BUTTE, Mont. and SIOUX FALLS, S.D., Feb. 14, 2024 (GLOBE NEWSWIRE) — NorthWestern Energy Group, Inc. d/b/a NorthWestern Energy (NASDAQ:NWE) reported financial results for the year ended December 31, 2023. Net income for the period was $194.1 million, or $3.22 per diluted share, as compared with net income of $183.0 million, or $3.25 per diluted share, for the same period in 2022. This increase of $11.1 million in net income was primarily due to new base rates resulting from the Montana rate review, lower non-recoverable Montana electric supply costs and lower property and other taxes. These favorable impacts were partly offset by lower electric and natural gas retail volumes, higher depreciation and depletion expense, higher interest expense, higher operating, maintenance, and administrative expenses, and higher income tax expense. The $0.03 decline in per-share earnings in 2023 was primarily due to $0.23 of equity dilution from higher average shares outstanding largely offset by $0.20 higher per share net income.
Non-GAAP Adjusted diluted earnings per share for 2023 was $3.27 ($0.05 higher than GAAP adjusting for unfavorable weather during the year) and above our guidance range of $3.00 – $3.10 primarily due to lower operating costs, lower non-recoverable Montana electric supply costs and lower income tax expense. See “Reconciliation of Non-GAAP Items” and “Non-GAAP Financial Measures” sections below for additional information on these measures, including a reconciliation of GAAP diluted earnings per share to Non-GAAP adjusted diluted earnings per share.
“We are pleased to deliver earnings that exceeded our recently communicated expectations for 2023 during what was otherwise an incredibly productive year,” said Brian Bird, President & Chief Executive Officer. “We remain committed to providing our customers with reliable, affordable and sustainable energy while operating a financially sound utility. Doing so requires adjusting customer rates on occasion to reflect the cost of providing that service. During the year, we worked closely with commission staffs and intervening parties to reach constructive resolutions in our Montana and South Dakota rate reviews. Building upon the thousands of pages of pre-filed testimony, hundreds of data responses, public input and two very well-run and robust public hearings, the respective Commissioners unanimously supported the settlements. We view both outcomes as striking a fair balance between mitigating impacts on our customers’ rates and ensuring our financial health as a provider of critical energy infrastructure services. The increase in rates resulting from our Montana rate review was a primary driver of our improvement in net income for 2023. The new rates in South Dakota went into effect January 10th, 2024.”
“In 2023 we also made a strategic realignment to effectuate a holding company with the final phase completed on January 1st, 2024. This proactive move is part of our commitment to effectively manage risks, ensure the long-term sustainability of our operations and more closely align our organizational structure with our industry peers. Additionally, in 2023, we marked ‘100 Powerful Years!’ This significant milestone symbolized a century of resilience, innovation, and steadfast commitment to fulfilling the energy needs of our valued customers. As we look forward to 2024 and the next century, we believe we are well-positioned to provide growth to our shareholders and continue our tradition of unwavering dedication to the customers and the communities we proudly serve,” said Bird.
Additional information regarding this release can be found in the earnings presentation found at www.northwesternenergy.com/about-us/investors/financials/earnings
FOURTH QUARTER FINANCIAL RESULTS
Net income for the three months ending December 31, 2023 was $83.1 million, or $1.37 per diluted share, as compared with net income of $66.7 million, or $1.16 per diluted share, for the same period in 2022. This increase of $16.4 million in net income was primarily due to new base rates resulting from the Montana rate review, lower non-recoverable Montana electric supply costs, lower Montana property tax expense and lower operating and income tax expense. These favorable impacts were partly offset by lower electric and natural gas retail volumes, higher depreciation and depletion expense and higher interest expense. The $0.21 increase in per-share earnings for the quarter was primarily due to $0.26 higher per share net income as discussed above partially offset by $0.05 equity dilution due to higher average shares outstanding.
Non-GAAP Adjusted diluted earnings per share for the quarter was $1.38 (or $0.01 higher than GAAP after adjusting for unfavorable weather mostly offset by removing and income tax benefit realized during the quarter) as compared to $1.13 for the same period last year. See “Reconciliation of Non-GAAP Items” and “Non-GAAP Financial Measures” sections below for additional information on these measures, including a reconciliation of GAAP diluted earnings per share to Non-GAAP adjusted diluted earnings per share.
COMPANY UPDATES
Affirming 2024 Earnings Guidance, Capital Plan and Long-Term EPS Growth
We are affirming 2024 diluted earnings guidance of $3.42 – $3.62 per diluted share and our $500 million capital plan. This guidance is based upon, but not limited to, the following major assumptions:
Normal weather in our service territories;
An effective income tax rate of approximately 12%-14%; and
Diluted average shares outstanding of approximately 61.3 million.
