West Coast Utilities
Seminar
Seminar
Four Seasons Hotel, Las Vegas, NV
December 10, 2009
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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.”
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.”
Except as noted herein, the information in this presentation is based upon
our current expectations as of the date hereof unless otherwise noted.
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.
our current expectations as of the date hereof unless otherwise noted.
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.
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who we are…
(1) As of 9/30/09
(2) Book capitalization calculated as total debt, excluding capital leases, plus shareholders’ equity.
¾ 656,000 customers
» 392,000 electric
» 264,000 natural gas
¾ Approximately 123,000 square
miles of service territory in
Montana, Nebraska and South Dakota
miles of service territory in
Montana, Nebraska and South Dakota
¾ Total generation (mostly base load coal)
» MT - - 222 MW - regulated beginning 1/1/09
» SD - - 312 MW - regulated
¾ Total Assets: $2,754 MM (1)
¾ Total Capitalization: $1,666 MM (1)(2)
¾ Total Employees: 1,385
Located in states with relatively stable economies with potential grid
expansion to support renewables.
expansion to support renewables.
¾ Solid operations
» Cost competitive
» Above-average reliability
» Award-winning customer service
¾ Improving credit ratings and strong balance sheet and liquidity
» Secured and unsecured investment grade ratings
» Moody’s has us on “positive” outlook
¾ Positive earnings and ROE trend
» Colstrip Unit 4 into rates effective January 1, 2009
» Delivery services rate cases for Montana electric and natural gas
¾ Strong cash flows
» NOLs and repair tax deduction provide an effective tax shield until likely 2014
¾ Competitive dividend
» Current yield approximately 5.5%
¾ Improving regulatory environment
¾ Realistic growth prospects
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NorthWestern’s attributes…
improving credit ratings…
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strong balance sheet and liquidity …
¾ Debt / Total capitalization of 53.4% (9/30/09)
¾ October 2009
» $55 million, 30 year First Mortgage Bonds issued at 5.71%
¾ June 2009
» Extended unsecured revolver maturity to June 30, 2012
» Increased size from $200 million to $250 million
¾ March 2009
» $250 million, 10 year First Mortgage Bonds issued at 6.34%
¾ Total liquidity currently in the $250 million range
¾ Nearly all long-term debt matures after 2014
positive earnings and ROE trend…
Mill Creek and Colstrip Unit 4 ROE’s of 10.25% & 10.00% respectively.
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strong cash flows…
Earnings growth, NOLs, and repairs tax deduction provide strong cash flows
to fund future growth projects.
to fund future growth projects.
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2009 return of approximately 20% year-to-date and expect to be greater than
90% funded.
90% funded.
pension funding and expense …
competitive dividend…
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Goal for dividend payout ratio of 60% - 70%.
Current dividend yield about 5.5%.
Current dividend yield about 5.5%.
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regulatory update…
¾ Montana
» Rate cases filed October 2009 requesting $17.5 million revenue increase
♦ We anticipate a rate adjustment to go into effect October 2010
» Mill Creek Generation Station filed with MPSC
♦ MPSC approval in 2Q 2009
♦ Under construction with $40.5 million capitalized CWIP as of 9/30/09
» Colstrip Unit 4 into rate base starting January 2009
¾ South Dakota / Nebraska
» Expect to file natural gas rate cases during 2010
¾ FERC
» Working with FERC for MSTI rate design
♦ FERC encouraged Company to develop MSTI on a cost of service basis
by requesting appropriate tariff waivers from existing OATT
by requesting appropriate tariff waivers from existing OATT
» FERC approved 230kV Renewable Collector System open season as
submitted
submitted
Establishing positive regulatory regulations in all jurisdictions.
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near-term potential earnings drivers…
¾ 2010
» Expecting flat volumes
♦ Due to higher mix of residential/commercial vs. industrial customers as
compared to other utilities
compared to other utilities
● Electric: 67% Residential & Commercial, 33% Industrial
● Natural Gas: 99% Residential & Commercial, 1% Industrial
» Montana rate adjustment expected to take effect second half of 2010
¾ 2011
» Full year effect of Montana rate adjustment
» South Dakota and Nebraska natural gas rate adjustments expected
» Mill Creek in rate base
♦ Approximately $10 million annualized contribution to net income
Near-term earnings drivers independent of transmission projects.
