Attached files
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| 8-K - 8-K_EEI PRESENTATION - NORTHWESTERN CORP | ek_110809.htm |
EEI
Financial
November
1-4, 2009
2
forward-looking
statement…
During
the course of this presentation, there will be forward-looking
statements within the meaning of the “safe harbor” provisions of the
Private Securities Litigation Reform Act of 1995. Forward-looking
statements often address our expected future business and financial
performance, and often contain words such as “expects,” “anticipates,”
“intends,” “plans,” “believes,” “seeks,” or “will.”
statements within the meaning of the “safe harbor” provisions of the
Private Securities Litigation Reform Act of 1995. Forward-looking
statements often address our expected future business and financial
performance, and often contain words such as “expects,” “anticipates,”
“intends,” “plans,” “believes,” “seeks,” or “will.”
Except
as noted herein, the information in this presentation is based upon
our current expectations as of the date hereof unless otherwise noted.
Our actual future business and financial performance may differ
materially and adversely from those expressed in any forward-looking
statements. We undertake no obligation to revise or publicly update our
forward-looking statements or this presentation for any reason. Although
our expectations and beliefs are based on reasonable assumptions, actual
results may differ materially. The factors that may affect our results are
listed in certain of our press releases and disclosed in the Company’s
public filings with the SEC.
our current expectations as of the date hereof unless otherwise noted.
Our actual future business and financial performance may differ
materially and adversely from those expressed in any forward-looking
statements. We undertake no obligation to revise or publicly update our
forward-looking statements or this presentation for any reason. Although
our expectations and beliefs are based on reasonable assumptions, actual
results may differ materially. The factors that may affect our results are
listed in certain of our press releases and disclosed in the Company’s
public filings with the SEC.
3
who we
are…
(1) As
of 9/30/09
(2) Book
capitalization calculated as total debt, excluding capital leases, plus
shareholders’ equity.
¾ 656,000
customers
» 392,000
electric
» 264,000
natural gas
¾ Approximately
123,000 square
miles of service territory in
Montana, Nebraska and South Dakota
miles of service territory in
Montana, Nebraska and South Dakota
¾ Total
generation (mostly
base load coal)
» MT
- 222 MW - regulated beginning 1/1/09
» SD
- 312 MW - regulated
¾ Total
Assets: $2,754 MM (1)
¾ Total
Capitalization: $1,666 MM (1)(2)
¾ Total
Employees: 1,385
Located
in states with relatively stable economies with potential grid
expansion in the Northwest region.
expansion in the Northwest region.
4
NorthWestern’s
attributes…
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 case filed in MT for electric and natural gas
¾ Strong
cash flows
» NOLs
and repair tax deduction provide an effective tax shield until likely
2014
¾ Competitive
dividend
» Current
yield approximately 5.5%
¾ Improving
Regulatory Environment
¾ Realistic
growth prospects
improving credit
ratings…
5
6
strong
balance sheet and liquidity …
¾ Debt
/ Total capitalization of 53.4% (9/30/09)
¾ October
2009
» $55
million, 30 year First Mortgage Bonds issued at 5.71%
¾ June
2009
» Extended
unsecured revolver maturity to June 30, 2012
» Increased
size from $200 million to $250 million
¾ March
2009
» $250
million, 10 year First Mortgage Bonds issued at 6.34%
¾ Total
liquidity currently in the $250 million range
¾ Nearly
all long-term debt matures after 2014
positive earnings
and ROE trend…
Mill
Creek and Colstrip Unit 4 ROE’s of
10.25% & 10.00% respectively.
7
8
2009
guidance change…
Earnings
guidance range for 2009 revised to $1.95 - $2.05
9
strong
cash flows…
Earnings
growth, NOLs, and repairs tax deduction provide strong cash flows
to fund future growth projects.
to fund future growth projects.
10
2009
return of approximately 20% year-to-date and expect to be greater than
90% funded.
