NorthWestern Energy Group, Inc. · NASDAQ:NWE
NorthWestern Energy — Investor Presentation (May 2015)
41 slides from NorthWestern Energy's investor presentation, May 2015
Slide 1: Investor Update April / May 2015
Thompson Falls Investor Update | April / May 2015
Slide 2: Forward Looking Statements
Forward Looking Statements Company Information NorthWestern Corp. 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 provisio
Slide 3: About NorthWestern
About NorthWestern South Dakota Operations Electric 62,500 customers 3,500 miles – transmission & distribution lines 360 MW of power generation Natural Gas 45,500 customers 1,655 miles of transmission and distribution pipeline Montana Operations Electric 353,600 customers 24,300 miles – transmission
Slide 4: Recent Significant Activities
Recent Significant Activities • Successful first full quarter of owning and operating our recently acquired fleet of hydro assets. • Improvement in net income of $5.8 million, or 13%, in the first quarter of 2015 as compared with the same period in 2014. • GAAP Diluted EPS of $1.09 as compared to $1
Slide 5: 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 6: A Diversified Electric and Gas Utility
A Diversified Electric and Gas Utility Gross Margin in 2014: Gross Margin in 2014: Montana: $609M Electric: $529M South Dakota: $102M Natural Gas: $193M Nebraska: $ 11M Above data reflects full year 2014 results. Jurisdiction and service type based upon gross margin contribution. Average Customers i
Slide 7: NorthWestern Energy Profile
NorthWestern Energy Profile (1) The FERC regulated portion of Montana electric transmission and DGGS are included as revenue credits to our MPSC jurisdiction customers. Therefore we do not separately reflect FERC authorized rate base or authorized returns. (2) For those items marked as "n/a," the re
Slide 8: 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 Average by a good margin. Source: NorthWestern 2008-2014 Forms 10-K and Unemployment Rate: US Department of Labor via SNL Database 2
Slide 9: Strong Utility Foundation
Strong Utility Foundation Electric source: Edison Electric Institute Typical Bills and Average Rates Report, 1/1/14 Natural gas source: US Dept of Energy Monthly residential supply and delivery rates as of 1/1/14 Customer Average Interruption Duration Index (CAIDI) NWE versus EEI System Reliability
Slide 10: Reaffirm 2015 Earnings Guidance
Reaffirm 2015 Earnings Guidance $3.10 - $3.30 Initial Guidance Range We reaffirm our 2015 adjusted earnings EPS guidance range of $3.10-$3.30 based upon, but not limited to, the following major assumptions and expectations: • Normal weather in our electric and natural gas service territories in 2015
Slide 11: 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 (2010-2014) Avg. Return on Equity: 10.3% 5 Year (2010-2014) CAGR Dividend Growth: 4.1% Current Dividend Yield Approximately 3.7% Notes: - ROE
Slide 12: Investment for Our Customers' Benefit
Investment for Our Customers’ Benefit Over the past 6 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. 2014 includes hydro assets in rate base but only 1.5 mo
Slide 13: Total Shareholder Return
Total Shareholder Return 13 * 15 member peer group: ALE, AVA, BKH, CNL, EDE, EE, GXP, IDA, MGEE, PNM, POR, STR, UIL, VVC, WR
Slide 14: Strong Cash Flows
Strong Cash Flows Components of Free Cash Flow While maintenance capex and total dividend payments have continued to grow since 2010 (8.2% and 7.3% CAGR respectively), Cash Flow from Operations has continued to outpace maintenance capex and averaged approximately $42 million of positive Free Cash Fl
Slide 15: Balance Sheet Strength and Liquidity
Balance Sheet Strength and Liquidity Credit Ratings Senior Senior Secured Unsecured Commercial Rating Rating Paper Outlook Fitch A A- F2 Stable Moody's A1 A3 Prime-2 Stable S&P A- BBB A-2 Stable A security rating is not a recommendation to buy, sell or hold securities. Such ratings Annual ratio is a
Slide 16: The Hydro Facilities
The Hydro Facilities Overview of Hydro Facilities(1) Net FERC 5-Yr Avg. Capacity License Capacity Plant (MW) COD River Source Expiration Factor(2) Black Eagle 21 1927 Missouri 2040 73.6% Cochrane 69 1958 Missouri 2040 49.1% Hauser 19 1911 Missouri 2040 79.3% Holter 48 1918 Missouri 2040 72.4% (3) 19
Slide 17: Hydro – Owned and Contracted Resources
Hydro – Owned and Contracted Resources Montana Annual Production (Excludes Kerr Dam1) NorthWestern Owned Facilities1 Coal Missouri Missouri Missouri River Missouri Missouri Missouri River River River River (Colstrip 4) Clark Clark ClarkFork Clark Clark Clark Fork Fork Fork Fork Flathead Flathead Fla
Slide 18: 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 19: Big Stone and Neal Air Quality Projects
Big Stone and Neal Air Quality Projects Big Stone Power Plant Neal Power Plant 19
Slide 20: South Dakota Rate Filing
South Dakota Rate Filing 34 Years of Declining ‘Real’ Rates Docket EL14-106 Three major projects alone account for 96% of the requested $26.5M increase. Big Stone/Neal……..$15.2M Aberdeen Peaker……$7.4M Yankton Substation…$2.8M All other……………...$1.1M Total $26.5M The requested $26.5 million revenue in
Slide 21: 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 22: 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 23: DGGS Update – Still waiting on FERC
DGGS Update – Still waiting on FERC 23
Slide 24: Capital Spending Forecast
Capital Spending Forecast * Nearly $1.5 billion estimated cumulative capital spending from 2015 through 2019. We anticipate funding the capital projects with a combination of cash flows (aided by NOLs) and long-term debt to deliver a 7-10% total return (EPS growth & dividend yield) to our investors.
