NorthWestern Energy Group, Inc.

Excuse me, 2025. My name is Travis Meyer and I'm the Director of Corporate Development and Investor Relations Officer for Northwestern. Joining us on the call today are Brian Bird, President and Chief Executive Officer, and Crystal Lael, Chief Financial Officer. Brian and Crystal will be walking us through the results and providing a little more color on a very solid quarter. Northwestern's results have been released, and the release is available on our website at northwesternenergy.com. We also released our 10-Q premarket this morning. Please note that the 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 in our SEC filings and the safe harbor provisions included on the second slide of this presentation. Also note that this presentation includes non-GAAP financial measures. Please see the non-GAAP disclosures, definitions, and reconciliations included in the presentation. The webcast is being recorded. The archived replay will be available shortly after the event and remain active for one year. Please visit the financial results section of our webcast to access the replay. With that, I'll hand it over to Brian Bird for his opening remarks.

Thanks, Travis. The recent highlights For the quarter reported gap diluted EPS of $1.25 and non-gap diluted EPS of $1.22. We are affirming our long-term rate base and earnings per share growth rate targets of four to 6%. We've completed our debt financing needs for 2025. And again, we'll stress, we have no planned equity to finance our current five-year capital investment. From a dividend declaration standpoint, We declared a 66 per share payable June 30, 2025 dividend to shareholders of record as of June 13, 2025. The Montana rate reviews nearing completion. We have a full natural gas settlement reached with major interveners and a partial electric settlement reached as well. And I think you know the hearing starts on June 9th. And lastly, the Montana legislature has passed wildfire and other constructive bills now pending the governor's approval. As we start presentation day, before we get into the quarterly results, just remind folks of the value proposition for Northwestern. Starting with a 5% dividend yield is very, very attractive, as you know. Add to that a 4% to 6% EPS growth, a great investment, as you know, in the next five years across our total business. provides a 9% to 11% total growth profile. We do believe there are opportunities with data centers and new large load opportunities to actually potentially achieve greater than 6% EPS growth. In addition to that, there's FERC regional transmission, incremental generating capacity, and transmission capacity associated with meeting new large load opportunities, which could result in greater than 11% total growth returns. And with that, I am going to pass it over to Crystal to talk about the first quarter.

