NWE - Earnings call transcript Q4 2017 | NorthWestern Corporation

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Operator

Good day and welcome to the NorthWestern Corporation Fourth Quarter 2017 Financial Results Conference Call. Today’s conference is being recorded. At this time, I would like to turn the conference over to your Investor Relations Officer, Mr. Travis Meyer. Please go ahead, sir.

Travis Meyer

Evan. you, Thank thank conference and ending joining Corporation’s NorthWestern XX, Good and you webcast results call year for financial XXXX. afternoon for the December full our the NorthWestern’s is released have northwesternenergy.com. and results available been on website at release

morning. We also premarket released XX-Q our this

call with are Bob your with in of management several Executive other and Rowe, Chief and the today Vice us team address Bird, members questions. Brian President us today room Financial the President Chief On Officer, Officer, to with along the

I company’s presentation, us to that presenters Before forward-looking call begin, to for responses contain turn over press the statements. please note your and comments the questions may this release by

our As Harbor language. such, will I you of Safe remind

meaning Litigation of Private Safe of of the Act provisions Reform the the be there During course the this Harbor Securities XXXX. presentation, within of will forward-looking statements

Forward-looking performance financial upon anticipates, will. business is this statements and as expected plans, presentation often The believes, address often expects, future such or current expectations. seeks in intends, words and our information our contain based

Our or reason. and or any adversely in may our performance undertake from for business presentation forward-looking financial differ expressed and statements. our statements obligation update materially to expectations publicly We no revise this any forward-looking future actual

releases with Although XX-Q SEC. disclosed results affect and The press filings reasonable factors certain in and our in XX-K are that the public Form along results assumptions, our and expectations may with based our on of may beliefs company’s actual differ materially. other are the listed

will replay webcast be X:XX today on the CEO, lines call, over teleconference dial I and Our Investor again that’s again, be ask hand dialed the Rowe. then and the the our access link. Webcasts at we presentation, the audio to Bob today’s northwesternenergy.com p.m. that’s to the to will XXX-XXX-XXXX will archived access allow The XXXXXXX. please our replay now can XXXXXXX, presentation our of open those beginning Eastern found phone Following up website, available Presentations code questions. into of To Relations, under Company,

Bob Rowe

afternoon, we and you clear good enjoying successful and South And a thank you board joining us. in for day completed Thank Dakota. wintry everyone meeting and crisp, are just

a The $X.XX Montana and non-GAAP to of a And the to begin credit summary a of affirmed dividend share, cover disclosures. Board payable Fitch, quarterly record GAAP a comparisons March off Northwestern of per on And one hand, X, to on on March X.X% shareholders XX. as February XX increase debt Public more declared on from weighed I ratings, of to but Energy’s negative will to First, rulings XXXX decline. to favorable in $XX in and increased XXXX $X.XX XXXX million $XX.X share XXXX customer is as XXXX Non-GAAP to growth. well benefit diluted Brian that X.X% improved remains to driven will primarily was due as results. to activities, margin million compared XXXX tax earnings flat recent XXXX, EPS our in gross a and adjusted operating million was weather was $X.X income in XXXX over Commission revised the by with have income compared writing and of quality. Service $X.XX results. as with significant outlook by due to primarily converted was unfavorable as per at down that, that which stable turn $X.XX Northwestern included on financial Brian GAAP that’s XXXX, net its series with

Brian Bird

was $XXX.X $X.X X% approximately Bob. under or income XXXX just than XXXX. for million, Thanks which million Net was less

tax We million was see on driver expense As the basis. that for a year-over-year income $XX income over primary in of you incremental had the line. taxes X Page decline on

interest we income. million million, And and gross X.X%. million equating $XXX things of result our as million forward favorable both at that our natural million increase approximately million over the had from increase was in is income kept drivers and XX% Page Primary regard. Bob $XX.X year-over-year was up that in million expenses All $XX.X the $XX.X negative a million get X.X% increase property on or increase up from gas million. from previous reasonable margin nice or $XX though margin. X% a gas in the adding $XX $XXX had basis $X.X gross very net that impacts earlier $XX an other and a consolidated drove had standpoint. or the administrative came million improvement year-over-year. at nearly two or And we was XXXX, to before the we $XX.X actually million change a was X.X% also If it – result, was almost in was increase. income $XX.X were improvement over pretax as primary a and and million, up on our XX.X% What a I weather on X.X% out also year customer a versus increase year general results. $XX a $X expense $XX.X a pointed operating As Also which just look and improvement benefit taxes up full as gross million $XX.X impacts we to volumes business the X, – up in electric even retail of That you improvement electric of taxes positive depreciation that out on both trackers reasonable or growth million it X.X another basis round gross gross improvement that Of those that in development in gross that helped margin. the million margin margin in move margin we to items flow total increased of had to for a year-over-year improvement a to through

compared XXXX box is benefit a we out $X.X whether red actually and benefit that to the normal estimated in the do versus as into that X, contributing million as the the this Page XXXX. approximately bottom, indicating on maps pretax weather really million to point we Moving $XX.X in weather compared discussing favorable weather an In normal. here pretax

