NorthWestern Energy Group (NWE) Q1 2026 earnings call transcript

Thank you, Audra. Good afternoon and thank you for joining Northwestern Energy Group's Financial Results Webcast for the quarter ended March 31, 2026. 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 Chief Executive Officer and Crystal Lail Chief Financial Officer.

They'll walk you through our financial results and provide an overall update on what great progress we've had this quarter. For the Western's results of the release and the release of the available on our website at NorthwesternEnergy. com, we also released our 10Q pre-market this morning. Please note that the company's press release, this presentation, comments by presenters and responses to your questions may contain forward-looking statements.

As such, I'll direct you to the disclosures contained within our SEC filings and the second slide of this presentation. Also note that this presentation includes non-gapped financial measures and information regarding the pending murder transaction. Please note these non-gapped disclosures, definitions and reconciliations and the 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 will remain active for one year. Please visit the financial results section on the website to access the replay. With those detailed behind us, I'll hand over the presentation of Brian Byrd for his opening remarks.

Thanks, Travis. On our recent highlights for the quarter, we reported gap earning diluted EPS of $1.03. On a non-gapped diluted EPS of $1.31. We're affirming our 2026 earnings guidance range of $3.68 to $3.83. And we're also affirming our long-term rate-based EPS growth rate targets of 4 to 6%. From a merger progress perspective, I'm sure all of you listening and have noted that we received shareholder approval of our pending merger with Black Hills and received approval of all proposals.

And we've also put in place constructive settlements with each of our key interveners in Montana and Nebraska and South Dakota associated with the merger documents.

In our regulatory and legislative standpoint, we've had constructive wildfire legislation passed in South Dakota, and we recently submitted a large and new low tariff proposal with the MPSE.

Regarding data centers, we're happy to announce we've signed another development agreement this time with Quantico infrastructure now for a total of three development agreements associated with data centers. And lastly, for dividend, we declared a $0.67 for share payable June 30, 2026, the June 15 record date. And with that, I'm going to pass it over to Crystal for our first quarter financial review.

Thank you, Brian. In my comments today, I will cover our first quarter results, our 2026 earnings outlook and our capital plan, and then I will turn it back to Brian to give you some of the exciting updates that he mentioned as we started the call. I will begin my comments on slide seven. We delivered gap earnings of $1.03, which includes impacts of a historically warm first quarter merger related costs and costs related to incremental culture ownership.

On an adjusted basis, we delivered $1.31 or 7.4% increase off of our 2025 first quarter results. Slide eight provides a bit of detail on the key drivers for the quarter. That includes improved margin, albeit net of the weather I just mentioned, offset by higher operating costs, depreciation, and interest expense.

With regard to those operating costs, that includes $0.12 of an increase from the prior quarter due to our incremental ownership of coal strip and four cents driven by labor benefits. We talked many times about the rationale for owning additional coal strip and the importance of that facility to serving our customers in Montana, and we expect the annual operating cost to be approximately $48 million related to that incremental ownership. On a quarterly basis, you can think about that generally running about $12 million in a quarter, and you will see that we have offset approximately $8 million of those costs here in Q1.

The recovery of these costs is certainly impacted by low market power prices, impacted by overall conditions, driving power pricing lower than our expectations.

Moving to slide nine to give you more details with regard to margins. Margins were the first quarter reflect new rates in Montana, you will recall the timing of our rate filing last year, and not having interim rate recovery in the first quarter will be that increase here. Also noted are the sales from the Puget coal strip interest, and also continued growth in our transmission revenues in the bulk electric system.

This was offset by weather as Montana experienced the warmest winter in over 100 years. Moving to slide 10, that warm weather impacted us as an unfavorable 17 cents versus what we would expect as normal volumetric loads. As I mentioned, very mild weather in Montana, and that continued off of our fourth quarter results as well. The quarter also included five cents of merger costs, and five cents of operating expenses from pollsters that were not recovered that I just mentioned.

Those adjustments result in on an adjusted basis of $1.31 of earnings again for the first quarter of 2026 as compared with the $1.22 in the prior quarter.

