NorthWestern Energy Group, Inc. · NASDAQ:NWE
NorthWestern Energy — FY2016 Earnings Presentation
36 slides from NorthWestern Energy's earnings presentation, Feb 17, 2017
Slide 1: 2016 Earnings Webcast
2016 Earnings Webcast February 17, 2017 Black Eagle Dam
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: 2016 results highlights
• 2016 net income improved by 8.6%, or $13.0 million, as compared to 2015. • This improvement was primarily due to a tax benefit related to costs to repair generation property along with improved gross margin driven by an increase in South Dakota electric rates. These benefits were partially offset
Slide 5: Summary Financial Results (Full Year)
Summary Financial Results (Full Year) 5
Slide 6: Gross Margin (Full Year)
6 Gross Margin (Full Year) (dollars in millions) Twelve Months Ended December 31, 2016 2015 Variance Electric $ 678.8 $ 663.1 $ 15.7 2.4% Natural Gas 177.5 178.3 (0.8) (0.4%) Gross Margin $ 856.3 $ 841.4 $ 14.9 1.8% Increase in gross margin due to the following factors: $ 33.5 South Dakota electric
Slide 7: Weather (Full Year)
Weather (Full Year) 7 2016 has been one of the warmest years, on record, for our service territory and significantly reduced our retail natural gas sales compared to normal. Montana (3rd warmest) South Dakota (4th warmest) Nebraska (3rd warmest).
Slide 8: Weather 2016 versus Normal (Full Year)
Weather- 2016 versus Normal (Full Year) 8 Heating Degree Day Months Cooling Degree Day Months During our heating periods, with the exception of December in Montana, our heating season was typically warmer than normal – negatively affecting our loads. During our cooling season we experienced near nor
Slide 9: Operating Expenses (Full Year)
Operating Expenses (Full Year) 9 Increase in operating expenses due mainly to the following factors: $5.4 million increase in OG&A $ 20.8 Insurance recovery, net 2.7 Employee benefit and compensation costs 2.2 Plant operator costs 1.5 Non-employee directors deferred compensation 0.9 Insurance reserv
Slide 10: Operating to Net Income (Full Year)
Operating to Net Income (Full Year) 10 $2.8 million increase in interest expense was primarily due to $2.9 million of interest associated with the MPSC disallowance, lower capitalization of debt allowance for funds used during construction (AFUDC), and increased debt outstanding, partly offset by de
Slide 11: Balance Sheet
Balance Sheet (doltars in millions) As of December 31, _ As of December 31, 2016 Cash $ 1 S$ Restricted cash Accounts receivable, net Inventories Other current assets Goodwill PP&E and other non-current assets Total Assets Payables. tal le ‘Short-term borrowings Other current liabilities Long-term d
Slide 12: Cash Flow
Cash Flow 12 Changes in working capital is largely attributed to the $30.8 million* refund to customers associated with the DGGS/FERC ruling and $7.2 million refund to SD electric customers for the difference between interim and final rates of our SD rate case. * $27.3 million of deferred revenues p
Slide 13: Adjusted Earnings (Full Year '16 vs '15)
Adjusted Earnings (Full Year ‘16 vs ’15) 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 calcula
Slide 14: 2017 Earnings Guidance
2017 Earnings Guidance 14 NorthWestern affirms 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 o
Slide 15: 2016 to 2017 EPS & Dividend Bridge
2016 to 2017 EPS & Dividend Bridge 2016 Non-GAAP EPS to 2017 Midpoint $3.30 → $3.40 = 3.0% increase 2016 to 2017 Dividend Growth $2.00 → $2.10 = 5.0% increase Slower near-term EPS growth along with slightly lower capital investment projections than previously provided, led us to a 5% (or 10 cents an
Slide 16: Other Significant Achievements in 2016
Other Significant Achievements in 2016 16 Strong year for safety at NorthWestern • Fewest OSHA recordable events of any year. • Best year for lost time incidents. Record best customer satisfaction scores with JD Power & Associates • Received our best JD Powers overall satisfaction survey score in 20
