NorthWestern Energy Group, Inc. · NASDAQ:NWE
NorthWestern Energy — Investor Presentation (February 2013)
42 slides from NorthWestern Energy's investor presentation, February 2013
Slide 1: Investor Update February 2013
INVESTOR UPDATE February 2013
Slide 2: Forward Looking Statement
2 FORWARD LOOKING STATEMENT During the course of this presentation, there will be forward‐looking statements within the meaningg of the “safe harbor” provisions p of the Private Securities Litigation Reform Act of 1995. Forward‐looking statements often address our expected future business and financ
Slide 3: About NorthWestern
3 ABOUT NORTHWESTERN Our Vision: Enriching lives through a safe, sustainable energy future Our Mission: i i Working together to deliver safe, reliable and innovative energy solutions Our Values: S ‐ safety E ‐ excellence R ‐ respect V ‐ value I ‐ integrity C ‐ community E ‐ environment
Slide 4: NWE: An Investment for the Long Term
4 NWE: AN INVESTMENT FOR THE LONG TERM We’re a fully regulated and financially solid utility; with – Diversity across states, service type and customer segments – A 100 year history hi t off competitive titi customer t rates, t system t reliability li bilit and d customer t satisfaction ti f ti – 5
Slide 5: NorthWestern Energy Profile
5 NORTHWESTERN ENERGY PROFILE TICKER: NWE
Slide 6: A Strong & Well Rounded Board & Executive Team
6 A STRONG & WELL ROUNDED BOARD & EXECUTIVE TEAM
Slide 7: NWE Corporate Responsibility
7 NWE CORPORATE RESPONSIBILITY
Slide 8: Better Than Average Economic Indicators
8 BETTER THAN AVERAGE ECONOMIC INDICATORS Top Left: Unemployment rate consistently below National Average for our service territory. National Ranking (NE 2nd, SD 3rd & MT 15th) Top: Bad Debt/Revenue Write‐off better than peer average in AGA/EEI 2011 Survey – Our customers pay their bills. Left: Proj
Slide 9: A Diversified Electric and Gas Utility
9 A DIVERSIFIED ELECTRIC AND GAS UTILITY The “80/20” rules of NorthWestern Gross Margin in 2012: Electric: $528M Natural Gas: $146M Gross Margin in 2012 Other $ 1M Montana: $570M South Dakota: $ 95M Nebraska: $ 10M Average Customers in 2012: Residential: 557k Above data reflects full year 2012 resul
Slide 10: Strong Utility Foundation
10 STRONG UTILITY FOUNDATION Electric source: Edison Electric Institute Typical Bills and Average Rates Report, 1/1/12 Natural gas source: US Dept of Energy Monthly residential supply and delivery rates as of 1/1/12 Strong utility operations: Solid system reliability (EEI 2nd quartile); A NWE cu
Slide 11: 2013 Earnings Guidance
11 2013 EARNINGS GUIDANCE 2013 Diluted GAAP EPS Range of $2 40‐2 55 $2.40‐2.55 1 Midpoint 2013 guidance range of $2.40‐$2.55 $2 40‐$2 55 based upon, upon but not limited to, to the following major assumptions and expectations: • A consolidated income tax rate of approximately 12% ‐ 16% of pre‐tax in
Slide 12: 5 Year Track Record of Delivering Results
12 5 YEAR TRACK RECORD OF DELIVERING RESULTS Return on Equity has steadily improved each year from 2008 – 2012 and Dividend per Share has increased each of the last 5 years. 1 1 2 5 Year (2008‐12) Average Return on Equity : 9.8% 5 Year (2008‐12) CAGR Dividend: 2.9% 2 9% Current Dividend Yield Approx
Slide 13: Strong Cash Flows
13 STRONG CASH FLOWS While maintenance capex and dividend payments have continued to grow over the th pastt 5 years (6.5% (6 5% and d 2.1% CAGR respectively), Cash Flow from Operations has continued to outpace maintenance capex and provided approximately p pp y $40‐60 million of positive Free Cash F
Slide 14: Solid Pension Funding
14 SOLID PENSION FUNDING We calculated our pension obligation with conservative estimates relative to our peers peers. Updated 2013 pension assumptions include an expected long‐term rate of return of 7.00% and discount rate assumed at 3.55%‐3.80%. NorthWestern pension funding status as of 12/31/12 i
Slide 15: Balance Sheet Strength and Liquidity
15 BALANCE SHEET STRENGTH AND LIQUIDITY
Slide 16: Hard Assets Providing Real Value
16 HARD ASSETS PROVIDING REAL VALUE (Left) We believe continued investment in our system to provide an even more safe, reliable, environmentally responsible and cost effective service for our customers will cost‐effective produce additional value for our shareholders. (Below) NWE Total Shareholder R
Slide 17: Net Investment in Existing Business
17 NET INVESTMENT IN EXISTING BUSINESS Maintenance capital p expenditures p have cumulativelyy outpaced p depreciation p by $160 million over the last five years (2008 to 2012), while maintaining a positive Free Cash Flow during the same period.