Moving to slide 11, Brian noted that we are reaffirming our guidance for 2026. Looking ahead to the timing of our next rate reviews, which you all typically would expect us to announce our timing of rate reviews here in Q4 or in Q1, excuse me, the settlement agreement that Brian will give you more detail on related to the merger do include some day off revisions, both in Nebraska and South Dakota.

For Montana, we have not determined the timing of our next rate review as the 2024 case still remains under reconsideration.

In addition, critical to our long-term earnings profile, as we talked about, or we want to be from a four to six percent earnings growth perspective are the developments that Brian referred to with relation to development agreements with Quantica and also the large load care filing, all underpinning our ability to reaffirm our guidance over 2026 and beyond. Slide 12 gives you more detail on our capital plan. This remains unchanged from our fourth quarter call of $3.2 billion from 2026 through 2030. And I'll remind you that that is driven by essential investments to meet our customers' needs.

It does not include incremental investments that may be driven by additional regional transmission opportunities that we are very excited about or serving any of these large loads. It does include, however, what we adjusted for Q4, which is to include the incremental generating capacity in South Dakota related to the South Dakota or STP expedited resource adequacy study. We are delivering on our base capital plan without issuing new common equity and have no equity needs in 2026. As we updated you on our Q4 call, incremental capital in 2027 related to the generation capacity in South Dakota will require some equity needs in 2027 and beyond.

And with that, I will turn it back to Brian for the rest of the update.

Thanks, Crystal. On page 14, we've got good news in terms of South Dakota wildfire bill. Senate bill 36 was passed to the South Dakota legislature with broad bipartisan support and has been signed into law. And I would just say, first and foremost, no strict liability. Strict liability cannot be applied to utility operations are alleged to have caused wildfire-related damage. In fact, the legal protections for providers and damages also shown on page 14, you will find it's extremely similar to what we have in our Montana legislation.

Matter of fact, if you want to go back and compare this page to our Montana page, it's very, very similar. So we're very excited about the protection that we have in our two electric states from a wildfire perspective, some of the best wildfire protection in the United States at the state level. We plan to submit our wildfire mitigation plan for the South Dakota PUC approval in the second half of 2026, and we expect to update that plan every two years going forward.

Last thing I would say here from a wildfire perspective, I looked back three years ago, and what we've been able to do from a legislative standpoint and an operational standpoint and a situational awareness standpoint, we feel much better about how we will mitigate wildfire risk in our states. But also at knowledge, there are, is it going to be a difficult fire season in front of and we need to be cognizant of that as we continue to monitor our systems in those two states.

Regarding the merger with Black Hills and how that benefits stakeholders, I think certainly we spent a lot of time talking to Sheryl about this, obviously the increased scale and our ability to go from a four to six percent EPS growth to five to seven percent and being able to putting these two companies together double our rate base on a going forward basis, expanding investment opportunity, having more resources, not only from the financial standpoint, but from a personnel standpoint putting the right amount of resources at these opportunities. A stronger balance sheet, two strong companies come together to even have a stronger balance sheet on the other end, and obviously enhanced business diversity in terms of a expanded footprint and a much larger company for both entities.

That's certainly a benefit to shareholders and that combination represents a highly attractive value creation opportunity. And I think that's been supported by our shareholders 86, approximately 86 percent of our shareholders voted, and of those that did, 99.7 percent voted in support of the merger. So obviously trying to do the right thing from a shareholder perspective, but this merger will benefit many stakeholders and certainly customers.

What I want to say about customers, not just taking two companies that provide great service and do it in a reliable and in a cost-effective manner, but on a going forward basis, any cost savings that these two companies will achieve, ultimately accrue back to customers in future rate reviews. And so we're excited in this time, carrying in the four abilities front and center in front of all of our customers, doing the things that we need to do to help in that regard. And the merger is certainly one of those. And so we hope as we move forward with each of three states, we're working with, we ultimately get those approvals. And with that, on slide 16, talking about the timeline itself, we did acknowledge your earlier in the call, reaching settlements in each of the three states that we filed applications for approval.

