AGA Financial Forum
JW Marriott Resort
Las Vegas, NV
May 4, 2009
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.
who we are…
(1)
As of 3/31/09
(2)
Book capitalization calculated as total debt, excluding capital leases, plus shareholders’ equity.
656,000 customers
392,000 electric
264,000 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 – regulated as of 1/1/09
SD – 312 MW – regulated
Total Assets: $2,791 MM (1)
Total Capitalization: $1,675 MM (1)(2)
Total Employees: 1,385 (1)
Located in relatively stable economies with potential grid expansion in the Northwest.
NorthWestern’s attributes…
Solid operations
Cost competitive
Above-average reliability
Award-winning customer service
Increasing earnings
Colstrip Unit 4 into rates effective Jan. 1, 2009
Expected to add $9 million or $.25/share in earnings over 2008
Rate case to be filed in Montana on electric and gas distribution business in 3Q ‘09
Strong cash flows
NOLs provide an effective tax shield until 2012
Improving debt ratings
Secured credit ratings of A-(MT) BBB+(SD) / BBB+ / Baa1
Moody’s has on “positive” outlook
Strong growth prospects
Electric generation and transmission opportunities
Solid operations with strong growth prospects.
regulatory update…
Rate case to be filed in Montana in 2009
Filing will include both electric and natural gas distribution businesses
Expect to file in 3Q 2009 on 2008 test year
Expect decision by July 1, 2010
Mill Creek Generation Station filed with MPSC
Filed for pre-approval on the plant in August 2008
Hearings occurred in February 2009
Expect decision by June 30, 2009
Filed with the FERC to conduct a second Open Season on MSTI
Requested ability to allow new participants the opportunity to reserve
capacity, while providing existing participants the opportunity to
reaffirm existing reservations
Reflects the change and increase of renewables in the generation
queue in Montana
Establishing constructive regulatory regulations in all jurisdictions.
2009 first quarter results…
Confirming earnings guidance for 2009.
Gross Margin increased
mainly due to transfer of
interest in CU4 into regulated
Electric ($5.8M) and other
miscellaneous items ($0.2M).
OG&A increased mainly due
to insurance reserves ($2.6M),
Pension ($2.1M), labor and
benefits ($1.6M), offset slightly
by other lower costs ($1.0).
Property and other taxes
increased due to higher
estimated valuations.
Depreciation increased
primarily due to 2008 plant
additions.
Interest Expense decreased
primarily due to lower rates on
our variable debt.
2009 income guidance…
Drivers
CU4 increase expected to be approximately $9 million or
$.25/share
Pension expense expected to be flat compared to 2008
Planned insurance recoveries will offset our Q1 insurance
reserve expense increase
Retail electric and natural gas volumes expected to
approximate 2008
Wholesale electric volumes in SD expected to decrease due
to a planned outage for regularly scheduled maintenance in
2009
Normal weather in our service territories for the rest of 2009
Expect increase of 5% to 13% over 2008 earnings of $1.77/share .
$1.85 to $2.00 per fully diluted share
strong balance sheet…
Plan to maintain a 50%-55% debt to total capitalization ratio.
Audited (Dollars in 000's)
March 31,
December 31,
2009
2008
Cash
83,246
11,292
Restricted Cash
14,948
14,727
Accounts Receivable, Net
142,377
155,672
Inventories
34,929
70,741
Other Current Assets
73,651
60,985
Goodwill
355,128
355,128
PP&E and Other Non-current Assets
2,087,570
2,093,492
Total Assets
2,791,849
$
2,762,037
$
Payables
66,289
94,685
Other Current Liabilities
283,396
264,654
Long & Short Term Capital Leases
37,828
37,991
Long & Short Term Debt
900,629
862,056
Other Non-current Liabilities
729,197
739,118
Shareholders' Equity
774,510
763,533
Total Liabilities and Equity
2,791,849
$
2,762,037
$
Long & Short Term Debt / Total Capitalization
53.8%
53.0%
liquidity highlights…
Total liquidity currently in the
$275 million range
Recently issued $250 million in
First Mortgage Bonds
10 year maturity with interest
rate of 6.34%
Primarily used proceeds to:
Refinance our Colstrip loan
maturing in December 2009
Pay down our revolver
Debt maturities in late 2009
Unsecured revolver matures on
Nov. 1, 2009
Currently no drawings on the
facility
Liquidity position remains strong
Nearly all long-term debt matures after 2014
credit ratings…
Fitch S&P Moody’s
Senior Secured Rating BBB+ A- (MT) Baa1
BBB+ (SD)
Senior Unsecured BBB BBB Baa2
Outlook Stable Stable Positive
Fitch upgraded in January 2009 and Moody’s upgraded in March 2009.