Thank you, Brian, and good afternoon, everyone. Thank you for joining us here in our update. In my comments today, I will cover a few things, updates since we last talked at our year-end earnings call in February. As Brian highlighted, we've been busy. So it's been a busy couple of months. So our first quarter 2025 results, I'll give you more detail on those. Also update you, and Brian mentioned a couple of our financing execution in the last couple of months, also providing a bit more additional insight into our key regulatory proceedings and update you on our 2025 outlook. We delivered a solid first quarter driven by strong margin contributions from both the electric and gas segments and ongoing consistent expense management. Moving to slide seven, this details the drivers of our earnings per share compared to the same period last year. We reported earnings of $1.25 on a GAAP basis as compared to $1.06 in the first quarter of 2024. These higher earnings were driven by rate recovery and colder weather, offset by operating costs, depreciation, and interest expense. Moving to slide eight for a bit more detail on how the margin increase breaks down. New rates, both via interim rates and also final base rates, drove 20 cents of margin improvement, which reflects impacts notably in all three of our jurisdictions. We also saw favorable loads of 13 cents during the first quarter here due to both colder weather, customer growth, and usage on our system. In addition, we continue to see favorable transition revenues of about 5 cents of contribution in the quarter, I would also note that the PCAM column here, or the non-recoverable Montana electric supply costs, while that looks like a small variance for the quarter, when you think about total impact there, we had a Q1 detriment this year of 2.7 million. I almost said 27 million, which as many of you who follow us know, that's what the total amount would be. The 10% sharing would be the 2.7 million impact as detriment this quarter. And this compared to 3 million of detriment in the prior quarter so first quarter of 2024 so comparatively only 300,000 of impact they're slightly favorable. But I would just highlight that we expect to see that as an ongoing trend here in 2025 of headwinds on the PCM front again cost being above that baseline and as I'll get into in a little more detail that remains an open item in our Montana rate review. So, again, concluding the earnings for the quarter on margin, significant improvement there on the backs of rate recovery really necessary to offset the costs that are already in place. Moving to slide nine, I highlighted already that weather was favorable during the quarter, so weather favorably impacted the first quarter by three cents. While in the first quarter of 2024, we had milder weather, so it was unfavorable by one cent, so that's a four cent swing between first quarter of 24 to first quarter of 2025. In addition, in the first quarter of 2024, there was net two cents of favorable adjustments that were backed out for other matters during the first quarter of 2024 that were one-time items. So on an adjusted basis, you'll see that our gap reported results for the quarter of $1.25, removing again favorable weather for the quarter of $0.03 to an adjusted earnings of $1.22. And that's a $0.13 improvement over the prior year. Those adjusted earnings were $1.09 in the prior year. And again, on the backs of favorable weather in the first quarter of 2025. Turning to financing activities on slide 10, we are happy to say that during March, we priced $500 million of long-term debt in two separate transactions. One was included in our disclosures in the 10Q detail on these, but 144A transaction and also a smaller first mortgage amount transaction in South Dakota. And with a bit of the volatility in the market, I'm glad to say we had solid investor interest close those out before maybe some of that volatility hit and those transactions successfully addressed. our financing needs for 2025. So in addition to that, I would also note that we consistent with our solid earnings performance in Q1, our cash flows match that. So you'll see that our FFO to debt metrics on a consolidated basis closed out the quarter just above our 14% threshold. And again, remaining focused on building cushion there to where we want to be from a long-term basis. But again, closing out our financing needs for 2025, and we feel good about