just above As days on jurisdictions. XXXX with the to on see million on you cooling all XXXX ‘XX warmer as and basis. in improvement of degree year-over-year that compared you see a degree days a can ‘XX, then as the contributed And that result significantly heating colder significantly charts there versus all $XX.X a

versus we Montana. less versus We were from to you cooling the from Montana. extent actually that average normal a we Dakota, say also as offset a were basis, normal we are basis historic if versus Montana can in warmer so and will in in cold warm great Nebraska South not degree normal heating And a benefit in our degree

million some a increase If were total that move this again very margin X% from nearly that does from pretax of again Dakota weather to has jurisdictional operating of positive the we on year-over-year year good million normal. on perspective. do This expenses Page to always Montana diversity XX.X perspective, or of benefit diversity benefits from some offset when been basis. All expenses $X.X as on results operating not a They or from South show our a case. you $XXX.X very standpoint gross have compared to help from some provide the X,

only general loads debt largest one where items could driven mentioned $X.X list of and and that the a year-over-year that bad I expense million $X.X increased were look million and basis. from that’s the administrative expenses argue as operating, was primarily – expense higher As of up at you the on

offset other The another. items on there are primarily

rates increased due up property Regarding million were taxes property to were that us higher also but primarily higher to $XX.X property mill during offset and increase, assessed plant additions, taxes, in XXXX. valuations

and driven improvement a $XXX.X operating net that expense X.X%, associated interest million, $X.X in depletion were plant below the XXXX. up million depreciation interest of operating income included results MPSC interest item did $X.X that primarily an our an million primarily or that to XXXX in by Lastly $X.X $XX.X expense million due From favorable disallowance up that income, I in additions. associated increase an million mention and with X.X% or was is

assets, the $XXX.X tax Also of in million lastly, improvement adoption was a $XX that whole. was in impact primarily XXXX XXXX or tax generation primarily increase have We or items improvement million expense $XX.X from actually did income income driven or we other in it change prior $XX AFUDC, And impact before ‘XX. the periods. those due million accounting taxes was all as a $XX.X And a also repair benefit XXXX, just our related to higher million $X.X netting out, income related million, income $XX to to cost million versus of that capitalization higher pre-tax had a obviously in of that XX.X%. of million healthy

the are drivers there. primary those So

the million and the primary in million benefits terms of repairs in the of on primary the reconciliation, income right is drove far income can drivers mentioned is the that of the in generation primary decrease prior repairs will primary result an drivers XXXX. of the if the in again primarily in establishment the $XX.X you to parts income two of income taxes of and X the I the to see dollars, flow-through those and million related deductions of change. moving reconciliation. $X.X tax the you Page reason as higher XXXX flow-through Speaking pre-tax $XX.X the periods course tax But over And drivers terms are for for

reform offsetting actually assets primarily and down that of sides, the from other two to the in in entry of sheet down non-current cap come also you by coming X% Moving $X.X on perspective, equity see asset sheet that’s we sheet tax ratio the liabilities but came finally really the the due And again flat and due that At due earnings, the a was during came billion Page of balance assets into items that from total to the total can perspective, to in down the place regulatory other and tax debt of year. the dead range XX, regard. driven in ATM as to took up down program forward did balance XX% to result improvement non-current XX% the issuance a and driven to the and ATM actually reform page, keeping balance and a bottom XXXX. to on a also shareholders’ line

flat I a EPS Page we there bottom income. do that to on keep that a on relatively non-GAAP speak diluted of I show Those flow basis. perspective. would We investing year-over-year from drivers the are very activities $XX XX, driver not cash having adjustments primarily Moving primary in to those by flow XX, the cash in million we in up, net in on have is change provided is operant that’s Page obviously driven XXXX of XXXX, to refunds refunds by provided the a cash did the primary on Bob non-cash on at a flow mentioned perspective. kind

moving of On the show $X.XX back-out get we to we $X.XX. far left, favorable we weather $X.XX from after

You moving may recall GAAP in unfavorable few had also of tracker weather XXXX, $X.XX out parts. we We a $X.XX, disallowance, $X.XX. backing backing quite had out number a

on we X.X%. We in went did those items, flat. of Important as of benefit. of bit taxes, thing removed the and X.X%. there. also spend actually to things reasonable also have LRAM one increase repairs property removed After to point I a basis, middle or all income removing slight also through million time of you $X.XX improvement OG&A, so year about little prior about the again $X.XX from basis and want margin though a $XX.X a these of year-over-year up $X.XX, the more we release gross we look to the as and reserve walk non-GAAP the other reconciled kind down kind tax we from The P&L, is to down on out talked

$XX.X that you $X.XX bridge look that a midpoint you might were of be the expecting our ‘XX to tax million, property at noted perspective If ‘XX to at in we from have about range.

