NorthWestern Corporation (NASDAQ:NWE) Q3 2023 Earnings Call Transcript

NorthWestern Corporation (NASDAQ:NWE) Q3 2023 Earnings Call Transcript October 27, 2023

Travis Meyer: Good afternoon, and thank you for joining NorthWestern Energy Group’s Financial Results Webcast for the quarter ended September 30, 2023. My name is Travis Meyer. I’m the Director of Corporate Development and Investor Relations Officer for NorthWestern. Joining us today to walk you through the results and provide an overall update are Brian Bird, President and Chief Executive Officer; and Crystal Lail, Chief Financial Officer. All participant lines are currently muted. After the presentation, we have allotted time for a Q&A session. I’ll provide instructions for asking questions at that time. However, if you intend to ask a question or joining us by computer, please set your Zoom identity to your first and last name and firm so we can call on you by name and let you know when your line is open.

NorthWestern’s results have been released and the release is available on our website at northwesternenergy.com. We also released our 10-Q pre-market this morning. Please note that this company’s press release, this presentation, comments by presenters and responses to your question may contain forward-looking statements. As such, I will direct you to the disclosures contained within our SEC filings and safe harbor provisions included in the second slide of this presentation. Please also note, this presentation includes non-GAAP financial measures. Please see the non-GAAP disclosures, definitions, and reconciliations also included in the presentation today. The webcast is being recorded. The archived replay of today’s call will be available for one year beginning at 6 p.m. Eastern today, and can be found in the financial results section of our website.

With that, I’ll turn the presentation over to NorthWestern CEO, Brian Bird.

Brian Bird: Thanks, Travis. First of all, we just completed our Board meetings for the third quarter in here in South Dakota. And matter of fact, last night, we celebrated the 100th birthday of NorthWestern Public Service. Many of you may remember, in 2012, we celebrated the 100th birthday of the Montana Power Company. So, now all of our businesses has achieved 100th birthday. In fact, actually, it will be this — November 27, will be the actual date, because back on 11/27/1923, three employees from the Albert Emmanuel Company incorporated NorthWestern Public Service Corporation. And just a little bit more history there, this company owned many utilities in the Ohio, Pennsylvania, and other Midwestern states. And the reason that they named this NorthWestern Public Service Company is because after its incorporation, it was the group of assets that were most NorthWestern of all the assets they own.

So, a little bit of history to start. For the quarter, the highlights certainly have to do with providing guidance both for ’23 and ’24. I think from ’23’s perspective, our diluted earnings per share, $3 to $3.10 per share, for 2024, $3.42 to $3.62. Crystal will give more color on the guidance of each of these and then also on our long-term growth rates. Regarding those long-term growth rates, we are increasing our long-term, I think, five-years, rate base and earnings per share growth rate targets to 4% to 6%. Much of this now hinges upon unanimous approval of a constructive multi-party settlement in the Montana rate review, resulting in electric and natural gas increases of $67.4 million — excuse me, $14.1 million, respectively, as rates go into effect November 1, 2023.

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Q&A Session

And I know Crystal will talk about this more, but I’m going to stop for a second, just to point out, first and foremost, I think we had a very constructive settlement between all of those intervening parties that provided revenue requirement testimony in the rate review. So that was also constructive in and of itself. But I think how the commission handle this case, and certainly, if you have an opportunity to listen in or listened in on Wednesday or have an opportunity to listen in by link — connecting to link, you should listen in. We were extremely impressed with the slide presentation that was provided to the commission. And just the comments from the commissioners in terms of the sincerity how they look at their jobs and their role, the balance, the needs, customers for sure, but also the needs, the financial health of the utility, and noting that there are federal and state statutory associated with that and many aspects that go into their decision making.

It was impressive and well done. So, we feel very, very good about it. I think you’ve heard me say in the past, I feel good about the alignment, certainly in the governor’s [office] (ph) legislature and the commission. I think what’s happening from my perspective, there is certainly observation by all of those parties how important it is the product, the service that we provide our customers from electric and gas perspective, and the many challenges that we faced to provide that service in the future in terms of capacity and other needs. And I think people understand, in order for us to do that we have to be a financially strong company. And I think, yesterday or — excuse me, Wednesday’s outcome certainly — that resonated with me as I heard the commissioners vote.

It wasn’t lost on us too that it was unanimous by vote. So — and we feel very, very good about that outcome. Earlier in the year, we got also approval to move forward with the holding company from all our jurisdictions, including Montana. Actually during the quarter, we effectuated the first phase of the holding company reorganization. I’ll talk a little bit more about that later on in the presentation. During the quarter, we also finished up our ATM program. We issued $63 million of the remaining $75 million, closing on our Equity Distribution Agreement. And we declared dividends of $0.64 per share payable December 29, ’23 for shareholders of record as of December 15, 2023. And with that, I’m going to hand it over to Crystal to walk through the financial matters.

Crystal Lail: Thank you, Brian. And I echo your comments on coming up on the 100-year anniversary. We’ve been here for about 20 years of that. Feel pretty privileged to work here and work with this team, so that’s a pretty cool accomplishment in getting to celebrate with those in the community and here on last night was wonderful. So with that, my comments today, I will discuss our third quarter results. I will also provide more commentary, as Brian alluded to, with regard to our release of 2023 and 2024 earnings guidance along with a bit of detail on our financing plans and how we’re thinking about that going forward. So, Slide 5, first, for the quarter. On a GAAP basis, we had an improvement of $1.9 million or $0.01 increase.

On the non-GAAP basis, that was an improvement of $4.2 million or $0.05 or 11.4% versus the quarter in 2022. To give you a bit more detail on that, turning to the quarterly variance, I’ll take you to Slide 8. Among the major items, when you look at the drivers for the quarter, you see margin improvement, which added $0.11, and that was offset by the continuing trends between depreciation and interest expense, and importantly, also $0.03 of dilution from our share issuance. For a bit more detail on the quarter and how margin, that $0.11 shaped up, I’ll move you to Slide 9. You can see, we had an improvement of $0.10, driven by interim rates in Montana. I would also tell you for the quarter, we saw a cooler summer weather. It was also wet across our service territories.