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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): July 30, 2024
NorthWestern Energy Group, Inc.
(Exact name of registrant as specified in its charter)
| | | | | | | | | | | | | | |
| Delaware | 000-56598 | 93-2020320 |
(State or other jurisdiction of
incorporation or organization) | (Commission File Number) | (I.R.S. Employer Identification No.) |
| 3010 W. 69th Street | Sioux Falls | South Dakota | | 57108 |
| (Address of principal executive offices) | | (Zip Code) |
Registrant’s telephone number, including area code: 605-978-2900
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Securities registered pursuant to Section 12(b) of the Act:
| | | | | | | | | | | |
| Registrant | Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
| NorthWestern Energy Group, Inc. | Common stock | NWE | Nasdaq Stock Market LLC |
Indicate by check mark whether the registrant is an emerging growth company as defined in as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging Growth Company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
☐
Item 2.02 Results of Operations and Financial Condition
On July 30, 2024, NorthWestern Energy Group, Inc. d/b/a NorthWestern Energy (Nasdaq: NWE) (the “Company”) issued a press release (the “Press Release”) discussing financial results for the quarter ended June 30, 2024. The Press Release is furnished as Exhibit 99.1 hereto and is incorporated herein by reference.
The information in this Current Report on Form 8-K provided under Item 2.02 shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that Section. The information provided under Item 2.02 in this Current Report shall not be incorporated by reference into any registration statement or other document pursuant to the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing.
Item 7.01 Regulation FD Disclosure.
As previously announced and as stated in the Press Release, the Company will host an investor earnings webcast on July 31, 2024, at 3:30 p.m. Eastern time to review its financial results for the quarter ending June 30, 2024. During the conference call, Brian B. Bird, president and chief executive officer, and Crystal D. Lail, vice president and chief financial officer of the Company, will make a slide presentation (the "Investor Webcast Presentation") concerning the Company's financial results.
The investor earnings webcast can be accessed from the Company’s website at www.northwesternenergy.com/earnings-registration. To listen and view the slideshow presentation, please go to the site at least 10 minutes in advance of the webcast to register. An archived webcast will be available shortly after the event and will be available for one year.
A copy of the Investor Webcast Presentation is being furnished pursuant to Regulation FD as Exhibit 99.2 to this Current Report on Form 8-K and is incorporated herein by reference. The information in the presentation shall not be deemed to be “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of that section. Furthermore, the presentation shall not be deemed to be incorporated by reference into the Company's filings under the Securities Act of 1933, as amended, or under the Securities Exchange Act of 1934, as amended, except as set forth with respect thereto in any such filing.
Item 9.01 Financial Statements and Exhibits.
| | | | | | | | |
| Exhibit No. | | Description of Document |
| | Press Release, dated July 30, 2024 |
| | Investor Webcast Presentation, dated July 31, 2024 |
| 104 | | Cover Page Interactive Data File – the cover page XBRL tags are embedded within the Inline XBRL document |
| | |
| * filed herewith |
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| | | | | | | | | | | |
| | NorthWestern Energy Group, Inc. | |
| | | |
| By: | /s/ Timothy P. Olson | |
| | Timothy P. Olson | |
| | Corporate Secretary | |
Date: July 31, 2024
| | | | | |
| NorthWestern Energy Group, Inc. d/b/a NorthWestern Energy 3010 W. 69th Street Sioux Falls, SD 57108 www.northwesternenergy.com |
FOR IMMEDIATE RELEASE
NorthWestern Reports Second Quarter 2024 Financial Results
Company reports GAAP diluted earnings per share of $0.52 for the quarter;
affirms 2024 earnings guidance and $500 million capital investment plan; and
announces a $0.65 per share quarterly dividend payable September 30, 2024
BUTTE, MT / SIOUX FALLS, SD - July 30, 2024 - NorthWestern Energy Group, Inc. d/b/a NorthWestern Energy (Nasdaq: NWE) reported financial results for the three months ended June 30, 2024. Net income for the period was $31.7 million, or $0.52 per diluted share, as compared with net income of $19.1 million, or $0.32 per diluted share, for the same period in 2023.
“We are pleased to report solid earnings growth this quarter, a clear testament to our team’s dedication and hard work,” said Brian Bird, President and CEO. “We are also happy to announce two strategic transactions that position us for future success. First, we have entered into an agreement to acquire Energy West Montana’s natural gas distribution system, which serves 33,000 customers, most of whom are already our electric customers. Second, we also entered an agreement to acquire Puget’s 370 megawatt ownership in Colstrip at no cost. The agreement features the same structure and December 31, 2025 transfer date as we currently have in place in the previously announced deal with Avista. The no-cost acquisition of Puget’s share of Colstrip will allow us to leverage existing infrastructure that is well established, dependable, reliable and consistently available when our customers need energy the most. Additionally, over the last two months we filed rate reviews in all three of our service territories to enable us to continue to make critical infrastructure investments. All of these actions highlight our commitment to providing reliable, affordable and sustainable energy services to our valued customers while providing a reasonable return on invested shareholder capital.”
SECOND QUARTER 2024 COMPARED TO SECOND QUARTER 2023
The increase in net income was primarily due to new base rates in Montana and South Dakota, electric transmission revenues, Montana property tax tracker collections, and electric and natural gas retail volumes. These were offset in part by a less favorable Qualifying Facility (QF) liability adjustment in the current year, non-recoverable Montana electric supply costs, depreciation, operating, administrative and general costs, and interest expense. Diluted earnings per share also increased as a result of higher net income but was partially offset by increased average shares outstanding due to equity issuances during 2023.
Adjusted non-GAAP diluted earnings per share for the quarter ended June 30, 2024 was $0.53 as compared to $0.35 for the same period in 2023. See “Adjusted Non-GAAP Earnings” and “Non-GAAP Financial Measures” sections below for more information on these measures.
NorthWestern Reports Second Quarter 2024 Financial Results
July 30, 2024
Page 2
COMPANY UPDATES
Acquisition of Energy West Montana Assets
On July 29, 2024, we entered into an Asset Purchase Agreement with Hope Utilities to acquire its Energy West natural gas utility distribution system and operations serving approximately 33,000 customers located near Great Falls, Cut Bank, and West Yellowstone, Montana for approximately $39.0 million in cash, subject to certain working capital and other agreed upon closing adjustments. The transaction is subject to a number of customary closing conditions, including Montana Public Service Commission (MPSC) approval, and we expect the acquisition to be completed by the end of the first quarter of 2025.
Colstrip – Puget Sound Energy Transaction
On July 30, 2024, we entered into a definitive agreement (the Agreement) with Puget Sound Energy (Puget) to acquire Puget's 25 percent interest in each of Units 3 and 4 (collectively representing 370 megawatts) at the Colstrip Generating Station for $0. The acquisition would be effective December 31, 2025, subject to the satisfaction of the closing conditions contained within the Agreement. Under the terms of the Agreement, we will be responsible for operating costs starting on January 1, 2026; while Puget will retain responsibility for its pre-closing share of environmental and pension liabilities attributed to events or conditions existing prior to the closing of the transaction and for any future decommission and demolition costs associated with the existing facilities that comprise Puget's interest. The Agreement is subject to customary conditions and approvals, including approval from the Federal Energy Regulatory Commission (FERC).
Acquisition of Puget’s ownership interest, in addition to the previously disclosed acquisition of Avista’s 15 percent interest in each of Colstrip Units 3 and 4 (collectively representing 222 megawatts), will result in our ownership of 55 percent of the facility with the ability to guide operating and maintenance investments. This provides capacity to help us meet our obligation to provide reliable and cost effective power to our customers in Montana, while allowing opportunity for us to identify and plan for newer lower or no-carbon technologies in the future.
Regulatory Update
Rate reviews are necessary to recover the cost of providing safe, reliable service, while contributing to earnings growth and achieving our financial objectives. We regularly review the need for electric and natural gas rate relief in each state in which we provide service. Our ongoing rate review activity includes the following:
Montana Rate Review - On July 10, 2024, we filed a Montana electric and natural gas rate review with the MPSC. The filing requests a base rate annual revenue increase of $156.5 million ($69.4 million net with Property Tax and Power Cost and Credit Adjustment Mechanism (PCCAM) tracker adjustments) for electric and $28.6 million for natural gas. Our request is based on a return on equity of 10.80 percent with a capital structure including 46.81 percent equity, and forecasted 2024 electric and natural gas rate base of $3.45 billion and $731.9 million, respectively. The electric rate base investment includes the 175-megawatt natural gas-fired Yellowstone County Generating Station (YCGS), which is expected to be in service during the third quarter of 2024. We requested interim base rates to be effective October 1, 2024.
South Dakota Natural Gas Rate Review - On June 21, 2024, we filed a natural gas rate review with the South Dakota Public Utilities Commission. The filing requests a base rate annual revenue increase of $6.0 million. Our request is based on a return on equity of 10.70 percent, a capital structure including 53.13 percent equity, and rate base of $95.6 million. If a final order is not received by December 21, 2024, interim base rates may go into effect.
Nebraska Natural Gas Rate Review - On June 6, 2024, we filed a natural gas rate review with the Nebraska Public Service Commission. The filing requests a base rate annual revenue increase of $3.6 million. Our request is
NorthWestern Reports Second Quarter 2024 Financial Results
July 30, 2024
Page 3
based on a return on equity of 10.70 percent, a capital structure including 53.13 percent equity, and rate base of $47.4 million. Interim base rates are not anticipated to be implemented prior to October 1, 2024.
Yellowstone County 175 MW plant
Construction of the new generation facility continues to progress and we expect the plant to be in service during the third quarter of 2024. The lawsuit challenging the YCGS air quality permit, which required us to suspend construction activities for a period of time, as well as additional related legal and construction challenges, delayed the project timing and have increased costs. As of June 30, 2024, total costs of approximately $288.9 million have been incurred, with expected total costs of approximately $310.0 million to $320.0 million.
Environmental Protection Agency (EPA) Rules
On April 25, 2024, the EPA released final rules related to Greenhouse Gas (GHG) emission standards (GHG Rules) for existing coal-fired facilities and new coal and natural gas-fired facilities as well as final rules strengthening the Mercury Air Toxics Standard (MATS) requirements (MATS Rules). Compliance with the rules will require expensive upgrades at Colstrip Units 3 and 4 with proposed compliance dates that may not be achievable and / or require technology that is unproven, resulting in significant impacts to costs of the facilities. The final MATS and GHG Rules require compliance as early as 2027 and 2032, respectively.
Affirming 2024 Earnings Guidance, Capital Plan and Long-Term EPS Growth
We are affirming 2024 diluted earnings guidance of $3.42 - $3.62 per diluted share and our $500 million capital plan. This guidance is based upon, but not limited to, the following major assumptions:
• Normal weather in our service territories;
• Interim rates in Montana in the fourth quarter;
• An effective income tax rate of approximately 12%-14%; and
• Diluted average shares outstanding of approximately 61.4 million.