having that work done So with slide 11, I will transition from talking about the financials for a regulatory update. So you all know the follow-ups that we submitted settlements in the Montana rate review here recently, and it was a partial settlement in the electric case with the remaining key contested issues related to the revenue requirement for the Yellowstone generating station facility and also the PCAM base. But we were able to reach a settlement on the base transition distribution and base generation costs. And of course, that was significant investment for us and on customers' behalf. Importantly, underlying that settlement, it maintains our existing electric ROE and also our as-filed capital structure. The slide here gives you significant detail, and I think there's more in the appendix on what that settlement looks like. And also, importantly, the bookends of the intervener position. So again, the contestant matters. detailed as the Yellowstone revenue requirement and also the PCAM base. And this slide gives you the bookends of what that looks like. Notably, even with the partial settlement, and if you include our position on those contested issues, the average bill impact is just over 4% to our customers. In addition, with the reduction in PCAMs, so putting Yellowstone into base rates, and reducing PKM, the supply mechanism related to that, it's an overall reduction in customer bills. So we feel really good with our position going into hearing to make that known to both the Commission and others, the value customers are receiving on the backs of that facility. Moving to slide 12, to talk about the gas settlement, it is a full settlement. and it has a slight increase in ROEs of 955 in the prior case to 96 in this one, and our as-filed capital structure, the average bill impact from this gas case is approximately 9%, maintaining rates below the national average. For these dockets, a hearing is scheduled in June, and we expect to implement rates in May. Following a hearing, a briefing schedule will be established with a final order we believe likely in late Q3 to potentially early Q4. Concluding my comments on the regulatory front and moving to our outlook slide here on slide 13, we believe we've made significant progress in 2025, and this provides a foundation for advancing critical customer objectives while balancing the importance of reliability and affordability to our customers, as well as the important part of delivering to our shareholders and supporting our long-term growth outlook. We are affirming, and I think Brian mentioned this up front, our long-term earnings and rate-based growth outlook. But as we've previously discussed, we don't expect to provide 2025 earnings guidance until conclusion of a hearing in the Montana Rate Review. However, we also wanted to be proactive in sharing how the timing impacts of that may affect our quarterly distribution of earnings in 2025. And obviously, many of you already have expectations out there for us for where you think our 2025 will land. And as noted in the regulatory update, we expect to implement updated rates in Montana in May versus, of course, incurring what is already a full year of cost associated with those new investments. This causes more of our quarterly distribution to be weighted in the second half of the year. As a result, we expect our second quarter to be a lower contribution to overall earnings than you would typically expect from us. And we have provided an indication of that earnings distribution here for the second quarter of 2025 to be approximately 10% contribution to the full year. I would also note that the first quarter was solid and slightly ahead of what would have been our expectations. So let me conclude my comments here and the outlook discussion by reinforcing our confidence in delivering on our earnings and rate-based growth commitments over the long term, which moves us to slide 14, And this is the capital slide you've seen before from us, our five-year capital plan and expected investments on our customers' behalf. We updated this in February, and the slide remains the same as to what you've seen before. So we are affirming our capital plan and on track for execution here in 25. And again, as Brian highlighted leading in, this is buys to need no equity, but also keeping both reliability and affordability for our customers in mind. So with that, I will turn it back to Brian.

