Northwestern Energy Group Inc (NWE) Q3 2026 Earnings Call Transcript

Operator: Hello, everyone. Thank you for joining us and welcome to the Northwestern Energy Third Quarter 2026 Financial Results Webinar. After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please press star 1 to raise your hand. To withdraw your question, press star 1 again. I will now hand the conference over to Travis Meyer director of corporate development and investor relations officer. Travis? Please go ahead.

Travis Meyer: Thank you, Elodie. Good morning, and thank you for joining NorthWestern Energy Group's financial results webcast for the quarter ending September 30, 26. Joining us on the call today are Brian Bird, president and chief executive officer and Crystal Dawn Lail, chief financial officer. Brian and Crystal will walk you through our financial results and provide an overall update on the progress we have made this quarter. Before handing it over, however, a few reminders regarding today's call. 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 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 in the Safe Harbor provisions included in the second slide of this presentation. Also note that this presentation includes non GAAP financial measures, and information regarding the pending merger transaction. Please see the non GAAP disclosures, definitions, and reconciliations and merger related disclosures included in the appendix of today's presentation materials. This webcast is being recorded. The archived replay will be available shortly after the event and remain active for 1 year. Please visit the financial results section of our website to access the replay. With those details behind us, I will hand the presentation over to Brian Bird for his opening remarks.

Brian Bird: Travis. Recent highlights first of all, reported GAAP diluted EPS of $0.50, non-GAAP diluted EPS of $0.58, We are affirming 2026 earnings guidance range of $3.8 to $3.83 We are also affirming our long term rate base and EPS growth rate targets of 4% to 6%. Also for the quarter, we are declaring a dividend of $0.67 per share payable December 1, 2026. This payment date and the November 17 record date align with Black Hills dividend dates and is intended to simplify the closing mechanics in the merger. Regarding the merger itself, we have received approvals from the Nebraska PSC, the South Dakota PUC, FERC, Our final order expected from the Montana Public Service is November twelfth 20 sixth. If final, with a satisfactory approval is received, we anticipate completing the merger with Black Hills Corporation by the year end 2026. With that, I am going to turn it over to Crystal for the third quarter financial review.

