NorthWestern Energy Group, Inc.

Good afternoon and thank you for joining Northwestern Energy Group's financial results webcast for the quarter ended March 31st, 2024. 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 Lael, Chief Financial Officer. All participant lines are currently muted. After the presentation, we've allowed time for a Q&A. I'll provide instructions for asking questions at that time. However, if you intend to ask a question and are joining us by computer, please set your Zoom identity to your first and last name 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 10Q pre-market 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'll direct you to the disclosures contained in our SEC filings and the safe harbor provisions included in the second slide of the presentation. Also, please note this presentation includes non-GAAP financial measures. Please see the non-GAAP disclosures, definitions, and reconciliations also included in the presentation. The webcast is being recorded. The archived 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 Brian Bird for his opening remarks. Thanks, Travis.

Well, we were in South Dakota this week. Actually, we were in Brookings earlier in the week. had the fortunate event of having a valve turning on the first renewable natural gas coming onto our system. As a matter of fact, with five more of those projects, two-thirds of our residential customers in South Dakota will be receiving renewable natural gas. So that's in 2025. So we have a handful more of those projects coming on. We're very excited about that. It's certainly helpful for our net zero by 2050 goal. We were in Brookings in the latter half of the week also for a board meeting, which we finished up this morning and had the annual meeting. And at that annual meeting, it was our board chair's last meeting. Dana Dykhaus turned out after 15 years on our board. He's been a fantastic person. board member and he is a icon in the state of South Dakota. We've been very, very fortunate to have him on our board and we will miss him dearly. With that, I'm going to talk about the recent highlights for the quarter. We reported gap diluted EPS of $1.06, non-gap diluted EPS of $1.09. We're affirming our 2024 diluted EPS guidance of $3.42 to $3.62 for 2024. We're affirming our long-term rate base and earnings per share growth rate targets of 4% to 6%. We've completed our debt financing needs for 2024. And we declared a dividend of $0.65 per share payable June 28, 2024 to shareholders at record as of June 14, 2024. We also have Montana Electric and gas rate review filings anticipated for the third quarter of 2024. And that will, for Montana Electric, will include the prudence review of Yellowstone County Generating Station. We also will be publishing here shortly in May our wildfire mitigation plan. That plan will include our new public safety power shutoff. PSPS process and the plan recognizes and addresses the unique needs of our customers, communities, and first responders. I'll speak to that more in a moment. Our Northwestern value proposition, I think with a 5% dividend yield sitting here today and following through on our base capital plan of $2.5 billion, and Crystal will speak to that more later in the presentation, But that 5% dividend yield plus a 4% to 6% EPS growth rate gets you to 9% to 11% total growth rate return. On top of that, we have some incremental opportunities. We continue to explore some transmission investments, incremental generating capacity necessary in both jurisdictions from an electric perspective. We're evaluating some QF contracts and PPAs for potential buyouts. and just to continue electrification that we're seeing in most jurisdictions, of course, in the U.S. that support economic development. And with those incremental opportunities, we'd see a higher than 11% total growth in return for investors. With that, I'll pass it over to Crystal for comments on the court.