$XX.X million $X.XX. basis, on actually that’s at after-tax look an you If

So, it huge were property that was miss perspective. – taxes from

$X.XX, property $X.XX million assume recovered end taxes you the $X.X property that So, of tracker, versus that that’s for our that’s of have of the we side, XXXX disallowance on tracker are on of for result low on $X.XX $X.XX. so some and of increase total in top so Throw the we course people expense if property a a the on $X.XX, of net the $X.XXX. of you assumed recent $X.XX as had get wondering a miss, taxes assume net ruling you the of guidance that that of why a are at at midpoint the tax you

You right can see its taxes. it there, property

year. would increase tax think manage down keep I to we that like certainly how those don’t pretax a our you can earnings the at reasonable the to able benefit you on and and obviously take see particular lower. million was moving a we income net care us And consideration when that in think increase necessarily year-over-year from because X.X% income into So of X.X up in operating that up expenses, X.X%, but was up about income primarily X.X%, basis. an who zero Operating program $X overall property it or brings for fortunately ATM we again number other income, are down seeing OG&A impacts the to dilution to that X.X%,

full So GAAP year earnings that’s a adjusted basis. non-GAAP the to on

the to Next come from managing valuations, a XX% even the somewhere taxes the but in in of $X.XX, perspective Again again tax point this in fourth did tracker. would gross $X.XX the obviously can you X.X%. is lead here up improvement also can – the to in thing we the OG&A quarter. and basis quarter primary fourth on out this – rates did fourth up year-over-year reason did margin nearly need and property mill in guidance. the was We thing But middle fourth margin, nice main that show at margin in there page property higher page, a same we reason above see where of the shows $X.XX see in impacting the you an quarter, the we indicate to but impacting higher a quarter gross our expenses job is on healthy

XX earnings guidance, of X about Page here. years do to talking you forward move obviously I show As history

assume XX% certainly out EPS Also X.X%. over obviously are of disappointed late, total time that low year. of our historic have we adjusted know able that the beat as guidance looking the end results of kind X-year We be XX% provide period. range. certainly We And X% about had headwinds to low to return at to X% X% growth of yield our the as of have you to again being within dividend to regulatory range historically XX% been our to and non-GAAP you certainly at have period, here When end return. we this point of a faced we we in guidance over talked

eliminate total to outcomes out combination our will return of and actually regulatory changed range the returns over have our the we end talking in achieve result our the our total proceedings I may higher investments – that return through are of now. to yield. upcoming We to near-term generation target allow reduce in and in below targeted X% And shortfall negative investors growth capacity X% or dividend now about point X% a long-term. to long-term being should us to our the X% earnings

in. also range has things end that top in same slightly for were take tax we at move $X.XX. as the guidance and itself to really to note and numbers $X.XX XX, XX% to competitive, a XXXX our keep they to that you of Please trying our now into $X.XX. paying range reform targeted These and Speaking we as I page When at are guidance the end year to looking a to here in past. guidance this stayed year of at ratio XXXX bridge, the Page $X.XX payout consideration dividend came EPS guidance provide other the results the of did $X.XX, adjusted

out have with come We our dividend.

the You at again total for midpoint dividend the of see primarily are $X.XX of to that going range. ‘XX targeted for year,

X% is and under excuse to ETM value little – in and do increase there, been our to result shareholders improvement equity, in a issued only to bit XXXX bottom XX ATMs the we million red provide million ratings to as order dilution protect credit expect would a to that to XXXX we need the to issue in to earnings box have Speaking remaining just of ATM dilution XX the increase. our prior after in a here course me, dilution continue to the X% the turning ATM in the our the just

equity growth, but to with provide perspective trying from our that value dividend as obviously just $X.XX growth provide again difficult trying to we dividend to take and to and going the $X.XX that more obviously necessary is are from to under a X% to provide to continue well So increase issuance in a shareholders.

our this forward Moving we going only every of XX, would the do benefit to Page this XX have so fortunately XXXX. in have to years Obviously, or to did reform forward. tax customers we be

net of liabilities. our The in thing point corporate tax as reform of impact million, at federal in tax reduced reduction was rate first had offset deferred page $XXX and the regulatory XXXX bottom liability I is the box our on in reduction this a income in assets approximately out result red tax by and the no this

initiated matter, South Dakota to income For XXXX that benefit for and January beyond in and dockets effective provide X, we tax have XXXX. customers to the both Montana

estimated immediately million a of reduction liability in The million basis in income we regulatory reduction offset consolidated expense a to no be anticipated be As into with $XX an by a year, in income. the this impact began revenue to on deferring account. recognized $XX to revenue net result to equal tax recognition is XXXX

reform result about talked argue in available now anticipated tax spent X% the adjusted I again to argue updating projects currently million, believe including assumption, primarily negative benefit and resulted point our the be of credit be from reform to adequate operations our here would our has XXXX actually income previously to are form $XX to a debt about ratios will Though XX% tax would we rate $XX effective coverage million but returned that reform perspective are ultimately or cash negatively customers. are will out XXXX. reform, customers to from that will this impacting tax of in tax think to dollars or on XXXX, net flow so maintain are we equal flow continued net revenue previously we of and we neutral, NOLs income, slide we due the range guidance though refunds impact the not even finally, cash in to we we and if X% you As into tax And to existing a to be that deferring X% ratings. maintain of are I to the been to

point lead to actions However, further credit regulatory would out downgrades. negative likely we should

did XX, the is time and and to Moving to XXXX Page shares program September in the $XXX $XX of we in the point here financing out third quarters activities we And anticipate ATM million this sold about XXXX. remaining the of end I fourth during mentioned talk main we we with of last thing issuing chatted The of XXXX. initiated you, proceeds. million as approximately equivalent $XX by million earlier, of

On with back we I amortization transaction did will X% million benefit at net the over that, pass from of was X.XX% to And debt of it the make-whole alone. money long-term debt refinancing, $X approximately approximately that approximately with refinance of with that X-year Bob.