Crystal Dawn Lail: Thank you, Brian, and good morning, everyone. Thank you again for attending our earnings call for Q3 here today. In my comments, I will take you through details on our third quarter performance how that ties into our year to date results, and an update on our 2026 earnings outlook. Starting with Brian's overview comments for the third quarter, we reported GAAP earnings of $0.50 compared with $0.62 in the third quarter of 25. On a year to date basis, we are reporting GAAP earnings of $1.93 as compared to $2.22 in 2025. Moving to slide 8, I will spend some time on the key drivers for the quarter. Notably provide more transparency and visibility into the full impact of our incremental holster ownership. We have provided a detailed breakout in our waterfall slides for the quarter and year today. You will note margin improved due to slightly favorable weather, and the absence of PCAM sharing versus the prior quarter. While volumes were impacted by favorable weather, particularly in July, this was offset by slightly unfavorable weather in August and September and also overall lower usage per customer. The margin improvement overall offset by higher operating costs, depreciation, and interest. The slide provides detail on the impact of our incremental Colstrip interest, as I mentioned, previously, for the quarter. The detriment for those 2 pieces, both the Avista and Puget piece, is $6.1 million or $0.10. Due to weak market prices overall, the PCAM tariff waiver provided no recovery of cost for the Avista portion during the quarter. With that I will move to Slide 9 to discuss our adjusted earnings reconciliation for the quarter. My comments on weather, again, a bit of favorable weather in July offset in August and September. Weather was overall favorable by $0.01 for the quarter versus what we would expect for normal. The quarter also included $0.04 of merger related costs. Also note, are adjusting out $0.05 of detriment related to the Avista portion tied to designated sales contracts. However, as noted in my prior comments, the full impact of both the Puget and Avista share is around $0.10. And we are only adjusting out here $0.05 You will see the reconciliation from left to right. Yeah. $0.50. With those adjustments, we are reporting $0.58 on an adjusted basis. Versus in the prior period in 2025, $0.79 on an adjusted basis. Moving to slide 10 and our year to date results, Margin improvement reflects new rates in Montana in the first half of youth. The year compared with 2025 offset by mild weather higher operating costs, depreciation, and interest. Again on this slide, we have broken out detail as it relates to our incremental interest from Colstrip, Puget, and Avista, which represent a $16.4 million detriment or $0.27 on a year to date basis. In a similar fashion, on the quarter results, the PCAM tariff waiver related to the Avista portion tied to certain designated contracts has not resulted in recovery of costs. I will take you to Slide 11, to discuss on an adjusted basis our results for the year. And remind you that we started out 2026 with a extremely mild winter, and year to date have largely continued that trend. We have added back $0.17 of weather versus normal our 2026 results. Merger related costs are $0.13 and, again, we are adjusting only a portion of the Colstrip impact, Related to the Avista designated sales contracts related to $0.15. You will note that we are adjusting from $1.93 to an adjusted basis of $2.39. As compared to an adjusted results in 2025 of $2.41. So $0.02 lower on a year to date basis than last year. Again, we are looking to provide transparency as to the impact of the incremental Colstrip interest and remain consistent with how we presented our results in prior quarters. If we were fully adjusting the Colstrip impact, which I will remind you is $0.27 year to date, that would reflect an incremental $0.12 on a year to date basis. With that, I will move to slide 12 and talk about our guidance. With our performance year to date, we are reaffirming NorthWestern stand-alone 2026 adjusted earnings per share guidance range of $3.68 to $3.83 with a bias towards the lower half of the range. While the agreements to take additional ownership in the Colstrip facility provide much needed capacity to serve our customers when they need it most, and provide for a 55% voting share of the facility near term market prices have impacted our ability to fully cover our costs. Our guidance range notes that assumptions include approval of the PCCAM waiver note that is only approved on an interim basis and power prices sufficient to recover operating expenses from the incremental of this and future posters. The Pacific Northwest has experienced extremely mild weather in both the winter heating season and summer cooling, leading to broadly low market prices. In working to offset this, we remain focused on cost control, and expect to be in the lower half of our guidance range on a standalone basis for 2026. Notably, as to how we think about those assets going forward, we had discussed in our Q2 earnings call that addressing cost recovery of the Avista portion will require a rate review of Montana. While we are still pending a determination on our motion for reconsideration, from our prior case, we do expect to file a rate review in Montana by the end of 26. To address these costs. We also look forward to the NPOC schedule hearing next week and associated implications regarding our Puget interest, which Brian will discuss further. Moving to Slide 13, our capital plan is $3.2 billion investing on our customers' behalf to remain reliable and provide good services to them remains on track. We expect to provide a CapEx refresh in early 27. And with that, I will turn it back to Brian.

Brian Bird: Thanks, Crystal. Obviously, folks are waiting for November 10, the hearing. On the merger with Black Hills. Obviously, the slide here talks about benefiting stakeholders I think both sets of shareholders from Northwestern and Black Hills understand the benefits to shareholders if you consider the votes that we had in the high turnout and also the high amount of votes for the merger Obviously, increasing scale, being able to achieve a higher EPS growth rate, expanding our opportunities to invest and better finance those opportunities, strengthen balance sheet, and obviously, enhanced business diversity. Certainly, it is a benefit to shareholders. Equally important, this is substantial long term value for customers. Now are we bringing together 2 complementary teams, we are going to provide reliable service like they have in the past, but even better on a combined basis. But any cost savings achieved from this merger ultimately going to accrue to customers in future rate reviews. And lastly, as we prepare for the combination with Black Hills, employees are excited about being part of something bigger, and about the 2 companies being better together as 1 company. So we are very excited about the opportunity. Obviously, we need 1 last approval. And with that, I turn your attentions to slide 16 that last approval is from the Montana Public Service Commission. And as highlighted there by the dotted box, you could see that our final order is expected by November 12, the hearing on November 10, And if we do, if we are fortunate enough to receive an approval with a satisfactory written order, we would plan to close shortly thereafter. So moving forward, we are also, as you know, working on data centers From a data center request perspective, combining the request and assessments, our queue count has gone from 14 to 16. We are seeing bit more interest in South Dakota. On a development agreement, you have noticed the queue count went down from 3 to 2. I would mentioned in previous meetings, Sebi had issues with land for its build in and around Butte. Montana, and as a result, has since exited from the development agreement. So our acute count from the development agreement is down to 2. Speaking about that on 18, we talked about those large load customers. The 2 remaining with development agreements is Atlas, of course, there is an expectation with a customer. They ultimately could go from 75 up to 150 starting in late 27. And then also, Quantica is. From a studying load at this point, 25 megawatts going up to 1.1 gig. It notes the target to start there of early 29. In recent discussions, that could actually occur sometime earlier than that. So excited about the progress. Made there with Quad. Lastly, on slide 19, a NorthWestern value proposition perspective, you know, again, approximately a 4% dividend yield and just yield and take into consideration our base plan of a 4% to 6% EPS growth, you have in and of itself an 8% to 10% total return. If in fact you think about opportunities around data centers, around FERC regional transmission, incremental generating, capacity in Montana and South Dakota. Those possibilities could show us with a return greater than 10%. Having said all that, obviously, with Black Hills we think we will be better together and that total return picture would be even better. And with that, we will open it up to Q&A.

