NorthWestern Q3 2026 Earnings Call Transcript

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November 5, 2026

Key Takeaways

  • Negative Sentiment: Third-quarter adjusted EPS was $0.58, down from $0.79 a year earlier, and year-to-date adjusted EPS was $2.39 versus $2.41. The company reaffirmed 2026 adjusted EPS guidance of $3.68–$3.83 but expects results toward the lower half.
  • Negative Sentiment: Weak power prices left NorthWestern unable to fully recover costs from its incremental Colstrip interests, a $0.10-per-share detriment in the quarter. Management plans to file a Montana rate case by year-end to seek recovery of the Avista-related costs.
  • Positive Sentiment: The proposed Black Hills merger has received Nebraska, South Dakota and FERC approvals, with a final Montana order expected November 12; if that approval is satisfactory, the companies expect to close by year-end 2026.
  • Neutral Sentiment: Data-center interest increased, particularly in South Dakota, but Sabey exited its development agreement. NorthWestern is targeting an agreement with Quantica by year-end, while Atlas remains a potential large-load customer; management cautioned that customer agreements and regulatory approvals take time.
  • Positive Sentiment: NorthWestern affirmed its long-term rate-base and EPS growth targets of 4%–6% and kept its $3.2 billion capital plan on track.
AI Generated. May Contain Errors.
Earnings Conference Call
NorthWestern Q3 2026
00:00 / 00:00

There are 9 speakers on the call.

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 one to raise your hand. To withdraw your question, press star one again. I will now hand the conference over to Travis Meyer, Director of Corporate Development and Investor Relations Officer. Travis, please go ahead.

Speaker 1

Thank you, Elodie. Good morning, and thank you for joining NorthWestern Energy Group's financial results webcast for the quarter ending September 30, 2026. Joining us on the call today are Brian Bird, President and Chief Executive Officer, and Crystal Lail, Chief Financial Officer. Brian and Crystal will walk you through our financial results and provide an overall update on the progress we've 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 pre-market 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 and the safe harbor provisions included in the second slide of this presentation.

Speaker 1

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 one year. Please visit the financial results section of our website to access the replay. With those details behind us, I'll hand the presentation over to Brian Bird for his opening remarks.

Speaker 2

Thanks, Travis. Recent highlights, first of all, reported GAAP diluted EPS of $0.50, non-GAAP diluted EPS of $0.58. We're affirming 2026 earnings guidance range of $3.68-$3.83. We're also affirming our long-term rate base and EPS growth rate targets of 4%-6%. Also for the quarter, we're 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 Corporation 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, and FERC. Our final order expected from the Montana Public Service Commission is November 12, 2026.

Speaker 2

If final, with a satisfactory approval is received, we anticipate completing the merger with Black Hills Corporation by the year-end of 2026. With that, I am going to turn it over to Crystal for the third quarter financial review.

Speaker 3

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 2025. On a year-to-date basis, we are reporting GAAP earnings of $1.93 as compared to $2.22 in 2025. Moving to slide eight, I will spend some time on the key drivers for the quarter. Notably, to provide more transparency and visibility into the full impact of our incremental Colstrip ownership, we have provided a detailed breakout in our waterfall slides for the quarter and year to date.

Speaker 3

You will note margin improved due to slightly favorable weather and the absence of PCCAM 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 was 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 two pieces, both the Avista and Puget piece, is $6.1 million or $0.10. Due to weak market prices overall, the PCCAM tariff waiver provided no recovery of cost for the Avista portion during the quarter. With that, I will move to slide nine to discuss our adjusted earnings reconciliation for the quarter.

Speaker 3

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 we 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. GAAP, $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.

Speaker 3

Margin improvement reflects new rates in Montana in the first half of 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 PCCAM 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 an extremely mild winter, and year to date have largely continued that trend. We have added back $0.17 of weather versus normal in our 2026 results.

Speaker 3

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 a $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 have 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.

Speaker 3

With our performance year to date, we are reaffirming NorthWestern's standalone 2026 adjusted EPS guidance range of $3.68-$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 Avista and Puget Colstrip interests. The Pacific Northwest has experienced extremely mild weather in both the winter heating season and summer cooling, leading to broadly low market prices.

Speaker 3

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 in 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 2026 to address these costs. We also look forward to the MPSC scheduled 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 service to them remains on track.

Speaker 3

We expect to provide a CapEx refresh in early 2027. With that, I'll turn it back to Brian.

Speaker 2

Thanks, Crystal. Folks are waiting for November 10th, the hearing on the merger with Black Hills. 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 and the high turnout, and also the high amount of votes for the merger. Increasing scale, being able to achieve a higher EPS growth rate, expanding our opportunities to invest and better finance those opportunities, a strengthened balance sheet, and enhanced business diversity certainly is a benefit to shareholders. Equally important, this is substantial long-term value for customers. Not only are we bringing together two complementary teams, we're going to provide reliable service like they have in the past, but even better on a combined basis.