Bob Rowe

Thank of legal following just with on up very that but remarks. you a start Brian’s points couple and before regulatory I Brian. update, I will much, a do

at you tax Commission’s also methodology coming then tracker the from in law. level in to has to execute are called changing in the X upon and changes the management Montana weeks high, First obviously tax had executive the And starting company and decision in grow people property docket levels we and called the is recently to federal mill that tremendous months described the tremendous at most with done us, and were really people what last on rates and executing companies. continuing invest execute X people through our the in there are customers. all they the in skilled shareholders just have thrown of Montana job a to couple essentially a do tax and are environments our Brian curveballs for continuing to company, doing for at whatever who this all

January Regulation related make to you Vice Senior and we executive to know as Affairs, some quite the a very of Secondly level. and changes President career Pat after area, for Corcoran that the and remarkable regulatory use our retired at an Government in the to opportunity that some

taking great remaining Counsel, added operations our and Heather regulatory the and of across for management the veterans some in regulatory consolidated are resources, some been have the and have purposes with executive our Grahame rest the as team particularly support We have General area people senior by have legal support over really responsibilities new entire of most and our these working we to team they extraordinary and company. an full of we regulatory, with the

an PCCAM we people implementation describing the electric the we Dakota of electric tax So, a where you number right Page to now doing to preparing pay fall. next first these. South did good law The supply the a tracker; we docket, Brian to this update Montana job attention XX, moment: as and all, a work. really of rate like lot Montana; change a things case three On for stand just secondly in file the both proceedings, year appreciation in Montana the of give federal third, of on then the general and this over

than in case property general the all, filed the year-to-year to be side. rate on but recover a case was on is tax statute when and us is tracker allows we the eventually gas of year far First, that tax Montana up taxes burden the substantial last from significant regulated electric that a filing, as the it in change recognizes utilities and Montana portion screwed will and the

that a affected motion us filed was customers federal of and that was changing commission. XXXX. but million for as approximately we $X.XX Commission had of this January, jurisdictional impact was result tracker the February jurisdictional issued a described ago. Brian decade the recovery with to we over reduced our a Commission property and the tax first was one that both between in bracket had the the methodology Montana tax property $X.X XXXX, of Montana XXXX method instructed reconsideration a total and taxes applied and So, million property filing implemented by And apply X, state On of end allocation the the the when the

interested I you filing. If certainly at look a you in to are encourage the take subject, that

this to requested One in to customers first time we that was in things the previously the appropriate. the fact produced commission Commission that previously of employed certainly and had we over ordered be instance the benefit demonstrated method, a the it continue method that

However, anticipated analysis out we should order the and January be schedule request to changed that for legal filed. commission could most a reconsideration, importantly, be there end of explained part method on the that that so set that. or any as not The support might briefs they did retroactively its at laid when correctly the of that order it have be request issued for reconsideration

there briefs the deliberations end expect see and of we the of So, decision to by and rounds March. will be a

in In March. expect with initial Next, we had we Commission Montana additional and the Act with proposal an the file the of different somewhat in March. the Montana, discussions implementation, with the And our and in approaches, commission Commission filing have the anticipate staffs. Cuts Dakota a Dakota January we comprehensive Job Tax the but filing both preliminary states, by South good and are end South did to and taking make Montana

issues. good additional Intervener at And eventual July on of end now for a retroactive administration of with House The supply March filed statute, proposed apply in line mandatory recovery for of or around larger context, gives prudently debt testimony filed in in really issue process equity provided Quackenbush, much its of and fantastic supply some tracker company. former Commission with expenses that Crystal is XXX costs a X, Bill the pervasive notice date which responsible May. decision was the on state a HB parties and the job a to don’t the did financial The costs. April supply and due advocated a legislature the look the In a a appropriate the the February November. is of John in initiated proposed directed XXX. filed the year, for December, had parties we July, may additional practical commission rebuttal the those credit not XXX. to additional replacement On stating Intervener develop provided to context, for revised support commission the incurred adjustment the this that scheduled and issued concerns was the for our in the that sharing electric testimony the PCCAM including year, features. to hearing great mechanism. which of the day-to-day consider PCCAM, range tracker other testimony. by implications well, testimony history variable tracker a filed person that alternatives of last additional the and that of Then know is was filing of In basis to legislature amended a basis trackers a you providing was testimony testimony discretion. incorporating mechanisms effective then as the experience Next, very is Commission by and also a case Commission’s issues Commission very cost is country. at who encourage and our with that advocacy regulator the passed of Commission’s of take use statute the would to Lail electric addressed our to Montana options the Again, describing I you specific mechanism power of sufficient last Montana the we risk and and the to HB history of the end for of

was Gates in are FERC a and of we decision second matter legal federal that this and parts to now see we Dave we of appeal with power Court X that the saga of at argument ongoing and oral costs briefed December disallowance commission of the by a you for courts hopeful costs before did Colstrip a months. one by DC there to arbitrary the the the the in precedent was been and end jurisdictional that station, which the of Appeals the or partial the next generating as way Nextly, expect disallowance XX update Unit commission Final inconsistent the on of know, the within decision argument resulted on to capricious other you has replacement and went decision order, the appeal quarter.