Operator: We will now begin the question and answer session. Please limit yourself to 1 question and 1 follow-up. If you would like to ask a question, please press star 1 on your telephone keypad. Withdraw your question, press star 1 again. Please pick up your handset when asking a question. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question is from the line of Shahriar Pourreza with Wells Fargo Securities. Please go ahead.

Whitney Mutalemwa: Good morning, team. This is Whitney Mutalemwa on for Shahriar.

Brian Bird: Hi, Whitney.

Crystal Dawn Lail: Good morning.

Whitney Mutalemwa: Q3 update states Montana is served by a portfolio that is long capacity from 2026, while the IRP shows winter shortfalls by 2027. How much of the 75 megawatts to 1.25 thousand megawatts is in your load forecast? And does the corrected IRP change what you would build or serve to Atlas and Quantica?

Brian Bird: Yeah. I think the issue for us is the 200 megawatts is something that we continue to think about in terms of serving large load. Of the 370. And that is what we continue to discuss with folks. Ultimately, we would love to be able to do that in a regulated basis, the full 370, and be able to serve large load customers. With that, and that is ultimately our plan. We ultimately need the commission to approve our large new load tariff in order for that to happen. And so that is our plan as we sit here today. In order to, in essence, help serve not only our existing customers, but having excess capacity to serve large renewal customers as well.

Whitney Mutalemwa: Understood. And then just as a quick follow-up, you had previously pointed to year-end for those ESAs With the large load tariff still unscheduled, is that date still realistic or could it move by a quarter?

Brian Bird: Yeah. I could say this. I think certainly, with Quantica, we are still attempting to sign an ESA on. And the other various agreements by the end of the year, in essence, from a large new load tariff perspective, we would have to have those agreements from Puget 370 on a nonregulated basis. But in order for speed to market, we need to be more flexible with these customers. And, ultimately, they understand that we would like to ultimately transition them to regulated customers. But in order to meet their needs, we need to move forward on an unregulated basis in the meantime.

Whitney Mutalemwa: Okay. Sounds good. Thank you. See you at EEI.

Brian Bird: Thank you. Thank you.

Operator: Your next question is from the line of Nicholas Campanella from Barclays. Please go ahead.

Nicholas Campanella: Hey, everyone. Good morning.

Crystal Dawn Lail: Good morning.

Nicholas Campanella: Hope you are doing well. Thanks for the updates. Hey. Maybe just starting on Colstrip, I think you are kind of calling out, like, roughly a 10¢ hurt. On a stand alone basis, as we think about your. I think you are going to refile or you are gonna file a rate case in Montana. Next year. On a stand alone basis, should we should we continue to expect that type of drag in our 2027 numbers?

Crystal Dawn Lail: Hi, Nick. it is Crystal, and I was in my comments there giving you the indication that we do need to file a rate case to recover those Colstrip costs on the Avista side as Brian was referring to the separate Puget piece and what that might enable strategically in the future as to growth and serving others. We are pending the Montana direction, I will call it, next week in the merger outcome, but how you are thinking about 2027 We expect a file a rate case. The commission has outwardly been extremely supportive of that Avista interest. The ability to serve customers with that, we would be seeking to recover those costs so that you would not continue to see drag in 2027. Obviously, the impact here, we expected to be able to cover some of these costs in 2026 with essentially indexed market sales. We happen to be capacity long, and a year when prices have been lower than we have seen in a long time. Sometimes timing is everything, but as we continue to 2027, we are focused on addressing that drag and filing a rate case to recover those costs and base rates.

Nicholas Campanella: Okay. that is great and then maybe just. I know you highlighted that you submitted the large load tariff in Montana, in March 2026. You are also kind of talking about still having confidence in getting an ESA done potentially by year end for some of these customers. Can you just talk about how those 2 interplay and just what the latest status update is on the new large load tariff? Thanks.

