NorthWestern Energy Group, Inc.

Good afternoon, and thank you for joining Northwestern Corporation's Financial Results Webcast for the quarter ending June 30, 2022. My name is Travis Meyer. I'm the Director of Corporate Finance and Investor Relations Officer for Northwestern. Joining us today to walk you through the results and provide an overall update are Bob Rowe, Chief Executive Officer, Brian Byrd, President and Chief Operating Officer, and Crystal Lael, Vice President and Chief Financial Officer. All participant lines are currently muted. After the presentation, we have allowed 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 to 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 have also released our 10Q premarket this morning. Please note that the company's press release, this presentation, comments by presenters, and responses to your questions may contain forward-looking statements. As such, I will direct you to the disclosures contained within our SEC filings and the 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 included in this presentation today. This webcast is being recorded. The archive replay of today's webcast 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 hand the presentation over to Northwestern CEO, Bob Rowe.

Good afternoon and thank you for joining us. The photograph on the cover of the deck you're looking at is taken from the rim rocks above Billings in Yellowstone County, Montana. That's appropriate because, as you know, we're working very hard to ensure adequate delivery and generating capacity in the Billings area, particularly the Yellowstone County Generating Station, but also other work as well. But in fact, our board meeting is in Kalispell in Flathead County over in the northwestern corner of Montana, where we're seeing really exciting growth on the natural gas side as well. Had a great visit with our local team here, board and employees in our Kalispell, Montana office. It was particularly nice because yesterday we concluded the last open contract we had and that was with our represented Kalispell employees. So as a result of that now we have multi-year labor contracts with all of our represented employees providing some real stability and I would say that we all came out of that much more united with a sense of shared purpose and I'll start off with some highlights, turn it over to Crystal for the financials, then to Brian for operating results and coming attractions, and then we'll come back and visit just a little bit about the other big news of the day that we're all really very pleased with. Recent highlights, starting off. Financial results are in line with our expectations for the quarter. That includes net income of $29.8 million, or $0.54 diluted EPS. and then non-GAAP EPS of $30.01 or $0.54 diluted EPS per share. Our expected long-term annual EPS growth rate is between 3% and 6%, and we're reaffirming our full-year non-GAAP guidance of between $3.20 and $3.40 per diluted share. Our $582 million capital plan for 2022 remains on track. Our folks do an excellent job managing our capital work despite all the challenges that are being thrown at them. In May, we went live with the 58 megawatt Bob Glanzer generating station in Huron, Montana. A neat story there is while we were cutting the ribbon, the generating station was called on by SPP at that moment. We had to all go outside and it's been working wonderfully well and typically has been called on by the power pool multiple times every week. So it's doing just what it was intended to do. We had really a great employee response in both Montana and South Dakota to some severe weather. Probably you all saw the photographs from Yellowstone Park and the Yellowstone River and you should know that our employees were very much in the middle of every part of that, working to restore service in the park, in the communities, along the river, and really even bigger storms hitting South Dakota, two derecho storms in particular. We track major events, but this was the rare catastrophic event, and we find catastrophic as seven times as significant as a major event. In both the Montana and the South Dakota events, our employees did a great job. We heard stories of customers just watching in tears, really grateful for the work they were doing. And very importantly, all of that work was done very, very safely. So we were doing, our folks were doing just what they were expected to do. In terms of the dividend, our quarterly dividend of 63 cents per share will be payable on September 30th 2022 for shareholders of record as of September 15th. Crystal, off to you.

