Annual Stockholder
Meeting
August 8, 2007
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 performance, and often contain
words such as “expects,” “anticipates,” “intends,” “plans,”
“believes,” “seeks,” or “will.”
These statements are based upon our current expectations and
speak only as of the date hereof. Our actual future business and
financial performance may differ materially and adversely from
those expressed in any forward-looking statementsAlthough our
expectations and beliefs are based on reasonable assumptions,
actual results may differ materially. The factors that may affect
our results are listed in certain of our press releases and
disclosed in the Company’s public filings with the SEC.
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agenda…
Termination of proposed BBI transaction
Overview of NorthWestern Energy
The future for NorthWestern Energy
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termination of BBI merger…
Stockholders approved a merger of NorthWestern with
Babcock & Brown Infrastructure Limited at last year’s
annual meeting
The necessary clearances had been received from:
Department of Justice
Committee on Foreign Investment in the United States
Federal Energy Regulatory Commission
Federal Communications Commission
Nebraska Public Service Commission
South Dakota Public Utilities Commission
The last condition necessary was from the Montana
Public Service Commission (“MPSC”)
The MPSC denied the joint application
BBI terminated the merger agreement
4
reasons for MPSC denial…
Too much debt as part of the purchase price
Assumed additional costs could ultimately be passed
on to ratepayers
Premium to be paid was too large
Concerned the premium eventually would get reflected
in rates
Concern that BBI would deplete future cash and
equity of the utility through excessive dividends
to parent
MPSC wants more certainty surrounding the
electric and natural gas utility
Preference for status quo
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who we are…
Electric transmission lines
Natural gas distribution lines
Supplier-owned electric or natural gas lines
Electric generating plant
Natural gas storage fields
Natural gas compressor stations
(1) As of 3/31/07.
(2)
Book capitalization calculated as short-term debt plus long-
term debt plus shareholders’ equity.
640,000 customers
382,000 electric
258,000 natural gas
Approximately 123,000 square miles
of service territory in Montana,
Nebraska and South Dakota
Total Assets: (1)$2,340 MM
Total Capitalization: (1)(2)$1,445 MM
Total Employees: (1) 1,350
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business overview…
Regulated Operations
One of the largest providers of electricity and natural gas in the Upper Midwest and Northwest,
serving approximately 640,000 customers in Montana, South Dakota and Nebraska
Electric Operations
Montana
322,000 customers (transmission/distribution)
Revenue by customer class(1):
35% residential, 51% comm./ind., 14% other
Approximately 7,000 miles of transmission
lines and 20,700 miles of distribution lines
South Dakota
59,700 customers (integrated utility)
Revenue by customer class(1):
37% residential, 51% comm./ind.,
12% other
Approximately 3,200 miles of T&D lines
Owns 310 net MW of power generation
Gas Operations
Montana
174,000 customers (residential/commercial)
3,800 miles of underground distribution
pipelines
2,000 miles of intrastate transmission
pipelines
16.3 Bcf of gas storage
South Dakota/Nebraska
83,900 customers (residential/commercial)
2,200 miles of distribution gas mains
Unregulated operations
Ethanol supply contracts
Moving to regulated business
Unregulated Operations
Electric —Primarily consists of a equity participation of 30% of Colstrip Unit 4,
a 740 MW coal-fired plant in Montana (portion lease/portion owned)
(1) Data as percent of total electric rate schedule revenue for 2006.
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senior leadership…
Michael J. Hanson, President & Chief Executive Officer
Board member since May 2005
26 years utility experience
Brian B. Bird, VP & Chief Financial Officer
21 years financial management experience; 10 years energy experience
Thomas J. Knapp, VP, General Counsel and Corporate Secretary
30 years legal experience; 16 years regulatory experience
Patrick R. Corcoran, VP–Regulatory & Government Affairs
28 years regulatory experience
David G. Gates, VP–Wholesale Operations
29 years utility experience
Curtis T. Pohl, VP–Retail Operations
21 years utility experience
Bobbi L. Schroeppel, VP–Customer Care & Communications
14 years utility experience
Gregory G. A. Trandem, VP–Administrative Services
31 years utility experience
More than 20 years utility experience on average.
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contribution of segments…
Gross Revenue (MM) - 2006
Gross Margin (MM) - 2006
$662
$359
83
77
$329
$119
$66
$6
Note: Revenue and Gross Margin exclude $48 million and $1 million of intercompany eliminations, respectively. Revenue and Gross
Margin reported in NorthWestern’s 10-K filing of $1.1 billion and $519 million incorporate the effect of such eliminations.
Total $1.1 billion
Total $519 million
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current operations…
Reliability
South Dakota is in the first quartile as ranked by IEEE benchmarking
Montana is in the second quartile as ranked by IEEE
EEI Emergency Recovery Award for 2005
Recognized for outstanding efforts to restore service following ice storm in SD
One of six utilities nationwide that received this award
Customer Service
NorthWestern Energy is the only three-time recipient of the ServiceOne™
Award from PA Consulting
JD Power ratings related to image and value are below industry average
but are improving
Our overall JD Power customer satisfaction ratings are above average
Cost effectiveness
No increase in customer base rates for the past eight years
Filed for rate cases requesting revenue increases for 2008 rates
Safety
Our safety results are below the industry average
Implementing a comprehensive safety improvement program
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historical growth – regulated electric…
Customers (000)
Volume (MWh 000)
(1)
2002 data is pro forma for full year results of Montana operations.
Actual revenues reported in 10-K included Montana results from February through December of 2002.
Volume growth rates have exceeded customer growth rates over the last few years.
(1)
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historical growth – regulated natural gas…
Therms Sales (MM MMBtu)
(1) 2002 data is pro forma for full year results of Montana operations.
