NorthWestern Energy Group, Inc. · NASDAQ:NWE
NorthWestern Energy — AGA 2013 Financial Forum
43 slides from NorthWestern Energy's conference presentation, May 2013
Slide 1: AGA 2013 Financial Forum
1 AGA 2013 Financial Forum May 2013 1
Slide 2: Forward Looking Statement
2 FORWARD LOOKING STATEMENT 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 financial
Slide 3: About NorthWestern
3 ABOUT NORTHWESTERN Our Vision: Enriching lives through a safe, sustainable energy future Our Mission: 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 of competitive customer rates, system reliability and customer satisfaction – 5 years of significant earnings and divi
Slide 5: NorthWestern Energy Profile
NORTHWESTERN ENERGY PROFILE 5 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 1st, SD 3rd & MT 14th) 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 1 Midpoint 2013 guidance range of $2.40-$2.55 based upon, but not limited to, the following major assumptions and expectations: • A consolidated income tax rate of approximately 12%; • Colstrip Unit 4, Big Stone, and Coyote generati
Slide 12: 5 Year Track Record of Delivering Results
12 5 YEAR TRACK RECORD OF DELIVERING RESULTS Return on Equity steadily improved each year from 2008 – 2012 and Dividend per Share 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% Current Dividend Yield Approximately 3.6%
Slide 13: Strong Cash Flows
13 STRONG CASH FLOWS While maintenance capex and dividend payments have continued to grow over the past 5 years (6.5% and 2.1% CAGR respectively), Cash Flow from Operations has continued to outpace maintenance capex and provided approximately $40-60 million of positive Free Cash Flow per year. We an
Slide 14: Solid Pension Funding
14 SOLID PENSION FUNDING We calculate our pension obligation with conservative estimates relative to our 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%. As of result of significant pension contributions in 2009 a
Slide 15: Balance Sheet Strength and Liquidity
15 BALANCE SHEET STRENGTH AND LIQUIDITY
Slide 16: Hard Assets Providing Real Value
HARD ASSETS PROVIDING REAL VALUE 16 (Left) We believe continued investment in our system to provide safe, reliable, environmentally responsible and cost- effective service for our customers will produce additional value for our shareholders. (Below) NWE Total Shareholder Return has outperformed our
Slide 17: Growth with Little Impact to Customers
GROWTH WITH LITTLE IMPACT TO CUSTOMERS 17 Over the past 5 years we have begun to rebuild our Montana energy supply portfolio and invested to enhance system safety, reliability and capacity. We have made these enhancements while delivering solid earnings growth to our investors with minimal impact to
Slide 18: Net Investment in Existing Business
18 NET INVESTMENT IN EXISTING BUSINESS Maintenance capital expenditures have cumulatively outpaced depreciation by $160 million over the last five years (2008 to 2012), while maintaining a positive Free Cash Flow during the same period.