commission Turning margin And ongoing seen reserve The on view compares you the that of as negative the to relevant by XXXX the we well regional planning actually our in the Montana developed the plan critical to before raised that needs initiatives, in the of the including what current to The issues docket shortfall. this some negative resolve is we positive Montana’s a and constrained reserve PCCAM items have margin. our focus the to of our portfolio, solutions market. we planning did resource the XX on the with as that would quite capacity ability planning in Montana. participate are margins in Page reserve action discussion have chart in

traditional the reduce and the the implementing RFP. very then to a optimize hydro of thermal thirdly, an advantage retained talked co-optimize resources, resources. in to Over all have the dispatchable need third-party responsible its hydro great customers about the with to system the take We our you a issued first system and our of to course, exposure continue had of with the secondly, the strategies began for capacity administer months in way we of to plan benefits, RFP,

planning over the blind which process show then series of rather a period difference XX-year a to that year terminated a The and At and like. a not would of the team we as by activities looked third-party completed RFP essence plan utilities concerns qualifying pride, utilities under the X, number working well comments modifications us. use lifetime. well obviously with or the through Montana supply and our public plan planning XX-year commission is well the Montana XXXX between both able result window had has underway the Dakota plan. to end in the of had to plan of Commission’s a the But RFP. again in on on we as questions we was have example issued other we to include made the it addition extension unusual – benefit In require we window had though implementation facilitator provisions for the over to to for that at utilities, facility hearings, Dakota. the South South order for the a is or Montana plan, solicitation Montana window time a several XXXX applied be to of on the Reluctantly, that commission February XX-year ordered process be XX-year the essentially the in the So, have underway and terminate same require process of we in and example

over plans and shared the updating forecast, is similar have spending and that forecast this investments of with year. capital previously. you Dakota $XXX What’s we the Montana in this X-year South different capacity the generation to removed been the Moving rest is while about aggregate million quite pending the to have of previously is that included

as that’s related and So around grid metering Dakota right incremental now well AMI South The is $XXX automated and [indiscernible] investment for or for is infrastructure million. Montana Nebraska. as for Montana to amount the modernization

to was service planning discussed include more communications – for of gas have with as and with and we we be over for the territory deployment electric as visibility all that. intended ahead of be the to platform decision deployed part Montana this customers move to will AMI the support As our entire before

$X.XXX billion. current now X-year estimated the cumulative So spending is capital

to. if a debt. that the as if couple we example program long-term these necessary. XXXX pages. not cash wanted as of funding through that distribution flows to current for highlighted are NOLs always round the natural combination with just projections we expenditures and as made continue by you probably our well close brag could with these And asset funding reserves, I in or arise opportunities of national will remainder the our of other And like, additional aided equity You And gas anticipate acquisitions equity up do a

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answer with available So your to is that questions. Brian

Operator

comes Michael Credit go from first from Suisse. [Operator Instructions] Please question Our Weinstein ahead.

Michael Weinstein

doing? Hi Brian, you how are

Brian Bird

you. Alright. Thank

Michael Weinstein

CapEx an plans the lower make were It’s the in that generation years. assume you interesting into guess and is kind that up current which I the I grid that plan X forward previous able of with to acceleration CapEx of more modernization current

billion lowering am be that to to targeted – X% this I wondering that, looking $X.X being range significantly the that that lowered just period total to for there am generation reduced mean X% Just of used push forward, presuming... about accounts of XX-year potential almost what’s the return CapEx in target pull you over X%, I by assuming X% like a and the does

Brian Bird

didn’t mean Mike to I I that. you am interrupt sorry

Michael Weinstein

much wondering just forward? of is offset how CapEx am grid I going by that

Brian Bird

Yes.

as to you profile here I it’s X% if the at to of think point that means that – low fact be about same even guidance the that achieve did high if to range. on I processes continued of And be add our our that to grow expect just are look the I we supply able that in achieve high able the reinvest a think on capacity the midpoint expect plan, investment if kind our end we deal in able of within to we at headwinds, a the basis perform form are are range a high in demonstrate near-term able X% Until midpoint even XX%. to out business to point be at end to with return we earlier would able slide forward we going think for shortfall, of our perform our we our the we range. thought or the XXXX at I when that X% add as X% to in of as X% were with going that in that And and see I should regulatory to I be the we fashion, to to some would becomes reality in range. I to we difficult particularly are generation, going

