NorthWestern (US:NWE)2025-10-29 22:11Financial Performance - Consolidated net income for the three months ended September 30, 2025, was $38.2 million, a decrease from $46.8 million in the same period in 2024, primarily due to higher operating expenses, including merger-related costs and depreciation [113]. - Consolidated net income for Q3 2025 was $38.2 million, down from $46.8 million in Q3 2024, primarily due to higher operating expenses and interest costs [142]. - Consolidated net income for the nine months ended September 30, 2025, was $136.4 million, down from $143.6 million in the same period of 2024, primarily due to higher operating expenses and interest expense [160]. - Consolidated gross margin increased by $24.3 million, or 23.6%, to $127.1 million in Q3 2025, driven by higher retail rates and increased natural gas and electric usage [143]. - Consolidated gross margin for the nine months ended September 30, 2025, increased to $387.8 million, up from $338.3 million in 2024, reflecting a 14.6% increase [161]. - Consolidated operating income for Q3 2025 was $80.3 million, compared to $67.9 million in Q3 2024, driven by new rates and increased customer usage [154]. - Consolidated operating income rose to $265.8 million for the nine months ended September 30, 2025, compared to $231.6 million in 2024, driven by new rates and increased customer usage [172]. - Consolidated interest expense rose to $38.4 million in Q3 2025 from $33.4 million in Q3 2024, attributed to higher borrowings and interest rates [155]. - Consolidated interest expense increased to $111.1 million for the nine months ended September 30, 2025, from $96.3 million in 2024, due to higher borrowings and interest rates [173]. - Consolidated other income decreased to $9.1 million for the nine months ended September 30, 2025, down from $19.6 million in 2024, primarily due to lower capitalization of AFUDC [174]. Operating Expenses - Operating expenses (excluding fuel and direct transmission) rose to $219.7 million in Q3 2025, a 16.0% increase from $189.4 million in Q3 2024 [151]. - Consolidated operating expenses, excluding fuel, purchased supply, and direct transmission expense, increased to $219.7 million for Q3 2025, up from $189.4 million in Q3 2024, representing a change of $30.3 million [152]. - Operating expenses, excluding fuel, purchased supply, and direct transmission expense, totaled $630.1 million for the nine months ended September 30, 2025, up from $569.7 million in 2024, marking a 10.6% increase [169]. - Consolidated operating expenses, excluding fuel, purchased supply and direct transmission expense, increased to $630.1 million for the nine months ended September 30, 2025, up from $569.7 million in the same period of 2024, representing an increase of 10.3% [170]. Revenue and Customer Growth - Total retail electric revenues increased to $339.8 million for the three months ended September 30, 2025, up from $306.5 million in 2024, reflecting a 10.9% increase [178]. - Total retail electric revenues increased by $10,227 thousand, or 1.3%, from $815,127 thousand in 2024 to $825,354 thousand in 2025 [187]. - Electric retail volumes were positively impacted by favorable weather in South Dakota and customer growth, while natural gas retail volumes also benefited from favorable weather and higher commercial demand [167]. - Residential customer counts grew from 379,039 in 2024 to 385,103 in 2025, an increase of 1.1% [187]. - The average customer count for natural gas in Montana increased from 739 in 2024 to 890 in 2025, a growth of 20.4% [198]. Regulatory and Rate Changes - A Montana electric and natural gas rate review was filed in July 2024, with a requested revenue increase of $110.3 million for electric base rates and $18.0 million for natural gas [118]. - The MPSC is expected to issue a final order on the electric and natural gas rate review in the fourth quarter of 2025 [122]. - Regulatory amortization revenue changes were primarily due to timing differences in recovering electric supply costs and property taxes, minimally impacting utility margin [185]. - Regulatory amortization revenue increased by $20,358 thousand, or 109.2%, from $18,637 thousand in 2024 to $38,995 thousand in 2025 [187]. Mergers and Acquisitions - The merger agreement with Black Hills involves an all-stock merger where each share of NorthWestern common stock will be converted into 0.98 shares of Black Hills common stock, aimed at creating a stronger energy company [106]. - The acquisition of Colstrip Units 3 and 4 from Avista and Puget for $0 is expected to be completed on January 1, 2026, with associated operating costs not collected through utility base rates until a future rate review [127]. - The acquisition of Energy West operations was completed for approximately $35.9 million, serving about 33,000 customers in Montana [131]. - The company expects to sign a contract in Q4 2025 to sell dispatchable capacity from Puget Interests starting January 1, 2026, which will help offset $30.0 million in annual operating costs [129]. Environmental Commitment - The company aims to achieve net zero carbon emissions by 2050, emphasizing its commitment to environmental stewardship [109]. Cash Flow and Liquidity - Cash provided by operating activities totaled $338.3 million for the nine months ended September 30, 2025, compared to $343.9 million in 2024 [218]. - Cash used in investing activities was $418.5 million in 2025, slightly higher than $405.1 million in 2024, including a $35.9 million acquisition of Energy West Operations [220]. - Cash provided by financing activities increased to $81.7 million in 2025 from $63.9 million in 2024, driven by $500 million in long-term debt issuance [221]. - As of September 30, 2025, total net liquidity was approximately $262.2 million, including $6.2 million in cash and cash equivalents [216]. Debt and Financial Obligations - The company plans to maintain a debt to total capital ratio of 50-55% and a long-term dividend payout ratio of 60-70% of earnings per share [215]. - The total long-term debt amounts to $3,163.66 million, with significant payments due in 2027 ($548.66 million) and thereafter ($2,477.0 million) [234]. - The total contractual cash obligations and commitments as of September 30, 2025, amount to $9,480.84 million, with $216.70 million due in 2025 [234]. - Estimated pension and other postretirement obligations total approximately $41.6 million, with cash obligations expected over the next five years [235]. - The company has entered into various purchase commitments for energy supply, with obligations totaling approximately $4,251.53 million [234]. Market Risks - Market risks include interest rates and energy commodity price volatility, with no material changes reported since the last annual report [243]. - Credit ratings from Fitch and S&P are both BBB, indicating stable outlooks, while Moody's rates the company at Baa2 [231].