AGA Financial Forum
May 5, 2008
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.”
The information in this presentation is based upon our current
expectations as of the date hereof. Our actual future business and
financial performance may differ materially and adversely from
those expressed in any forward-looking statements. We undertake
no obligation to revise or publicly update our forward-looking
statements or this presentation for any reason. Although 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.
2
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 12/31/07
(2)
Book capitalization calculated as total debt, excluding capital leases, plus shareholders’ equity.
650,000 customers
388,000 electric
262,000 natural gas
Approximately 123,000 square miles
of service territory in Montana,
Nebraska and South Dakota
Total Generation (mostly base load coal)
MT – 222 MW – unregulated
SD – 312 MW – regulated
Total Assets: (1) $2,547 MM
Total Capitalization: (1)(2) $1,629 MM
Total Employees: (1) 1,350
3
business overview …
Regulated Operations (89% of Gross Margins)
One of the largest providers of electricity and natural gas in the Upper Midwest and Northwest,
serving approximately 650,000 customers in Montana, South Dakota and Nebraska
Electric Operations (65%)
Montana
328,000 customers (transmission/distribution)
Approximately 7,000 miles of transmission
lines and 21,000 miles of distribution lines
South Dakota
60,100 customers (integrated utility)
Approximately 3,200 miles of T&D lines
Owns 312 net MW of power generation
Gas Operations (24%)
Montana
177,000 customers (residential/commercial)
3,900 miles of distribution pipelines
2,000 miles of intrastate transmission
pipelines
16.2 Bcf of gas storage
South Dakota/Nebraska
84,500 customers (residential/commercial)
2,200 miles of distribution pipelines
Unregulated Operations (11%)
Electric — 222 MW - Primarily consists of an equity participation in 30% of Colstrip Unit 4,
a 740 MW coal-fired power plant in Montana
Source: NorthWestern Corporation 10-K.
4
2007 segment information …
Unaudited (Dollars in 000's)
YE Dec 31, 2007
ELECTRIC
UTILITY
GAS
UTILITY
UNREGULATED
ELECTRIC
OTHER /
ELIMINATIONS
TOTAL
Gross Margin
346,976
127,626
56,152
901
531,655
% of Total
65%
24%
11%
0%
Operating Income
90,692
36,067
20,407
(7,073)
140,093
% of Total
65%
26%
15%
-5%
Net Income
33,730
14,599
10,274
(5,412)
53,191
% of Total
63%
27%
19%
-10%
5
2008 1Q results …
(000's)
2008
2007
B(W)
% change
Operating Revenues
385,975
366,565
19,410
5.3%
Cost of Sales
229,084
219,278
(9,806)
-4.5%
Gross Margin
156,891
147,287
9,604
6.5%
Operating Expenses
Operating, general & administrative
60,071
62,448
2,377
3.8%
Property and other taxes
23,640
20,592
(3,048)
-14.8%
Depreciation
21,091
19,894
(1,197)
-6.0%
Total Operating Expenses
104,802
102,934
(1,868)
-1.8%
Operating Income
52,089
44,353
7,736
17.4%
Interest Expense
(16,080)
(13,220)
(2,860)
21.6%
Investment Income and Other
662
378
284
75.1%
Income (Loss) from Cont. Ops. Before Taxes
36,671
31,511
5,160
16.4%
Benefit (Provision) for Income Taxes
(13,220)
(12,369)
(851)
6.9%
Net Income (Loss)
23,451
19,142
4,309
22.5%
Three Months Ended March 31,
6
strong balance sheet …
Debt Ratings
Unaudited (Dollars in 000's)
March 31
December 31
2008
2007
Cash
33,755
12,773
Restricted Cash
13,904
14,482
Accounts Receivable, Net
142,280
143,482
Inventories
29,579
63,586
Other Current Assets
51,619
44,031
Goodwill
355,128
355,128
PP&E and Other Non-current Assets
1,922,041
1,913,898
Total Assets
2,548,306
$
2,547,380
$
Payables
65,989
91,588
Other Current Liabilities
234,642
209,245
Long & Short Term Capital Leases
39,877
40,391
Long & Short Term Debt
776,212
805,977
Other Non-current Liabilities
597,158
577,155
Shareholders' Equity
834,428
823,024
Total Liabilities and Equity
2,548,306
$
2,547,380
$
Long & Short Term Debt / Total Capitalization
48.2%
49.5%
7
Colstrip Unit 4 strategic alternatives update …
Considerations
Sale of the plant
Evaluate possible transfer to rate base
Retain plant as unregulated
Analyze a long-term index sale to NorthWestern’s regulated customers
Possible sale of NorthWestern’s 30% interest in CU4
Confidential Information Memorandum in market
First round bids received
Site visits and other due diligence in process
Final bids due in late May ‘08
Timing
Decide which alternative to pursue in 2Q ’08
Execute on alternative pursued in second half of ‘08
MPSC’s possible court action
MPSC waived their jurisdiction over this asset in 1985
Customers are already receiving the benefit through supply contracts that are
below market
NorthWestern likely to contest any possible legal action on this matter
Intend to complete its evaluation of options for CU4
8
2008 guidance bridge from 2007 results …
2008 = 2007 plus rate increases in MT, SD, NE
* Estimates by the three sell side firms covering NWEC average $1.71/fully diluted share for 2008.