Speaker 2

Any cost savings achieved from this merger ultimately going to accrue to customers' future rate reviews. Lastly, as we prepare for the combination with Black Hills, employees are excited about being part of something bigger and about the two companies being better together as one company. We're very excited about the opportunity. We need one 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 can see that our final order is expected by November 12th, the hearing on November 10th. If we do, if we're fortunate enough to receive an approval with a satisfactory written order, we would plan to close shortly thereafter. Moving forward, we're also, as you know, working on data centers.

Speaker 2

From a data center request perspective, combining the request and assessments, our queue count has gone from 14 to 16. We're seeing a bit more interest in South Dakota. On a development agreement, you've noticed the queue count went down from three to two. I'd mentioned in previous meetings, Sabey 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 queue count from the development agreement is down to two. Speaking about that on 18, we talk about those large load customers. The two remaining with development agreements is Atlas, of course. There's an expectation with a customer, they ultimately could go from 75 MW up to 150, starting in late 2027. Then also Quantica is from a studying load at this point, 25 MW going up to 1.1 gig.

Speaker 2

It notes a targeted start there of early 2029. In recent discussions, that could actually occur sometime earlier than that. Excited about the progress made there with Quantica. Lastly, on slide 19, from a NorthWestern value proposition perspective, again, approximately a 4% dividend yield, and just yield, and take into consideration our base plan of a 4%-6% EPS growth, you have in and of itself an 8%-10% total return. If in fact you think about opportunities around data centers, around regional transmission, incremental generating capacity in obviously Montana and South Dakota, those possibilities could show us with a return greater than 10%. Having said all that, obviously combining with Black Hills, we think we will be better together, and that total return picture would be even better. With that, we will open it up to Q&A.

Operator

We will now begin the question and answer session. Please limit yourself to one question and one follow-up. If you would like to ask a question, please press star one on your telephone keypad. To withdraw your question, press star one again. Please pick up your handset when asking your 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 Shar Pourreza with Wells Fargo Securities. Please go ahead.

Speaker 4

Good morning, team. This is Whitney with Halama on for Shar.

Speaker 2

Hi, Whitney.

Speaker 1

Good morning.

Speaker 4

3Q's 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 MW to 1,250 MW is in your load forecast, and does the corrected IRP change what you'd build or serve to Atlas and Quantica?

Speaker 2

Yeah, I think the issue for us is the 200 MW is something that we continue to think about in terms of serving a large load of the 370, and that's what we continue to discuss with folks. Ultimately, we'd 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's ultimately our plan. We ultimately need the commission to approve our large new load tariff in order for that to happen. That's 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 new load customers as well.

Speaker 4

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

Speaker 2

Yeah, I would say this. I think certainly with Quantica, we are still attempting to sign an ESA, 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 non-regulated 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.

Speaker 4

Okay, sounds good. Thank you. See you at EEI.

Speaker 1

Thank you.

Speaker 2

Thank you.

Operator

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

Speaker 5

Hey, everyone. Good morning. Hope you're doing well. Thanks for the updates. Hey. Maybe just starting on Colstrip, I think you're kind of calling out like roughly a $0.10 hurt. On a standalone basis, as we think about your I think you're going to refile or you're going to file a rate case in Montana next year. On a standalone basis, should we continue to expect that type of drag in our 2027 numbers?

Speaker 3

Hi, Nick. It's 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'll call it, next week and the merger outcome, but how you're thinking about 2027, we expect to file a rate case. The commission has outwardly been extremely supportive of that Avista interest and the ability to serve customers with that. We'd be seeking to recover those costs so that you wouldn't 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 index market sales.

Speaker 3

We happen to be capacity long at a year when prices have been lower than we've 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.

Speaker 5

Okay, that is great. Then maybe just, I know you highlighted that you submitted this large load tariff in Montana in March of 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 two interplay and just what the latest status update is on the new large load tariff? Thanks.

Speaker 3

Nick, I will start, and Brian will back clean up on this one. One, on the large new load tariff, 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 and 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, but also our prior motion for reconsideration of PCCAM, other things. So the docket is progressing.

Speaker 3

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 re-regulated, and there is customer choice. So we do have the option to continue negotiating with customers toward an ESA, or we could serve them as a choice customer and eventually, hopefully, bring them in to a fully regulated customer if the Montana Commission wants that, or if they prefer to keep them separate as a choice, we could do that. So the two definitely interplay, but we are continuing to have conversations with customers to get to 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?

Speaker 2

Yeah, I would just add, I think people may recall that 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 us be transparent about 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 can be fully observed at that point in time.

Speaker 5

That's great. If I could just sneak one more in, I appreciate all the comments on that. How are you kind of thinking about, as you get approval in Montana for the merger, would the unveil for the pro forma company be on the fourth quarter update, or would there be kind of an analyst day update shortly thereafter, just given you would plan to close this year, it seems? Thanks.

Speaker 2

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 what our long-term EPS growth rate would be, but to get guidance for 2027 at that time.

Speaker 5

All right. See you soon. Thanks so much.

Speaker 2

Hey, thanks, Nick.

Speaker 3

Thanks, Nick.

Operator

Your next question is from Jamieson Ward with Jefferies. Please go ahead.

Speaker 6

Hi, guys.

Speaker 2

Hey, James.