We are also affirming our long-term (5 year) diluted earnings per share growth guidance of 4% to 6% from a 2022 base year of $3.18 diluted earnings per share on a non-GAAP basis. We expect rate base growth of 4% to 6%. Our current capital investment program is sized to provide for no equity issuances. Future generation capacity additions or other strategic opportunities may require equity financing.
Dividend Declared
NorthWestern Energy Group's Board of Directors declared a quarterly common stock dividend of $0.65 per share payable September 30, 2024 to common shareholders of record as of September 13, 2024. Over the longer-term, we expect to maintain a dividend payout ratio within a targeted 60-70% range.
Additional information regarding this release can be found in the earnings presentation at
https://www.northwesternenergy.com/investors/earnings
[The remainder of page is intentionally left blank]
NorthWestern Reports Second Quarter 2024 Financial Results
July 30, 2024
Page 4
CONDENSED CONSOLIDATED STATEMENT OF INCOME
| | | | | | | | | | | | | | | | | | | | | | | |
| (in millions) | | Three Months Ended June 30, | Six Months Ended June 30, |
| Reconciliation of gross margin to utility margin: | | 2024 | | 2023 | 2024 | | 2023 |
| | | |
| Operating Revenues | | $ | 319.9 | | | $ | 290.5 | | $ | 795.3 | | | $ | 745.1 | |
| Less: Fuel, purchased supply and direct transmission expense (exclusive of depreciation and depletion shown separately below) | | 76.5 | | | 67.6 | | 251.2 | | | 233.1 | |
| Less: Operating and maintenance | | 57.4 | | | 54.9 | | 111.6 | | | 110.7 | |
| Less: Property and other taxes | | 36.2 | | | 40.1 | | 83.4 | | | 89.3 | |
| Less: Depreciation and depletion | | 57.0 | | | 52.4 | | 113.7 | | | 105.6 | |
| Gross Margin | | 92.8 | | | 75.5 | | 235.4 | | | 206.4 | |
| | | | | | | |
| Operating and maintenance | | 57.4 | | | 54.9 | | 111.6 | | | 110.7 | |
| Property and other taxes | | 36.2 | | | 40.1 | | 83.4 | | | 89.3 | |
| Depreciation and depletion | | 57.0 | | | 52.4 | | 113.7 | | | 105.6 | |
Utility Margin(1) | | $ | 243.4 | | | $ | 222.9 | | $ | 544.1 | | | $ | 512.0 | |
(1) Non-GAAP financial measure. See “Non-GAAP Financial Measures” below. |
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended
June 30, | | Six Months Ended
June 30, |
| (in millions, except per share amounts) | 2024 | | 2023 | | 2024 | | 2023 |
| Revenues | $ | 319.9 | | | $ | 290.5 | | | $ | 795.3 | | | $ | 745.1 | |
Fuel, purchased supply and direct transmission expense(1) | 76.5 | | | 67.6 | | | 251.2 | | | 233.1 | |
Utility Margin (2) | 243.4 | | | 222.9 | | | 544.1 | | | 512.0 | |
| | | | | | | |
| Operating and maintenance | 57.4 | | | 54.8 | | | 111.5 | | | 110.7 | |
| Administrative and general | 31.3 | | | 30.0 | | | 71.7 | | | 64.7 | |
| Property and other taxes | 36.3 | | | 40.1 | | | 83.4 | | | 89.3 | |
| Depreciation and depletion | 56.9 | | | 52.4 | | | 113.7 | | | 105.6 | |
Total Operating Expenses (3) | 181.9 | | | 177.3 | | | 380.3 | | | 370.3 | |
| Operating income | 61.6 | | | 45.6 | | | 163.7 | | | 141.7 | |
| Interest expense, net | (31.9) | | | (28.4) | | | (62.9) | | | (56.4) | |
| Other income, net | 6.2 | | | 4.1 | | | 10.5 | | | 8.8 | |
| Income before income taxes | 35.9 | | | 21.3 | | | 111.3 | | | 94.0 | |
| Income tax expense | (4.2) | | | (2.1) | | | (14.6) | | | (12.4) | |
| Net Income | 31.7 | | | 19.1 | | | 96.7 | | | 81.7 | |
| Basic Shares Outstanding | 61.3 | | | 59.8 | | | 61.3 | | | 59.8 | |
| Earnings per Share - Basic | $ | 0.52 | | | $ | 0.32 | | | $ | 1.58 | | | $ | 1.37 | |
| Diluted Shares Outstanding | 61.4 | | | 59.8 | | | 61.3 | | | 59.8 | |
| Earnings per Share - Diluted | $ | 0.52 | | | $ | 0.32 | | | $ | 1.58 | | | $ | 1.37 | |
| | | | | | | |
| Dividends Declared per Common Share | $ | 0.65 | | | $ | 0.64 | | | $ | 1.30 | | | $ | 1.28 | |
(1) Exclusive of depreciation and depletion expense. (2) Utility Margin is a Non-GAAP financial measure. See "Reconciliation of gross margin to utility margin" above and “Non-GAAP Financial Measures” below. (3) Excluding fuel, purchased supply and direct transmission expense. |
NorthWestern Reports Second Quarter 2024 Financial Results
July 30, 2024
Page 5
RECONCILIATION OF PRIMARY CHANGES DURING THE QUARTER
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended
June 30, 2024 vs. 2023 |
| Pre-tax
Income | | Income Tax (Expense) Benefit (3) | | Net
Income | | Diluted
Earnings
Per Share |
| (in millions, except EPS) | | |
| Second Quarter, 2023 | $ | 21.3 | | | $ | (2.2) | | | $ | 19.1 | | | $ | 0.32 | |
Variance in revenue and fuel, purchased supply, and direct transmission expense(1) items impacting net income: | | | | | | | |
Base rates | 16.4 | | | (4.2) | | | 12.2 | | | 0.20 | |
| Electric transmission revenue | 4.1 | | | (1.0) | | | 3.1 | | | 0.05 | |
| Montana property tax tracker collections | 2.5 | | | (0.6) | | | 1.9 | | | 0.03 | |
Natural gas retail volumes | 1.1 | | | (0.3) | | | 0.8 | | | 0.01 | |
Montana natural gas transportation | 0.8 | | | (0.2) | | | 0.6 | | | 0.01 | |
Electric retail volumes | 0.6 | | | (0.2) | | | 0.4 | | | 0.01 | |
| QF liability adjustment | (4.2) | | | 1.1 | | | (3.1) | | | (0.05) | |
Non-recoverable Montana electric supply costs | (0.9) | | | 0.2 | | | (0.7) | | | (0.01) | |
Production tax credits, offset within income tax benefit | (0.8) | | | 0.8 | | | — | | | — | |
| Other | 3.7 | | | (0.9) | | | 2.8 | | | 0.05 | |
| | | | | | | |
Variance in expense items(2) impacting net income: | | | | | | | |
Depreciation | (4.5) | | | 1.1 | | | (3.4) | | | (0.06) | |
| Interest | (3.5) | | | 0.9 | | | (2.6) | | | (0.04) | |
Operating, maintenance, and administrative | (2.3) | | | 0.6 | | | (1.7) | | | (0.03) | |
| Other | 1.6 | | | 0.7 | | | 2.3 | | | 0.04 | |
| Dilution from higher share count | | | | | | | (0.01) | |
| Second Quarter, 2024 | $ | 35.9 | | | $ | (4.2) | | | $ | 31.7 | | | $ | 0.52 | |
| Change in Net Income | | | | | $ | 12.6 | | | $ | 0.20 | |
(1) Exclusive of depreciation and depletion shown separately below (2) Excluding fuel, purchased supply, and direct transmission expense (3) Income Tax (Expense) Benefit calculation on reconciling items assumes blended federal plus state effective tax rate of 25.3%. |
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NorthWestern Reports Second Quarter 2024 Financial Results
July 30, 2024
Page 6
EXPLANATION OF CONSOLIDATED RESULTS
Three Months Ended June 30, 2024 Compared with the Three Months Ended June 30, 2023
Consolidated gross margin for the three months ended June 30, 2024 was $92.8 million as compared with $75.5 million in 2023, an increase of $17.3 million, or 22.9 percent. This increase was primarily due to new base rates in Montana and South Dakota, electric transmission revenues, Montana property tax tracker collections, and electric and natural gas retail volumes. These were offset in part by a less favorable QF liability adjustment in the current year, non-recoverable Montana electric supply costs, depreciation, and operating and maintenance expenses.
| | | | | | | | | | | | | | |
| | Three Months Ended
June 30, |
| (in millions) | | 2024 | | 2023 |
| |
| Reconciliation of gross margin to utility margin: | | | | |
| Operating Revenues | | $ | 319.9 | | | $ | 290.5 | |
| Less: Fuel, purchased supply and direct transmission expense (exclusive of depreciation and depletion shown separately below) | | 76.5 | | | 67.6 | |
| Less: Operating and maintenance | | 57.4 | | | 54.9 | |
| Less: Property and other taxes | | 36.2 | | | 40.1 | |
| Less: Depreciation and depletion | | 57.0 | | | 52.4 | |
| Gross Margin | | 92.8 | | | 75.5 | |
| | | | |
| Operating and maintenance | | 57.4 | | | 54.9 | |
| Property and other taxes | | 36.2 | | | 40.1 | |
| Depreciation and depletion | | 57.0 | | | 52.4 | |
Utility Margin(1) | | $ | 243.4 | | | $ | 222.9 | |
(1) Non-GAAP financial measure. See “Non-GAAP Financial Measures” below. |
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, |
| 2024 | | 2023 | | Change | | % Change |
| (dollars in millions) |
| Utility Margin | | | | | | | |
| Electric | $ | 199.2 | | | $ | 186.9 | | | $ | 12.3 | | | 6.6 | % |
| Natural Gas | 44.2 | | | 36.0 | | | 8.2 | | | 22.8 | |
Total Utility Margin(1) | $ | 243.4 | | | $ | 222.9 | | | $ | 20.5 | | | 9.2 | % |
(1) Non-GAAP financial measure. See “Non-GAAP Financial Measures” below. | | | |
Consolidated utility margin for the three months ended June 30, 2024 was $243.4 million as compared with $222.9 million for the same period in 2023, an increase of $20.5 million, or 9.2 percent.
