investment for the Long Term • 100% Regulated electric & natural gas utility business Pure Electric • 100 year history of competitive customer rates, system reliability and customer satisfaction & Gas Utility • Solid economic indicators in service territory • Constructive regulatory relation
Slide 5: A Diversified Electric and Gas Utility
A Diversified Electric and Gas Utility Gross Margin in 2015: Gross Margin in 2015: Electric: $663M Montana: $729M Natural Gas: $178M South Dakota: $102M Nebraska: $ 10M Above data reflects full year 2015 results. Jurisdiction and service type based upon gross margin contribution. Average Customers i
Slide 6: NorthWestern Energy Profile
NorthWestern Energy Profile Financial and Company Statistics 6 See “Non-GAAP Financial Measure” slide in appendix for Net Debt and EBITDA reconciliation
Slide 7: Solid Economic Indicators
Solid Economic Indicators • Unemployment rates in all three of our states are meaningfully below National Average. • Customer growth rates historically exceed National Averages. Source: NorthWestern customer growth - 2008-2015 Forms 10-K Unemployment Rate: US Department of Labor via SNL Database 2/1
Slide 8: Strong Utility Foundation
Strong Utility Foundation Electric source: Edison Electric Institute Typical Bills and Average Rates Report, 1/1/16 Natural gas source: US EIA - Monthly residential supply and delivery rates as of 1/29/16 System Average Interruption Duration Index (SAIDI) NWE versus EEI System Reliability Quartiles
Slide 9: Track Record of Delivering Results
Track Record of Delivering Results Return on Equity within 9.5% - 11.0% band over the last 5 years. Annual dividend increases since emergence in 2004. 5 Year (2011-2015) Avg. Return on Equity: 10.4% 5 Year (2011-2015) CAGR Dividend Growth: 7.5% Current Dividend Yield Approximately 3.5% Notes: - ROE
Slide 10: Investment for Our Customers' Benefit
Investment for Our Customers’ Benefit Over the past 7 years 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
Slide 11: Total Shareholder Return
Total Shareholder Return • 15 member peer group: ALE (Allete), AVA (Avista), BKH (Black Hills), CNL (Cleco), EDE (Empire District Electric), EE (El Paso Electric), GXP (Great Plains), 11 IDA (IDA Corp), MGEE (Madison Gas & Electric), PNM (PNM Resources), POR (Portland Electric), STR (Questar), VVC (
Slide 12: Strong Cash Flows
Strong Cash Flows Components of Free Cash Flow While maintenance capex and total dividend payments have continued to grow since 2011 (16.6% and 14.8% CAGR respectively), Cash Flow from Operations has continued to outpace maintenance capex and averaged approximately $38 million of positive Free Cash
Slide 13: Balance Sheet Strength and Liquidity
Balance Sheet Strength and Liquidity 13
Slide 14: 2016 Earnings Guidance
2016 Earnings Guidance $3.10 - $3.30 $2.60$3.20-$3.40 - $2.75 Our 2016 guidance range of $3.20 - $3.40 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; • Excludes any potential
Slide 15: The Hydro Facilities
The Hydro Facilities Overview of Hydro Facilities Hydro Asset Integration (1) • Montana Asset Optimization Study: With the acquisition of the hydros, we are modeling different scenarios in an attempt to optimize the integration and operation of our entire generation fleet and determine the most econ
Slide 16: South Dakota Electric Operations
South Dakota Electric Operations Beethoven Wind Project: In September 2015, we completed the purchase of the 80 MW Beethoven wind project, near Tripp, South Dakota for approximately $143 million with BayWa r.e. Wind LLC. The SDPUC granted approval of our request on placing the assets into rate base
Slide 17: Natural Gas Reserves Opportunity
Natural Gas Reserves Opportunity We continue to pursue opportunities to secure Total Annual Need low cost gas reserves for our customers. First ~6 Bcf annual • Three acquisitions totaling approximately $100 million production acquired since September 2010: Owned for ~$100M • 84.6 Bcf of natural gas
Slide 18: Infrastructure Projects
Infrastructure Projects • In Montana, our Distribution System Infrastructure Project (DSIP) and Transmission System Infrastructure Project (TSIP), both of which are currently in process, are to maintain a safe and reliable electric and natural gas distribution and transmission system. – The primary
Slide 19: DGGS Update – Still waiting on FERC
DGGS Update – Still waiting on FERC 19
Slide 20: Capital Spending Forecast
Capital Spending Forecast * Current estimated cumulative capital spending for 2016 through 2020 is $1.47 billion. We anticipate funding the capital projects with a combination of cash flows, aided by NOLs now anticipated to be available into 2020, and long-term debt. If other opportunities arise tha
Slide 21: 'Clean' Owned & Contracted Supply Portfolio
‘Clean’ Owned & Contracted Supply Portfolio * Wind Owned delivered in 2015 includes a partial year of production from the Beethoven wind farm, which was acquired on September 25, 2015. Based upon 2015 delivered electric portfolio, approximately 54% of our total company owned and contracted supply is
Slide 22: EPA's 2030 carbon target for Montana