And we actually had a hearing already in Nebraska, and we'll have hearings in Montana and South Dakota, in the May and June timetable respectively. So continued good progress there. And again, having key intervener settlements or key at this point in time. In addition to the state perspective, we certainly filed back with FERC way back in December. And if you look at the 180-day approval timeline, hope to hear back from FERC by the end of June and FERC perspective. In terms of the S-4 and joint proxy, obviously the shareholder approvals were received here not too long ago. And the heart Scott Redino, we've satisfied that based upon the waiting period, expiring that. So really a lot of great checks on this page and this timeline, that's fantastic.

But we still certainly waiting, not only for the three states to ultimately make a decision, and obviously we have to have hearings in two of those states. So lots of green checks, we'd like to think we could get something sooner rather than later. But we still believe that an outcome will finally be achieved here. And obviously getting the approvals we need, we expect to have that in the second half of 2026.

Regarding data center process and progress, I would say we continue to quite a bit of demand. We actually increased our data center request queue from six to eight since the last time you've seen this page. High level assessments actually come down one. I think as people go through the process and understand what they need to do, in essence, to put forward a deposit, think about the cost associated with moving forward. We had one of those fall away down to four in that high level assessment. Hopefully we can continue to move folks there to a development agreement. And by the way, speaking of that, you can notice on slide 17, we've kind of grayed out letters of intent.

When Quantica signed the development agreement, we no longer have any LOIs per se. We've moved those to the development agreement stage. And as we move forward with folks in the high level assessment, we would want to move them directly to a development agreement. And so that's the hope there. And up the three in the development agreement phase, we'd like to move all of those to an ESA for an energy service agreement. And I would say this, instead of guaranteeing a timing of any ESA's, I would put this context. All three of those parties, those developers, would like to have an ESA done by the end of 2026. We on our end, we're doing everything we possibly can to deliver that we're ready from a 2026 perspective.

But we'd also point out that they need to do certain things on their aspects as well. So the hope is we can bring some of these development agreements to ESA by the end of the year, but certain things certainly must get done. And we will work with them and all of us desire to make that happen by the end of the year. On slide 18, in the regulatory front terms of large load customers, the big news in this quarter is we did submit our large new low tariff with the MPSE in March 2026. Certainly a lot of questions about data centers and protected customers.

If you take a look at our large new low tariff, that is definitely what the intent is. Not only protect customers in the company, but also just give the guidelines in terms of where we're going to go if in fact we could serve large loan. So that was a significant development during the quarter. And I think the rest is relatively the same in Montana and South Dakota. We're ready to move forward if in fact that we get to large load tariff in Montana, but we're ready today with an ability to serve large load in South Dakota.

Regarding that, I mentioned earlier, we're seeing some demand. We were disappointed. We were not able to achieve any sales tax relief from a data center perspective in South Dakota, but we're still seeing quite a bit of interest in South Dakota nonetheless. And so we'll continue to work with folks to see if we can come to any agreements there at any time soon. In terms of the three parties that we're working with, I'm sure many of Red SAB has had some issues procuring the land necessary for their data center. They continue to work through that issue and we're certainly being patient with them in that process. Atlas continues to move along the process necessary to get from development agreement to ESA.

And then Quantica, of course, the big news as of late is that our development agreement with Quantica further load, which goes from 25 megawatts ramping up to 1.1 gig with a targeted start date of early 2029. As is common in these transactions, and particularly at this phase in the process, a customer's not been named at this point and will certainly be named at the point in time that if in fact we do enter it to an ESA with that customer. Colestryth slide 19, and the reason I want to cover this slide, just to make sure there's no confusion about our intent with our two pieces of incremental Colestryth. I think everyone's aware we acquired the Avista portion of Colestryth to get we've procured the Puget 370 megawatts to go from 30% with Avista to 55% to make sure we have control over the poll strip in the future of Colestryth and is in our hands instead of at the hands of some others who may not think about Colestryth in a long-term basis.

And so that's really important for the state. I think you also know Puget piece is currently in a birth regulated entity and will be there until we have an indication on our large new low tariff. And if in fact that large new low tariff is actually put in place, it would be our desire to move that asset into our Montana state regulated business. But until we have an outcome on the large new low tariff, we will continue to have that as a folk regulated asset. I think now you're aware of the Northwestern value proposition as a 4% dividend yield and our 4 to 6% EPS growth based upon a 3.21 billion capital program which is divided relatively evenly between our transmission distribution and supply businesses.