Bob Rowe

we and bit add plans. in of orderly distribution, a a just and transmission really sensible supply your friendly both to I electric about are And amendment investment would question thinking

of AMI, by still the into And we Montana, those will forecast. our that we we of Dakota very what’s identified the I we been bet The to that’s whatever same thoughtful clarity investments just think out capital some is the basic characteristics risk our obviously, as some will Obviously, reflected get need. with we to factor in thing been going South XXXX future more to X-year plan have comes that of really strategies. electric to world at true what of are over as had as what’s there have our have it where out And we looking we capital will coming supply file in is the month regulatory the degree market that concerns to specifically plan, developments the the out pulled that’s terms the that that supply but that in, and question capital be to in of side. the small in of year, plans are lot to there. automation clearly has reflected done Montana of requires associated the have was policy There discussed in then in relatively this see with plan out asset the we on plan. plan. well and Montana And overall proceed of work the for deployment in is So the coming example, sequence management folks the response

Michael Weinstein

approved in mean, Right, going the last RFP, I you of or another to at long-term I from XX next would differ terms understood. you – before be conditions at that want you am to rate years to how need plan, XX-year one This security that least see is behind inferring least what procurement base? reinitiate in contracts correct

Bob Rowe

early be we for It’s this point. would what looking at say really to

be As into building integrating power to operations Dakota, are in pool changing part going our experience the of on we the plan there. South Southwest and

looking some the and We our offense our operation of of folks, those at fleet are to of also no the supply evaluating efficient the antiquity units.

we in participate. responding the region the that at in to with looking be a to factor, are So, at plan, developments in South as larger but did we Dakota. concern the that’s how the that again region to In challenges order table will say Montana, be to XXXX study the will going bring kinds we regional something on move have to interact a forward are included same that that and in to of going we look as the you got

Michael Weinstein

one recovery question ongoing just FERC you tax Hey, Brian are much last XXXX hit that an figure, property for a million that allocation? and is for of XXXX, hit getting how then portion unless is beyond $X.X in Could the it you ongoing will is the of see explain the successful floor. into the I year, and

Brian Bird

also the rate whole basis, recovery in what again. do prospective a to and but we in and on we of And going ‘XX basis go you forward for start the reset get think have from case as for to Montana that’s FERC. I in in Yes, property over the going forward a need base a think when ‘XX taxes will that way by basis Montana to will – the the X.X portion going continue on we a

one One is things amount from recover that is of a recovery point the able are taxes to basis a the going property standpoint rate. tax to minus of we on on forward that probably the kind

the through should go well. up tax as come So, rate since down ability recover the has to tracker

is moving parts this there. So,

Michael Weinstein

Got it.

you very thank much. Okay,

Bob Rowe

you. Thank

Operator

Please from question America/Merrill Lynch. comes go Nick Bank next of ahead. Our from Campanella

Nick Campanella

good Hi, afternoon.

Bob Rowe

Nick. Hi,

Nick Campanella

but upward forecast remarks, rate guidance it we still through slightly talked you I tax – on is period? rate, if missed on now. your reform sorry it to to expect new Should going that the happen in before Hey, tax tax your this with pressure your about still do increase you

Brian Bird

our share do for Actually, Nick I but everyone. in result with be helpful that X would as And X% increase a X% in less out. X% fairness, and of to pointing there, much solely some be plan, on XXXX that upward long-range years to reform that we show didn’t next for that a range on we the that’s on this if focused that trajectory thanks X% and would the expect to tax long-term range over XXXX. will basis

Nick Campanella

Very think us on reform how to And in if then just you. tax flow what ‘XX? comments maybe Thank should you given targeting debt tell your FFO cash can you’re helpful. about we

Brian Bird

is the a be our range over a higher, to we even ratings. from want that’s And the want in going would another than ratings. of be be little again, like to we be targeting – bit maintaining certainly and to think what need to XX% Well, this, range regulatory on is certainly but like only be portion we environment are the higher of that ratings, certainly would we but to I portion we a in to that we XX% forward basis obviously time

impact debt regulatory could our maintain ratings, of of me, to to environment want aware a clear types have those I are So, we you very, even make maintain if those difficult know – other can very things ratings, we excuse numbers I that. FFO

Bob Rowe

are in the would driven significant FFO by part metrics add regulatory I to to including outcome. that debt

Brian Bird

Fair enough, point. Bob. Good

Nick Campanella

That’s all from Thanks. me. enough. Fair

Bob Rowe

Thanks Nick.

Nick Campanella

Thanks.