90% funded.
pension
funding and expense …
competitive
dividend…
11
Goal
for dividend payout ratio of 60% - 70%.
Current dividend yield about 5.5%.
Current dividend yield about 5.5%.
12
regulatory
update…
¾ Montana
» Rate
cases filed October 2009 in Montana
» Mill
Creek Generation Station filed with MPSC
♦ MPSC
approval in 2Q 2009
♦ Under
construction with $40.5 million capitalized CWIP as of 9/30/09
» Colstrip
Unit 4 into rate base starting January 2009
¾ South
Dakota / Nebraska
» Expect
to file natural gas rate cases during 2010
¾ FERC
» Working
with FERC for MSTI rate design
♦ FERC
encouraged Company to develop MSTI on a cost of service
basis by requesting appropriate tariff waivers from existing OATT
basis by requesting appropriate tariff waivers from existing OATT
» FERC
approved 230kV Renewable Collector System open season as
submitted
submitted
Establishing
positive regulatory regulations in all jurisdictions.
13
rate
request filed with MPSC…
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 July 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
million, respectively
Rate
request excludes Colstrip Unit 4 generation and the
under- construction Mill Creek Generation Plant.
under- construction Mill Creek Generation Plant.
14
near-term potential
earnings drivers…
¾ 2010
» Expecting
flat volumes
♦ Due
to higher mix of residential/commercial vs. industrial
customers as compared to other utilities
customers as compared to other utilities
● Electric:
67% Residential & Commercial, 33% Industrial
● Natural
Gas: 99% Residential & Commercial, 1% Industrial
» Montana
rate adjustment expected to take effect July 2010
¾ 2011
» Full
year effect of Montana rate adjustment
» South
Dakota and Nebraska natural gas rate adjustments
expected
expected
» Mill
Creek in rate base
♦ Approximately
$10 million annualized contribution to net income
Near-term
earnings drivers independent of transmission projects.
15
Balanced
growth opportunities across the business.
longer-term
potential earnings drivers …
¾ Distribution
system enhancements
» Exploring
incremental rate based investment (early
stages)
¾ Energy
supply
» Mill
Creek Generation Station
» South
Dakota peaking generation
» Natural
gas reserves (early
stages)
» Wind
projects and other renewable projects (early
stages)
¾ Transmission
projects
» Colstrip
500kV upgrade
» 230
kV Renewable Collector System
» Mountain
States Transmission Intertie (MSTI)
» Electric
Transmission America (ETA) (early
stages)
» Green
Power Express (ITC) (early
stages)
16
Investing
in better services for our customers.
distribution system
enhancements …
¾ Continued
emphasis on investment that maintains current high
service quality levels
service quality levels
¾ Proactive
approach to address future infrastructure needs
» Significant
potential for investment over next 5 - 7 years, incremental
to current maintenance capex spending, is under evaluation and
discussion with key stakeholders including:
to current maintenance capex spending, is under evaluation and
discussion with key stakeholders including:
♦ Circuit
upgrades along with pole and cable replacement
♦ Substation
enhancements
♦ Gas
system enhancements
♦ Communications
and automation
17
energy
supply …
Rate
based supply provides stability and diversity.
¾ Mill
Creek Generation Station
» 150
MW plant near Anaconda, MT
» Estimated
cost $202 million
» Construction
underway with scheduled completion date of December 2010
¾ South
Dakota peaking generation
» $50
million investment to add one 45 MW modular peaking unit
¾ Natural
gas reserves
» Currently
evaluating opportunities afforded by new Montana statute allowing
utilities to rate base gas reserves. This provides price stability to customers and
allows NorthWestern to earn a return on an otherwise pass-through cost.
utilities to rate base gas reserves. This provides price stability to customers and
allows NorthWestern to earn a return on an otherwise pass-through cost.
