NorthWestern Energy Group, Inc.

Previous wording

NorthWestern Energy Group, doing business as NorthWestern Energy, provides electricity and/or natural gas to approximately 775,300 customers in Montana, South Dakota, Nebraska and Yellowstone National Park. Our operations in Montana and Yellowstone National Park are conducted through our subsidiary, NW Corp, and our operations in South Dakota and Nebraska are conducted through our subsidiary, NWE Public Service. For a discussion of NorthWestern’s business strategy, see Management’s Discussion and Analysis of Financial Condition and Results of Operations in the NorthWestern Energy Group Annual Report on Form 10-K for the year ended December 31, 2023.

Current wording

NorthWestern Energy Group, doing business as NorthWestern Energy, provides electricity and/or natural gas to approximately 809,000 customers in Montana, South Dakota, Nebraska and Yellowstone National Park. Our operations in Montana and Yellowstone National Park are conducted through our subsidiary, NW Corp, and our operations in South Dakota and Nebraska are conducted through our subsidiary, NWE Public Service. For a discussion of NorthWestern’s business strategy, see Management’s Discussion and Analysis of Financial Condition and Results of Operations in the NorthWestern Energy Group Annual Report on Form 10-K for the year ended December 31, 2024.

Previous wording

As you read this discussion and analysis, refer to our Condensed Consolidated Statements of Income, which present the results of our operations for the three and nine months ended September 30, 2024 and 2023.

Current wording

As you read this discussion and analysis, refer to our Condensed Consolidated Statements of Income, which present the results of our operations for the three months ended March 31, 2025 and 2024.

Previous wording

HOW WE PERFORMED AGAINST OUR THIRD QUARTER 2023 RESULTS

Current wording

HOW WE PERFORMED AGAINST OUR FIRST QUARTER 2024 RESULTS

Previous wording

The MPSC has developed its procedural schedule for our rate review request including a hearing scheduled to commence on April 22, 2025. If a final order is not received by May 23, 2025, which is 270 days from acceptance of our filing, we intend to implement, as permitted by the MPSC regulations, our requested rates, which will be subject to refund, until a final order is received.

Current wording

Revised interim filing rates are requested to be effective May 1, 2025. If the revised interim rates are not approved, and a final order is not received by May 23, 2025, which is 270 days from acceptance of our filing, we intend to implement, as permitted by Montana statute, our rebuttal rates, which will be subject to refund, until a final order is received.

Previous wording

Nebraska Natural Gas Rate Review -In June 2024, we filed a natural gas rate review with the NPSC. The filing requests a base rate annual revenue increase of $3.6 million. Our request is based on a return on equity of 10.70 percent, a capital structure including 53.13 percent equity, and rate base of $47.4 million. Interim rates, which increased base natural gas rates $2.3 million, were implemented on October 1, 2024. Interim rates will remain in effect on a refundable basis until the NPSC issues a final order.

Current wording

A hearing on the electric and natural gas rate review is scheduled to commence on June 9, 2025. Interim rates will remain in effect on a refundable basis until the MPSC issues a final order.

Previous wording

On April 25, 2024, the EPA released GHG Rules for existing coal-fired facilities and new coal and natural gas-fired facilities as well as MATS Rules. Compliance with the rules will require expensive upgrades at Colstrip Units 3 and 4 with proposed compliance dates that may not be achievable and / or require technology that is unproven, resulting in significant impacts to costs of the facilities. The final MATS and GHG Rules require compliance as early as 2027 and 2032, respectively. See Note 10 - Commitments and Contingencies to the Condensed Consolidated Financial Statements included herein for additional information regarding these rules.

Current wording

In April 2024, the EPA released GHG Rules for existing coal-fired facilities and new coal and natural gas-fired facilities as well as MATS Rules. Compliance with the rules will require expensive upgrades at Colstrip Units 3 and 4 with proposed compliance dates that may not be achievable and / or require technology that is unproven, resulting in significant impacts to costs of the facilities. The final MATS and GHG Rules require compliance as early as 2027 and 2032, respectively. On April 8, 2025, President Trump issued a proclamation, "Regulatory Relief for Certain Stationary Sources to Promote American Energy," exempting certain coal plants, including Colstrip Units 3 and 4, Big Stone Plant, and Coyote Plant, from compliance with the MATS Rule through July 8, 2029. See Note 10 - Commitments and Contingencies to the Condensed Consolidated Financial Statements included herein for additional information regarding these rules.

Previous wording

On July 29, 2024, we entered into an Asset Purchase Agreement with Hope Utilities to acquire its Energy West natural gas utility distribution system and operations serving approximately 33,000 customers located near Great Falls, Cut Bank, and West Yellowstone, Montana for approximately $39.0 million in cash, subject to certain working capital and other agreed upon closing adjustments. The transaction is subject to a number of customary closing conditions, including MPSC approval, and we expect the acquisition to be completed by the end of the first quarter of 2025.

Current wording

In July 2024, we entered into an Asset Purchase Agreement with Hope Utilities to acquire its Energy West natural gas utility distribution system and operations serving approximately 33,000 customers located near Great Falls, Cut Bank, and West Yellowstone, Montana for approximately $39.0 million, subject to certain working capital and other agreed upon closing adjustments. The transaction is subject to a number of customary closing conditions, including MPSC approval, and we expect the acquisition to be completed in the second or third quarter of 2025.