But in executable and low risk critical capital to our customers, we could still with that investment that growth rate can achieve an 8 to 10% total return. We do have incremental opportunities we believe that could help us grow faster than 6% but we have to deliver on those. And none of these opportunities I'm going to talk to you about today are in our current plan. There's no data center in our current plan and off to the left in terms of capital investment. There's no regional transmission. There's no incremental generating capacity other than the South Dakota capacity that we've talked about. This would be incremental above and beyond that. Those are not in our plans today.

But if in fact we were to deliver on that, we could see total returns greater than 10%. The other thing I would say here is back to the merger conversation, we believe we can execute on this plan even better, better together with our friends at Black Hills. And so obviously the merger continues to be important to even maximize more so that value proposition. And with that, that concludes our presentation and we'll take any questions at this point.

Hello. Thank you. Mark, you stated that there's a need for large loads to get things done on there and before getting to the ESA stage. Does the recent baby land situation reinforce the need for stricter milestones just around site control permitting before Northwestern really begins to treat a project as part of a planning baseline? And then I have a follow up.

I think I would say in this context, initially when we wanted to file the large low tariff, the intent was for us to take an ESA with one of these large low customers and jointly go in and talk about the large low tariff. One of the things we want to do is make sure that we continue to work with these parties in. It's going to take a while, I believe, to get ultimately a resolution of the large low tariff. In the meantime, we'll be able to continue to work with these three developers on all the necessary things they need to do and we need to do to ultimately bring us to an ESA position.

Yeah, the primary change here was specifically to Quantica. I think you might see prior, I think we had something in the 500 rate for them, obviously 1.1 gig from them today. So I think the change is primarily associated with Quantica.

Jeez, Aidan, this is a great question, and I could talk about this for about a half an hour, but I will try to keep it as brief as I can. We definitely would like to participate. I think one of the things I've talked about in the past is concerns about the rules, procurement rules in Montana in terms of IRPs, RFPs, and pre-approval. It's a long process. And our data center partners certainly would like to move faster than that. So one of the things that we're looking to do with them is to say, is there ability to participate in some form of fashion through a build-on transfer process? And they obviously want to be working, and I think you serve data centers, say, we'd rather be served by the utility through a portfolio than stand alone behind the meter resources.

And so that's ultimately what we'd like to do, but our procurement rules and their desire to move quicker is going to be top. So I think we're going to have to work together and try and necessarily find a way to do that. Obviously, the Puget interests are available, if you will, for large, low tariffs, so that's certainly how far existing portfolio is really there to serve our existing customers, but the Puget 370 portion certainly can help. But in our long-term, IRP does have some cases associated with data center build-up, but it would have to be in the back half of some of these opportunities. And so we will work with each of these developers in their resource planning and ultimately come together where we can participate together, but certainly on a lesser interest maybe than some utilities who have procurement rules, rules that allow them to actually provide all of these resources.

So again, we want to participate certainly as much as we can from a generation perspective, and we'll plan to do as much as we can there with the timing we have. But remember, there's going to also be a tremendous amount of transmission opportunities associated with this as well. So we're excited about our ability to invest along with our development partners from a data center perspective.

In terms of our strategy in the state, I would put it this way. We don't have a strategy in the state in terms of what commissioners ultimately elected. We're obviously going to work with whoever gets elected and want to, obviously, with the Commission to do the right things for our customers in Montana. If you have a question regarding what the races are looking like, I could certainly go there, but I'm not necessarily sure specifically what your question is there.

Yeah, I think there's always lots of things that go into our filing cadence. And we've been very clear with and obviously being in a state with elected commissions, all three of ours actually, that regardless of when elected commissioners may come or go, we're going to need to recover our costs. We're investing significantly to serve our customers in Montana. So those are going to be fairly frequent cadences. And while there is an election, there's two seats for this year, one with one turning out and the other with a commissioner running for re-election. Either way, we're going to continue our cadence of needs to recover across the historic rate making in Montana alluded to the fact that 23 tests period 24 known to measurable filing and it's 2026 in April, I think, and we still don't have a final outcome.

So we're going to need to work within that historic rate making context and keep filing. So while the elections may come and go, it doesn't necessarily change our broader strategy of recovery.