Thanks, Crystal. We had two main objectives going into this legislative session in 2025 and two bills that we want to sponsor was a wildfire bill and a transmission bill. We're pleased to report that we've had success in both of those efforts and the Montana wildfire bill is something we're extremely excited about. It's a significant risk for the company and all Western utilities. This bill which passed through the house and Senate, unanimous bipartisan support, um, sitting on the governor's desk, uh, believed to be signed. And so we feel extremely good about this. We provides tremendous protection, which I'll talk about in a second, but we believe this is one of the strongest wildfire bills in the country from a state perspective. Um, it's there's no strict liability. It confirms strictly legally cannot be applied to utility operations related to wildfire. legal protections there's a rebuttable presumption utility acted reasonably if it substantially followed an mpsc approved wildfire mitigation plan for wildfire ignited uh what was ignited from a damages perspective as we'd expect at any time there's property damages and fire control costs we'd be responsible for those economic damages but one thing we were cons we were extremely George Malavasic, concerned about is where we seen in other states where we see non economic and punitive damages assigned in this case for us non economic damages can only apply be applied. George Malavasic, If there's bodily injury or death occurs and punitive can only be applied where there's clear and convincing evidence of gross negligence or intent. George Malavasic, We feel very good about this and we really appreciate the state and all the parties, we work with co ops and all parties associated getting this done. Uh, we'd like to think this will come off the governor's desk relatively soon with a signature. So excited about where that sits. Um, and, uh, feel really good about legislative session on that item alone, but we also had some success from the transmission perspective. As you're well aware, many States have a certificate of public convenience and necessity CPCN. Um, we are now have established a means to be able to get a CPCN for our large transmission work and at our request. And also there's some timelines associated with approvals for getting a CPCN and actually the cost recovery of that. Prudency will still be at hand in terms of when the project is complete and appropriate cost recovery. But this is a great step in the right direction. And I think this, everyone knows, it's extremely important from the build-out and being able to serve customers nationwide is to be able to have better means and more assurance around transmission build-out. So really, really happy with the outcomes of our legislative session here in 2025. Moving on, on slide 18, just reasoning, nothing really has changed on Coal Strip. I think it's extremely important to talk about the importance of Coal Strip. You know, the no-cost acquisition of the incremental pieces from both Avista and Puget. It certainly provides energy independence for the state and improves our reliability and certainly integrity. It moves our portfolio from a short capacity position to a long capacity. And obviously with a zero upfront cost, it maintains affordability while insulating customers from volatile capacity and energy market price. That increased ownership, and I think you might recall when we talked about this the very first time, we were very concerned about being, as a 15% owner, having other state policies drive the likelihood that the plant could be shut down. Now at 55% ownership, we can protect our existing ownership and provide Montana control to keep the plant open beyond the Washington, Oregon mandated closure deadlines. And significant capacity surplus provides opportunity for new large load customers, spreading fixed costs over more kilowatt hours. lowering and stabilizing the cost per unit for all our customers. And I'd also point out here, I think you may have seen, and we certainly press released it, there's been some good outcomes from the EPA that also gives us more time to address mass and other issues at the Cold Strip facility. And what I'd argue is a more realistic timetable to make decisions for the long-term health of Cold Strip and ultimately give us potentially more time to decisions for the ultimate closure of Coal Strip. And as we like to think that could be certainly in the late 2030s and the 2040s, depending on economic, commercially available resources to replace it. And we believe in Coal Strip long-term, be it Coal Strip Coal Plant or whatever is there to replace it, we want to do at or around Coal Strip. The far right on this page shows our existing ownership, then the incremental 592 megawatts from the Puget Sound Collectively, those would be larger than the average load in Montana, but certainly substantially less than our peak load. But obviously we have a full portfolio of resources. And again, remind folks in Montana, we're currently at over 60% carbon free, but our all of the above approach and this incremental cost allows us to be, as I mentioned earlier, not only energy independent, but protects our customers from those peak days when the wind's not blowing, the sun's not necessarily shining. So really excited about what's happening at Coal Strip and how it can certainly help our customers and us from a planning perspective going forward to certainly support economic development in the state. Speaking of economic development, large load customers with a full portfolio and now being long capacity, we have the ability to serve some large load customers. Starting out in Montana, as you know, we've signed LOIs with savey and Atlas and is up off to the right. You can see how those megawatts are expected to grow over time. We're in a letter of intent with those parties at this point in time, and we continue to work on various aspects to ultimately get to contracts with these with these parties. Hopefully sometime in the second quarter or third quarter to get that to have that happen. And we expect to serve those two customers under existing Montana tariffs. In addition to that, we are actually working with quite a few other parties at various stages of development in both Montana and South Dakota. And even though we have incremental capacity from Coal Strip, remember that as a regulated utility, these customers are receiving our full portfolio not just resources off of coal strips. So again, 60% carbon free in Montana. In South Dakota, in addition to having to add resources like we would in Montana above and beyond our first two announced data centers in South Dakota, we already have a deviated great tariff that could certainly help us there and a means for quicker recovery. Montana, we wouldn't have to work on incremental tariffs associated with anything beyond SABE and Atlas at this point in time. So really excited about that opportunity, but definitely a lot of work yet to do. Lastly, not much more to report on the regional transmission opportunities. We continue to work with GridUnited and the other utilities looking at that opportunity and also with GridUnited on opportunities with working with us to move power out of Southwest Montana Those discussions continue, working ultimately to get further down the contracting process. One thing I guess I would also mention is we've announced in the past, as have others, there was a $700 million GRIP financing associated with this project, and I think that's still in question, $70 million of which would be used for the coal strip transmission system upgrade. I would say one thing I would argue about what the federal government is doing at this point in time. I also think they see the opportunity that transmission provides to all resources and also to keep customers' bills as low as possible longer term in order for us to move power around in between markets. So I think there's quite a bit of support for transmission, and I'd like to think that this grid financing will be looked upon favorably, and we will continue to work with others to certainly try and achieve that for this project. And with that, that concludes our comments, and we'll turn it back to Mr. Meyer to drive the Q&A process.