Slide 17: Montana Natural Gas Rate Filing
Montana Natural Gas Rate Filing 17 Montana PSC Docket D2016.9.68 In September 2016, we filed a request with MPSC for an annual revenue increase of $10.9 million. This increase is primarily due to investments made to our gas infrastructure and natural gas reserves since 2012. On February 2, 2017, two
Slide 18: Capital Spending Forecast
Capital Spending Forecast 18 The updated current estimated cumulative capital spending for 2017 through 2021 is $1.58 billion. Capital spending has been reduced, from the prior $1.66 billion plan, primarily as a result of reduced and delayed spending on necessary generation assets in both Montana an
Slide 19: Montana 2015 Electric Supply Resource Plan
Montana 2015 Electric Supply Resource Plan 19 The resource initiatives and actions developed in 2015 Electricity Supply Resource Procurement Plan identify the critical future needs of our portfolio, including solutions to resolve our current negative planning reserve margin. The plan identifies how
Slide 20: Montana 2015 Electric Supply Resource Plan
Montana 2015 Electric Supply Resource Plan 20 On February 13, 2017 we issued a Request for Proposal (RFP) to partially address NorthWestern’s negative reserve margin. Pacific Northwest planning bodies (PNUCC & NWPPC*) have reaffirmed the expected growing capacity need. NorthWestern is addressing thi
Slide 21: Conclusion
Conclusion 21 Pure Electric and Gas Utility Solid Utility Foundation Strong Earnings and Cash Flows Attractive Future Growth Prospects Best Practices Corporate Governance
Slide 22: Appendix
22 Appendix
Slide 23: Electric Segment (Full Year)
23 Electric Segment (Full Year)
Slide 24: Natural Gas Segment (Full Year)
24 Natural Gas Segment (Full Year)
Slide 25: Segment Results (Full Year)
25 Segment Results (Full Year)
Slide 26: Income Tax Reconciliation (Full Year)
Income Tax Reconciliation (Full Year) 26
Slide 27: Summary Financial Results (Fourth Quarter)
Summary Financial Results (Fourth Quarter) 27
Slide 28: Gross Margin (Fourth Quarter)
28 Gross Margin (Fourth Quarter) (dollars in millions) Three Months Ended December 31, 2016 2015 Variance Electric $ 167.9 $ 163.3 $ 4.6 2.8% Natural Gas 55.0 54.3 0.7 1.3% Gross Margin $ 222.9 $ 217.6 $ 5.3 2.4% Increase in gross margin due to the following factors: $ 5.7 South Dakota electric rate
Slide 29: Weather (Fourth Quarter)
Weather (Fourth Quarter) 29 While December 2016 was colder than normal (increasing our loads), the months of October and November were either at normal or warmer than normal temperatures.
Slide 30: Operating Expenses (Fourth Quarter)
Operating Expenses (Fourth Quarter) 30 Increase in operating expenses due mainly to the following factors: $6.9 million increase in OG&A $ 4.2 Employee benefit and compensation costs ($2.5M additional pension funding in 2016) $ 2.2 Plant operator costs $ 0.2 Bad debt expense $ (0.7) Distribution Sys
Slide 31: Operating to Net Income (Fourth Quarter)
Operating to Net Income (Fourth Quarter) 31 $1.1 million decrease in interest expense was primarily due to debt refinancing transactions partially offset by lower capitalization of allowance for funds used during construction (AFUDC) and increased debt outstanding associated with the $45 million of
Slide 32: Segment Results (Fourth Quarter)
32 Segment Results (Fourth Quarter)
Slide 33: Adjusted Earnings (Fourth Quarter '16 vs '15)
Adjusted Earnings (Fourth Quarter ‘16 vs ’15) 33 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 34: NorthWestern Energy Profile
NorthWestern Energy Profile 34
Slide 35: 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 36: Delivering a bright future
Upelivering a bright future Energy