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Balanced growth opportunities across the business.
longer-term potential earnings drivers …
¾ Distribution system enhancements
» Exploring incremental rate based investment (early stages)
¾ Energy supply
» Mill Creek Generation Station
» South Dakota peaking generation
» Natural gas reserves (early stages)
» Wind projects and other renewable projects (early stages)
¾ Transmission projects
» Colstrip 500 kV upgrade
» 230 kV Renewable Collector System
» Mountain States Transmission Intertie (MSTI)
» Electric Transmission America (ETA) (early stages)
» Green Power Express (ITC) (early stages)
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great wind potential in our service territory…
MSTI provides link between supply …
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and demand…
our proposed transmission projects…
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capex spending - next few years…
Additional equity not
anticipated until we proceed
with MSTI or other major
investments.
anticipated until we proceed
with MSTI or other major
investments.
We will move forward with
the funding of these projects
only when they make
economic sense.
the funding of these projects
only when they make
economic sense.
MSTI project is now slated for
early 2015 and capex has
been modified accordingly.
Capital still shown at 100%
but still evaluating partners.
early 2015 and capex has
been modified accordingly.
Capital still shown at 100%
but still evaluating partners.
Utility Maintenance
Capex is funded 100%
by free cash flow.
Capex is funded 100%
by free cash flow.
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growth project potential…
Opportunity to double and diversify earnings as compared with our existing
$1.5 billion rate base.
$1.5 billion rate base.
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growth project milestones ’09 & ’10…
2009
Mill Creek
ü Expect decision from the MPSC (APPROVED) Q2
ü Begin construction Q3
500 kV Upgrade
ü Complete engineering and planning studies Q4
ü WECC regional planning process begins Q4
¾ Finalize commercial terms w/partners Q4
230 kV Collector System
ü Information meeting with customers Q2
ü FERC ruling allowing “open season” Q2
¾ Identify potential anchor tenant Q4
MSTI
ü Work with FERC to clarify filings process Q3
¾ EIS admin draft for public review due Q4
2010
Mill Creek
¾ Complete construction Q4
¾ Start up, commissioning and completion Q4
500 kV Upgrade
¾ Complete detailed engineering Q3
¾ Complete regional planning process Q4
230 kV Collector System
¾ Conduct “open season” Q1
¾ Siting and permitting process begins Q1
¾ WECC regional planning process Q2
MSTI
¾ Draft EIS Q1
¾ Conduct “open season”/commercial terms Q1
¾ EIS Record of Decision Q3
¾ Begin right of way procurement Q4
¾ Begin Final Engineering Q4
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in summary…
¾ Solid operations
¾ Improving credit ratings and strong balance
sheet and liquidity
sheet and liquidity
¾ Positive earnings and ROE trend
¾ Strong cash flows
¾ Competitive dividend
¾ Improving regulatory environment
¾ Realistic growth prospects
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2009 guidance change… (appendix)
Earnings guidance range for 2009 revised to $1.95 - $2.05
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results through Q3 2009… (appendix)
Prior earnings guidance of $1.75 - $1.85 revised upward to $1.95 - $2.05 on
October 28, 2009 due to repairs tax deduction.
October 28, 2009 due to repairs tax deduction.
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Q4 2009 earnings bridge … (appendix)
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MPSC rate request … (appendix)
¾ Requested revenue increase of $17.5 million
» Electric T&D = $15.5 million (6.98%)
» Natural gas T&D = $2.0 million (1.89%)
» Expect decision within nine months after accepted filing
» Interim rates requested
» Increase primarily due to pension and wage increases
¾ Requested for both Electric and Natural Gas Cases
» ROE of 10.90%
» Ratio of 50.55% debt / 49.45% equity
» Cost of debt of 5.76%
» Resulting cost of capital of 8.30%
» Electric and Natural Gas rate base of $632 million and $257 million, respectively
¾ We anticipate a rate adjustment to go into effect October 2010
Rate request excludes power supply costs, Colstrip Unit 4 generation and the
under- construction Mill Creek Generation Plant.
under- construction Mill Creek Generation Plant.