Northwestern Energy Group Inc Q2 FY2025 earnings call

• Recent highlights: GAAP diluted EPS was $0.35, non-GAAP diluted EPS $0.40 for the quarter. Initiated 2025 earnings guidance range $3.53 to $3.65. Affirmed long-term rate base and earnings per share growth rate targets of 4% to 6%. Completed acquisition of Energy West and Cut Bank gas facilities. Entered third letter of intent with Quantica for a 500-plus megawatt data center developer. Declared dividend of $0.66 per share. - Montana Wildfire Law passed, providing protection for utilities from strict liability in wildfire-related operations and setting a negligence standard. Senate Bill 301 (transmission bill) gives greater certainty for regional transmission investment. - Progress on data center opportunities: In Montana, moving forward with data centers, aiming to have at least one energy service agreement (ESA) by October; in South Dakota, continuing to work with hyperscalers despite sales tax implications. - Colstrip ownership: Acquired Avista and Puget portions, seeing Colstrip as an energy hub and planning to serve large load customers either via state-regulated or FERC-regulated basis.

No detailed breakdown of product segment financial performance by absolute terms and revenue contribution % provided in the transcript.

• Initiated 2025 earnings guidance range of $3.53 to $3.65. - Affirmed long-term rate base and earnings per share growth rate targets of 4% to 6% based on 5-year capital of about $2.75 billion. - Guidance consistent with delivering 4% to 6% long-term earnings growth off 2024 base of $3.40. - Montana rate review outcome likely in fourth quarter, retroactive to May 23.

• Impact of Montana property tax legislation, which is a $0.05 detriment in the quarter and expected to continue. - PCCAM headwinds, a $0.02 detriment in the quarter and expected to continue. - Unfavorable weather affecting results. - Uncertainty around outcome of Montana rate review proceeding.

Q: On the data center front, could you offer an updated sense on the potential timing to sign ESAs for the 3 data centers that are currently under LOIs? Are you waiting on a transmission service agreement study to wrap up at this point? Or are there any other gating items here to move these projects forward?

A: We're wrapping up on a transmission service issue side in the first 2. As mentioned earlier, by the time of the October call, expecting at least one of the either Atlas or Sabey will be an ESA, very confident at least one of them Q: Understood. Understood. That's good to hear. And then I guess just with this pipeline kind of expanding today, could you speak to how you are thinking about addressing load requirements like in the scenario that this data center interest develops beyond existing capacity? I know you mentioned you would also look to work with regulators to kind of structure tariffs in '26. So maybe just curious on that end. And then also like the thoughts on the possibility to integrate more utility-owned generation in the scenario of excess demand in Montana?

A: Because of the need for speed of deliverability, we're working with these data centers. They are planning to build some of their own generation to serve these data centers. We want to work with them on that. And ultimately, from our ability to put those into rates, we talked to -- we have been talking to them potentially about build own transfer -- build transfer capabilities. That allows us to demonstrate that those resources from a pre-approval perspective gives us time to ultimately get approval from the Montana Commission to actually own them. And again, if for whatever reason, if the MPSC doesn't support that, we will find a means and a FERC-regulated basis to do the same Q: So just on the DC ramp, just thanks for clarifying on like when you think you're going to get the ESAs in place. If you do get that by the third quarter, just what is the ramp of the megawatts on the system? Like what year would it hit? Is it more '27 and beyond? Could you see some uptake in '26? Just how are you kind of thinking through that?

A: The stuff in '26 is going to be relatively small, just in essence, from a construction standpoint, whatever megawatts are needed there. So I would stay focused on '27 Q: Just on the DC ramp, just thanks for clarifying on like when you think you're going to get the ESAs in place. If you do get that by the third quarter, just what is the ramp of the megawatts on the system? Like what year would it hit? Is it more '27 and beyond? Could you see some uptake in '26? Just how are you kind of thinking through that?

A: The stuff in '26 is going to be relatively small, just in essence, from a construction standpoint, whatever megawatts are needed there. So I would stay focused on '27 Q: Just can you kind of anticipate handling the Colstrip cost once you acquire the facility in '26? I know that there's some pending processes, and we have some variability about how that will get kind of captured in the rates. But if you were able to keep that merchant, is that an option? And how do you feel about the growth rate in that scenario?

A: There's -- as you guys know, we've entered into 2 transactions, one to take Avista portion and another to take Puget. The Avista portion, we believe, is needed to serve existing customers, at least a portion of that and expect to make a filing here sometime in Q3 to propose a process to get us really to the next rate review to recover those costs. The Puget megawatts wouldn't be needed to -- as you look at our load today to serve regulated load, this kind of goes back to what Brian was addressing with our ability to serve large load. We expect to serve large load, whether it's Montana regulated or FERC regulated, we want to make sure we leave our options open at the Montana Commission well. And I think the comment earlier alluded to a tariff that can help affordability for others. We absolutely believe there's a path for that. But if the commission doesn't want to go down that road, we're certainly keeping and working to have our FERC-regulated approach open to be able to serve out of that what would be the Puget tranche. So again, to deliver from a data center perspective, whether it be Montana regulated or the Puget piece that might be FERC regulated. All that being said, I say we do expect to make a filing here in this quarter to address recovery of some of those Colstrip costs