NorthWestern Reports Second Quarter 2024 Financial Results
July 30, 2024
Page 7
Primary components of the change in utility margin include the following (in millions):
| | | | | |
| Utility Margin
2024 vs. 2023 |
| Utility Margin Items Impacting Net Income | |
| Base rates | $ | 16.4 | |
| Transmission revenue due to market conditions | 4.1 | |
| Montana property tax tracker collections | 2.5 | |
| Natural gas retail volumes | 1.1 | |
| Montana natural gas transportation | 0.8 | |
| Electric retail volumes | 0.6 | |
| QF liability adjustment | (4.2) | |
| Non-recoverable Montana electric supply costs | (0.9) | |
| Other | 3.7 | |
| Change in Utility Margin Items Impacting Net Income | 24.1 | |
| Utility Margin Items Offset Within Net Income | |
| Property and other taxes recovered in revenue, offset in property and other taxes | (3.8) | |
| Production tax credits, offset in income tax expense | (0.8) | |
| Operating expenses recovered in revenue, offset in operating and maintenance expense | 1.0 | |
| Change in Utility Margin Items Offset Within Net Income | (3.6) | |
Increase in Consolidated Utility Margin(1) | $ | 20.5 | |
| (1) Non-GAAP financial measure. See “Non-GAAP Financial Measures” below. | |
Higher electric retail volumes were driven by favorable weather in Montana impacting residential demand, higher industrial demand, and customer growth in all jurisdictions, partly offset by unfavorable weather in South Dakota impacting residential demand and lower commercial demand. Higher natural gas retail volumes were driven by favorable weather in Montana and customer growth, partly offset by unfavorable weather in South Dakota and Nebraska.
The less favorable adjustment to our electric QF liability (unrecoverable costs associated with contracts covered by the Public Utility Regulatory Policies Act of 1978 as part of a 2002 stipulation with the MPSC and other parties) reflects a $0.8 million gain in 2024, as compared with a $5.0 million gain for the same period in 2023, due to a favorable adjustment in the prior year, decreasing the QF liability by $4.2 million, reflecting annual actual contract price escalation for the 2023-2024 contract year, which was less than previously estimated. The 2023-2024 contract year was the last year of the contract that contains variable pricing terms.
Under the PCCAM, net supply costs higher or lower than the PCCAM base rate (excluding QF costs) are allocated 90 percent to Montana customers and 10 percent to shareholders. For the three months ended June 30, 2024, we over-collected supply costs of $11.0 million resulting in a reduction to our under collection of costs, and recorded an increase in pre-tax earnings of $1.2 million (10 percent of the PCCAM base variance). For the three months ended June 30, 2023, we over-collected supply costs of $18.9 million resulting in a reduction to our under collection of costs, and recorded an increase in pre-tax earnings of $2.1 million.
NorthWestern Reports Second Quarter 2024 Financial Results
July 30, 2024
Page 8
| | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended June 30, |
| | 2024 | | 2023 | | Change | | % Change |
| ($ in millions) | |
| Operating Expenses (excluding fuel, purchased supply and direct transmission expense) | | | | | | | |
| Operating and maintenance | $ | 57.4 | | | $ | 54.8 | | | $ | 2.6 | | | 4.7 | % |
| Administrative and general | 31.3 | | | 30.0 | | | 1.3 | | | 4.3 | |
| Property and other taxes | 36.3 | | | 40.1 | | | (3.8) | | | (9.5) | |
| Depreciation and depletion | 56.9 | | | 52.4 | | | 4.5 | | | 8.6 | |
| Total Operating Expenses (excluding fuel, purchased supply and direct transmission expense) | $ | 181.9 | | | $ | 177.3 | | | $ | 4.6 | | | 2.6 | % |
Consolidated operating expenses, excluding fuel, purchased supply and direct transmission expense, were $181.9 million for the three months ended June 30, 2024, as compared with $177.3 million for the three months ended June 30, 2023. Primary components of the change include the following (in millions):
| | | | | |
| Operating Expenses |
| 2024 vs. 2023 |
| Operating Expenses (excluding fuel, purchased supply and direct transmission expense) Impacting Net Income | |
| Depreciation expense due to plant additions and higher depreciation rates | $ | 4.5 | |
| Electric generation maintenance | 2.0 | |
Labor and benefits(1) | 1.8 | |
| Insurance expense | 0.5 | |
| Technology implementation and maintenance expenses | 0.4 | |
| Uncollectible accounts | (0.5) | |
| Other | (1.9) | |
| Change in Items Impacting Net Income | 6.8 | |
| |
| Operating Expenses Offset Within Net Income | |
| Property and other taxes recovered in trackers, offset in revenue | (3.8) | |
Pension and other postretirement benefits, offset in other income(1) | 0.7 | |
| Operating and maintenance expenses recovered in trackers, offset in revenue | 1.0 | |
| Deferred compensation, offset in other income | (0.1) | |
| Change in Items Offset Within Net Income | (2.2) | |
| Increase in Operating Expenses (excluding fuel, purchased supply and direct transmission expense) | $ | 4.6 | |
| (1) In order to present the total change in labor and benefits, we have included the change in the non-service cost component of our pension and other postretirement benefits, which is recorded within other income on our Condensed Consolidated Statements of Income. This change is offset within this table as it does not affect our operating expenses. |
We estimate property taxes throughout each year, and update those estimates based on valuation reports received from the Montana Department of Revenue. Under Montana law, we are allowed to track the increases and decreases in the actual level of state and local taxes and fees and adjust our rates to recover the increase or decrease between rate cases less the amount allocated to FERC-jurisdictional customers and net of the associated income tax benefit.
NorthWestern Reports Second Quarter 2024 Financial Results
July 30, 2024
Page 9
Consolidated operating income for the three months ended June 30, 2024 was $61.6 million as compared with $45.6 million in the same period of 2023. This increase was primarily due to new base rates in Montana and South Dakota, electric transmission revenues, Montana property tax tracker collections, and electric and natural gas retail volumes. These were offset in part by a less favorable QF liability adjustment in the current year, non-recoverable Montana electric supply costs, depreciation and operating, administrative and general expenses.
Consolidated interest expense was $31.9 million for the three months ended June 30, 2024 as compared with $28.4 million for the same period of 2023. This increase was due to higher borrowings and interest rates, partly offset by lower interest on our revolving credit facilities and higher capitalization of Allowance for Funds Used During Construction (AFUDC).
Consolidated other income was $6.2 million for the three months ended June 30, 2024 as compared with $4.1 million for the same period of 2023. This increase was primarily due to higher capitalization of AFUDC and a decrease in the non-service component of pension expense.
Consolidated income tax expense was $4.2 million for the three months ended June 30, 2024 as compared to $2.1 million for the same period of 2023. Our effective tax rate for the three months ended June 30, 2024 was 11.8% as compared with 10.1% for the same period in 2023.
The following table summarizes the differences between our effective tax rate and the federal statutory rate ($ in millions):
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, |
| 2024 | | 2023 |
| Income Before Income Taxes | $ | 35.9 | | | | | $ | 21.3 | | | |
| | | | | | | |
| Income tax calculated at federal statutory rate | 7.5 | | | 21.0 | % | | 4.5 | | | 21.0 | % |
| | | | | | | |
| Permanent or flow-through adjustments: | | | | | | | |
| State income tax, net of federal provisions | 0.0 | | | 0.1 | | | 0.3 | | | 1.3 | |
| Flow-through repairs deductions | (3.0) | | | (8.5) | | | (1.7) | | | (8.0) | |
| Production tax credits | (2.0) | | | (5.6) | | | (1.1) | | | (5.4) | |
| Amortization of excess deferred income tax | (0.2) | | | (0.5) | | | (0.2) | | | (1.1) | |
| Plant and depreciation flow-through items | 1.1 | | | 3.0 | | | 0.2 | | | 0.9 | |
| Other, net | 0.8 | | | 2.3 | | | 0.1 | | | 1.4 | |
| (3.3) | | | (9.2) | | | (2.4) | | | (10.9) | |
| | | | | | | |
| Income tax expense | $ | 4.2 | | | 11.8 | % | | $ | 2.1 | | | 10.1 | % |
| | | | | | | |
We compute income tax expense for each quarter based on the estimated annual effective tax rate for the year, adjusted for certain discrete items. Our effective tax rate typically differs from the federal statutory tax rate primarily due to the regulatory impact of flowing through federal and state tax benefits of repairs deductions, state tax benefit of accelerated tax depreciation deductions (including bonus depreciation when applicable) and production tax credits.
Consolidated net income for the three months ended June 30, 2024 was $31.7 million as compared with $19.1 million for the same period in 2023. This increase was primarily due to new base rates in Montana and South Dakota, electric transmission revenues, Montana property tax tracker collections, and electric and natural gas retail
NorthWestern Reports Second Quarter 2024 Financial Results
July 30, 2024
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volumes. These were offset in part by a less favorable QF liability adjustment in the current year, non-recoverable Montana electric supply costs, depreciation, operating, administrative and general costs, and interest expense.
LIQUIDITY AND OTHER CONSIDERATIONS
Liquidity and Capital Resources
As of June 30, 2024, our total net liquidity was approximately $393.4 million, including $6.4 million of cash and $387.0 million of revolving credit facility availability with no letters of credit outstanding. This compares to total net liquidity one year ago at June 30, 2023 of $366.8 million.
Earnings Per Share
Basic earnings per share are computed by dividing earnings applicable to common stock by the weighted average number of common shares outstanding for the period. Diluted earnings per share reflect the potential dilution of common stock equivalent shares that could occur if unvested shares were to vest. Common stock equivalent shares are calculated using the treasury stock method, as applicable. The dilutive effect is computed by dividing earnings applicable to common stock by the weighted average number of common shares outstanding plus the effect of the outstanding unvested restricted stock and performance share awards. Average shares used in computing the basic and diluted earnings per share are as follows:
| | | | | | | | | | | |
| Three Months Ended |
| June 30, 2024 | | June 30, 2023 |
| Basic computation | 61,288,870 | | | 59,804,283 | |
| Dilutive effect of: | | | |
Performance share awards(1) | 68,478 | | | 45,391 | |
| Diluted computation | 61,357,348 | | | 59,849,674 | |
| | | | | | | | | | | |
| Six Months Ended |
| June 30, 2024 | | June 30, 2023 |
| Basic computation | 61,277,418 | | | 59,790,316 | |
| Dilutive effect of: | | | |
Performance share awards(1) | 56,065 | | | 29,200 | |
| Diluted computation | 61,333,483 | | | 59,819,516 | |
(1) Performance share awards are included in diluted weighted average number of shares outstanding based upon what would be issued if the end of the most recent reporting period was the end of the term of the award. |
As of June 30, 2024, there were 35,933 shares from performance and restricted share awards which were antidilutive and excluded from the earnings per share calculations, compared to 21,890 shares as of June 30, 2023.