We are also affirming our long-term (5 year) diluted earnings per share growth guidance of 4% to 6% from a 2022 base year of $3.18 diluted earnings per share on a non-GAAP basis. We expect rate base growth of 4% to 6%. Our current capital investment program is sized to provide for no equity issuances. Future generation capacity additions or other strategic opportunities may require equity financing.
South Dakota Electric Rate Review
On June 15, 2023, we filed a South Dakota electric rate review filing (2022 test year) for an annual increase to electric rates totaling approximately $30.9 million. Our request was based on a 7.54% rate of return, a capital structure including 50.5 percent equity, and rate base of $787.3 million. On January 10, 2024, the South Dakota Public Utilities Commission (SDPUC) issued a final order approving the settlement agreement between NorthWestern and SDPUC Staff for an annual increase in base rates of approximately $21.5 million and an authorized rate of return of 6.81%. The approved settlement is based on a capital structure of 50.5 percent equity and a rate base of $791.8 million. Final rates were effective January 10, 2024. In addition, the SDPUC approved a phase in rate plan rider that allows for the recovery of capital investments not yet included in base rates.
Dividend Declared
NorthWestern Energy Group’s Board of Directors declared a quarterly common dividend of $0.65 per share (a 1.6% increase over the prior quarter’s dividend) payable March 29, 2024 to common shareholders of record as of March 15, 2024. Over the longer-term, we expect to maintain a dividend payout ratio within a targeted 60-70% range.
CONSOLIDATED STATEMENT OF INCOME
Year Ended December 31,
(in millions)
2023
2022
Reconciliation of gross margin to utility margin:
Operating Revenues
$
1,422.1
$
1,477.8
Less: Fuel, purchased supply and direct transmission expense (exclusive of depreciation and depletion shown separately below)
420.2
492.0
Less: Operating and maintenance
220.5
221.4
Less: Property and other taxes
154.6
192.5
Less: Depreciation and depletion
210.5
195.0
Gross Margin
416.3
376.9
Plus: Operating and maintenance
220.5
221.4
Plus: Property and other taxes
154.6
192.5
Plus: Depreciation and depletion
210.5
195.0
Utility Margin(1)
$
1,001.9
$
985.8
Year Ended December 31,
(in millions, except per share amounts)
2023
2022
Consolidated Statements of Income
Revenues
$
1,422.1
$
1,477.8
Fuel, purchased supply and direct transmission expense (2)
420.2
492.0
Utility Margin (1)
1,001.9
985.8
Operating and maintenance
220.5
221.4
Administrative and general
117.3
113.8
Property and other taxes (3)
153.1
192.5
Depreciation and depletion
210.5
195.0
Operating Expenses
701.4
722.7
Operating income
300.5
263.1
Interest expense, net
(114.6
)
(100.1
)
Other income, net
15.8
19.4
Income before income taxes
201.6
182.4
Income tax (expense) benefit
(7.5
)
0.6
Net Income
194.1
183.0
Basic Shares Outstanding
60.3
55.8
Earnings per Share – Basic
$
3.22
$
3.28
Diluted Shares Outstanding
60.4
56.3
Earnings per Share – Diluted
$
3.22
$
3.25
Dividends Declared per Common Share
$
2.56
$
2.52
(1) Utility Margin is a Non-GAAP financial measure.
See Reconciliation of Gross Margin to Utility Margin and Non-GAAP Financial Measure sections that follow.
(2) Exclusive of depreciation and depletion.
(3) 2023 Property and other taxes of $153.1 million includes a $1.5million expense benefit in the Other segment that is not included in the Property and other taxes amount of $154.6 million as shown in the Reconciliation table further above.
RECONCILIATION OF PRIMARY CHANGES
Year Ended December 31, 2023 vs. 2022
Pre-tax
Income
Inc. Tax
Benefit (Expense)(3)
Net
Income
Diluted Earnings Per Share
(in millions)
Year ended December 31, 2022
$
182.4
$
0.6
$
183.0
$
3.25
Variance in revenue and fuel, purchased supply, and direct transmission expense(1) items impacting net income:
Montana rate review – new base rates
32.6
(8.3
)
24.3
0.43
Lower non-recoverable Montana electric supply costs
14.2
(3.6
)
10.6
0.19
Montana property tax tracker collections
12.8
(3.2
)
9.6
0.17
Higher Montana natural gas transportation
2.2
(0.6
)
1.6
0.03
Higher electric transmission revenue
0.6
(0.2
)
0.4
0.01
Lower natural gas retail volumes
(7.0
)
1.8
(5.2
)
(0.10
)
Lower electric retail volumes
(1.8
)
0.5
(1.3
)
(0.02
)
Higher revenue from lower production tax credits, offset within income tax benefit (expense)
3.8
(3.8
)
—
—
Other
(1.7
)
0.4
(1.3
)
(0.02
)
—
Variance in expense items(2) impacting net income:
—
Higher depreciation expense
(15.5
)
3.9
(11.6
)
(0.21
)
Higher interest expense
(14.5
)
3.7
(10.8
)
(0.19
)