Thank you, Brian. My comments today will cover our financial performance for the first quarter and a bit of an update on our overall financing plans and balance sheet in addition to where we're at on the capital execution side for the year. As Brian noted, we delivered strong financial performance here in the first quarter of 2024 with EPS of $1.09 compared to $1.05 last year. These quarterly results were driven by new rates, importantly, and solid expense management. They were tempered a bit by milder weather and a few one-time items impacting the quarter, which I will provide a bit more details on in a minute. From a net income basis for the quarter, that led to, from a gap perspective, a $2.6 million improvement or 4.2%. On a non-gap adjusted basis, $4.2 million of an increase or 6.7% increase versus the fourth quarter of 2024. Moving to slide seven. This slide highlights for you the after-tax drivers of change in our diluted earnings per share for Q1 2024 as compared to 2023. You'll note, importantly, the strength of our higher utility margin of 15 cents, really driven by the regulatory execution that we talked about quite a few times with the Montana Electric and Gas Rate Review and what we will have as a full year impact of new rates for 2024 in addition to that. We also concluded the South Dakota electric rate review and received final rates there in January. So you see a significant driver of results here in the first quarter for us. In addition to that, you'll note O&M expenses increased about five cents versus the first quarter. of 2023, I would highlight for you that included in that five cents of detriment at the O&M line is a litigation outcome and also an impairment impact. Together, those items were six cents. So if you remove that, subtract the six cents of impact from that litigation outcome and the impairment impact sitting in the O&M line, you would actually see solid cost management there, which would result in one cent lower of O&M versus the first quarter of last year. Also note that depreciation interest expense also increased each 4 cents versus the first quarter of 2023. In addition, we had 3 cents of dilution impact from additional shares outstanding, all that leading to $1.06 of earnings on a gap diluted basis and on an adjusted basis, $1.09. Moving to slide eight, a bit more detail on our utility margin. For the quarter, higher margin was driven by 25 cents of new rates and 4 cents of improvement from transmission services. These were offset a bit by lower volumes of about 8 cents driven primarily by milder weather and 4 cents from an impact from our Montana PCAM, and that was driven by the January cold weather event. I think we spoke with you about that at our February call, but we saw power prices drop over 1,000 box a megawatt hour to procure and serve our customers in that storm event. You see that impact in our peak cam noted here at the 4 cents of detriment in Q1. Slide 9, we provide the details of our adjusted earnings to highlight a couple of things that I just covered in our bridge detail. So you'll note that on the left-hand side of this in Q1 2024, we start with $1.06 of earnings. add back one cent of unfavorable weather, and then netting the two items, which is the impairment of the energy storage-related investment offset by the reversal of a penalty, netting to a two-cent add-back gets you to $1.09 of earnings in the first quarter of 2024. When you compare that to last year in the first quarter, notably, we had significantly more favorable weather. So think about where we live. It was really cold last year in Q1 in Montana, South Dakota, Nebraska. And this year it was certainly a lot milder and we all noticed it. So you saw a five cent add back last year. So notably, that was a six cent swing and earnings impact to us versus the two quarters last. And then also you see that we had a tax item that we had adjusted last year. All that being said to say $1.09 of earnings compared to $1.05 of adjusted earnings in the prior quarter, which is a 4 cent increase or 3.8%. Moving to slide 10, a key strategic objective for us has been further strengthening our balance sheet. We have been very disciplined about our regulatory execution, which we've talked about and the impact of that to our utility margin and importantly to our cash flows. in addition to discipline capital allocation, such that I am happy to say here at the end of Q1 closing out the quarter that our FFO to debt metric, as we concluded, is over 14%. And many of you that follow us know that that is our downside threshold from a credit rating agency perspective. So we're really happy to see the disciplined execution in the last couple of years, leading us to a point where we're very happy about where we are from a balance sheet perspective. In addition to that, During Q1, we had announced our financing plans for the year, which include no equity, but some debt financing needs. We have executed on that and have closed out our financing needs for 2024. I will turn you to slide 11 and reiterate, Brian has already noted earlier that we are affirming our guidance for the year. So in Q1, we are reaffirming our 2024 guidance of $3.42 to $3.62. And that is consistent with our long-term earnings guidance of 4% to 6% from an earnings per share growth rate. And we feel good about where we are from those targets and where we are with solid execution in Q1, setting up a base for the rest of 2024. Slide 12, I'll highlight our capital forecast for 2024 includes over $500 million of investment driven by our base system and really supporting our customer needs and making sure we're serving them well. But also and importantly, the completion of the Yellowstone County Generating Station. We've talked about this many times, but resources such as Yellowstone County are incredibly critical to our ability to serve our customers when they need it most. We're happy to say that our capital forecast here is on track. and importantly on track for what we think are the most critical investments to serve our customers. So with that, I will turn it back to Brian.