Funny you asked that question, Chris. We're actually prepared for that one. I think first quarter of 2019, we actually have a slightly larger deviation and that one happened to be a colder weather event. So we actually saw incredibly cold weather that winter. So we did go back and take a look, so it isn't the most material weather impact, but it's overall average warmth. I would tell you Brian, do you discuss how the races are going? So how are they going?

Well, I think I would say that we have a commissioner up for election in both South Dakota and Nebraska, and in terms of primaries, they're relatively quiet. What I can see in Montana, I know Commissioner Dr. Booker check has got two Republicans running against her in the primary there and I think in an unchallenged Democrat. Early innings here, in terms of what we can say there, the panochi seat is open in there. I know a couple of Democrats running for that seat, and I think an unchallenged Democrat. And again, regardless, Chris, obviously, whoever gets elected, we're comfortable working with, and we'll continue to watch. But as we sit here today, I think the primaries and I think we're coming up in the June timetable and the time period for others to get into those races in Montana, I think, is past.

So stay tuned.

Thanks, Chris. That's a good question. Obviously, we saved the latter half of 2026. I'd say I'm confident, first of all, you know, we don't know what the ultimate and we hope to acquire certainly the appropriate amount of votes in order to get a good outcome. The reason, I think, the speed of that outcome should be relatively quickly. We've, for two reasons, one, the important interveners, if you will, large customer through, obviously, the Montana Consumer Council. And obviously, you saw a handful of other interveners have agreed and settled here. And so in essence, we've gotten to a point where people are comfortable with the merger such to be in the settlement with us. That's the first reason.

So I think we've taken a lot of the issues if you will off the table. And we have two interveners that really remain that we need to have a hearing with, have a contested issue. So I think the fact that we've got a lot of progress from these settlements should help in the speed. The second thing I'd say is there's a $10 million benefit that that will accrue to customers shortly after the merger. And I think if that benefit, I would expect that the commission would want that benefit to get to customers as quickly as it possibly can. So I would think taking those things into consideration, I'd like to think this would move faster, but then slower.

Good enough relative to being able to take a customer specifically. Yeah, I have two things, Chris. First and foremost, the nice thing about the utility space is we do see what our neighbors do. And we think we've taken really the best of all of the large load tariffs that we've seen out there. I think we've used seen kind of a middle of the fairway proposal that's in line with what you see elsewhere in the industry. And in one that's in such a position that it protects customers. The second thing I'd say is that we were at a point in time, I believe that we would have an ESA some time ago. As you know, say these run into some land issues that we're not aware of until here most recently.

So I think the timing of a large load tariff and that ESA, we thought they would be about the same time. And why not bring that ESA with it into that large load tariff? From our perspective, we want, and there's a lot of questions out there, Chris, about how we're thinking about data centers and how we're going to protect customers. We thought this was in the best interest of everybody for that dialogue to make this large new load tariff filing. And you're right, if you think about it, it's very, very similar to the other protections utilities are seeking for their customers.

And so that we certainly end up to look at what others are doing. And Chris, I would just add on our filing for those who don't read the devil in detail, the filings, it is a good spot to be in because you could reference all these others that states that have always already found a path to making sure there's not cost shifting, reasonable, random asset protections. Our framework does exactly that and does specifically benchmark all those other tariff filings that have gotten there. So I think it brings us to a point that there's a great basis to your question there that the commission can consider without having a specific customer contract to look at. And hopefully we will have one of those soon, but they can consider that that tariff framework provides adequate protections for customers and state, while allowing for the great benefits that you could see on needed system investment, but a large load of customers paid for that.

Yeah, I can't I can't speak for the commissioners. My expectation they and the staff are following what's happening in other states. I certainly hope so. I just like them to understand that what we're trying to do and as Crystal also pointed out, we're trying to do something similar similar protections that have already been done and accepted in various states. And so and I think testimony is certainly provided to give examples of that. And like you said, the settlement in Montana for the merger has benefits. It's not just protections. There's customer benefits that come from these as well that you would think they would want to speed along to customers.

Anyway, yeah, I I Chris, I'd argue in all three states, it's obviously it's credit in Montana, but even the moratorium in South Dakota and Nebraska provides protections for customers in all three of those things.