Slide 25: Conclusion
Conclusion Pure Electric Strong Attractive Best Practices Solid Utility and Gas Utility Earnings and Future Growth Corporate Foundation Cash Flows Prospects Governance Madison Morony Thompson Falls Hauser Holter Rainbow Hydro Transaction Transaction Announced Closed 9/26/2013 11/18/2014 Cochrane Rya
Slide 26: Appendix
Appendix 26
Slide 27: Summary Financial Results (First Quarter)
Summary Financial Results (First Quarter) 27
Slide 28: Heating Degree Days (First Quarter)
Heating Degree Days (First Quarter) Maximum Temperature from Normal Minimum Temperature from Normal 28 Source: National Climatic Data Center, NOAA
Slide 29: Adjusted Earnings (First Quarter '15 vs '14)
Adjusted Earnings (First Quarter ‘15 vs ’14) Non-GAAP adjusted Net Income increased 23.5% over same period prior year. However, due to $400 million equity issuance in November 2014, our adjusted diluted EPS only increased by 1.7%. We anticipate realizing a majority of the expected accretion 29 benef
Slide 30: Hypothetical Accretion Illustration
Hypothetical Accretion Illustration As shown in the example above, a company making an acquisition that would contribute relatively consistent net income over each of the four quarters could anticipate the most earnings per share benefit in the quarters with the ‘lightest’ earnings. 30 (Illustrative
Slide 31: 2014 to 2015 Reconciliation (First Quarter)
2014 to 2015 Reconciliation (First Quarter) 31
Slide 32: Balance Sheet
Balance Sheet (dollars in millions) As of March 31, As of December 31, 2015 2014 Cash $ 12.1 $ 20.4 Restricted cash 24.7 29.7 Accounts receivable, net 148.8 163.5 Inventories 48.0 55.1 Other current assets 84.3 82.3 Goodwill 355.1 355.1 PP&E and other non-current assets 4316.0 4,267.9 Total Assets $
Slide 33: Cash Flow (First Quarter)
Cash Flow (First Quarter) $14.6 million improvement in cash flow provided by operating activities primarily due to: • a reduction in our under collection of supply costs in our trackers; • Improved collections of customer receivables; and • improved earnings from the hydro acquisition. These improve
Slide 34: Income Tax Reconciliation (First Quarter)
Income Tax Reconciliation (First Quarter) 34
Slide 35: 2014 to 2015 EPS & Dividend Bridge
2014 to 2015 EPS & Dividend Bridge 2014 Non-GAAP Adjusted Diluted EPS $2.68 2015 ESTIMATES Low Midpoint High $2.68 $2.68 Basic assumptions include, 2015 Earnings Drivers (after-tax and per share) but are not limited to: Gross margin improvements 2.75 - 2.83 • Normal weather in our electric and OG&A
Slide 36: 2014 System Statistics
2014 System Statistics (1) Note: Statistics above are as of 12/31/2014 (1) Nebraska is a natural gas only jurisdiction 36
Slide 37: Experienced & Engaged Board of Directors
Experienced & Engaged Board of Directors Dana J. Dykhouse - Chief Executive Officer of First PREMIER Bank. Director since 2009 Dorothy M. Bradley - Retired District Court Administrator for the 18th Judicial Court of Montana. Director since 2009 E. Linn Draper Jr. - Chairman of the Board - Retired Ch
Slide 38: Strong Executive Team
Strong Executive Team From the left: Patrick R. Corcoran - VP of Government and Regulatory Affairs. 35 years utility industry experience; current position since 2001 John D. Hines - VP of Supply. 25 years utility industry experience; current position since 2011 Kendall G. Kliewer - VP and Controller
Slide 39: 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 2 years. Began Tem Name Party Serving Ends Kirk Bushman R Jan-13 Jan-17
Slide 40: 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 41: NorthWestern Energy
Upetivering a bright future NorthWestern Energy