generation growth highlights…
In service date for Mill Creek Generation Station is 4Q 2010
Mill Creek Generating Unit in Montana
Existing regulating services are
becoming more expensive and scarce
120-150 MW plant near Anaconda, MT
To be built for regulation services to
balance supply and load for NWE’s
Balancing Area
Rate-based cost of service investment
Estimated to cost approximately
$200 million
Public hearing held in front of MPSC
Decision expected 2Q ‘09
our proposed transmission projects…
generation plans shifting to wind…
New generation in Montana mostly wind and will need to find an end user.
supply - Montana wind potential…
Very strong wind regime in Montana.
demand - renewable standards…
The current renewable percentage of NorthWestern’s
electric supply in Montana is a little more than 8%.
our transmission developments…
Line already exists – represents an
upgrade
Upgrades substation capacity
Increases load capacity of existing line by 500-600
MW’s
Needed to relieve congestion to the West
Market interest is increasing for
Montana’s high quality wind profile
NorthWestern announced joint
development agreement with others
Portland General
Puget Sound Energy
Pacificorp
Avista
Bonneville Power Authority
Cost estimate of our portion of 500 kV
upgrade = $50M - $75M
Anticipated ownership interest of 30% on upgrade
In service date of January 1, 2012.
Colstrip 500 kV Upgrade
transmission project developments…
In service date in 2014.
230 kV “Collector System”
Provides gathering system for
new generation to access
MSTI and network system
benefits
Our project with no partners
Informational meeting with
customers in 2Q 2009
Open Season 3Q ‘09 to
determine demand
Cost estimate of “collector”
project = $200M
transmission project developments cont’d…
Provides additional capacity on a
historically constrained path, and
connects expanding new
renewable markets in Idaho, Utah
and the Southwest U.S.
Total project cost estimated from
$800 million to $1 billion
Considering strategic partners
Plan to be operational in 2014
FERC filing in January ’09
Information meeting with FERC in
March ‘09
Start construction 2011
For current information:
www.MSTI500kV.com
Estimated to be on line early 2014.
MSTI
cap ex spending – next few years…
Includes more than $1 billion of potential generation
and transmission growth projects.
Non-discretionary
capex is funded 100%
by free cash flow.
Company doesn’t anticipate
needing equity unless we
proceed with MSTI.
We will move forward with
the funding of these projects
only when they make
economic sense.
MSTI project is now slated for
early 2014 and capex has
been modified accordingly.
Non-discretionary
growth project potential…
Possibility to double and diversify earnings as compared with our
existing $1.5 billion rate base as of 1/1/09.
(in millions)
Timing
Mill Creek Generation Station
200
$
to
200
$
10.0
$
to
10.0
$
Dec 2011
Colstrip 500 kV transmission upgrade **
50
$
to
75
$
2.5
$
to
3.8
$
Jan 2012
South Dakota Peaking generation
75
$
to
90
$
3.8
$
to
4.5
$
Jan 2013
230 kV Wind Collector system
150
$
to
200
$
7.5
$
to
10.0
$
Jan 2014
MSTI transmission line
800
$
to
1,000
$
40.0
$
to
50.0
$
Jan 2014
Totals
1,275
$
to
1,565
$
63.8
$
to
78.3
$
* For illustrative purposes = Cost of project times 50% equity ratio times estimated ROE of 10%.
** Assumes a 30% ownership of the $200 million project.
Cost of Project
Annual Earnings
Opportunity *
growth project milestones ’09 & ’10…
Mill Creek
2009
Expect decision from the MPSC Q2
Begin construction (if approved) Q3
500 kV upgrade
2009
Complete engineering and planning studies Q4
WECC regional planning process begins Q4
Finalize commercial terms w/partners Q4
230 kV Collector system
2009
Information meeting with customers Q2
FERC ruling allowing “open season” Q2
Conduct “open season” Q3
Complete commercial terms Q4
MSTI
2009
FERC ruling allowing “open season” Q2
Continue discussions w/possible JV partner Q2
Conduct “open season”/commercial terms Q3
EIS draft for public review due Q4
Mill Creek
2010
Complete construction Q4
Start up, commissioning and completion Q4
500 kV upgrade
2010
Run subscription process Q1
Complete regional planning process Q4
Begin construction Q4
230 kV Collector system
2010
Siting and permitting process begins Q1
WECC regional planning process Q2
MSTI
2010
Final EIS Q1
Record of decision Q3
Begin right of way procurement Q4
Final Engineering Q4
summary…
Value
Dividend yield in excess of 6.0%
Currently trading at approximately book value
Strong financial profile
All debt is investment grade rated
2009 earnings expected to increase 5%-13% over 2008
Strong cash flows from increasing earnings and NOLs expected into
2012
Improving regulatory relationships
Opportunity for growth
Montana T&D rate case to be filed in 2009
expecting a rate increase request
effective in 2010
Possibility of increasing rate base on growth projects with investment in
excess of $1 billion
Potential additional annual earnings of more than $60 million post 2014
Current value with growth opportunities.