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NorthWestern Reports Second Quarter 2024 Financial Results
July 30, 2024
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Adjusted Non-GAAP Earnings
We reported GAAP earnings of $0.52 per diluted share for the three months-ended June 30, 2024 and $0.32 per diluted share for the same period in 2023. Adjusted Non-GAAP earnings per diluted share for the same periods are $0.53 and $0.35, respectively. A reconciliation of items factored into our Adjusted Non-GAAP diluted earnings are summarized below. The amount below represents a non-GAAP measure that may provide users of this data with additional meaningful information regarding the impact of certain items on our expected earnings. More information on this measure can be found in the "Non-GAAP Financial Measures" section below.
| | | | | | | | | | | |
| (in millions, except EPS) | |
| | | |
| Three Months Ended June 30, 2024 |
| Pre-tax
Income | Net(1)
Income | Diluted
EPS |
| 2024 Reported GAAP | $35.9 | $31.7 | $ | 0.52 | |
| | | |
| Non-GAAP Adjustments: |
Unfavorable weather as compared to normal | 0.7 | | 0.5 | | 0.01 | |
| | | |
| 2024 Adj. Non-GAAP | $36.6 | $32.2 | $0.53 |
| | | |
| | | |
| Three Months Ended June 30, 2023 |
| Pre-tax
Income | Net(1)
Income | Diluted
EPS |
| 2023 Reported GAAP | $21.3 | $19.1 | $ | 0.32 | |
| | | |
| Non-GAAP Adjustments: |
Unfavorable weather as compared to normal | 1.8 | | 1.3 | | 0.03 | |
| | | |
| 2023 Adj. Non-GAAP | $23.1 | $20.4 | $0.35 |
| | | |
| (1) Income tax rate on reconciling items assumes blended federal plus state effective tax rate of 25.3%. |
Company Hosting Earnings Webcast
NorthWestern will also host an investor earnings webcast on Wednesday, July 31, 2024, at 3:30 p.m. Eastern time to review its financial results for the quarter ending June 30, 2024. To register for the webcast, please visit www.northwesternenergy.com/earnings-registration. After registration, a link to access the event will be emailed to the address provided. Please note that a unique and valid email address is required for each attendee to access the webinar. Please go to the site at least 10 minutes in advance of the webinar to register. An archived webcast will be available shortly after the event and remain active for one year.
NorthWestern Energy - DELIVERING A BRIGHT FUTURE
NorthWestern Energy Group, Inc., doing business as NorthWestern Energy, provides essential energy infrastructure and valuable services that enrich lives and empower communities while serving as long-term partners to our customers and communities. We work to deliver safe, reliable, and innovative energy solutions that create value for customers, communities, employees, and investors. We do this by providing low-cost and reliable service performed by highly-adaptable and skilled employees. We provide electricity and / or natural gas to approximately 775,300 customers in Montana, South Dakota, Nebraska, and Yellowstone National Park. Our operations in
NorthWestern Reports Second Quarter 2024 Financial Results
July 30, 2024
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Montana and Yellowstone National Park are conducted through our subsidiary, NW Corp, and our operations in South Dakota and Nebraska are conducted through our subsidiary, NWE Public Service. We have provided service in South Dakota and Nebraska since 1923 and in Montana since 2002.
Non-GAAP Financial Measures
This press release includes financial information prepared in accordance with GAAP, as well as other financial measures, such as Utility Margin, Adjusted Non-GAAP pretax income, Adjusted Non-GAAP net income and Adjusted Non-GAAP Diluted EPS that are considered “non-GAAP financial measures.” Generally, a non-GAAP financial measure is a numerical measure of a company’s financial performance, financial position or cash flows that excludes (or includes) amounts that are included in (or excluded from) the most directly comparable measure calculated and presented in accordance with GAAP.
We define Utility Margin as Operating Revenues less fuel, purchased supply and direct transmission expense (exclusive of depreciation and depletion) as presented in our Condensed Consolidated Statements of Income. This measure differs from the GAAP definition of Gross Margin due to the exclusion of Operating and maintenance, Property and other taxes, and Depreciation and depletion expenses, which are presented separately in our Condensed Consolidated Statements of Income. A reconciliation of Utility Margin to Gross Margin, the most directly comparable GAAP measure, is included in the press release above.
Management believes that Utility Margin provides a useful measure for investors and other financial statement users to analyze our financial performance in that it excludes the effect on total revenues caused by volatility in energy costs and associated regulatory mechanisms. This information is intended to enhance an investor's overall understanding of results. Under our various state regulatory mechanisms, as detailed below, our supply costs are generally collected from customers. In addition, Utility Margin is used by us to determine whether we are collecting the appropriate amount of energy costs from customers to allow for recovery of operating costs, as well as to analyze how changes in loads (due to weather, economic or other conditions), rates and other factors impact our results of operations. Our Utility Margin measure may not be comparable to that of other companies' presentations or more useful than the GAAP information provided elsewhere in this report.
Management also believes the presentation of Adjusted Non-GAAP pre-tax income, Adjusted Non-GAAP net income and Adjusted Non-GAAP Diluted EPS is more representative of normal earnings than GAAP pre-tax income, net income and EPS due to the exclusion (or inclusion) of certain impacts that are not reflective of ongoing earnings. The presentation of these non-GAAP measures is intended to supplement investors' understanding of our financial performance and not to replace other GAAP measures as an indicator of actual operating performance. Our measures may not be comparable to other companies' similarly titled measures.
Special Note Regarding Forward-Looking Statements
This press release contains forward-looking statements within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, including, without limitation, the information under "Reconciliation of Non-GAAP Items." Forward-looking statements involve risks and uncertainties, which could cause actual results or outcomes to differ materially from those expressed. We caution that while we make such statements in good faith and believe such statements are based on reasonable assumptions, including without limitation, management's examination of historical operating trends, data contained in records and other data available from third parties, we cannot assure you that we will achieve our projections. Factors that may cause such differences include, but are not limited to:
•adverse determinations by regulators, as well as potential adverse federal, state, or local legislation or regulation, including costs of compliance with existing and future environmental requirements, and wildfire
NorthWestern Reports Second Quarter 2024 Financial Results
July 30, 2024
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damages in excess of liability insurance coverage, could have a material effect on our liquidity, results of operations and financial condition;
•the impact of extraordinary external events and natural disasters, such as a wide-spread or global pandemic, geopolitical events, earthquake, flood, drought, lightning, weather, wind, and fire, could have a material effect on our liquidity, results of operations and financial condition;
•acts of terrorism, cybersecurity attacks, data security breaches, or other malicious acts that cause damage to our generation, transmission, or distribution facilities, information technology systems, or result in the release of confidential customer, employee, or Company information;
•supply chain constraints, recent high levels of inflation for product, services and labor costs, and their impact on capital expenditures, operating activities, and/or our ability to safely and reliably serve our customers;
•changes in availability of trade credit, creditworthiness of counterparties, usage, commodity prices, fuel supply costs or availability due to higher demand, shortages, weather conditions, transportation problems or other developments, may reduce revenues or may increase operating costs, each of which could adversely affect our liquidity and results of operations;
•unscheduled generation outages or forced reductions in output, maintenance or repairs, which may reduce revenues and increase operating costs or may require additional capital expenditures or other increased operating costs; and
•adverse changes in general economic and competitive conditions in the U.S. financial markets and in our service territories.
Our 2023 Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, reports on Form 8-K and other Securities and Exchange Commission filings discuss some of the important risk factors that may affect our business, results of operations and financial condition. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
Investor Relations Contact: Media Contact:
Travis Meyer (605) 978-2967 Jo Dee Black (866) 622-8081
travis.meyer@northwestern.com jodee.black@northwestern.com
2024 Second Quarter Earnings Webcast July 31, 2024 18-K July 31, 2024
NorthWestern Energy 2 Forward Looking Statements 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 of this document unless otherwise noted. Our actual future business and financial performance may differ materially and adversely from our expectations 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 10-K and 10-Q along with other public filings with the SEC.
Recent Highlights • Reported GAAP diluted EPS of $0.52 o Non-GAAP diluted EPS of $0.531 • Affirming 2024 diluted EPS guidance of $3.42 - $3.62 • Affirming long-term (5 year) rate base and earnings per share growth rates targets of 4% - 6%2 • Dividend Declared: $0.65 per share payable September 30, 2024 to shareholders of record as of September 13, 2024 Rate Reviews Filed: • Montana electric and natural gas • South Dakota natural gas • Nebraska natural gas Announcement of Two Strategic Transactions: • Entered agreement to acquire Energy West Montana’s natural gas distribution system (serving ~33,000 customers) for $39 million • Entered agreement to acquire Puget Sound’s 370MW ownership in Colstrip Units 3 & 4 at no cost 1.) See “Second Quarter 2024 Non-GAAP Earnings” below and “Non-GAAP Financial Measures” in appendix 2.) Based on 2022 adjusted non-GAAP earnings of $3.18 per diluted share and 2022 estimated rate base of $4.54 billion 3
9%-11% Total Growth 11%+ Total Growth Incremental Opportunities: 6% + EPS Growth ~5% Dividend Yield Base Capital Plan: 4%-6% EPS Growth FERC Transmission Incremental generating capacity (subject to successful resource procurement bids) Qualifying Facility and / or Power Purchase Agreement buyouts Electrification supporting economic development Nearly $2.5 billion of highly executable and low-risk capital investment forecasted over the next five years. This investment is expected to drive annualized earnings and rate base growth of approximately 4% - 6%. See slide titled “Strong Growth Outlook” for additional information. + The NorthWestern Value Proposition + 4 = =
Q2 Financial Results 5
Second Quarter Financial Results 6 1.) Utility Margin is a non- GAAP Measure. See appendix slide titled “Reconciling Gross Margin to Utility Margin” for additional disclosure. (in millions except per share amounts) 2024 2023 Variance % Variance Operating Revenues 319.9$ 290.5$ 29.4$ 10.1% 76.5 67.6 8.9 13.2% Utility Margin 243.4 222.9 20.5 9.2% Operating Expenses Operating and maintenance 57.4 54.8 2.6 4.7% Administrative and general 31.3 30.0 1.3 4.3% Property and other taxes 36.3 40.1 (3.8) (9.5%) Depreciation and depletion 56.9 52.4 4.5 8.6% Total Operating Expenses 181.9 177.3 4.6 2.6% Operating Income 61.6 45.6 16.0 35.1% Interest expense (31.9) (28.4) (3.5) (12.3%) Other income, net 6.2 4.1 2.1 51.2% Income Before Taxes 35.9 21.3 14.6 68.5% Income tax expense (4.2) (2.2) (2.0) (90.9%) Net Income 31.7$ 19.1$ 12.6$ 66.0% Effective Tax Rate 11.8% 10.1% 1.70% Diluted Shares Outstanding 61.4 59.8 1.6 2.7% Diluted Earnings Per Share $0.52 $0.32 0.20$ 62.5% Dividends Paid per Common Share 0.65$ 0.64$ 0.01$ 1.6% Three Months Ended June 30, Fuel, purchased supply & direct transmission expense (exclusive of depreciation and depletion) 1
Second Quarter 2024 Financial Results 7 1.) See “Second Quarter 2024 Non-GAAP Earnings” below and “Non-GAAP Financial Measures” in appendix. Second Quarter Net Income vs Prior Period •GAAP: 12.6 million or 66.0% •Non-GAAP1: 11.8 million or 57.8% Second Quarter EPS vs Prior Period •GAAP: $0.20 or 62.5% •Non-GAAP1: $0.18 or 51.4%
Year-to-Date 2024 Financial Results 8 Year-to-Date Net Income vs Prior Period •GAAP: 15.0 million or 18.4% •Non-GAAP1: 15.9 million or 19.1% Year-to-Date EPS vs Prior Period •GAAP: $0.21 or 15.4% •Non-GAAP1: $0.22 or 15.7% 1.) See “Second Quarter 2024 Non-GAAP Earnings” below and “Non-GAAP Financial Measures” in appendix.