Actual revenues reported in 10-K included Montana results from February through December of 2002.
(1)
Gas volumes have decreased over the last few years as homes become more efficient.
Customers (000)
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financial highlights…
Source: Company reports and SEC filings.
Note: Full year 2004 results show combined results for NWEC’s predecessor company from January 1, 2004 to
October 31, 2004 and for NWEC from November 1, 2004 to December 31, 2004.
(1) 2006 includes impact of reorganization expenses and charge for litigation verdict.
EBITDA(1)
Total Capital Expenditures
Gross Margin
($ in millions)
Cash Flow from Operations
($ in millions)
($ in millions)
($ in millions)
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NorthWestern’s future…
Operationally strong
Above average reliability
Award winning customer service
Becoming financially stronger
Earnings and cash flow continue to grow
Approximately a 50/50 debt to total capitalization ratio
Investment grade ratings on senior secured basis
Increased September 30 dividend from $.31/share to
$.33/share
Opportunities to expand current cash flows
Aligning revenues with operating costs
Expanding transmission and distribution lines
Continuing to bring supply stability to our customers
Owning rate-based/regulated generation
Adding renewables in all jurisdictions where we serve electricity
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near term strategic focus…
Operational effectiveness and cost control
Continue to enhance reliability
Continue to improve customer satisfaction
Strengthen cost effectiveness and efficiency
Proactively invest in infrastructure-related
regulated utility assets
Transmission and distribution upgrades
Electric transmission expansion projects (in excess of
$875 million planned for NorthWestern)
Montana generation
Proceed with rate cases in all jurisdictions
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investment opportunities…
Company in strategic location in U.S. for
transmission expansion
Existing transmission opportunities
Montana States Intertie Transmission Line
($800 million planned)
Colstrip 500 kV upgrade with partners ($250 million is
total project; our portion $75 million)
Other potential opportunities
Gas pipelines to supply new ethanol plants
Montana generation (House Bill #25 law change in ’07)
Seek out opportunities for new regulated investments
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Montana States Intertie Transmission Line…
500 kV AC Line Option
Southwestern Montana
to Southeastern Idaho
Length: Approx. 400 miles
Capacity: 1,500 MW
Capital Cost: $808 million
Assumed ROE of 13%:
ROE range on recent
FERC-regulated projects
of 9%-13.5%
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next steps on MSTI…
Open Season –study process ongoing; more than 50% capacity
interest through transmission deposits
FERC “Enhanced Or” rate approval Dec. 2006
Regional Planning Process Ongoing
MFSA Application process Through Dec. 2009
NEPA/MEPA Scoping Through Dec. 2009
EIS 2009 through 2010
Right of Way Acquisition 2009 through 2011
Engineering Through Dec. 2011
Construction 2010 through mid 2013
Target In-Service Date 1st half of 2013
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Colstrip 500 kV upgrade…
“Traditional” pathway to
West Coast and California
markets
New substations near
Townsend and Missoula, MT
Upgrade to existing stations
No new line construction
necessary
Capacity increase: 500-700 MW
Working with other Colstrip
transmission owners
NWEC’s current ownership
share approx. 30%
Capital cost: $250 Million
NWEC’s share dependant on
other owners participation
Assumed ROE: 10.13%
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next steps on Colstrip 500 kV upgrade…
Complete Coordinated Studies with BPA Summer 2007
Regional Planning Process Begin Q3 2007
Staged Development Analysis Q3 2007
Identify Ownership and Investment Options Q4 2007
Final Engineering, Siting and Permitting 2008
Incremental upgrade construction
timed to match shippers needs 2009-2010
On line date 2nd half 2010
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transmission growth projects capital spending…
More than $875 million of identified growth projects.
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rate case filings…
Montana
Last case was in 2000 (test year 1999); requesting revenue increase of
approximately $41.9 million annually
FERC
Requesting revenue increase of approximately $8.6 million annually
South Dakota
Last natural gas rate case was in 1998 (test year 1997); requesting
revenue increase of approximately $3.7 million annually
Nebraska
Last natural gas rate case was in 2000 (test year 1999); requesting
revenue increase of approximately $2.8 million annually
Total revenue requests are approximately $57 million annually.
(All ’06 test years)
Rate Base
Requested
Requested
Requested
Existing
2006
in millions
ROE
Equity
ROR
ROE
ROR
MT Electric
667.4
12.00%
51.46%
8.98%
10.75%
6.14%
MT Natural Gas
264.5
11.75%
51.46%
8.85%
10.75%
6.45%
SD Natural Gas
53.2
11.25%
51.46%
8.99%
10.25%
4.50%
NE Natural Gas
25.6
11.25%
51.46%
8.98%
10.25%
2.40%
SD Electric
165.7
Total
1,176.4
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financial objectives…
Investment grade capital structure
Currently investment grade on secured debt
Striving to achieve investment grade on unsecured debt / corporate
rating
Long-term dividend payout of 60–70%
Quarterly dividend increase to $.33/share for September 30, 2007
Grow earnings per share
Utilize excess cash flow and debt capacity to invest in the business
Invest in organic growth in existing service territories
Invest in transmission opportunities (MSTI and 500 kV upgrade)
Invest in gas transmission (natural gas pipes to Ethanol plants)
Invest in electric generation opportunities (MT gas plant)
Provide annual earnings guidance
$1.45 - $1.60 for 2007
Provide earnings guidance on 2008 later this year
Obtain analyst coverage
Attract analyst coverage that did not exist during sale process
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investment highlights…
Attractive Transmission and Distribution Business
Strong, Predictable Earnings
Increasing Gross Margin, Earnings and
Free Cash Flow (Increased Dividend in Q3 ‘07)
Significant Investment Potential
Experienced Management
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