Speaker 6

Hey, building on Nick's 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, it was after the start of 2025. If it passes with that language, how should we think about the potential impact on your large new load rule and any agreement you sign before it's enacted?

Speaker 2

I think from what I understand from the legislative perspective, a large new load, it's relatively in line with what we're doing from a large new load tariff perspective. I am not too concerned about that, James.

Speaker 6

Okay. Terrific. You now expect a PCCAM decision in the first half of next year. Your deck shows 90/10 sharing. It was pre-tax $8.2 million in 2025. If sharing comes back, how should we think about the annual pre-tax exposure that you might expect now that you are long capacity?

Speaker 3

Yeah, it's a great question. One 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 1st in 2026. 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 in the sense of before we were short and at the mercy of market prices on a detrimental basis. Now that we are long, you continue to be. Obviously, if I could, I would, but I don't control broader power prices, so you would continue to have exposure there.

Speaker 3

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. You are looking to regulated utilities to earn a return on invested capital, not to make money in the market on power sales or purchases. As to sensitivity there, I would like to think that is a done topic and we will not see that going forward. If for some reason that PCCAM docket sharing does not go away, then we would have more clarity on sensitivity there. Again, we are many times now long in the market, so it is still the price of market now sales instead of purchases. I would like to think certainly also if we combine into Black Hills, hopefully soon, that the sensitivity of that around our earnings would be minimal as well.

Speaker 2

The only thing I would add to that is, if you think about when sharing was instituted, we were still very, very short from a capacity standpoint, so that 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 Montana Commission is acknowledge, 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.

Speaker 6

Got it. Very helpful explanation. Thank you, Brian. Thank you, Crystal. See you guys soon.

Speaker 2

Thanks, Jackson.

Speaker 3

Thank you.

Operator

Your next question is from Aidan Kelly with J.P. Morgan Securities LLC. Please go ahead. Aidan Kelly on the line, please go ahead.

Speaker 7

Hey, guys. Good morning. Thanks for the time today. Can you hear me now?

Speaker 2

Yeah, Aidan. I thought I was going to have to ask you a question.

Speaker 7

Yeah. Good on my end. Thanks. I guess on the data center, like request and assessment stage, looks like there was some slight uptick there, I guess, despite the Sabey termination on the development agreement side. Could you just help us understand the underlying momentum in customer interest and whether you're 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.

Speaker 2

Yeah, I think there's two things going on, Aidan. I think first and foremost, I think you know that there's a move from data centers that kind of saturated urban areas. They're starting to move into rural areas. Obviously, we're getting more attention from that perspective. You're also seeing, secondly, in the U.S., a lot of pushback in certain states that may have been deemed pro-data center states in the past, no longer being in that case. I think there's just been more interest. I think we're also getting closer to legislative sessions. I think South Dakota's doing some more things to be helpful on some fronts. I just see a bit more positive momentum in that state.

Speaker 7

Understood. That was my only question, so I'll leave it there. I appreciate it. See you guys soon.

Speaker 2

Thanks, Aidan. Thanks, Aidan.

Operator

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

Speaker 8

Thanks for taking my question this morning.

Speaker 2

Morning, Paul. Morning, Paul.

Speaker 8

Good morning. With Sabey sort of being eliminated from the development agreement, are they included in the other bucket, or are they eliminated entirely?

Speaker 2

Yeah, they're eliminated entirely. The queue count, yeah, they don't jump back in the data center request and assessment. They come out of the development agreement. They are all completely off of slide 17.

Speaker 8

Okay. Then, you used to have sort of two buckets, data center requests and high-level assessment. Can you sort of just walk us through the logic of, it looks like combining those two buckets?

Speaker 2

Yeah, I think we were getting a lot of specific questions about various buckets themselves, and obviously, until you get to a development agreement where you're actually putting money down towards studies, I think that's where people should be focusing their attention. I think it's appropriate to see how much demand is people looking in our states, but until you see folks in the development agreement bucket, I don't think anyone should be counting their chickens before they hatch, if you will.

Speaker 8

Great. Then last question from me. I guess previously you had commented about the potential of having both Quantica and Atlas signed by the end of the year. Is that still the case?

Speaker 2

I think Atlas is less apt to be done by the end of the year. I still feel really good about Quantica. Paul, as we found out, I think others find out, these things do take a little longer than you initially expect. But we're certainly targeting with Quantica to be done by the end of the year.

Speaker 8

Great. That's it for me. Thank you so much.

Speaker 2

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.

Speaker 2

Well, first of all, I want to just thank everyone, patience through this process. It's been a long time since we announced the merger. Investors have patiently waited, and as we have. I think about all the 4,000-plus employees of the combined entity patiently waiting and anxious about this, but everyone's worked extremely hard to ultimately get to an approval. As you know, we've gotten approvals from everyone else that we need approvals from. Hopefully, Montana Commission will also understand the benefits associated with the merger, and we'll get to that approval as well. I think we can demonstrate to all of you, if we get the chance, that we'll be better together as we move forward as Bright Horizon Energy.

Speaker 2

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. Hopefully, we'll talk the next time from 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.

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