Thank you, Bob. As Bob noted, an operational quarter with some significant events there, and then we look at results from a Q2 perspective. Those see on slide four, as Bob mentioned, lower at the net income line by $7.4 million, coming in at $29.8 million of net income, or $0.54 million. The thing I would mention is after adjusting for non-GAAP items, which I'll get into in a little bit more detail here, that is actually an improvement at the net income line of 30.1 million in Q2 22 versus 29.2 million in Q2 of 21 or 54 cents as compared with 56 cents. Turning to slide five to give you a bit more detail on our earnings here, really solid performance from retail volume. You'll see that on the left side of the page offset by items, really favorable in Q2 of 21. The absence of those is affecting the comparative results here. Also, we had a penalty associated with some prep litigation driving unfavorable results. I would also mention the higher operating and depreciation there in line with our expectations. And then of course the share dilution based off the equity that we issued in late 2021, all leaning to 18 cents lower on a gap basis versus 2021. A bit more detail on the margin line at page six, down $2 million, primarily, again, driven by some of those favorable items that occurred in Q2 of 21, offset by solid customer growth and usage, and then weather on the natural gas side. So I'll take it from the left side of the page to the right here. The first column is the adjustment to our liability that we have for out-of-market QF costs. This is my favorite thing. It was my favorite thing when I was an accountant to go through this every year. But last year in Q2, that was $9.2 million favorable to us. This year, $5.1 million favorable. So you see a lower impact there, negative of $4.1 million. The next column here is our transmission, electric transmission margins. The thing I would mention there is last year we had the release of $4.7 million of margin related to prior deferred revenues. You remove that, and we actually are continuing to see solid transition revenues and a slight improvement over Q2 of 21. But again, the absence of that $4.7 million favorable in 2021 is impacting the results there. Moving to our fundamental natural gas and electric volumes for the quarter, you'll see natural gas is favorable really on the backs of cooler April and May weather there contributing. And then on the residential side, Weather not quite as favorable on the electric piece, I should say, but solid residential and commercial usage offset of this by the industrial side. So margin there together on natural gas and electric volume, 6.7 million favorable. I would comment that weather was 3 million favorable to us versus normal and 1 million favorable versus the prior period. And again, I would mention that's driven a lot on the natural gas side by cooler weather in April. May, that did reverse a bit on us in June. The other thing that I would mention is as we talked in April, we mentioned quite a bit about weather and snowpack conditions. And that, as Bob started us off with, has turned dramatically in Q2 with snow. wet weather in Montana, helping our hydro conditions broadly. All of that leading to, again, $2 million lower in margin, driven really by the absence of some favorable items in the prior year, or 0.9%. Moving on to the next slide, slide seven, operating expenses. You'll see continuing increase or headwinds on the operating side, but consistent with our expectations of the guidance that we laid out for 2022. An increase of $2.8 million overall for the quarter that falls to the bottom line, driven by higher insurance costs and higher depreciation. But again, in line with our expectations. Then slide eight gives you the gap to non-gap reconciliation. Again, I would highlight, starting from the left side, working in $29.8 million of net income, or $0.54 on a gap basis. We're adjusting out favorable weather here of $2.2 million, and then also adjusting the prep penalty that we recorded in Q2. The reason I would comment on that, that we're adjusting out that penalty is that related to litigation from prior periods and legislation that indeed no longer applies to us so because it's related to prior periods and legislation is no longer applicable we've added that back and obviously our weather adjustment is typical so that gets us to a non-gap net income basis of 30.1 million or 54 cents as compared to the prior period. And again, Q2 of 2021 impacted by weather, but certainly by QF liability adjustment, they're significant. So after removing those, it's 30.1 million in Q2 of 22 versus 29.2 million in the prior period or a slight improvement on the net income line, but offset by dilution at the share line, 54 cents there versus 56 cents, but does show improvement. With that, I would move to slide nine from a cash flow basis. At Q1, we had talked about solid improvement from a cash flow perspective, and that trend has continued into Q2. Much of that driven by collecting prior period energy costs, both electric and gas. Think winter storm, URI costs. Think about the slowness of collection in our montana pcam those are favorable also driven by favorable revenues and strength at that line as well and also the absence of some refunds that occurred in the prior period here so we continue to see strong cash flows here i would also comment that on the backs of some of that and our equity issuance we were taken off of negative outlook by moody's during the quarter so with that i would lead you to slide 10. And note that, obviously, we noted in our press release and Bob noted at the open that we are reaffirming our guidance based off the performance in the first half of the year in line with our expectations and no changes to this slide as to the items that we expect to impact us in 2022. And with that, I'll turn it over to Brian.