Thanks, Chris.

Yeah, that's a good question, Paul, from a ramping perspective, I think about two years, starting at 29 and about two years. Yeah, I think our materials are around 2031. They'd be a full ramp.

All the way I would answer that is each of these bills are going to be specific to the needs of the customer and what's the needed investment that will be driven by where that customer is located, where they want to be. So we've consistently said, hey, we can't specifically quantify it until we get to an agreement with them and can then clarify what that impact is to earnings, but all things considered equal certainly pushes us upwards in the range.

No, we shouldn't assume that the Avista portion is I think you may recall and Paul, we talked about this for some time at this company, we were certainly did not have the appropriate reserve margin in our business. We're not resource adequate. The Avista piece got us to resource adequate to serve our existing customer needs. The Puget piece, remember that as I described earlier in the call, that got us from an ownership perspective at cold strip that made us more comfortable that we had controlled certainly over the future cold strip, but that 370 not necessary for customers today and nor did we want to burden our customers with $30 million of operating costs that for assets they don't need today, but that 370 is available to serve large low customers.

Yeah, you're speaking specifically here from a generation perspective. Obviously, there's going to be a transmission investment, another investment necessary to support. And I think as Crystal pointed out, when we have an ESA, we'll be able to talk a little bit more about that. I would, Paul, I would also add that our large low filing and that framework, the premise is that each customer would pay the current embedded race in the large low tariff and that you would surcharge for any incremental investment such a transmission or generation. So the other way to think about that is they would come on paying the race that is set in each space race case, then that's the floor of race they would pay and contribute to the system.

And then beyond that, we would be able to surcharge based off each individual's customer needs and that's where you get to the question you're going to. How do you think about this and model the opportunity, which is when we are able to sign a specific ESA, we'll know what that needed incremental investment might be.

Yeah, I think in that time table that they're talking about, as we talked about in our current IOP, we talked about the ability to certainly in a base load, our base plan didn't talk about serving data centers, but we had scenarios where data centers are included. But I think in essence for them to for us to participate on the back end of that, we're going to have to, you know, baby catch the back half of that 20 and 31 with some generation. But I think in our discussions with them, they're going to have to bring their own generation. And particularly for the 29 and 30 and I'm going to guess from their needs, all of that load, certainly a good portion of 31 as well.

We'd like to participate, but it's going to be in the back end. We like to make sure in what they do build, we would like to have the opportunity from a build on transfer and anything that they built.

Yeah, I would think from the generation needs to serve our customer. I think the generation closest to our customers are likely to continue to be built in our service territory. The biggest opportunity out of the blocks would be looking at PAP 80 from a transmission interconnection perspective. I shared that in the past at one of those paths. But I think as we continue to look at North Plains Connector and other opportunities for regional transmission, being able to be combined with Black Hills certainly I think gives us better opportunities to participate in all of the regional opportunities we're looking at.

Well, North Plains Connector, we're talking about a 10% or a 300 megawatt interest. And I'm not sure what's publicly stated in terms of the dollar amount associated with that project as we sit here today. It was a pretty sizable investment for us. We're evaluating that. We're evaluating, of course, continuing to invest in the transmission line and the upgrades associated there. Paul, we're looking at our Montana to Idaho opportunity in terms of investment there. And also PAP 80, obviously being able to connect ourselves between Black Hills and our system. We have a slide associated with that regional transmission we shared in the past. In terms of the dollars associated with that, we're still in relatively early phases of development.

And until we get to certain stages there, we're going to probably stay away from sharing what dollar amounts would be we think those investments would be.

Appreciate it, Paul. Thanks, Paul.

I appreciate the comment earlier about a great quarter. I just want to say this. I think you think of the progress thus far on the merger, the shareholder vote, the three settlements. I just wanted to thank my team. I want to thank the Black Hills team. Great coordination to make that happen in the timetable that we have. Great work here at Northwestern and not only be able to make progress on the merger, but to deliver all the things that we're all the other things we're talking about here on this quarter and to continue to serve our customers as well as we do each and every day. So really, really proud of our group and the great quarter we've had.

So thank you very much. And this concludes today's conference call. Thank you for your participation. You may now disconnect.