Operator

comes ahead. Please question from Williams go Capital. next Ellinghaus from Chris Our

Chris Ellinghaus

the and Brian Bob, all afternoon there. good relevant Hey, traverses out

Bob Rowe

Chris. Hi,

Chris Ellinghaus

to be you utilities processes going part be? in need sort supply financing. calculus terms use be of that are your Is to terms to thought for – you about what it’s XX-year new of is process for early talk too resources, little part it’s of to your those determining pretty traditional going on the talking think your Bob, about what’s required to thought

Bob Rowe

the are early that a provide options financing best in some you and RFP. cost impact – look Typically what to not identifies it’s resources are out has including at those is going do value what What really customers planning it so long of as question to resources is Montana The wanted meet are usually to in have it customers’ our in an much going needs the to cost regulators through lives to plan be asset too needs Yes, that say. that is then years. the driver side greatest and the the a feather and a for owned for effectiveness recovery question. generational that equity to have a

kind and So to of to period if essentially as of in show how a commitment re-look you been with regulators receiving we you if customers resource some a typically depreciation to benefit then hard what years, company the XX a looked customers to to doing a was the it’s greater there imagine what the would it’s then at make would and resources dividend contrary market have the this XX-year do benefit, expect were will you for first sense. essentially but value doing turned expected to make a it for even payback of the is the XX we to that out in doesn’t years,

we we most of But understand can’t a of we are notion just XX-year asked get gate where we how to well work other clarity the what the resources will the the commission X at of for for rest it the basis, need into clarity. specific make required. resource to method In year commission importantly right the and the see regulatory now and has that next to more planning that out decisions on is will would past goes addressed. what a with just until so is try the so the over years cycle, odds RFPs XX-year that parts So we so apply situation with realistically

Brian Bird

is concerned years obviously if would historically to All as assets if allow beyond add lending it point lived mean period to to you I would to those XX of – Chris and XX-year to risk have early think look financing difficult the be able on in is to a us debt your that, been fact the fair. I will. tenors course I track long I investor be will

factor that develop this as year. we in plan something it’s ought So we to a

Bob Rowe

of creating Mismatches equity a investors not needs to are actions exist, saying degree triggering view is that be both we that series And what’s from the otherwise create side troubling is unfortunately compensated. that concern that the and regulatory us risk just and that’s is to risk risk on actions what the debt now compensated. of

Chris Ellinghaus

seems guidance have got some the to to the and be? Along some aware supply far some less you Right. of risk is included request like commission results a equity about you your the of as supply ratings It outcome. obviously should the outcome is side credit the risks ratings, the favorable you Brian what have concern range, docket as in have in docket the those the will side lines, credit that guidance there to that credit and same

Brian Bird

know have outlook sell-side are rating I know various the shared shared I would negative Fitch I to was the with report think the like therefore been and commissioners. and that and commission they commission reports staffing staff. with recent

commissioners. I And is speak so for I can’t but there the believe awareness, an

Bob Rowe

the the And docket, John in is it to I rate, will professional. I of add mention that, attend reports. first to it most relevant testimony is his Quackenbush’s testimony does did he

Chris Ellinghaus

you Okay. us some clarity Couple the on to the portion on of XXXX that? in you throughout fulfill the ATM. Do early year? year, give Can quick the questions expect

Brian Bird

time, at that, I committed to it this just believe Yes, will were I not year. end when of do Chris the we the in myself by can am I done get point we sure

Chris Ellinghaus

so give far? you color the year-to-date on us Can little a weather Okay.

Brian Bird

in little I was a tell that it we Yes, would wished have colder you January. would

Chris Ellinghaus

Okay. Thanks.

Bob Rowe

little With and the the bit to system great. we year snowpack moisture having things last this pretty in attention but of very targeted we pay content system, the close light, was year. capacity still for and to a with look overall lot we hydro the are a [indiscernible], factor a year good were Interestingly, and diversity

Brian Bird

that’s helping Yes, a February colder, bit been is so too.

Bob Rowe

front, Montana. you Okay. economic skier, development the to if And come are on

Chris Ellinghaus

I will not.

Bob Rowe

you. to talking wasn’t I maybe Chris

Chris Ellinghaus

so it. Thanks appreciate guys. I much,

Bob Rowe

Thanks, Chris.

Operator

Our ahead. next question KeyBanc. comes from Paul Please from go Ridzon

Paul Ridzon

Bob, you for say did maybe I gas improving that reserves? hear market was the potential

Bob Rowe

the perspective, I would customer From market positive, be say continues I to improving though. certainly say wouldn’t it’s a

Paul Ridzon

uplift you smaller reform? should in than increase, Okay. And next that that rate Brian, was before tax years the tax then is several it but said

Brian Bird

is. I Yes, think it

help basis for to X I heard a that you on argue XX% percentage things approaching to were as X% that addition thing to we downward going pressure You spoke a to about and to keep on, too to but deductions tax some these down of similar percentage my keep of focus get to as downward to think looking and investments something basis, reforms X to we obviously to put the pressure continue in get mind, like means X%, are benefits in reform to deductions, the those we tax of so our keep types X closer other X making lot continue as might could taxes in on that repairs meters those past on as rates. we be will

obviously through and captured the dockets rate benefit tax result all going we of are ultimately cases again, for process of for and as of a those customers benefits now. So, through reform the our that XXXX

Paul Ridzon

is X% what time to over that X% period? In uplift

Brian Bird

However, that’s beyond. years X

over to the over so to X So argue you past ‘XX, talking that X-year X time correct horizon X the Is for X next could X was helpful? you but if are about saying I years ‘XX.