Yeah, we'll open it up for questions, Eric.

At this time, I would like to remind everyone, in order to ask a question, please press star followed by the one on your telephone keypad. The first question comes from the line of Nicholas Campanella with Barclays. Please go ahead.

Hey, good afternoon.

Hey, Nick.

Hi, Nick. Hopefully I'm coming through. Yeah.

Hey, hope everything's going well. So just on the tariff proceeding, it sounds like you are having conversations with, you know, customers other than the ones that you've identified so far. And just how long do you think the tariff proceeding could go for? And is that, you know, do you need that to be finished before you announce anything incremental here on the data center side, I guess?

thanks i think i put it to you in this in this context nick you know we have five levels if you will of process for data centers and let me just tell you the five real quick there's a data center request there's a high level assessment there's a contractual estimate a completed contract and then construction those are your five we are in various stages of the first three with parties So on your data center request, there's currently nine parties. This is between both Montana and South Dakota that are in the very early stages. You know, they've, they've, they've provided a data center request, if you will. And, uh, in addition to that, there are three parties that are currently in the what's called the high level assessment. Um, they've gotten past the request. We shared information between the two parties and we're moving on to a high level assessment. And there are two parties, the LOI parties, Atlas and SABE, that are in the contractual estimate. We are doing transmission service agreement studies to calculate total costs, if necessary, to finalize the contract. Once those studies are completed, we believe we'll get those two parties to a contract sometime in the second quarter, hopefully by the end of the second quarter, but could go into the July time period as well. So the studies take some time. um and uh so once those get resolved we believe we can get to contracts with those two parties but as you've heard also there are 12 other parties at various levels prior to that i'm sure there are a lot of folks a lot of utilities talking to many different parties in that process so um hard to say on those in the early stages um and obviously in the queue atlas and savey there's we have a full portfolio to serve those two customers we have to build generation for folks that come in behind those. And I don't know, Chris, do we have anything to add there?

Yeah, just layering on, and Nick, your question as to the tariff under which we literally serve them and how do we move forward. So today we have an existing tariff that we believe these initial ones, and Brian was talking about the process, were unique in being long energy. So we can serve them under that. And the important part of that is Underlying our current rate design is that commercial and industrial customers subsidize residential. So I know that's not the same everywhere, but that exists today and will continue outside of or as we continue through this rate case, that underlying rate design sits there. So we believe we can serve them under existing tariff. And then in a future filing, we certainly think there's there's modifications that can make that even better and then lay the foundation for what Brian was alluding to there. as to when you get past the megawatts we have available today and need to build or have incremental infrastructure investment, that there likely could be modifications to the tariff there to further continue to protect the other customers, even though those protections already exist today. And that would be in an upcoming filing. But again, I would just say we believe we can serve them under our existing tariffs, that those tariffs will continue through this rate review to provide subsidization, quite candidly, of the residential customer group And that's obviously large load can be good broadly for the system in that regard and that we can sign them up as it is today. But Brian alluded to the process we're working through to get them there.

And I think, again, reiterate, South Dakota, a tariff's already established and we can move forward there.

I was talking about Montana. I should say that.

And in Montana, Crystal's absolutely right. There's going to be some work that needs to be done from the tariff development for further data centers beyond the first two in Montana.

Okay, that's all helpful context. I appreciate that. And then, you know, thanks for the info on the quarterly distribution. I guess just kind of taking into account you had a good start to the year, you have this, you know, partial settlement that's out there, if that's approved, do you kind of still see yourself within that 4% to 6% EPS range as we think through 2025?

Nick, that is a very nice way of asking about our 25 guidance that we haven't given you a specific range on. I'll acknowledge that. And the only thing I would just say is on the long term, I would expect that we would stay within that 4% to 6% range, but also acknowledging that we've had some years here where we didn't hit it, that it may not be entirely linear. And we'll update you more after the hearing.

All right. Hey, thanks. Thanks, Nick. Thanks.

The next question comes from the line of Chris Ellinghouse with Hubert William Schenck and Company.

Hey, everybody.

Hi, Chris.

Hey, Chris. A couple of esoteric questions to start with. Did I detect that you changed the electric average customer counts? And was that really just lighting portion? And what was that all about?

I believe, so Chris, as usual, you know as well, and so Travis is feeding me this answer currently, and I believe lighting is correct.

Chris, it was just a, it was really boiled down to the way we were counting our street lighting districts and the new system we have that handles that. And so, yes, it was, we still saw our kind of one and a half-ish percent customer growth, but beyond that, it was the street lighting. Okay.

And also, I was a little surprised by this. and maybe I just didn't detect this, but your average historic heating degree days in Montana actually went up. Has it actually been getting colder in Montana the last few years?

That average is over the long term, Chris, so I don't know that there's anything changing there. There's nothing changed in our methodology that I'm aware of.

Methodology is the same. We do use a rolling 10-year And so that may have worked up over the last 10 years. I haven't drilled in deep enough to know if we had a real warm year fall off, but it may have moved up slightly.