2008 Guidance
Reported 2007 - EPS fully diluted
1.44
$
Mid-point
Guidance for 2008 - diluted
1.60
$
1.75
$
1.68
$
Yr over yr increase
0.24
$
per share
Bridge to 2008:
Rates - MT
0.23
$
Rates - FERC
0.01
$
Rates - SD
0.04
$
Rates - NE
0.02
$
Anticipated reduction to CU4 earnings in 2008
(0.04)
$
Anticipated yr over yr changes
0.26
$
per share
9
NorthWestern’s future …
Operationally strong
Cost competitive
Above-average reliability
Award-winning customer service
Financially strong
Steady earnings growth
Strong cash flows
Approximately a 50/50 debt to total capitalization ratio
Secured credit ratings of A-(MT) BBB+(SD) / BBB / Baa3
Unsecured credit ratings of investment grade from 2 of 3 agencies
Utilize excess cash flow and debt capacity to invest in the business
Organic growth in existing service territories
Electric generation opportunities in Montana and South Dakota
Electric transmission opportunities (Colstrip 500 kV upgrade and MSTI)
Gas transmission expansion in Nebraska and South Dakota
10
Montana proposed generation landscape …
Potential Generation Development in Montana
722
770
52
1,526
300
375
268
4,012
3,000
-
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
Coal
Gas
Hydro
Wind
MATL
In-Service
Signed
LGIA
Total
MT
Existing
Generation
New transmission is needed to support new generation
11
generation project developments …
Mill Creek Generation Plant
Site selected at Mill Creek, near Anaconda, Montana
Design phase
Filing expected by end of 2Q ‘08
Construction to begin upon approval
Estimated to be on-line at beginning of 2011
Approximately 120 MW of installed capacity
Approximately $150 million project
Expandable project
Current need is about 80 MW of regulating capacity
Regulating capacity need will grow over time
12
transmission pathway considerations …
13
transmission project developments …
Colstrip 500 KV Upgrade
NorthWestern currently assumes it will be only partner
Renewed interest by certain of the other owners
Significant proposed generation but mix is changing
May effect the timing and the configuration of the project
Looking to make the upgrade a “wind collector system”
Cost estimate = $200M - $250M
Inclusive of the collector system
Estimated to be on-line beginning of 2013
14
transmission project developments cont’d …
MSTI
Permitting for 500 KV line
Will scale this project to committed long term contracts
230KV, 270 mile line to move 430 MWs; cost = $250M - $300M
345KV, 370 mile line to move 800 MWs; cost = $650M - $700M
500KV, 400 mile line to move 1,500 MWs; cost = $750M - $900M
Reservations currently at 639 MWs
Considering strategic partnering
15
growth project timing…
Mill Creek Generation Plant
Construction
Cumulative Dollars Spent:
$4M-$5M
$100M
$150 M
Colstrip 500 KV upgrade
Cumulative Dollars Spent:
$1M-$2M
$100M
$200M-$250M
MSTI
Cumulative Dollars Spent:
$10M-$12M
$40M-$50M
$200M
$400M
2008
2009
2010
2011
Operation
Planning
2011
2012
2013
2008
2009
2010
Planning & Technical Studies
Construction
Operation
2008
2009
2010
2011
2012
2013
Operation
$750M - $900M
Planning & Technical Studies
Construction
16
growth project actions ‘08/’09 …
Mill Creek
2008
File for approval with the MPSC Q2
Air quality permit received Q4
Expect decision from the MPSC Q4
500 KV upgrade
2008
Complete facilities studies Q4
WECC regional planning process Q4
MSTI
2008
Select preferred route Q2
File MFSA with the MT DEQ Q2
Begin formal EIS process Q3
Mill Creek
2009
Reserve equipment Q1
Engineering design Q1
Begin construction Q3
500 KV upgrade
2009
Run Open Season or subscription
process Q1
Complete regional planning process Q4
MSTI
2009
Draft EIS for public review Q4
FERC tariff and service
agreements Q4
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growth project potential …
MSTI transmission line
500 KV scenario
37.5
$
to
45.0
$
750.0
$
to
900.0
$
Jan 2013
345 KV scenario
32.5
$
to
35.0
$
650.0
$
to
700.0
$
Jan 2013
230 KV scenario
12.5
$
to
15.0
$
250.0
$
to
300.0
$
Jan 2013
Colstrip 500 kV transmission upgrade
10.0
$
to
12.5
$
200.0
$
to
250.0
$
Jan 2013
Mill Creek Generator
Located by Anaconda, MT
6.3
$
to
7.5
$
125.0
$
to
150.0
$
Jan 2011
Natural Gas Pipeline Extensions
1.0
$
to
2.0
$
20.0
$
to
40.0
$
Thru 2009
*For illustrative purposes = Cost of project times 50% equity ratio times estimated ROE of 10%
Timing
Cost of Project
Annual Earnings
Opportunity*
(in millions)
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Northwestern – value and growth …
Value
Dividend yield of 5.1%
Currently trading at approximately 1.2x book value
Opportunity for Growth
Possibility of rate base growth in excess of $1 billion
Potential additional annual earnings of approximately
$50 million by 2013
Strong balance sheet/credit ratings
19
summary …
Attractive
Transmission &
Distribution Business
Regulated electric and gas contribute 90% of gross
margins
Cost-based operating structure approved by regulatory
commissions
Increasing cash flows support growth opportunities
Stable and Predictable
Cash Flow
Strong Balance Sheet
Current Value with
Potential for Growth
Conservative capital structure provides increased
flexibility
Improving credit ratings
Dividend yield of 5.1%
Trading at low multiple of book value
Identified projects providing opportunity for rate
base/earnings growth
Regional T&D utility with stable customer growth
Attractive mix of electric and natural gas customers
Reliable and cost competitive operations
20