Crystal Dawn Lail: Nick, I will start and Brian will back clean up on this 1. 1 of the largely low tariff, we are. The commission did take quite some time to notice and start a procedural on that. Obviously, complex issues that I think you see in the election this week. Lots of folks have thoughts on them. We are in discovery, and discovery has been very significant. Lots of data requests in that docket as to how you should think about the context for serving these large new load customers. So that docket is progressing. We will work together with staff in the commission. Obviously, they have a few other dockets of consequence in front of them that we would like them to consider first. Obviously, the merger being top of that heap, also our prior motion for reconsideration, peak PCAM, other things. So the docket is progressing. That will set the context as to how we would serve customers under a fully regulated approach. As a reminder, and I think Brian was touching on this, Montana deregulated in the past, is reregulated, and there is customer choice. So we do have the option to continue negotiating with an ESA where we could serve them as a choice customer and eventually, hopefully, bring them in a fully regulated customer at the Montana Commission website or if they prefer to keep them separate as a choice, we could do that. So the 2 definitely interplay, but we are continuing to have conversations with customers to get you an ESA while the Montana commission takes its time to address, I think, appropriately, the large new load tariff and how they may want us to serve those customers in the future. Brian?

Brian Bird: Yeah. I would just add. I think people may recall what the thought was to file the large new load tariff with a customer and an ESA. And this has taken longer than we initially thought, so we decided to let's be transparent with what that large new load tariff would look like. We made the filing in March, as you pointed out. And the hope is by the time we ultimately are going down the path in terms of approval, we will have an ESA We will have someone actually make a filing a large load customer to make a filing, and put that in front of the commission so it could be fully observed at that point in time.

Nicholas Campanella: that is great. And if I could just sneak 1 more in and appreciate all the comments on that. How are you kind of thinking about as you get approval Montana, for the merger, would the unveil for the pro forma company be on the fourth quarter update would there be kind of an Analyst Day update shortly thereafter just given plan to close this year, it seems? Thanks.

Brian Bird: Yeah. Thanks, Nick. I would say, first of all, we need to get approval first. Make sure we remind everybody of that. But assuming if we did get approval, the plan would be at our February earnings call to not only talk about, you know, what our long term EPS growth rate would be, but to get guidance for 2027 at that time. Alright. See you soon. Thanks so much. Hey. Thanks, Nick. Thanks, Nick.

Operator: Your next question is from James Ward with Jefferies. Please go ahead.

Analyst: Hi, guys.

Brian Bird: Hey, James. Building. Hey, building on next question, I think just the data center bill that Montana's interim committee moved forward in September, said that it would apply retroactively, right, to proceedings begun was up to the start of 2025. If it passes with that language, how should we think about the potential impact on your large new load rule in any agreement you signed before it is enacted? I think from what I understand from the legislative perspective, a large new load, it is relatively in line with what we are doing from a large new load tariff perspective. So I am not too concerned about that. James.

Analyst: Okay. Okay. Terrific. And you now expect a PCAM decision in the first half of next year. Your deck shows 90-10 sharing. It was pretax $8.2 million in 2025. But if sharing comes back, how should we think about the annual pretax exposure that you might expect now that you are long capacity?

Crystal Dawn Lail: Yeah, it is a great question. And so 1, is sharing coming back? I think if you looked at staff's memo on the topic, they are suggesting that sharing ends and, obviously, we are reflecting that in our numbers. Effective I think, February first in 26. So I would like to think sharing is a bad idea that should not have never been there and will go away quite candidly. If it did come back, you still have a similar exposure the sense that before we were short. And I. The mercy of market prices on a detrimental basis. Now that we are long, you continue to be. We. Obviously, if I could, I would, but I cannot control broader power prices, so you would continue to have exposure there. But I do think staff has made a strong case in their memo as to why sharing should go away and why it does not make sense, and my view has never made sense that you are looking to regulated utilities to earn a return on investing capital, not to make money in the market on power sales or purchases. So as to sensitivity there, I would like to think that is a dumb topic, and we will not see that going forward. If for some reason, that PCCAM docket sharing does not go away, then we have more clarity on sensitivity there. Again, we are many times now long in the market, so it is really the. it is still the price of market now sales instead of purchases. But I would like to think, certainly, also, if we combine into Black Hills, hopefully soon, that the sensitivity of that around their earnings would be minimal as well.

Brian Bird: The only thing I would add to that The only thing I would add is you think about when sharing was instituted, we were still very, very short from a capacity standpoint. So even the argument could be had in terms of how we go about filling that portfolio with market sales. Obviously, we are in a much different place today. I think the commission is, like, acknowledged, at least through the staff comments, that we are in a different position, and there is no reason to have sharing on a going forward basis. Got it. Very helpful explanation. Thank you, Brian.