Either a warm year rolled off or something recent was colder. Yeah. So it certainly sounds like you've got a lot in the queue for possibilities. Yeah. Um, you know, and you can't tell us today when some of those things might get, you know, at least to the LOI stage, but do you have a sense of, you know, when you might need to begin the process of advancing some new capacity? And do you have any kind of sense of what that magnitude might be for long-term planning purposes?

Yeah, I'll start. I'll work backwards. You're not going to see us talk megawatts until we have LOIs, right? I am really nervous about counting chicks before they hatch, as they say. But I think what we'd like to do is have a real good idea. I talked about those three layers in the process, and as we continue to think about our resource planning perspectives, I mean, we're going to work with these parties. Obviously, time is of the essence, and we're going to work with these parties to meet their needs as best we can from a timing perspective. So we could get at things pretty quickly, but we want to make sure not just protect the company but protect our customers. We don't want to get ahead of our skis in terms of starting too far down the process in terms of resources until we know we're lined up, signed up with contracts with parties. Chris, you won't see us front running numbers here.

OK, fair enough. So you sort of alluded to, you know, the long term replacement of coal strip for whatever the next commercially available, you know, capacity is. I presume that that the only real long term commercial capacity that you'd be waiting for is nuclear Is, in your view, at Coal Strip, is there an adequate space at the plant to sort of contemporaneously construct a replacement capacity while maintaining Coal Strip in the future? Is there just enough space? there to be able to do that and sort of just flip a switch?

Yeah, Chris, let's just say this. At or around Coal Strip, there's adequate, we'll call sections, as they say. I grew up in Wisconsin where you talked acres. We talked about sections in Montana. There's adequate land for, I'd argue, a gas plant, a coal plant, or both. near or around our transmission facilities in Montana. Gas or nuclear? Gas or nuclear. What did I say? Coal. I did say coal. The gas or nuclear. Thank you, Travis. There's plenty of coal already there. Gas or nuclear, thank you, at or around Coal Strip. So, and matter of fact, I'll be at Coal Strip on Friday. They're having a study It's been done by one of the labs talking about nuclear at Coal Strip, and so they'll be presenting at Coal Strip to the community. And so that's the long-term solution, Chris. Obviously, if federal government decides that we don't have adequate time and we need to close down Coal Strip sooner, let's say in the early 2030s, well, I think we've said this before, we're likely to have to replace that plant with natural gas. longer term we're going to look at nuclear that's as you know that's something closer to the 2040s but if we have to do something sooner we're going to look at natural gas and the issue being here we're certainly going to continue to think about renewables and storage don't get me wrong but to replace a plant like that from a base load perspective we we have to look at like-kind type resources and unfortunately as we sit here today it's natural gas And there may be other technologies beyond nuclear we can look at, but as we sit here today, we think SMRs make a ton of sense.

Okay, great. One more question on SB 301. The 300 days makes a lot of sense in terms of sort of the strategic approval process for a C-10. cost prudency review seems kind of short. Is there any portion of the bill that allows for any kind of overlapping of the approval process? Or does it have to be after the first 300-day process is over? Or can you just do the sort of

intervener education process throughout that I think that I think the 90 days is is appropriate and I think primarily from a prudence perspective I'm expecting that that really comes into play if there's any overages associated with the with the project and so I think that timings appropriate I don't think there's any overlapping that comes into play here with those two timetables so I think they're appropriate okay

All right, thanks a bunch. Appreciate the clarity.

Thanks, Chris. And Chris, we're not going to build any coal plants, just so you know.

Gotcha.

I will now turn the call over to Brian Bird for closing remarks. Please go ahead.

I understand from Travis, we have no further questions. I appreciate everyone's attendance here and staying abreast of what's happening at Northwestern. We feel like it's been a very good effort in terms of the regulatory front to negotiate a full settlement on gas and partial settlement on electric. I think it's been a great outcome. We've got a great legislative outcome. Feel real good about the first quarter as we sit here today. And so real excited about how things are looking for us in the remainder of the year. So thanks, everybody.

Ladies and gentlemen, this concludes today's call. Thank you all for joining and you may now disconnect.