EPA’s 2030 carbon target for Montana NWE’s CO2 intensity* decreased by approximately 37% with the addition of the hydro facilities to our Montana generation portfolio. However EPA’s Clean Power Plan targets are statewide and not utility specific targets. CO2 Intensity* 37% * lbs CO2 per MWH produced
Slide 23: EPA's Clean Power Plan (CPP)
EPA’s Clean Power Plan (CPP) If the CPP rules were utility specific, NorthWestern would be in Source: www.eenews.net/interactive/clean_power_plan excellent shape…. but emission targets are established at a state level. • NorthWestern’s Montana electric supply portfolio has a low carbon emissions rat
Slide 24: Other Significant Achievements in 2015
Other Significant Achievements in 2015 Strong year for safety at NorthWestern • Fewest OSHA recordable events of any year. • One of the best years for Lost Time Incidents. • Tragic fatality of a respected senior lineman. Record best customer satisfaction scores with JD Power & Associates • Received
Slide 25: Conclusion
Conclusion Pure Electric and Gas Utility Best Practices Solid Utility Corporate Foundation Governance Attractive Strong Future Earnings and Growth Cash Flows Prospects 25
Slide 26: Appendix
Appendix 26
Slide 27: Summary Financial Results (Qtr & Full Year)
Summary Financial Results (Qtr 4 & Full Year) 27
Slide 28: Weather (Fourth Quarter)
Weather (Fourth Quarter) Maximum Temperature from Normal Minimum Temperature from Normal 28
Slide 29: 2015 Weather
2015 Weather Q1 2015 Q4 2015 NorthWestern service territory has significantly more heating degree-days than cooling degree- days. As a result, first and fourth quarter weather anomalies tend to be more impactful to earnings. We estimate the mild weather has unfavorably impacted our total gross margi
Slide 30: Non-GAAP Adjusted Earnings (Fourth Quarter '15 vs '14)
Non-GAAP Adjusted Earnings (Fourth Quarter ‘15 vs ’14) The non-GAAP measures presented in the table above are being shown to reflect significant items 30 that were not contemplated in our original guidance, however they should not be considered a substitute for financial results and measures determi
Slide 31: Non-GAAP Adjusted Earnings (Full Year '15 vs '14)
Non-GAAP Adjusted Earnings (Full Year ‘15 vs ’14) 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 31 determined o
Slide 32: 2014 to 2015 Reconciliation (4th Qtr & Full Year)
2014 to 2015 Reconciliation (4th Qtr & Full Year) 32
Slide 33: Balance Sheet
Balance Sheet Property plant & equipment (PP&E) increased by 8% as a result of the acquisition of the Beethoven wind project and continued investment to improve system safety, reliability and capacity. 55.4% Debt to capitalization slightly above our targeted 50-55% due to seasonality of cash flows,
Slide 34: Cash Flow
Cash Flow $89.8 million improvement in cash flow provided by operating activities was primarily due to higher net income after non-cash adjustments. 34
Slide 35: Income Tax Reconciliation (Qtr & YTD)
Income Tax Reconciliation (Qtr 4 & YTD) 35
Slide 36: 2015 to 2016 EPS & Dividend Bridge
2015 to 2016 EPS & Dividend Bridge Basic assumptions include, but are not limited to: • Normal weather in our electric and natural gas service territories; • Excludes any potential additional impact as a result of the FERC decision regarding revenue allocation at our Dave Gates Generating Station; •
Slide 37: Big Stone and Neal Air Quality Projects
Big Stone and Neal Air Quality Projects Big Stone Power Plant Neal Power Plant 37
Slide 38: Meeting Montana Customer Demands
Meeting Montana Customer Demands Light Load Hours (MWh's) 400,000 Conveyance of Kerr Dam to Confederated Salish and Kootenai Tribes 300,000 MWh's 200,000 100,000 - Hydro Contracted Owned Generation Light Load Demand Heavy Load Hours (MWh's) 500,000 Conveyance of Kerr Dam to Confederated Salish and K
Slide 39: 2015 System Statistics
2015 System Statistics (1) Note: Statistics above are as of 12/31/2015 (1) Nebraska is a natural gas only jurisdiction 39
Slide 40: Strong Executive Team
Strong Executive Team Robert C. Rowe President and Chief Executive Officer + Current position since August 2008 + Board member since August 2008. + 20-plus years energy and utility industry experience and is currently serving as Chairman of Westem Energy Institute (2012-2013) and Co-Chair of IEE, an
Slide 41: Experienced & Engaged Board of Directors
Experienced & Engaged Board of Directors 41
Slide 42: Our Commissioners
Our Commissioners Montana Public Service Commission Commissioners are elected in statewide elections from each of five districts. Chairperson is elected by fellow Commissioners. Commissioner term is 4 years, Chairperson term is 2years. Non Began Term Name Party Serving Ends Kirk Bushman R Jan-13 Jan
Slide 43: Non-GAAP Financial Measures
Non-GAAP Financial Measures The data presented above includes financial information prepared in accordance with GAAP, as well as another financial measure, Gross Margin, Free Cash Flows, Net Debt and EBITDA, but is considered a “Non-GAAP financial measure.” Generally, a Non-GAAP financial measure is
Slide 44: Upetivering a
Upetivering a bright future NorthWestern Energy