After-tax EPS vs Prior Year Second Quarter Earnings Drivers 9 1 2 Improvement in Utility Margin offset mild weather, higher OA&G expense, depreciation, interest expense, and slight dilution from higher share count. 1.) Utility Margin is a non-GAAP Measure. See appendix slide titled “Reconciling Gross Margin to Utility Margin” for additional disclosure. 2.) See “Second Quarter 2024 Non- GAAP Earnings” below and “Non- GAAP Financial Measures” in appendix.
Second Quarter Utility Margin Bridge Pre-tax Millions vs. Prior Year $24.1 million or 10.8% increase in Utility Margin items that impact Net Income NOTE: Utility Margin is a non-GAAP Measure. See appendix slide titled “Reconciling Gross Margin to Utility Margin” for additional disclosure. 10
We estimate weather to be a $0.7 million pre-tax detriment as compared to normal and a $1.1 million benefit as compared to second quarter 2023. (1) As a result of the adoption of Accounting Standard Update 2017-07 in March 2018, pension and other employee benefit expense is now disaggregated on the GAAP income statement with portions now recorded in both OG&A expense and Other (Expense) Income lines. To facilitate better understanding of trends in year-over-year comparisons, the non-GAAP adjustment above re-aggregates the expense in OG&A - as it was historically presented prior to the ASU 2017-07 (with no impact to net income or earnings per share). (2) Utility Margin is a non-GAAP Measure. See the slide titled “Reconciling Gross Margin to Utility Margin” for additional disclosures. Second Quarter 2024 Non-GAAP Earnings 11 The adjusted non-GAAP measures presented in the table reflect significant items that are non-recurring or a variance from normal weather, however they should not be considered a substitute for financial results and measures determined or calculated in accordance with GAAP.
Credit, Cash Flow, and Financing Plans 12 Credit Ratings 2024 Financing Plan No equity expected to fund the current 5-year | $2.5 billion capital plan Financing plans (targeting a FFO to Debt ratio > 14%) are expected to maintain our current credit ratings. We expect to pay minimal cash taxes into 2028 due to utilization of our NOL’s and tax credits. Financing plans are subject to change.
Strong Growth Outlook This guidance range is based upon, but not limited to, the following major assumptions: • Normal weather in our service territories; • Interim rates in Montana in the fourth quarter; • An effective income tax rate of approximately 12%-14%; and • Diluted average shares outstanding of approximately 61.4 million. 2024 Non-GAAP EPS Guidance1 of $3.42 - $3.62 Affirming long-term (5 Year) expected growth rates • EPS growth of 4% to 6% from 2022 base year of $3.18 Non-GAAP • Rate base growth of 4% to 6% from 2022 base year $4.54 billion • Continued focus on earned returns driven by financial and operational execution No equity expected to fund the current 5-year | $2.5 billion capital plan • Capital plan is expected to be funded by cash from operations (aided by net operating losses1) and secured debt • Any equity needs would be driven by opportunities incremental to the plan Expect to maintain FFO / Debt > 14% through 2024 and beyond Earnings growth is expected to exceed dividend growth until we return to our targeted 60% to 70% payout ratio. 13 1.) See “2024 Earnings Bridge” in the Appendix for additional detail.
Rate Reviews 14
15
Strategic Update 16
Energy West/Cut Bank Natural Gas 17 Transaction Highlights Purchase Price Approvals and Timing • Two natural gas LDC’s in Montana: Energy West Montana (“EWM”) and Cut Bank Gas Co. (“CBGC”) from Hope Utilities • 33,000 customers in Great Falls area, West Yellowstone and Cut Bank communities • EWM’s and CBGC’s currently authorized rates will remain until our next natural gas rate review • Asset purchase price of $39 million*, subject to a number of customary closing conditions • Expected closing in the first quarter of 2025 • Subject to Montana Public Service Commission approval (August 2024 filing) • Opportunity to acquire assets strategically located within our service territory • Consistent with focus on our existing regulated utility business Customers • Expands and reinforces NorthWestern’s commitment to Montana, its communities and residents • Opportunity to expand NorthWestern’s charitable and economic development impact Communities • EWM and CBGC employees offered employment with NWE • NorthWestern remains committed to competitive pay, benefits and opportunity for advancement Employees • Regulated distribution assets within our existing geography • Expected to be earnings and credit neutral Investors * Approximately 1.5x estimated 2024 ending Property Plant & Equipment balance
Colstrip Transaction Overview 18 NorthWestern Energy entered into an agreement to acquire Puget Sound Energy’s ownership interests in Colstrip Units 3 and 4. This transaction is in addition to our previously disclosed agreement with Avista to acquire their ownership interest in Colstrip. Similar to the previously disclosed Avista agreement, the Puget acquisition is subject to customary conditions and approvals, including approval from the FERC. NorthWestern will have the right to exercise Avista’s and Puget Sound’s votes with respect to capital expenditures between now and 2025 with both Avista and Puget Sound responsible for its pro rata share. Avista and Puget Sound will retain their respective existing environmental and decommissioning obligations through life of plant. Announcement Date: Effective Date: Generating Capacity: Acquisition Price: Puget Sound July 2024 December 31, 2025 370 MW (185 MW of each CU 3 & 4) $0.0 Avista January 2023 December 31, 2025 222 MW (111 MW of each CU 3 & 4) $0.0 Reliability NorthWestern has considerable low cost wind and solar generation on our system today, but that generation is variable. Colstrip’s generation provides power for our customers when the wind isn’t blowing and the sun isn’t shining. Affordability As other states require a transition away from coal resources at a pace faster than is feasible in Montana, this no-cost acquisition allows our customers to transition to a cleaner energy future at a pace that works for Montanans. Sustainability Colstrip is a dependable bridge to a cleaner energy future, which could ultimately include new lower- or no-carbon emitting resources such as gas-fired generation, small modular nuclear reactors, long- duration storage or other technologies, which we believe could be located in the Colstrip area. But this will take time and we will not sacrifice service reliability during the transition. The no-cost acquisition will allow us to leverage existing infrastructure in Montana that is available when our customers need energy the most at an affordable cost.
Colstrip Facility Ownership Overview 19 In January 2026, we will own 55% of Colstrip Units 3 &4. This allows us to guide investments in operation and maintenance in providing on- demand, 24/7 cost-effective generation for our Montana customers until a viable equivalent, carbon-free energy resource is available.
Montana Wildfire Mitigation Plan 20 Reduction of Ignition Potential System and Environmental Monitoring Enhanced Vegetation Maintenance Enriched Public Communication and Outreach Comprehensive summary of wildfire mitigation activities Expect to update plan with each electric rate review filing Deferral treatment for wildfire costs beyond amounts authorized in rates (up to $95 million over 5 years) Key elements of the plan, driven by risk analysis include: • Situational Awareness • Operational Practice • System Preparedness Our operational practice includes situationally performing power shutdowns and adjusting system operating protocols during periods of heightened wildfire risk. Power shutdown considerations include environmental conditions, system performance, and mitigating any potential impacts of an outage to customers and emergency services. • Vegetation Management • Public Communication Distribution 5.9% Transmission 7.3% Linear line miles of highest risk Montana electric assets NorthWesternEnergy.com/Wildfire
Conclusion Pure Electric & Gas Utility Solid Utility Foundation Best Practices Corporate Governance Attractive Future Growth Prospects Strong Earnings & Cash Flows 21 NorthWestern Energy Group, Inc. dba: NorthWestern Energy Ticker: NWE (Nasdaq) www.northwesternenergy.com Corporate Support Office 3010 West 69th Street Sioux Falls, SD 57108 (605) 978-2900 Investor Relations Officer Travis Meyer 605-978-2967 travis.meyer@northwestern.com
Appendix: 22
2024 Earnings Bridge This guidance range is based upon, but not limited to, the following major assumptions: • Normal weather in our service territories; • Interim rates in Montana in the fourth quarter; • An effective income tax rate of approximately 12%- 14%; and • Diluted average shares outstanding of approximately 61.4 million. 23 Appendix
$2.5 billion of highly-executable and low-risk capital investment Regulated Utility Five-Year Capital Forecast 24 Appendix
(1) The revenue requirement associated with the FERC regulated portion of Montana electric transmission and ancillary services are included as revenue credits to our MPSC jurisdictional customers. Therefore, we do not separately reflect FERC authorized rate base or authorized returns. (2) The Montana gas revenue requirement includes a step down which approximates annual depletion of our natural gas production assets included in rate base. (3) For those items marked as "n/a," the respective settlement and/or order was not specific as to these terms. (4) On June 15, 2023, we filed a South Dakota electric rate review filing (2022 test year) with the South Dakota Public Utility Commission Coal Generation Rate Base as a percentage of Total Rate Base Revenue from coal generation is not easily identifiable due to the use of bundled rates in South Dakota and other rate design and accounting considerations. However, NorthWestern is a fully regulated utility company for which rate base is the primary driver for earnings. The data to the left illustrates that NorthWestern only derives approximately 9 -14% of earnings from its jointly owned coal generation rate base. Rate Base & Authorized Return Summary Appendix 25