¾ Wind
and other renewable projects
» Montana
- August 2009 issued Request for Information for purchase, partnership,
or long-term PPA in renewable supply projects.
or long-term PPA in renewable supply projects.
» South
Dakota - Long-term PPA in 25 MW wind farm with option for additional 25
MWs and purchase after 5 years. Estimated in-service date of January 2010.
MWs and purchase after 5 years. Estimated in-service date of January 2010.
» South
Dakota - Request for Proposal issued for an additional 25 MWs of wind
energy.
energy.
18
Montana
is between load and resources …
19
our
proposed transmission projects…
20
transmission
projects …
¾ Colstrip
500 kV upgrade
» Upgrade
existing line and substations to increase capacity of existing line by 500-600
MW’s
to relieve congestion to the west
to relieve congestion to the west
» Joint
project with other Colstrip Transmission system owners
» Cost
of our portion of the project (assuming full participation) is estimated at $41
million
» Anticipated
in-service date of Q3 2012
¾ 230
kV Renewable Collector System
» Gathering
system for renewable generation
» Cost
estimate of a single “collector” line is estimated at $200 million
» Anticipated
in-service date of Q2 2014
¾ Mountain
States Transmission Intertie (MSTI)
» 1,500
MWs of additional capacity on a historically constrained path
» 500kV,
400 mile long line estimated total cost of $1 billion
» Continue
to evaluate potential partners
» Open
season to be conducted in the first half 2010
» Anticipated
in-service date of Q1 2015
¾ Electric
Transmission America (ETA) and Green Power Express (ITC)
» Potential
opportunity to invest in transmission in South Dakota
Significant
opportunity to grow transmission rate base.
capex
spending - next few years…
Additional
equity not
anticipated until we proceed
with MSTI or other major
investments.
anticipated until we proceed
with MSTI or other major
investments.
We
will move forward with
the funding of these projects
only when they make
economic sense.
the funding of these projects
only when they make
economic sense.
MSTI
project is now slated for
early 2015 and capex has
been modified accordingly.
Capital still shown at 100%
but still evaluating partners.
early 2015 and capex has
been modified accordingly.
Capital still shown at 100%
but still evaluating partners.
Utility
Maintenance
Capex is funded 100%
by free cash flow.
Capex is funded 100%
by free cash flow.
22
growth
project potential…
Opportunity
to double and diversify earnings as compared with our existing
$1.5 billion rate base.
$1.5 billion rate base.
23
growth
project milestones ’09 & ’10…
2009
Mill
Creek
ü Expect
decision from the MPSC
(APPROVED) Q2
ü Begin
construction Q3
500
kV Upgrade
¾ Complete
engineering and planning studies Q4
¾ WECC
regional planning process begins Q4
¾ Finalize
commercial terms w/partners Q4
230
kV Collector System
ü Information
meeting with customers Q2
ü FERC
ruling allowing “open
season” Q2
¾ Identify
potential anchor tenant Q4
MSTI
ü Work
with FERC to clarify filings process Q3
¾ EIS
draft for public review due Q4
2010
Mill
Creek
¾ Complete
construction Q4
¾ Start
up, commissioning and completion Q4
500
kV Upgrade
¾ Run
subscription process Q1
¾ Complete
regional planning process Q4
¾ Begin
construction Q4
230
kV Collector System
¾ Conduct
“open season” Q1
¾ WECC
regional planning process Q2
¾ Siting
and permitting process begins Q3
MSTI
¾ Draft
EIS Q1
¾ Conduct
“open season”/commercial terms Q1
¾ EIS
Record of Decision Q3
¾ Begin
right of way procurement Q4
¾ Final
Engineering Q4
24
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
25
2009
results through September
(appendix)…
(appendix)…
Prior
earnings guidance of $1.75 - $1.85 revised upward to $1.95 - $2.05 on
October 28, 2009 due to repairs tax deduction.
October 28, 2009 due to repairs tax deduction.
26
Q4 2009
earnings bridge … (appendix)