Paul Ridzon

big impact ‘XX to just here your of line? really that’s tax moving in then the reform on to pieces earnings ‘XX just And but bridge, revenue there, some Yes. clarify the

Brian Bird

that gross have There here. we things Yes, guide, reforms the moving provided the couple drivers impact of other is last but on a we this since biggest things that’s biggest tax learned obviously margin. are

Paul Ridzon

in reform? discussion place do tax Nebraska expect about you what take would the when And to to about

Brian Bird

as question, I very of a good business. think small part very, a you it’s our That’s know

I think seeing do likely a case dialogue and as continue well. Nebraska customers think there about we rate would and will math that what we to a as be the perspective have will need to impact to that be even it from

Paul Ridzon

reserve you interim, the just three in kind will all for jurisdictions? of But

Brian Bird

think that very clear is a very, $XX out the million that consolidated I And be point million want to just Correct. to $XX to I here thing number.

Paul Ridzon

you Thank Understood. very much.

Bob Rowe

Thanks, Paul.

Operator

from Jonathan next comes from ahead. Please Our question Reeder Fargo. go Wells

Jonathan Reeder

if new the CapEx What’s needed. It’s afternoon. determine kind good Hi, possible South see Dakota IRPs earliest capacity revised some again of could materialize? Montana the generation and timeframe we

Bob Rowe

plans I be that. that ahead the will getting would question done end will far of any then of by too have otherwise flow very careful and the the out year or action of capital

Jonathan Reeder

Maybe pulled another X-year CapEx you do of could way, into asking this you forecast back come period? the expect $XXX some that I the million of over like mean out

Brian Bird

Yes.

those would dollars there that plan, over I perspective, think we to anything but have from X-year as ahead don’t in wait a this skiing show skis be fairness, what and generation you analogy Jonathan, going believe time. that at our within get period certainly certainly rollout ultimate I to want the what X-year and do keeping see point we plans – in of will plans we

Jonathan Reeder

Okay, versus that’s ‘XX relates of fair DSIP enough. the And lower amortization? half for deferred it expectations the I to of the expensing in then remind OG&A end like ‘XX think us driving what’s

Brian Bird

final the everyone’s knowledge hit just amortized the out was were right and DSIP year We the there of blocks the upfront one of year for costs that. You there. last for major that right

significant away going that’s portion. as So, the

have significant with not have do any maintenance maintenance a say over let’s associated We well. We that’s period. schedule that X-year scheduled as

we to our the continues to that reduce of But trying have continue of to I of well. benefit our to particular investment we reactive this in that also for lung trying returns the on earnings especially ultimately growth continue do in reduction we costs in run plans on work costs, a company, an are to manage provide of what are as and ultimately shareholders done obviously as the alter understand technology significant that’s important do making and trying help lastly, expenses. in we environment and overall difficult headcount we are want we to amount can terms because we say and these it’s the as to are show We all DSIP to think customers manage

Jonathan Reeder

you investments just run some benefits business efficiently in DSIP? other of in the of made of so ways are to kind Okay, that more realizing one, the major a it’s of the those trying lot

Brian Bird

Yes.

Jonathan Reeder

issue kind year debt Okay. And then this we revolver finance need permanently long-term the Brian, of balance? to to outstanding

Brian Bird

by have typically to to less it’s in They exactly our been we argue ATM would what debt I typically our issuance I mitigated done be to would the each prepared – not guess an be, going than some in issuance issuance, prior We but extent am have years. but I have have year to we plans. speak

kind on the you fact to going year-over-year we are that it’s our again doing finishing is program see If you – the consider relative and in capital have been ATM pressure continuing plans same of also help up our the will output to CapEx basis in to lower a basis. And than our going downward amounts on our forward the debt debt coverage past. ratios that’s on again, a

Jonathan Reeder

I or… case just is of revolver carrying a you that the to that clear Is higher balance the Okay. kind thought may out? have kind of where not

Brian Bird

short-term there long-term debt to issue debt the Anytime we obviously your is ability that at that reduce that time.

Jonathan Reeder

of to tax kind X% utilize then guess NOLs briefly last, XXXX million just the plan us given how through And expectations? rate effective all $XXX you by can walk the Okay. you I of federal

Brian Bird

Yes.

that course have no obviously hurts. tax a have got rate certainly you helps, lower but of bonus which you think also I

pulled some still focused those tax significantly X have we a we on so from benefit that we we cash a so really that non-cash of into until NOL AMT XXXX, is because be and full benefit as PTCs X actually XXXX, continue to even result have of of in status. that the trying though kind And terms of XXXX years have to taxpayer stay all year won’t net in maintain for well,

Jonathan Reeder

color. Okay, thanks. appreciate I the

Brian Bird

Jonathan. Thanks

Operator

There questions time. at to appears no this other be

Bob Rowe

forward you hopefully seeing thank many care. good the all Take questions you April. the discussion. of to visiting of months coming with We Well, Okay. you in look for and over and

Operator

conclude for today. participation. your does for our Thank conference This

You may disconnect.

NorthWestern (NWE) 13 Feb 182017 Q4 Earnings call transcript