Our Net-Zero Vision Over the past 100 years, NorthWestern Energy has maintained our commitment to provide customers with reliable and affordable electric and natural gas service while also being good stewards of the environment. We have responded to climate change, its implications and risks, by increasing our environmental sustainability efforts and our access to clean energy resources. But more must be done. We are committed to achieving net zero emissions by 2050. • Committed to achieving net-zero by 2050 for Scope 1 and 2 emissions • Must balance Affordability, Reliability and Sustainability in this transition • No new carbon emitting generation additions after 2035 • Pipeline modernization, enhanced leak detection and development of alternative fuels for natural gas business • Electrify fleet and add charging infrastructure • Carbon offsets likely needed to ultimately achieve net-zero • Please visit www.NorthWesternEnergy.com/NetZero to learn more about our Net Zero Vision. 26 Appendix
Rate Review Appendix 27
Montana Electric Rate Review Montana Electric: • 69.4 Million Total Request • $874 Million Plant-in-Service additions (’23-’24F) • Operating Costs increase 1.1% CAGR (’21-’23) • Typical Residential Bill increase 8.3% at full request 28 $156.5 Million Base Rate Increase Requested & $69.4 Million Total Request Typical 750 kWh Residential Electric Bill YCGS Net Customer Impact Appendix
Montana Gas Rate Review 29 $28.6 Million Base Rate Increase Requested Montana Natural Gas: • $28.6 Million Total Request • $174 Million Plant-in-Service additions (’23-’24F) • Operating Costs increase 3.3% CAGR (’21-’23) • Typical Residential Bill increase 17.0% at full request Typical 65 Therm Residential Natural Gas Bill Appendix
South Dakota Natural Gas Rate Review 30 South Dakota Natural Gas: • $6.0 Million Total Request • $80 Million Plant-in-Service additions (’10-’23) • Operating Costs increase 1.9% CAGR (’10-’23) • Typical Residential Bill increase 7.9% at full request $6.0 Million Rate Increase Requested Typical 100 Therm Residential Natural Gas Bill Appendix
Nebraska Natural Gas Rate Review 31 $3.6 Million Rate Increase Requested Typical 100 Therm Residential Natural Gas Bill Nebraska Natural Gas: • $3.6 Million Total Request • $42 Million Plant-in-Service additions (’07-’23) • Operating Costs increase 1.3% CAGR (’07-’23) • Typical Residential Bill increase 5.8% at full request Appendix
Second Quarter Appendix 32
Utility Margin (Q2) (dollars in millions) Three Months Ended June 30, 2024 2023 Variance Electric $ 199.2 $ 186.9 $ 12.3 6.6% Natural Gas 44.2 36.0 8.2 22.8% Total Utility Margin1 $ 243.4 $ 222.9 $ 20.5 9.2% (1) Utility Margin is a non-GAAP Measure. See appendix slide titled “Reconciling Gross Margin to Utility Margin” for additional disclosure. Increase in utility margin due to the following factors: $ 16.4 Base rates 4.1 Transmission revenue due to market conditions 2.5 Montana property tax tracker collections 1.1 Natural gas retail volumes 0.8 Montana natural gas transportation 0.6 Electric retail volumes (4.2) Qualifying Facility (QF) liability adjustment (0.9) Non-recoverable Montana electric supply costs 3.7 Other $ 24.1 Change in Utility Margin Impacting Net Income $ (3.8) Property & other taxes recovered in revenue, offset in property & other taxes (0.8) Production tax credits, offset in income tax expense 1.0 Operating expenses recovered in revenue, offset in operating & maintenance expense $ (3.6) Change in Utility Margin Offset Within Net Income $ 20.5 Increase in Utility Margin 33 Appendix
Operating Expenses (Q2) Increase in operating expenses due to the following factors: $ 4.5 Depreciation expense due to plant additions and higher depreciation rates 2.0 Electric generation maintenance 1.8 Labor and benefits(1) 0.5 Insurance expense 0.4 Technology implementation and maintenance expenses (0.5) Uncollectible accounts (1.9) Other $ 6.8 Change in Operating Expense Items Impacting Net Income (dollars in millions) Three Months Ended June 30, 2024 2023 Variance Operating & maintenance $ 57.4 $ 54.8 $ 2.6 4.7% Administrative & general 31.3 30.0 1.3 4.3% Property and other taxes 36.3 40.1 (3.8) (9.5)% Depreciation and depletion 56.9 52.4 4.5 8.6% Operating Expenses $ 181.9 $ 177.3 $ 4.6 2.6% $ (3.8) Property and other taxes recovered in trackers, offset in revenue 0.7 Pension and other postretirement benefits, offset in other income(1) 1.0 Operating and maintenance expenses recovered in trackers, offset in revenue (0.1) Deferred compensation, offset in other income $ (2.2) Change in Operating Expense Items Offset Within Net Income $ 4.6 Increase in Operating Expenses (1) In order to present the total change in labor and benefits, we have included the change in the non- service cost component of our pension and other postretirement benefits, which is recorded within other income on our Condensed Consolidated Statements of Income. This change is offset within this table as it does not affect our operating expenses. 34 Appendix
Operating to Net Income (Q2) (dollars in millions) Three Months Ended June 30, 2024 2023 Variance Operating Income $ 61.6 $ 45.6 $ 16.0 35.1% Interest expense (31.9) (28.4) (3.5) (12.3)% Other income, net 6.2 4.1 2.1 51.2% Income Before Taxes 35.9 21.3 14.6 68.5% Income tax expense (4.2) (2.2) (2.0) (90.9)% Net Income $ 31.7 $ 19.1 $ 12.6 66.0% $3.5 million increase in interest expense was primarily due to higher borrowings and interest rates, partly offset by lower interest on our revolving credit facilities and higher capitalization of Allowance for Funds Used During Construction (AFUDC). $2.1 million increase in other income, net was primarily due to higher capitalization of AFUDC and a decrease in the non-service component of pension expense. $2.0 million increase in income tax expense was primarily due to higher pre-tax income. 35 Appendix
Tax Reconciliation (Q2) 36 Appendix (in millions) Variance Income Before Income Taxes $35.9 $21.3 14.6 Income tax calculated at federal statutory rate 7.5 21.0% 4.5 21.0% 3.0 Permanent or flow through adjustments: State income tax, net of federal provisions - 0.1% 0.3 1.3% (0.3) Flow-through repairs deductions (3.0) (8.5%) (1.7) (8.0%) (1.3) Production tax credits (2.0) (5.6%) (1.1) (5.4%) (0.9) Amortization of excess deferred income tax (0.2) (0.5%) (0.2) (1.1%) - Plant and depreciation flow-through items 1.1 3.0% 0.2 0.9% 0.9 Other, net 0.8 2.3% 0.1 1.4% 0.7 Sub-total (3.3) (9.2%) (2.4) (10.9%) (0.9) Income Tax Expense 4.2$ 11.8% 2.1$ 10.1% 2.1$ Three Months Ended June 30, 2024 2023
Segment Results (Q2) (1) Utility Margin is a non-GAAP Measure. See appendix slide titled “Reconciling Gross Margin to Utility Margin” for additional disclosure. 37 Appendix Three Months Ended June 30, 2024 Electric Gas Other Total Operating revenues 260,134$ 59,795$ -$ 319,929$ Fuel, purchased supply & direct transmission* 60,887 15,593 - 76,480 Utility margin 199,247 44,202 - 243,449 Operating and maintenance 43,467 13,900 - 57,367 Administrative and general 23,294 7,821 166 31,281 Property and other taxes 28,006 8,251 (1) 36,256 Depreciation & depletion 47,546 9,387 56,933 Operating income (loss) 56,934 4,843 (165) 61,612 Interest expense (23,298) (7,147) (1,430) (31,875) Other income 4,031 927 1,202 6,160 Income tax (expense) benefit (3,891) 304 (656) (4,243) Net income (loss) 33,776$ (1,073)$ (1,049)$ 31,654$ Three Months Ended June 30, 2023 Electric Gas Other Total Operating revenues 229,266$ 61,236$ -$ 290,502$ Fuel, purchased supply & direct transmission* 42,363 25,215 - 67,578 Utility margin 186,903 36,021 - 222,924 Operating and maintenance 41,368 13,472 - 54,840 Administrative and general 21,635 8,321 (1) 29,955 Property and other taxes 31,022 9,104 3 40,129 Depreciation & depletion 43,319 9,061 - 52,380 Operating income (loss) 49,559 (3,937) (2) 45,620 Interest expense (21,724) (4,490) (2,197) (28,411) Other income (expense) 2,954 1,144 (36) 4,062 Income tax (expense) benefit (3,515) (373) 1,741 (2,147) Net income (loss) 27,274$ (7,656)$ (494)$ 19,124$ * Direct Transmission expense excludes depreciation and depletion (in thousands) 1 1
2024 2023 $ % 2024 2023 2024 2023 Montana 86,028$ 83,840$ 2,188$ 2.6 % 582 568 327,655 321,820 South Dakota 15,392 15,686 (294) (1.9) % 117 135 51,340 51,162 Residential 101,420 99,526 1,894 1.9 % 699 703 378,995 372,982 Montana 99,655 101,919 (2,264) (2.2) % 756 759 75,602 74,234 South Dakota 26,356 25,134 1,222 4.9 % 259 266 13,083 12,985 Commercial 126,011 127,053 (1,042) (0.8) % 1,015 1,025 88,685 87,219 Industrial 11,282 10,722 560 5.2 % 739 644 80 78 Other 8,550 8,732 (182) (2.1) % 36 33 6,460 6,388 Total Retail Electric 247,263 246,033 1,230 0.5 % 2,489 2,405 474,220 466,667 Regulatory amortization (10,904) (36,254) 25,350 (69.9) % Transmission 22,436 18,352 4,084 22.3 % Wholesale and other 1,339 1,135 204 18.0 % Total Revenues 260,134 229,266 30,868 13.5 % Total fuel, purchased supply & direct transmission expense* 60,887 42,363 18,524 43.7 % Utility Margin 199,247 186,903 12,344 6.6 % * Direct transmission expense is exclusive of depreciation and depletion expense (in thousands) Megawatt Hours (MWH) Average Customer CountsChange Three Months Ended June 30, Revenues 1 Electric Segment (Q2) (1) Utility Margin is a non-GAAP Measure. See appendix slide titled “Reconciling Gross Margin to Utility Margin” for additional disclosure. 38 Appendix
2024 2023 $ % 2024 2023 2024 2023 Montana 18,921$ 17,589$ 1,332$ 7.6 % 2,224 1,864 185,449 183,669 South Dakota 5,894 8,375 (2,481) (29.6) % 568 703 42,440 41,914 Nebraska 3,798 7,457 (3,659) (49.1) % 438 508 37,889 37,711 Residential 28,613 33,421 (4,808) (14.4) % 3,230 3,075 265,778 263,294 Montana 10,743 9,918 825 8.3 % 1,301 1,147 26,160 25,714 South Dakota 3,754 5,505 (1,751) (31.8) % 600 675 7,354 7,217 Nebraska 1,969 4,665 (2,696) (57.8) % 333 387 5,044 5,004 Commercial 16,466 20,088 (3,622) (18.0) % 2,234 2,209 38,558 37,935 Industrial 169 160 9 5.6 % 23 19 237 232 Other 292 326 (34) (10.4) % 44 43 196 188 Total Retail Electric 45,540$ 53,995$ (8,455)$ (15.7) % 5,531 5,346 304,769 301,649 Regulatory amortization 3,735 (3,369) 7,104 210.9 % Wholesale and other 10,520 10,610 (90) (0.8) % Total Revenues 59,795$ 61,236$ (1,441)$ (2.4) % Total fuel, purchased supply & direct transmission expense* 15,593$ 25,215$ (9,622)$ (38.2) % Utility Margin 44,202$ 36,021$ 8,181$ 22.7 % - * Direct transmission expense is exclusive of depreciation and depletion expense Revenues Dekatherms (Dkt) Average Customer CountsChange Three Months Ended June 30, (in thousands) 1 Natural Gas Segment (Q2) 39 Appendix (1) Utility Margin is a non-GAAP Measure. See appendix slide titled “Reconciling Gross Margin to Utility Margin” for additional disclosure.