Crystal Dawn Lail: Thank you, Crystal.

Analyst: See you guys soon.

Brian Bird: Thanks, James.

Crystal Dawn Lail: Thank you.

Operator: Your next question is from Aidan Kelly with JPMorgan Securities LLC. Please go ahead. Aidan Kelly on the line. Please go ahead.

Aidan Kelly: Hey, guys. Morning.

Brian Bird: Thanks for the time today.

Aidan Kelly: Can you hear me now?

Brian Bird: Yeah. Hey, I thought I was going to have to ask you a question. Yeah. Good on my end. Thanks.

Aidan Kelly: I guess on the data center, like, request and assessment stage, looks like there was some slight uptick there, I guess, despite, the Savvy like, termination on the development agreement side. Could you just help us understand know, if the underlying momentum in customer interest and whether you are seeing improving conversion prospects among these early stage requests. I know, Brian, in your opening remarks, you kind of said South Dakota was a bright spot there. So just curious how we should think about the potential for additional development agreements beyond Atlas and Quantica heading into the New Year.

Brian Bird: Yeah. I think there is 2 things going on, Aidan. I think first and foremost, I think you know that there is certainly be. there is a move from data centers that they have kind of saturated urban areas. They are starting to move into rural areas, obviously, they are getting more attention from that perspective. We are also seeing, secondly, in The United States, a lot of pushback in certain states that may have been deemed pro data center states in the past. No longer being that. In that case. So I think there is just been more interest think we are also getting closer to legislative sessions. And so I think there is. And I think South Dakota's doing some more things to be helpful on some fronts. So I just see a bit more positive momentum in that. Understood.

Aidan Kelly: That was my only question, so I will leave it there. Appreciate. See you guys soon.

Brian Bird: Thanks, Aidan. Thanks, Aidan.

Operator: Your next question is from Paul Fremont with Ladenburg Thalmann. Please go ahead.

Paul Fremont: For taking my question this morning. Paul. With when with Sebi sort of being eliminated from the development agreement, are they included in the other bucket, or are they eliminated entirely?

Brian Bird: Yeah. They are eliminated entirely. The queue count, yeah, they do not jump back in the data center request assessment. They come out of the development agreement so that they are all completely off of slide 17.

Paul Fremont: Okay. And then you used to have sort of 2 bucket data center request, and high level assessment. Can you sort of just walk us through the logic of, it looks like combining those 2 buckets.

Brian Bird: Yeah. I think we were getting a lot of specific questions about various buckets themselves, and, obviously, we are--until you get to a development agreement where you are actually putting money down, towards studies, I think that is where people should be focusing their attention. I think it is appropriate to see how much demand is people looking at in our states. But until you are. You see folks in the development agreement bucket, I do not think anyone should be counting their chickens before they hatch, if you will.

Paul Fremont: Great. And then last question for me. I guess, previously, you would you would commented about the potential of having both Quantica and Atlas signed by the end of the year. Is that still the case?

Brian Bird: I think Atlas is less apt to be done by the end of the year. I feel. Still feel really good about Quantica. But it is--as we found out, I think others find out, these things do take a little longer than you initially expect, but we are certainly targeting with Quantica that it would be done by the end of the year.

Paul Fremont: Great. that is it for me. Thank you so much.

Brian Bird: Thanks, Paul. Thanks, Paul.

Operator: There are no further questions at this time. I will now turn the call back to Brian Bird for closing remarks.

Brian Bird: Well, first of all, I wanna just thank everyone for their patience through this process. it is been a long time since we announced the merger. Investors have patiently waited and as we have, and I think about all the 4 thousand-plus employees in the combined entity patiently waiting and anxious about this. That everyone's worked extremely hard to ultimately get to an approval. And as you know, we have gotten approvals from everyone else that we need approvals from. Hopefully, Montana commission will also understand the benefits associated with the merger, and we will get that approval as well. And I think what they can demonstrate to all of you, if we get the chance, that we will be better together as we move forward as Brighter Horizons. But as CEO of Northwestern today, just want to thank you for your continued support as you continue to evaluate us as an independent entity up until that time that you no longer have to do that. So, hopefully, we will talk the next time earnings call perspective. From a different spot, if you will. But in the meantime, thank you for your support. Appreciate it.

Operator: This concludes today's call. Thank you for attending, and you may now disconnect.