Attached files
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| 8-K - 8-K_03-03-2010 INVESTOR UPDATE - NORTHWESTERN CORP | ek_030310.htm |
Investor
Update
San
Francisco, CA
March
3 - 4, 2010
2
forward-looking
statement…
During
the course of this presentation, there will be forward-looking
statements within the meaning of the “safe harbor” provisions of the
Private Securities Litigation Reform Act of 1995. Forward-looking
statements often address our expected future business and financial
performance, and often contain words such as “expects,” “anticipates,”
“intends,” “plans,” “believes,” “seeks,” or “will.”
statements within the meaning of the “safe harbor” provisions of the
Private Securities Litigation Reform Act of 1995. Forward-looking
statements often address our expected future business and financial
performance, and often contain words such as “expects,” “anticipates,”
“intends,” “plans,” “believes,” “seeks,” or “will.”
The
information in this presentation is based upon our current
expectations as of the date hereof 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
public filings with the SEC.
expectations as of the date hereof 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
public filings with the SEC.
3
who we
are…
Above
data as of 12/31/09
(1) Book
capitalization calculated as total debt, excluding capital leases, plus
shareholders’ equity.
¾ 661,000
customers
» 396,000
electric
» 265,000 natural
gas
¾ Approximately
123,000 square
miles of service territory in
Montana, South Dakota, and Nebraska
miles of service territory in
Montana, South Dakota, and Nebraska
» 32,000 miles of
electric T&D lines
» 8,400 miles of
natural gas T&D pipelines
» 18 Bcf natural gas
storage
¾ Total
generation (mostly
base load coal)
» MT
- 222 MW - regulated beginning 1/1/09
» SD
- 312 MW - regulated
¾ Total
Assets: $2,795 MM
¾ Total
Capitalization: $1,774 MM(1)
¾ Total
Employees: 1,354
Located
in states with relatively stable economies with potential grid
expansion in the Northwest region.
expansion in the Northwest region.
¾ Solid
operations
» Cost
competitive
» Above-average
reliability
» Award-winning
customer service
¾ Improving
credit ratings and strong balance sheet and liquidity
» Secured
and unsecured investment grade ratings
» Moody’s
has us on “positive” outlook
¾ Positive
earnings and ROE trend
» Colstrip
Unit 4 into rates effective January 1, 2009
» Delivery
services rate cases for Montana electric and natural gas
¾ Strong
cash flows
» NOLs
and repair tax deduction provide an effective tax shield until likely
2014
¾ Competitive
dividend
» Current
yield approximately 5.2%
¾ Improving
regulatory environment
¾ Realistic
growth prospects
4
NorthWestern’s
attributes…
improving credit
ratings…
5
6
strong
balance sheet and liquidity…
¾ Debt
/ Total capitalization of 55.6% (12/31/09)
¾ October
2009
» $55
million, 30 year First Mortgage Bonds issued at 5.71%
¾ June
2009
» Extended
unsecured revolver maturity to June 30, 2012
» Increased
size from $200 million to $250 million
¾ March
2009
» $250
million, 10 year First Mortgage Bonds issued at 6.34%
¾ Total
liquidity currently in the $230 million range
¾ Nearly
all long-term debt matures after 2014
positive earnings
and ROE trend…
Recent authorized
ROE’s: Mill Creek (10.25%)
and Colstrip Unit 4 (10.00%).
and Colstrip Unit 4 (10.00%).
7
8
strong
cash flows…
Earnings growth, NOLs, and repairs tax
deduction provide strong
cash flows to fund future growth projects.
cash flows to fund future growth projects.
pension
funding and expense…
9
2009
return in excess of 20%. Moved
from 62% funded at
12/31/2008 to 94% funded at 12/31/2009.
12/31/2008 to 94% funded at 12/31/2009.
competitive
dividend…
10
Goal
for dividend payout ratio of 60% - 70%.
Current dividend yield about 5.2%.
Current dividend yield about 5.2%.
11
regulatory
update…
¾ Montana
» Rate
cases filed October 2009 requesting $17.5 million revenue increase
♦ November
2009 the MPSC determined the initial filing failed to comply with MPSC
applicable minimum filing requirements, primarily related to allocated cost of
service and rate design
applicable minimum filing requirements, primarily related to allocated cost of
service and rate design
♦ On
February 2, 2010 our supplemental filing was accepted as compliant
♦ Final
order and rate adjustment now expected by October 11, 2010
» Mill
Creek Generation Station filed with MPSC
♦ MPSC
approved in 2Q 2009
♦ Under
construction with $84.7 million capitalized CWIP as of 12/31/09
» Colstrip
Unit 4 placed into rate base starting January 2009
¾ South
Dakota / Nebraska
» Evaluate
whether to file natural gas rate cases during late 2010
¾ FERC
» Working
with FERC for MSTI rate design
♦ FERC
encouraged Company to develop MSTI on a cost of service basis
by requesting appropriate tariff waivers from existing OATT
by requesting appropriate tariff waivers from existing OATT
» FERC
approved 230kV Renewable Collector System open season
Establishing
positive regulatory regulations in all jurisdictions.