2024 Year-to-Date Appendix 40
(1) As a result of the adoption of Accounting Standard Update 2017-07 in March 2018, pension and other employee benefit expense is now disaggregated on the GAAP income statement with portions now recorded in both OG&A expense and Other (Expense) Income lines. To facilitate better understanding of trends in year-over-year comparisons, the non-GAAP adjustment above re- aggregates the expense in OG&A - as it was historically presented prior to the ASU 2017-07 (with no impact to net income or earnings per share). (2) Utility Margin is a non-GAAP Measure. See the slide titled “Reconciling Gross Margin to Utility Margin” for additional disclosure. Year-to-Date 2024 Non-GAAP Earnings 41 For the six months ended June 30, we estimate weather to be a $1.9 million pre-tax detriment as compared to normal and a $3.7 million detriment as compared to 2023. The adjusted non-GAAP measures presented in the table reflect significant items that are non-recurring or a variance from normal weather, however they should not be considered a substitute for financial results and measures determined or calculated in accordance with GAAP. Appendix
(in millions except per share amounts) 2024 2023 Variance % Variance Operating Revenues 795.3$ 745.1$ 50.2$ 6.7% 251.2 233.1 18.1 7.8% Utility Margin 544.1 512.0 32.1 6.3% Operating Expenses Operating and maintenance 111.5 110.7 0.8 0.7% Administrative and general 71.7 64.7 7.0 10.8% Property and other taxes 83.4 89.3 (5.9) (6.6%) Depreciation and depletion 113.7 105.6 8.1 7.7% Total Operating Expenses 380.3 370.3 10.0 2.7% Operating Income 163.7 141.7 22.0 15.5% Interest expense (62.9) (56.4) (6.5) (11.5%) Other income, net 10.5 8.8 1.7 19.3% Income Before Taxes 111.3 94.0 17.2 18.3% Income tax (expense) benefit (14.6) (12.4) (2.2) 17.7% Net Income 96.7$ 81.7$ 15.0$ 18.4% Effective Tax Rate 13.1% 13.2% (0.1%) Diluted Average Shares Outstanding 61.3 59.8 1.5 2.5% Diluted Earnings Per Share $1.58 $1.37 $0.21 15.4% Dividends Paid per Common Share $1.30 $1.28 0.02$ 1.6% Six Months Ended June 30, Fuel, purchased supply & direct transmission expense (exclusive of depreciation and depletion) 1 Year-to-Date Financial Results 42 1.) Utility Margin is a non- GAAP Measure. See appendix slide titled “Reconciling Gross Margin to Utility Margin” for additional disclosure. Appendix
Utility Margin (YTD) (dollars in millions) Six Months Ended June 30, 2024 2023 Variance Electric $ 427.1 $ 404.1 $ 23.0 5.7% Natural Gas 117.0 107.9 9.1 8.4% Total Utility Margin $ 544.1 $ 512.0 $ 32.1 6.3% (1) Utility Margin is a non-GAAP Measure. See appendix slide titled “Reconciling Gross Margin to Utility Margin” for additional disclosure. Increase in utility margin due to the following factors: $ 36.2 Base rates 7.6 Transmission revenue due to market conditions 3.4 Montana property tax tracker collections 1.0 Montana natural gas transportation (4.4) Non-recoverable Montana electric supply costs (4.2) QF liability adjustment (2.6) Electric retail volumes (2.4) Natural gas retail volumes 3.6 Other $ 38.2 Change in Utility Margin Impacting Net Income $ (6.2) Property & other taxes recovered in revenue, offset in property & other taxes (1.3) Revenue from higher production tax credits, offset in income tax expense 1.4 Operating expenses recovered in revenue, offset in operating & maintenance expense $ (6.1) Change in Utility Margin Offset Within Net Income $ 32.1 Increase in Utility Margin 43 Appendix
(dollars in millions) Six Months Ended June 30, 2024 2023 Variance Operating & maintenance $ 111.5 $ 110.7 $ 0.8 0.7% Administrative & general 71.7 64.7 7.0 10.8% Property and other taxes 83.4 89.3 (5.9) (6.6)% Depreciation and depletion 113.7 105.6 8.1 7.7% Operating Expenses $ 380.3 $ 370.3 $ 10.0 2.7% Increase in operating expenses due to the following factors: $ 8.1 Depreciation expense due to plant additions 3.4 Labor and benefits(1) 2.4 Litigation outcome (Pacific Northwest Solar) 2.2 Non-cash impairment of alternative energy storage investment 1.0 Insurance expense 0.6 Technology implementation and maintenance expenses 0.3 Property and other taxes not recoverable within trackers (1.0) Uncollectible accounts (0.6) Electric generation maintenance (1.5) Other $ 14.9 Change in Operating Expense Items Impacting Net Income $ (6.2) Property and other taxes recovered in trackers, offset in revenue (0.2) Pension and other postretirement benefits, offset in other income(1) 1.4 Operating and maintenance expenses recovered in trackers, offset in revenue 0.1 Deferred compensation, offset in other income $ (4.9) Change in Operating Expense Items Offset Within Net Income $ 10.0 Increase in Operating Expenses Operating Expenses (YTD) (1) In order to present the total change in labor and benefits, we have included the change in the non- service cost component of our pension and other postretirement benefits, which is recorded within other income on our Condensed Consolidated Statements of Income. This change is offset within this table as it does not affect our operating expenses. 44 Appendix
Operating to Net Income (YTD) (dollars in millions) Six Months Ended June 30, 2024 2023 Variance Operating Income $ 163.7 $ 141.7 $ 22.0 15.5% Interest expense (62.9) (56.4) (6.5) (11.5)% Other income, net 10.5 8.8 1.7 19.3% Income Before Taxes 111.3 94.0 17.2 18.3% Income tax expense (14.6) (12.4) (2.2) 17.7% Net Income $ 96.7 $ 81.7 $ 15.0 18.4% $6.5 million increase in interest expenses was primarily due to higher borrowings and interest rates partly offset by lower interest on our revolving credit facilities and higher capitalization of AFUDC. $1.7 million increase in other income, net was primarily due a $2.3 million reversal of a previously expensed Community Renewable Energy Project penalty due to a favorable legal ruling and higher capitalization of AFUDC, partly offset by a $2.5 million non-cash impairment of an alternative energy storage equity investment and an increase in the non-service component of pension expense. $2.2 million increase in income tax expense was primarily due to higher pre-tax income and plant and depreciation flow-through items.45 Appendix
Tax Reconciliation (YTD) 46 Appendix Variance Income Before Income Taxes $111.3 $94.0 $17.3 Income tax calculated at federal statutory rate 23.4 21.0% 19.7 21.0% 3.7 Permanent or flow through adjustments: State income taxes, net of federal provisions 0.7 0.6% 1.2 1.3% (0.5) Flow-through repairs deductions (9.2) (8.3%) (7.6) (8.0%) (1.6) Production tax credits (5.0) (4.5%) (4.3) (4.6%) (0.7) Amortization of excess deferred income tax (0.6) (0.5%) (1.0) (1.1%) 0.4 Reduction to previously claimed alternative minimum tax credit - - 3.2 3.4% (3.2) Plant and depreciation flow-through items 4.1 3.7% 0.9 0.9% 3.2 Share-based compensation 0.3 0.3% 0.4 0.4% (0.1) Other, net 0.9 0.8% (0.1) (0.1%) 1.0 Sub-total (8.8) (7.9%) (7.3) (7.8%) (1.5) Income Tax Expense 14.6$ 13.1% 12.4$ 13.2% 2.2$ 2024 2023 Six Months Ended June 30,
Segment Results (YTD) (1) Utility Margin is a non-GAAP Measure. See appendix slide titled “Reconciling Gross Margin to Utility Margin” for additional disclosure. 47 Appendix Six Months Ended June 30, 2024 Electric Gas Other Total Operating revenues 603,320$ 191,951$ -$ 795,271$ Fuel, purchased supply & direct transmission* 176,228 74,973 - 251,201 Utility margin 427,092 116,978 - 544,070 Operating and maintenance 83,766 27,783 - 111,549 Administrative and general 51,213 17,867 2,646 71,726 Property and other taxes 64,306 19,120 1 83,427 Depreciation & depletion 94,850 18,826 - 113,676 Operating income (loss) 132,957 33,382 (2,647) 163,692 Interest expense (47,955) (13,396) (1,503) (62,854) Other income (expense) 9,492 1,981 (994) 10,479 Income tax expense (11,174) (2,869) (534) (14,577) Net income (loss) 83,320$ 19,098$ (5,678)$ 96,740$ Six Months Ended June 30, 2023 Electric Gas Other Total Operating revenues 524,574$ 220,470$ -$ 745,044$ Fuel, purchased supply & direct transmission* 120,497 112,573 - 233,070 Utility margin 404,077 107,897 - 511,974 Operating and maintenance 83,781 26,920 - 110,701 Administrative and general 46,603 18,087 13 64,703 Property and other taxes 69,273 20,002 5 89,280 Depreciation & depletion 87,217 18,411 - 105,628 Operating Income (loss) 117,203 24,477 (18) 141,662 Interest expense (40,284) (7,741) (8,394) (56,419) Other income (expense) 6,320 2,559 (80) 8,799 Income tax expense (10,143) (139) (2,106) (12,388) Net income (loss) 73,096$ 19,156$ (10,598)$ 81,654$ * Direct Transmission expense excludes depreciation and depletion (in thousands) 1 1
Electric Segment (YTD) (1) Utility Margin is a non-GAAP Measure. See appendix slide titled “Reconciling Gross Margin to Utility Margin” for additional disclosure. 48 Appendix 2024 2023 $ % 2024 2023 2024 2023 Montana 203,391$ 209,302$ (5,911)$ (2.8) % 1,429 1,439 326,986 321,278 South Dakota 34,702 35,457 (755) (2.1) % 290 330 51,396 51,218 Residential 238,093 244,759 (6,666) (2.7) % 1,719 1,769 378,382 372,496 Montana 201,158 214,532 (13,374) (6.2) % 1,580 1,610 75,639 74,249 South Dakota 54,128 50,262 3,866 7.7 % 546 545 13,047 12,964 Commercial 255,286 264,794 (9,508) (3.6) % 2,126 2,155 88,686 87,213 Industrial 22,951 22,563 388 1.7 % 1,464 1,270 80 79 Other 13,366 13,986 (620) (4.4) % 49 48 5,689 5,623 Total Retail Electric 529,696 546,102 (16,406) (3.0) % 5,358 5,242 472,837 465,411 Regulatory amortization 25,442 (61,551) 86,993 (141.3) % Transmission 44,824 37,245 7,579 20.3 % Wholesale and other 3,358 2,778 580 20.9 % Total Revenues 603,320 524,574 78,746 15.0 % Total fuel, purchased supply & direct transmission expense* 176,228 120,497 55,731 46.3 % Utility Margin 427,092$ 404,077$ 23,015$ 5.7 % * Direct transmission expense is exclusive of depreciation and depletion expense Megawatt Hours (MWH) Average Customer Counts Six Months Ended June 30, (in thousands) Revenues Change 1