Slide 18: 2012 Montana Natural Gas Rate Filing
18 2012 MONTANA NATURAL GAS RATE FILING We are dedicated to operating a safe, reliable natural gas system and that requires ongoing investment i infrastructure in i f replacements. l If approvedd by b the h MPSC, MPSC on average this hi request wouldld result l in i a monthly increase of $5.69 or 7.
Slide 19: Investment Opportunity Outlook
19 INVESTMENT OPPORTUNITY OUTLOOK Energy Supply – Big Stone/Neal pollution control – S th D South Dakota k t natural t l gas peaking ki generation ti – Montana Spion Kop Wind facility ‐ completed – Other vertical integration opportunities in Montana including gas reserves or base load generation
Slide 20: Investment Project Summary
20 INVESTMENT PROJECT SUMMARY COMPLETED Note: Color / label indicate NorthWestern Energy's current probability of execution and timing of expenditures. Several opportunities exist to further increase and diversify earnings as compared pp to our approximatelyy$ y Additional opportunities $1.8 billion
Slide 21: South Dakota Electric Supply Capex
21 SOUTH DAKOTA ELECTRIC SUPPLY CAPEX We are planning on spending approximately $190 million on capital expenditures on our South Dakota electric supply plants.
Slide 22: Natural Gas Needs and Supply
22 NATURAL GAS NEEDS AND SUPPLY Top p Left: Approximately pp y 11% of our total natural gas needs go toward electric generation and the remaining 89% is sold to our retail customers Top: We own approximately 10% of our total retail needs in Montana Left: As we continue to add to our natural gas rese
Slide 23: Montana Electric Generation Opportunity
23 MONTANA ELECTRIC GENERATION OPPORTUNITY The total load served over our Montana system is approximately 11 million MWh. The load we currently have responsibility for providing supply is approximately 6 million MWh. Our owned generation in Montana , including the addition of Spion Kop in 2013, woul
Slide 24: Distribution Investment Outlook
24 DISTRIBUTION INVESTMENT OUTLOOK Distribution System Integrity Program (DSIP) The Project addresses the emerging issue of our aging infrastructure and prepares our natural gas and electric distribution systems for the next generation of technology. For the electric distribution system, system the
Slide 25: Capital Spending
25 CAPITAL SPENDING DSIP – Distribution System y Infrastructure Project j ‐ $253M over the next 5 yyears. Supply / Generation includes the planned environmental spending on our Big Stone, Neal 4, and Aberdeen Peaker plants. Does not include any electric or natural gas supply acquisitions or any pote
Slide 26: Conclusion
26 CONCLUSION We’re a fully- Best practices Attractive future regulated and corporate growth prospects financially sound governance and utility; with - Reintegrating energy - Diversity across states, supply portfolio (natural -A strong and well rounded service type and customer gas and electric) boa
Slide 27: Appendix
27 APPENDIX NorthWestern Energy Delivering a Bright Future
Slide 28: Earnings Reconciliation
28 EARNINGS RECONCILIATION Twelve Months Ended December 31, 2012 ($millions, except EPS) 5 3 & a3 2 5 . Fy B a § 2 8 3 = 8 § 2 g = ¢ Fe gs g@ «£ 5€ : zg 8 ~ A = oo ¢€ g > (CoS » 8 g gS 5 8§& x z § § = ¢« 8 B 2 €&€ $ 8 8 Bb BPE 3 3 = of 2 we 4 = &s $ = @ > 4 2 2 os ° E ge 8 8 op 82 8 gs: 2s = ¢ £ 3 8
