NorthWestern (NWE) - 2023 Q3 - Quarterly Report

EXPLANATORY NOTE Details the October 2, 2023, holding company reorganization, establishing NorthWestern Energy Group as the successor issuer, with a second phase planned for early 2024 to separate utility operations - Holding company reorganization completed on October 2, 2023, with NorthWestern Energy Group, Inc. (New NWE) becoming the successor issuer to NorthWestern Corporation (Old NWE)[15][17] - A second phase of the reorganization is planned for early 2024, where Old NWE will operate the Montana utility, and NPS will operate the South Dakota and Nebraska utilities, both under New NWE[15][16] - This Quarterly Report on Form 10-Q is co-filed by both Old NWE and New NWE to ensure continuity of information to investors[17] SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS This section outlines the nature of forward-looking statements, emphasizing inherent risks and uncertainties that could cause actual results to differ materially from expectations - Forward-looking statements involve risks and uncertainties that could cause actual results to differ materially[22] - Key factors that may cause differences include[24] - Adverse determinations by regulators, legislation, and environmental compliance costs[24] - Impact of extraordinary external events and natural disasters (e.g., pandemics, geopolitical events, weather)[24] - Acts of terrorism, cybersecurity attacks, and data security breaches[24] - Supply chain constraints, high inflation for product, services, and labor costs[24] - Changes in availability of trade credit, creditworthiness of counterparties, usage, commodity prices, and fuel supply costs[24] - Unscheduled generation outages or forced reductions in output, maintenance, or repairs[24] - Adverse changes in general economic and competitive conditions in financial markets and service territories[24] PART I. FINANCIAL INFORMATION Item 1. Financial Statements This section presents the unaudited condensed consolidated financial statements for NorthWestern Corporation, including statements of income, comprehensive income, balance sheets, cash flows, and shareholders' equity, along with explanatory notes Condensed Consolidated Statements of Income | Metric | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | | :-------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Total Revenues (in thousands) | $321,090 | $335,068 | $1,066,134 | $1,052,554 | | Operating Income (in thousands) | $55,630 | $48,294 | $197,292 | $179,851 | | Net Income (in thousands) | $29,335 | $27,368 | $110,989 | $116,264 | | Basic Earnings per Average Common Share | $0.48 | $0.48 | $1.85 | $2.12 | | Diluted Earnings per Average Common Share | $0.48 | $0.47 | $1.85 | $2.09 | | Dividends Declared per Common Share | $0.64 | $0.63 | $1.92 | $1.89 | Condensed Consolidated Statements of Comprehensive Income | Metric | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | | :-------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Net Income (in thousands) | $29,335 | $27,368 | $110,989 | $116,264 | | Total Other Comprehensive Loss (in thousands) | $(62) | $(49) | $(173) | $(140) | | Comprehensive Income (in thousands) | $29,273 | $27,319 | $110,816 | $116,124 | Condensed Consolidated Balance Sheets | Metric | Sep 30, 2023 (in thousands) | Dec 31, 2022 (in thousands) | | :-------------------------------- | :-------------------------- | :-------------------------- | | Total Current Assets | $358,354 | $538,824 | | Property, plant, and equipment, net | $5,932,179 | $5,657,480 | | Total Assets | $7,429,499 | $7,317,783 | | Total Current Liabilities | $569,514 | $620,845 | | Long-term debt | $2,544,522 | $2,474,357 | | Total Liabilities | $4,689,085 | $4,652,600 | | Total Shareholders' Equity | $2,740,414 | $2,665,183 | Condensed Consolidated Statements of Cash Flows | Metric | 9 Months Ended Sep 30, 2023 (in thousands) | 9 Months Ended Sep 30, 2022 (in thousands) | | :-------------------------------- | :-------------------------- | :-------------------------- | | Cash Provided by Operating Activities | $426,922 | $309,270 | | Cash Used in Investing Activities | $(410,974) | $(387,253) | | Cash (Used in) Provided by Financing Activities | $(16,771) | $87,946 | | (Decrease) Increase in Cash, Cash Equivalents, and Restricted Cash | $(823) | $9,963 | | Cash, Cash Equivalents, and Restricted Cash, end of period | $21,640 | $28,725 | Condensed Consolidated Statements of Shareholders' Equity | Metric | Sep 30, 2023 (in thousands) | Dec 31, 2022 (in thousands) | Sep 30, 2022 (in thousands) | | :-------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Common Stock | $648 | $633 | $613 | | Treasury Stock | $(98,122) | $(98,392) | $(98,578) | | Paid-in Capital | $2,078,554 | $1,999,376 | $1,900,992 | | Retained Earnings | $767,355 | $771,414 | $741,752 | | Accumulated Other Comprehensive Loss | $(8,021) | $(7,848) | $(7,450) | | Total Shareholders' Equity | $2,740,414 | $2,665,183 | $2,537,329 | Notes to Condensed Consolidated Financial Statements Note 1. Nature of Operations and Basis of Consolidation NorthWestern Energy Group provides electricity and natural gas to approximately 764,200 customers across Montana, South Dakota, Nebraska, and Yellowstone National Park, completing a holding company reorganization on October 2, 2023 - Serves approximately 764,200 customers in Montana, South Dakota, Nebraska, and Yellowstone National Park[41] - Completed holding company reorganization on October 2, 2023, making NorthWestern Energy Group the parent of NorthWestern Corporation[44] - A second phase of reorganization is planned for early 2024 to separate the Montana regulated utility from the South Dakota and Nebraska regulated utilities[44] - Annual goodwill impairment test as of April 1, 2023, concluded no impairment[48] Note 2. Regulatory Matters The Montana Public Service Commission approved a rate review settlement effective November 1, 2023, resulting in a total annual revenue increase of $151.6 million for electric and $18.3 million for natural gas, while a South Dakota electric rate review filing for a $30.9 million annual increase is ongoing - Montana Rate Review settlement approved by MPSC on October 25, 2023, with final rates effective November 1, 2023[50] - Montana Rate Review Settlement Agreement (in millions) | Metric | Electric | Natural Gas | | :-------------------------- | :------- | :---------- | | Return on Equity (ROE) | 9.65% | 9.55% | | Equity Capital Structure | 48.02% | 48.02% | | Base Rates | $67.4 | $14.1 | | Power Cost & Credit