Natural Gas Segment (YTD) 49 Appendix (1) Utility Margin is a non-GAAP Measure. See appendix slide titled “Reconciling Gross Margin to Utility Margin” for additional disclosure. 2024 2023 $ % 2024 2023 2024 2023 Montana 67,511$ 84,471$ (16,960)$ (20.1) % 8,482 8,381 185,332 183,583 South Dakota 19,499 28,310 (8,811) (31.1) % 2,005 2,455 42,521 42,032 Nebraska 14,315 27,970 (13,655) (48.8) % 1,669 1,915 37,970 37,838 Residential 101,325 140,751 (39,426) (28.0) % 12,156 12,751 265,823 263,453 Montana 35,826 46,257 (10,431) (22.6) % 4,698 4,834 26,121 25,690 South Dakota 13,021 19,791 (6,770) (34.2) % 1,914 2,177 7,362 7,235 Nebraska 8,188 17,828 (9,640) (54.1) % 1,192 1,386 5,063 5,040 Commercial 57,035 83,876 (26,841) (32.0) % 7,804 8,397 38,546 37,965 Industrial 588 889 (301) (33.9) % 83 94 237 232 Other 868 1,122 (254) (22.6) % 133 136 196 188 Total Retail Electric 159,816$ 226,638$ (66,822)$ (29.5) % 20,176 21,378 304,802 301,838 - Regulatory amortization 10,661 (28,770) 39,431 (137.1) % Wholesale and other 21,474 22,602 (1,128) (5.0) % Total Revenues 191,951$ 220,470$ (28,519)$ (12.9) % Total fuel, purchased supply & direct transmission expense* 74,973$ 112,573$ (37,600)$ (33.4) % Utility Margin 116,978$ 107,897$ 9,081$ 8.4 % * Direct transmission expense is exclusive of depreciation and depletion expense (in thousands) Change Dekatherms (Dkt) Average Customer CountsRevenues Six Months Ended June 30, 1
PCCAM Impact by Quarter Qualified Facility Earnings Adjustment Our electric QF liability consists of unrecoverable costs associated with contracts covered under PURPA that are part of a 2002 stipulation with the MPSC and other parties. Risks / losses associated with these contracts are born by shareholders, not customers. Therefore, any mitigation of prior losses and / or benefits of liability reduction also accrue to shareholders. 50 Appendix Pretax millions – shareholder (detriment) benefit
(dollars in millions) As of June 30, As of December 31, 2024 2023 Cash and cash equivalents 6.4$ 9.2$ Restricted cash 24.6 16.0$ Accounts receivable, net 149.5 212.3$ Inventories 115.0 114.5$ Other current assets 68.6 55.0$ Goodwill 357.6 357.6$ PP&E and other non-current assets 6,992.2 6,836.1$ Total Assets 7,713.8$ 7,600.7$ Payables 91.3 124.3 Other current liabilities 280.2 307.3 Total debt & capital leases 2,901.7 2,793.4 Other non-current liabilities 1,633.5 1,590.3 Shareholders' equity 2,807.3 2,785.3 Total Liabilities and Equity 7,713.8$ 7,600.7$ Capitalization: Total Debt & Capital Leases 2,901.7 2,793.4 Less: Basin Creek Capital Lease (7.2) (8.8) Shareholders' Equity 2,807.3 2,785.3 Total Capitalization 5,701.7$ 5,569.9$ Ratio of Debt to Total Capitalization 50.8% 50.0% Balance Sheet 51 Appendix Debt to Total Capitalization up from last quarter and inside our targeted 50% - 55% range.
Cash from Operating Activities decreased by $70.2 million due primarily to significant net cash inflows from recovery of previously under-collected energy supply cost in the prior period, and net cash outflows in 2024 from our January 2024 cold weather event. Funds from Operations increased by $53.1 million over prior period. Net Under-Collected Supply Costs (in millions) Beginning (Jan. 1) Ending (June 30) (Outflow) / Inflow 2023 $115.4 $30.0 $85.4 2024 $7.8 $14.9 $(7.1) 2024 Cash Outflow $(92.5) Year-to-Date Cash Flow 52 No Planned Equity Issuances in 2024 Financing plans (targeting a FFO to Debt ratio > 14%) are expected to maintain our current credit ratings and are subject to change. Debt financing in 2024 • Issued $175 million, 5.56% coupon, 7 year Montana FMBs in Q1 • Issued $33 million, 5.55% coupon, 5 year South Dakota FMBs in Q1 • Issued $7 million, 5.75% coupon, 10 year, South Dakota FMBs in Q1 • Entered $100 million term loan in Q2 with variable rate of Secured Overnight Financing Rate plus an applicable margin. (dollars in millions) 2024 2023 Operating Activities Net Income 96.7$ 81.7$ Non-Cash adjustments to net income 128.1 95.3 Changes in working capital 1.0 124.3 Other noncurrent assets & liabilities (1.9) (7.2) Cash Provided by Operating Activities 223.9 294.1 Cash Used in Investing Activities (248.3) (265.8) Cash Provided by (Used In) Financing Activities 30.2 (26.8) Cash Provided by Operating Activities 223.9$ 294.1$ Less: Changes in working capital 1.0 124.3 Funds from Operations 222.9$ 169.8$ PP&E additions 247.4 263.4 Capital expenditures included in trade accounts payable (15.2) (43.8) AFUDC Credit 9.4 7.8 Total Capital Investment 241.6$ 227.4$ Six Months Ended June 30, Appendix
Reconciling Gross Margin to Utility Margin Management believes that Utility Margin provides a useful measure for investors and other financial statement users to analyze our financial performance in that it excludes the effect on total revenues caused by volatility in energy costs and associated regulatory mechanisms. This information is intended to enhance an investor's overall understanding of results. Under our various state regulatory mechanisms, as detailed below, our supply costs are generally collected from customers. In addition, Utility Margin is used by us to determine whether we are collecting the appropriate amount of energy costs from customers to allow recovery of operating costs, as well as to analyze how changes in loads (due to weather, economic or other conditions), rates and other factors impact our results of operations. Our Utility Margin measure may not be comparable to that of other companies' presentations or more useful than the GAAP information provided elsewhere in this report. (1) Utility Margin is a non-GAAP Measure. 53 Appendix 2024 2023 2024 2023 2024 2023 (in millions) Reconciliation of gross margin to utility margin Operating Revenues 260.1$ 229.3$ 59.8$ 61.2$ 319.9$ 290.5$ Less: Fuel, purchased supply and direct transmission expense (exclusive of depreciation and depletion shown separately below) 60.9 42.4 15.6 25.2 76.5 67.6 Less: Operating & maintenance expense 43.5 41.4 13.9 13.5 57.4 54.9 Less: Property and other tax expense 28.0 31.0 8.2 9.1 36.2 40.1 Less: Depreciation and depletion expense 47.6 43.3 9.4 9.1 57.0 52.4 Gross Margin 80.1 71.2 12.7 4.3 92.8 75.5 Plus: Operating & maintenance expense 43.5 41.4 13.9 13.5 57.4 54.9 Plus: Property and other tax expense 28.0 31.0 8.2 9.1 36.2 40.1 Plus: Depreciation and depletion 47.6 43.3 9.4 9.1 57.0 52.4 Utility Margin 199.2$ 186.9$ 44.2$ 36.0$ 243.4$ 222.9$ 2024 2023 2024 2023 2024 2023 (in millions) Reconciliation of gross margin to utility margin Operating Revenues 603.3$ 524.6$ 192.0$ 220.5$ 795.3$ 745.1$ Less: Fuel, purchased supply and direct transmission expense (exclusive of depreciation and depletion shown separately below) 176.2 120.5 75.0 112.6 251.2 233.1 Less: Operating & maintenance expense 83.8 83.8 27.8 26.9 111.6 110.7 Less: Property and other tax expense 64.3 69.3 19.1 20.0 83.4 89.3 Less: Depreciation and depletion expense 94.9 87.2 18.8 18.4 113.7 105.6 Gross Margin 184.1 163.8 51.3 42.6 235.4 206.4 Plus: Operating & maintenance expense 83.8 83.8 27.8 26.9 111.6 110.7 Plus: Property and other tax expense 64.3 69.3 19.1 20.0 83.4 89.3 Plus: Depreciation and depletion 94.9 87.2 18.8 18.4 113.7 105.6 Utility Margin 427.1$ 404.1$ 117.0$ 107.9$ 544.1$ 512.0$ Total Reconciliation of Gross Margin to Utility Margin for the Three Months Ended June 30, Reconciliation of Gross Margin to Utility Margin for the Six Months Ended June 30, Electric Natural Gas Total Electric Natural Gas (1) (1)
Non-GAAP Financial Measures 54 Appendix
Non-GAAP Financial Measures This presentation includes financial information prepared in accordance with GAAP, as well as other financial measures, such as Utility Margin, Adjusted Non-GAAP pretax income, Adjusted Non-GAAP net income and Adjusted Non-GAAP Diluted EPS that are considered “non-GAAP financial measures.” Generally, a non-GAAP financial measure is a numerical measure of a company’s financial performance, financial position or cash flows that excludes (or includes) amounts that are included in (or excluded from) the most directly comparable measure calculated and presented in accordance with GAAP. We define Utility Margin as Operating Revenues less fuel, purchased supply and direct transmission expense (exclusive of depreciation and depletion) as presented in our Consolidated Statements of Income. This measure differs from the GAAP definition of Gross Margin due to the exclusion of Operating and maintenance, Property and other taxes, and Depreciation and depletion expenses, which are presented separately in our Consolidated Statements of Income. A reconciliation of Utility Margin to Gross Margin, the most directly comparable GAAP measure, is included in this presentation. Management believes that Utility Margin provides a useful measure for investors and other financial statement users to analyze our financial performance in that it excludes the effect on total revenues caused by volatility in energy costs and associated regulatory mechanisms. This information is intended to enhance an investor's overall understanding of results. Under our various state regulatory mechanisms, as detailed below, our supply costs are generally collected from customers. In addition, Utility Margin is used by us to determine whether we are collecting the appropriate amount of energy costs from customers to allow recovery of operating costs, as well as to analyze how changes in loads (due to weather, economic or other conditions), rates and other factors impact our results of operations. Our Utility Margin measure may not be comparable to that of other companies' presentations or more useful than the GAAP information provided elsewhere in this report. Management also believes the presentation of Adjusted Non-GAAP pre-tax income, Adjusted Non-GAAP net income and Adjusted Non-GAAP Diluted EPS is more representative of normal earnings than GAAP pre-tax income, net income and EPS due to the exclusion (or inclusion) of certain impacts that are not reflective of ongoing earnings. The presentation of these non-GAAP measures is intended to supplement investors' understanding of our financial performance and not to replace other GAAP measures as an indicator of actual operating performance. Our measures may not be comparable to other companies' similarly titled measures. 55 Appendix
Delivering a bright future 56
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