12
near-term potential
earnings drivers…
¾ 2010
» Expecting
modest growth in volumes and economic activity
♦ Due
to higher mix of residential/commercial vs. industrial customers as
compared to other utilities
compared to other utilities
● Electric:
69% Residential & Commercial, 31% Industrial
● Natural
Gas: 99% Residential & Commercial, 1% Industrial
» Montana
rate adjustment expected to take effect last quarter of 2010
¾ 2011
» In
2011 we anticipate:
♦ Full
year effect of Montana rate adjustment
♦ Potential
South Dakota and Nebraska natural gas rate adjustments
♦ Mill
Creek in rate base
● Approximately
$10 million annualized contribution to net income
Near-term
earnings drivers independent of
transmission
projects.
projects.
longer-term
potential earnings drivers…
¾ Distribution
system enhancements
» Exploring
incremental rate based investment (early
stages)
¾ Energy
supply
» Mill
Creek Generation Station
» South
Dakota peaking generation
» Natural
gas reserves (early
stages)
» Wind
projects and other renewable projects (early
stages)
» Big
Stone pollution control equipment (early
stages)
¾ Transmission
projects
» Colstrip
500 kV upgrade
» 230
kV Renewable Collector System
» Mountain
States Transmission Intertie (MSTI)
» Electric
Transmission America (ETA) (early
stages)
» Green
Power Express (ITC) (early
stages)
13
Balanced
growth opportunities across the business.
14
great
wind potential in our service territory…
15
service
territory is a link between supply…
16
and
demand…
17
our
proposed transmission projects…
18
capex
spending - next few years…
Additional
equity not
anticipated until we proceed
with MSTI or other major
investments not shown here.
anticipated until we proceed
with MSTI or other major
investments not shown here.
We
will move forward with
the funding of these projects
only when they make
economic sense.
the funding of these projects
only when they make
economic sense.
MSTI
project is now slated for
early 2015 and capex has
been modified accordingly.
Capital still shown at 100%
but still evaluating partners.
early 2015 and capex has
been modified accordingly.
Capital still shown at 100%
but still evaluating partners.
Utility
Maintenance
Capex is funded 100%
by free cash flow.
Capex is funded 100%
by free cash flow.
19
growth
project potential…
Opportunity
to double and diversify earnings as compared with
our existing $1.5 billion rate base.
our existing $1.5 billion rate base.
20
growth
project milestones ’10 & ’11…
2010
Mill
Creek
¾Test
“fire” the turbines
Q3
¾Periodic
filings with MPSC
Qtrly
¾Complete
Construction
Q4
¾Commercial
operation date
Q4
500
kV Upgrade
¾Finalize
commercial terms with partners
Q4
¾WECC
phase 1 planning process completed
Q4
¾Decision
point on proceeding w/construction
Q4
230
kV Collector System
¾Open
season information meeting
Q1
¾Collector open
season commences
Q2
¾LGIA
tendered to qualified participants
Q4
MSTI
¾Draft
EIS
Q1
¾Phase
1 of open season
Q2
¾Phase
2 of open season
Q3
¾EIS
Record of Decision
Q4
|
2011
|
|
|
Mill
Creek
|
|
|
¾Providing
regulating services
¾Tariffs
filed for rates
¾MPSC
prudence review filing
|
Q1
Q1
Q1
|
|
500
kV Upgrade
|
|
|
¾WECC
phase 2 rating
|
Q3
|
|
¾Construction
begins
|
Q3
|
|
230
kV Collector System
|
|
|
¾Open
season results posted
|
Q1
|
|
¾Customers
provide full credit support
|
Q1
|
|
¾FERC
approvals of OATT waivers
|
Q2
|
|
¾WECC
regional planning approval
|
Q4
|
|
MSTI
|
|
|
¾Open
season results posted
|
Q1
|
|
¾FERC
approvals of OATT waivers
|
Q1
|
|
¾Customers
provide full credit support
|
Q2
|
|
¾Begin
right of way procurement
|
Q4
|
21
in
summary…
¾ Solid
operations
¾ Improving
credit ratings and strong balance
sheet and liquidity
sheet and liquidity
¾ Positive
earnings and ROE trend
¾ Strong
cash flows
¾ Competitive
dividend
¾ Improving
regulatory environment
¾ Realistic
growth prospects
22
Appendix
23
income
statement…
Appendix
24
2008 -
2009 earnings bridge…
Prior
earnings
guidance for 2009 of
$1.75 - $1.85 was
revised upward to
$1.95 - $2.05 on
October 28, 2009 due
to repairs tax
deduction.
guidance for 2009 of
$1.75 - $1.85 was
revised upward to
$1.95 - $2.05 on
October 28, 2009 due
to repairs tax
deduction.
Appendix
2009 -
2010 earnings bridge…
25
Appendix
balance
sheet…
26
Appendix
cash
flow…
27
Appendix
28
MPSC
rate request…
¾ Requested
revenue increase of $17.5 million
» Electric
T&D = $15.5 million (6.98%)
» Natural
gas T&D = $2.0 million (1.89%)
» Expect
decision by October 11, 2010
» Interim
rates requested
» Increase
primarily due to pension and wage increases
¾ Requested
for both Electric and Natural Gas Cases
» ROE
of 10.90%
» Ratio
of 50.55% debt / 49.45% equity
» Cost
of debt of 5.76%
» Resulting
cost of capital of 8.30%
» Electric
and Natural Gas rate base of $632 million and $257 million,
respectively
Rate
request excludes Colstrip Unit 4 generation and the
under-construction Mill Creek Generation Plant.
under-construction Mill Creek Generation Plant.
Appendix
29
repairs
tax deduction impact…
As
pre-tax income increases the repairs tax deduction benefit, as a % of
the
effective tax rate, decreases.
effective tax rate, decreases.
Appendix
Sample
calculation
30
Montana
rate filing…
The
above demonstrates the impact of our repairs tax deduction on our current
rate
filing in Montana. The reduction in our income tax expense has been passed through
to customers in the form of a lower rate request while leaving NorthWestern “whole”.
filing in Montana. The reduction in our income tax expense has been passed through
to customers in the form of a lower rate request while leaving NorthWestern “whole”.
Appendix