Slide 29: Adjusted EPS Schedule
ADJUSTED EPS SCHEDULE 29 2012 Q12012, « Q22012. Q32012 42012 FY 2012 Reported GAAP diluted EPS $ 0.88 $ 0.31 $ (0.10) $ 1.57|$ 2.66 Non-GAAP Adjustments: Weather 0.09 0.05 (0.06) 0.06 | $ 0.14 Release of MPSC DGGS deferral (0.05) $ (0.05) Lost revenue recovery related to 2010/2011 (0.05) $ (0.05) DG
Slide 30: 2013 EPS Bridge from 2012
30 2013 EPS BRIDGE FROM 2012 Basic assumptions include the following expectations in 2013: A consolidated income tax rate of approximately 12% ‐ 16% of pre‐tax income; Colstrip Unit 4, Big Stone, and Coyote generation plants are scheduled for routine maintenance d i second during d quarter t off 201
Slide 31: Consolidated Statement of Income
31 CONSOLIDATED STATEMENT OF INCOME
Slide 32: Consolidated Statement of Cash Flows
32 CONSOLIDATED STATEMENT OF CASH FLOWS
Slide 33: Consolidated Balance Sheet
33 CONSOLIDATED BALANCE SHEET
Slide 34: Effective Tax Rate Reconciliation
34 EFFECTIVE TAX RATE RECONCILIATION
Slide 35: 2012 System Statistics
35 2012 SYSTEM STATISTICS (2) (1) •MT electric supply increased 40 MW in 2012 due to the addition of Spion Kop wind. •MT NG reserves includes 13 13.4 4 Bcf Bear Paw acquisition in 2012. 2012 Note: Statistics above are as of 12/31/2012 (1) Includes 60 MW Aberdeen Peaker to be placed in service during
Slide 36: Environmental Controls
ENVIRONMENTAL CONTROLS 36 PRESENT Primary Pollutant Controlled Nitrogen Oxide (NOX) Particulate Matter | | - 5) Low Nox HG Control Plant Name SNCR Burner Injection Colstrip 3 & 4 |Big Stone nis DGGS (Natural Gas) x Coyote x Neal #4 x x PLANNED / REQUIRED Primary Pollutant Controlled Nitrogen Oxide (
Slide 37: Our Commissioners
OUR COMMISSIONERS 37 Montana Monras® 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 2 years. Name Kirk Bushman Bill Gallagher Travis Kavulla (Cha
Slide 38: One Hundred Years Later
38 ONE HUNDRED YEARS LATER. . . . After One Hundred Years, Electricity is still a great value
Slide 39: Montana Major Transmission Projects
39 MONTANA MAJOR TRANSMISSION PROJECTS Jack Rabbit – Big Sky 161kV Line Columbus – Rapelje 100kV NorthWestern Energy continues to makek significant f investments to upgrade our transmission system to add capacity and improve reliability. Two such projects are: Jack Rabbit – Bigg Skyy 161kV Line and
Slide 40: FERC's ALJ Ruling – We Got the Crust
40 FERC’s ALJ RULING – WE GOT THE CRUST 40
Slide 41: The Back Story on DGGS
41 THE BACK STORY ON DGGS Background •NorthWestern Energy operates a transmission system and balancing authority within Montana and is charged with the responsibility of providing safe and reliable electric service to all of its customers. This includes retail and wholesale customers. • Part of Nort
Slide 42: The Back Story on DGGS (Continued)
42 THE BACK STORY ON DGGS (CONTINUED) Support for DGGS (continued) • On April 29, 2010, NorthWestern made a filing with FERC proposing to collect costs associated with DGGS under the same cost allocation methodology and for the same magnitude of Regulating Resource as had been previously approved by
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