Slide 19: 2012 Montana Natural Gas Rate Filing
19 2012 MONTANA NATURAL GAS RATE FILING We are dedicated to operating a safe and reliable natural gas system that requires ongoing infrastructure investment. -Feb. 8: The Montana Consumer Counsel recommended a $4.1 million increase based upon a 9.0% ROE (45% equity) and other adjustments. -Apr. 15:
Slide 20: Investment Opportunity Outlook
20 INVESTMENT OPPORTUNITY OUTLOOK Energy Supply – Big Stone/Neal pollution control – South Dakota natural gas peaking generation – Montana Spion Kop Wind facility - completed – Other vertical integration opportunities in Montana including gas reserves or base load generation Transmission – Netwo
Slide 21: Investment Project Summary
21 INVESTMENT PROJECT SUMMARY In commercial operation April 2013 In commercial operation December 2012 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 to
Slide 22: Natural Gas Needs and Supply
22 NATURAL GAS NEEDS AND SUPPLY Top Left: Approximately 14% of our total natural gas needs go toward electric generation and the remaining 86% is sold to our retail customers Top: We own approximately 11% of our total retail needs in Montana Left: As we continue to add to our natural gas reserves to
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, would
Slide 24: Distribution Investment Outlook
DISTRIBUTION INVESTMENT OUTLOOK 24 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, the Program
Slide 25: Capital Spending
CAPITAL SPENDING 25 Capital spending projections do not include potential future electric or natural gas energy supply additions or capital related to our Gas Transmission Infrastructure Plan (GTIP*). Source: 2012 10-K. Energy Supply estimates updated to reflect reduction in Big Stone AQCS budget in
Slide 26: Conclusion
26 CONCLUSION Fully- Best Financially Strong Realistic regulated Attractive practices sound cash flows dividend investment utility corporate opportunities governance to invest Free Cash Flow
Slide 27: Appendix
27 APPENDIX NorthWesterni Energy Delivering a Bright Future
Slide 28: Earnings Reconciliation
28 EARNINGS RECONCILIATION Three Months Ended March 31, 2013 {$millions, except EPS) B < > 2 gs 2 B a 2 o 3 = Z § 3 i 2G § 5 .: i 2 8 $s ¢& o Ba | 3 3 g$eeé B38 Big 24 22 & és 3. ec 8 3 5 * 8 3 2 & & Ps 3 2 oe &§ § 3 8 g 3s 8 & es F & 2 2 £8 5 az | 3 s £§ 2? 3 2 = o EE Bg 2 € 3 $8 § ee EGR = ~ = 2 @
Slide 29: Adjusted EPS Schedule
29 ADJUSTED EPS SCHEDULE 2013 EPS guidance range midpoint Note: No one-time adjustments for Q1 2013 2013 EPS guidance range is $2.40 - $2.55 – midpoint of $2.48
Slide 30: 2013 EPS Bridge from 2012
2013 EPS BRIDGE FROM 2012 30 Basic assumptions include the following expectations in 2013: A consolidated income tax rate of approximately 12% of pre-tax income; Colstrip Unit 4, Big Stone, and Coyote generation plants are scheduled for routine maintenance during second quarter of 2013; Diluted aver
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
2012 SYSTEM STATISTICS 35 (2) (1) •MT electric supply increased 40 MW in 2012 due to the addition of Spion Kop wind. •MT NG reserves includes 13.4 Bcf Bear Paw acquisition in 2012. Note: Statistics above are as of 12/31/2012 (1) Includes 60 MW Aberdeen Peaker to be placed in service during 2013 (2)
Slide 36: Environmental Controls
36 ENVIRONMENTAL CONTROLS PRESENT Primary Pollutant Controlled Nitrogen Oxide (NOX) Particulate Matter | 0 Low Nox HG Control Plant Name SNCR Burner B E Injection Colstrip 3 & 4 x x x x Big Stone nis x DGGS (Natural Gas) x (Coyote x x Neal #4 x x PLANNED / REQUIRED Primary Pollutant Controlled Nitro
Slide 37: Our Commissioners
37 OUR COMMISSIONERS . ow 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. Moxras® Began Term Name Party Serving Ends Kirk Bushman
Slide 38: One Hundred Years Later...
38 ONE HUNDRED YEARS LATER. . . . After One Hundred Years, Electricity is still a great value
Slide 39: South Dakota Electric Supply Capex
SOUTH DAKOTA ELECTRIC SUPPLY CAPEX 39 We are planning on spending approximately $180 million on capital expenditures on our South Dakota electric supply plants.
Slide 40: Montana Major Transmission Projects
MONTANA MAJOR TRANSMISSION PROJECTS 40 Jack Rabbit – Big Sky 161kV Line Carbon - Stillwater 100kV NorthWestern Energy continues to make significant investments to upgrade our transmission system to add capacity and improve reliability. Two such projects are: Jack Rabbit – Big Sky 161kV Line and Carb
Slide 41: FERC's ALJ Ruling – We Got the Crust
41 FERC’s ALJ RULING – WE GOT THE CRUST 41
Slide 42: The Back Story on DGGS
42 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 43: The Back Story on DGGS (Continued)
43 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