Investor Update
Chicago, Milwaukee & Minneapolis
July 29-31, 2009
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
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.
3
who we are…
(1)
As of 6/30/09
(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: $2,720 MM (1)
Total Capitalization: $1,638 MM (1)(2)
Total Employees: 1,385 (1)
Located in relatively stable economies with potential grid expansion in the Northwest.
4
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 over 2008 earnings
Estimate includes outage period
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.
5
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
MPSC approval in 2Q 2009
Construction underway
FERC denied negotiated rate authority for MSTI
FERC encouraged Company to develop MSTI on a cost of service
basis by requesting appropriate tariff waivers from existing OATT
FERC acknowledged the need for innovative proposals to develop new
transmission projects
Continuing the development of the project without interruption
Establishing constructive regulatory regulations in all jurisdictions.
6
2009 year to date results…
Earnings guidance range for 2009 reduced to $1.75 - $1.85.
Gross Margin increased
mainly due to transfer of
interest in CU4 into regulated
electric and offset by reduced
wholesale revenues
OG&A increased mainly due
to higher pension ($5.1M),
labor and benefits ($4.9M),
and insurance reserves
($2.6M)
Property and other taxes
decreased due to lower
property assessments.
Depreciation increased
primarily due to 2008 plant
additions.
Interest Expense increased
primarily due to increased debt
outstanding
Unaudited (Dollars in 000's)
2009
2008
Variance
Operating Revenues
606,616
662,481
(55,865)
Cost of Sales
314,850
378,438
(63,588)
Gross Margin
291,766
284,043
7,723
Operating Expenses
OG&A Expense
126,317
113,937
12,380
Property and other taxes
42,535
44,180
(1,645)
Depreciation
44,982
42,316
2,666
Total Operating Expenses
213,834
200,433
13,401
Operating Income
77,932
83,610
(5,678)
Interest Expense
(33,136)
(31,849)
(1,287)
Investment Income and Other
789
422
367
Income Before Taxes
45,585
52,183
(6,598)
Income Taxes
(16,674)
(19,229)
2,555
Net Income
28,911
32,954
(4,043)
Six Months Ended June 30,
7
2009 income guidance…
Drivers
Reduced wheeling transmission revenues in Montana for the
remainder of 2009
2009 net income will increase by approximately $9 million or $.25
per share as a result of the inclusion of our interest in Colstrip
Unit 4 in regulated electric rate base
Includes additional est. $1.3 million O&M cost for CU4 rotor repair
Pension expense based on an assumed 8% return on plan assets
for 2009
Retail electric volumes will be flat compared to 2008 volumes
Wholesale electric revenues in SD will decrease due to pricing and
volume reductions
Residential and Commercial natural gas volumes will be relatively
flat
Fully diluted average shares outstanding of 36.5 million; and
Normal weather in the Company’s electric and natural gas service
territories for the rest of 2009
$1.75 to $1.85 per fully diluted share
8
strong balance sheet…
Plan to maintain a 50%-55% debt to total capitalization ratio.
(Dollars in 000's)
June 30,
December 31,
2009
2008
Cash
22,963
11,292
Restricted Cash
16,640
14,727
Accounts Receivable, Net
97,962
155,672
Inventories
47,350
70,741
Other Current Assets
75,459
60,985
Goodwill
355,128
355,128
PP&E and Other Non-current Assets
2,104,468
2,093,492
Total Assets
2,719,970
$
2,762,037
$
Payables
56,121
94,685
Other Current Liabilities
258,520
264,654
Long & Short Term Capital Leases
36,202
37,991
Long & Short Term Debt
868,979
862,056
Other Non-current Liabilities
731,187
739,118
Shareholders' Equity
768,961
763,533
Total Liabilities and Equity
2,719,970
$
2,762,037
$
Long & Short Term Debt / Total Capitalization
53.1%
53.0%
9
liquidity highlights…
Total liquidity currently in the
$270 million range
Recently issued $250 million in
First Mortgage Bonds
10 year maturity with interest rate
of 6.34%
Primarily used proceeds to:
Prepay our Colstrip loan that was
to mature in December 2009
Prepay Colstrip lease debt
Pay down our revolver
Unsecured revolver amended
Maturity date extended to June 30,
2012
Added $50 million in availability to
$250 million
Liquidity position remains strong
Nearly all long-term debt matures after 2014
10
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.
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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
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
MPSC approved plant in 2Q ‘09
Capital structure of 50/50
Authorized ROE of 10.25%
Construction underway
Artist rendering of completed
plant.
12
our proposed transmission projects…
13
generation plans shifting to wind…
New generation in Montana mostly wind and will need to find an end user.
14
supply - Montana wind potential…
Very strong wind regime in Montana.
15
demand - renewable standards…
The current renewable percentage of NorthWestern’s
electric supply in Montana is a little more than 8%.
16
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 ourportion of 500 kV
upgrade = $50M - $75M
Anticipated ownership interest of 30% on upgrade
In service date of January 1, 2012.
Colstrip 500 kV Upgrade
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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
In 2Q ’09, FERC approved
NorthWestern’s proposal to
directly assign the cost of the
project to the generators
The FERC found that the
project is an innovative
proposal
Cost estimate of “collector”
project = $200M
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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
Continuing filings with FERC
Open Season to be conducted
Start construction 2011
For current information:
www.MSTI500kV.com
Estimated to be on line early 2014.
MSTI
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capex 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
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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 2010
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 *
21
growth project milestones ’09 & ’10…
Mill Creek
2009
Expect decision from the MPSC (APPROVED) Q2
Begin construction 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” Q4
Complete commercial terms Q4
MSTI
2009
Continue discussions w/possible JV partner Q3
Work with FERC to clarify filings process Q3
Conduct “open season”/commercial terms Q4
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
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summary…
Value
Dividend yield in excess of 5.4%
Strong financial profile
All debt is investment grade rated
2009 earnings expected to increase 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.