Previous wording

In August 2024, the U.S. Department of Energy awarded a $700.0 million grant through the Grid Resilience and Innovation Partnership (GRIP) program to advance the North Plains Connector (NPC) Consortium project. The 415-mile, high-voltage direct-current transmission line is intended to connect Montana's Colstrip substation, of which we are the operator and a joint owner, to central North Dakota, bridging the eastern and western U.S. energy grids. The NPC Consortium includes potential upgrades to our jointly owned Colstrip Transmission System and $70.0 million of the award is earmarked for the Colstrip Transmission System Upgrade. The NPC project, estimated to be a $3.6 billion investment, aims to enhance grid reliability, support renewable energy integration, and provide additional capacity across multiple states. We collaborated with Grid United, the Montana Department of Commerce, and other regional utilities on the successful GRIP grant application. The project is a critical infrastructure investment that aligns with our commitment to providing reliable and affordable energy to our customers while also supporting broader grid resilience efforts in the region. In addition to the Colstrip Transmission System Upgrade, we are considering an investment in NPC and are engaged in regional transmission development activities.

Current wording

In August 2024, the U.S. Department of Energy awarded a $700.0 million grant through the Grid Resilience and Innovation Partnership (GRIP) program to advance the North Plains Connector (NPC) Consortium project. The 415-mile, high-voltage direct-current transmission line is intended to connect Montana's Colstrip substation, of which we are the operator and a joint owner, to central North Dakota, bridging the eastern and western U.S. energy grids. The NPC Consortium includes potential upgrades to our jointly owned Colstrip Transmission System and $70.0 million of the award is earmarked for the Colstrip Transmission System Upgrade. The NPC project aims to enhance grid reliability, support renewable energy integration, and provide additional capacity across multiple states. We collaborated with Grid United, the Montana Department of Commerce, and other regional utilities on the successful GRIP grant application.

Previous wording

Consolidated gross margin for the three months ended September 30, 2024 was $102.8 million as compared with $83.5 million in 2023, an increase of $19.3 million, or 23.1 percent. This increase was primarily due to new base rates in Montana and South Dakota, electric transmission revenues, electric retail volumes, Montana property tax tracker collections, and lower non-recoverable Montana electric supply costs. These were offset in part by natural gas retail volumes, depreciation, and operating and maintenance costs.

Current wording

Consolidated gross margin for the three months ended March 31, 2025 was $166.2 million as compared with $142.5 million in 2024, an increase of $23.7 million, or 16.6 percent. This increase was primarily due to rates, electric retail volumes, natural gas retail volumes, electric transmission revenues, and natural gas transportation revenues. These were offset in part by Montana property tax tracker collections, depreciation, and operating and maintenance expenses.

Previous wording

Consolidated utility margin for the three months ended September 30, 2024 was $257.3 million as compared with $232.2 million for the same period in 2023, an increase of $25.1 million, or 10.8 percent. Primary components of the change in utility margin include the following (in millions):

Current wording

Consolidated utility margin for the three months ended March 31, 2025 was $328.4 million as compared with $300.6 million for the same period in 2024, an increase of $27.8 million, or 9.2 percent. Primary components of the change in utility margin include the following (in millions):

Previous wording

Higher electric retail volumes were driven by favorable weather in Montana impacting residential demand, higher commercial and industrial demand, and customer growth in all jurisdictions, partly offset by unfavorable weather in South Dakota impacting residential demand. Lower natural gas retail volumes were driven by unfavorable weather in Montana partly offset by customer growth in all jurisdictions.

Current wording

Higher electric retail volumes were driven by favorable weather in all jurisdictions impacting residential demand, higher commercial demand, and customer growth in all jurisdictions, partly offset by lower industrial demand. Higher natural gas retail volumes were driven by favorable weather and customer growth in all jurisdictions.

Previous wording

Under the PCCAM, net supply costs higher or lower than the PCCAM base rate (PCCAM Base) (excluding qualifying facility (QF) costs) are allocated 90 percent to Montana customers and 10 percent to shareholders. For the three months ended September 30, 2024, we over-collected supply costs of $5.9 million resulting in a reduction to our under collection of costs, and recorded an increase in pre-tax earnings of $0.7 million (10 percent of the PCCAM Base cost variance). For the three months ended September 30, 2023, we over-collected supply costs of $1.0 million resulting in a reduction to our under collection of costs, and recorded an increase in pre-tax earnings of $0.1 million.

Current wording

Under the PCCAM, net supply costs higher or lower than the PCCAM base rate (PCCAM Base) (excluding qualifying facility (QF) costs) are allocated 90 percent to Montana customers and 10 percent to shareholders. For the three months ended March 31, 2025, we under-collected supply costs of $24.3 million resulting in an increase to our under collection of costs, and recorded a decrease in pre-tax earnings of $2.7 million (10 percent of the PCCAM Base cost variance). For the three months ended March 31, 2024, we under-collected supply costs of $27.1 million resulting in an increase to our under collection of costs, and recorded a decrease in pre-tax earnings of $3.0 million.

Previous wording

Consolidated operating expenses, excluding fuel, purchased supply and direct transmission expense, were $189.4 million for the three months ended September 30, 2024, as compared with $176.6 million for the three months ended September 30, 2023. Primary components of the change include the following (in millions):

Current wording

Consolidated operating expenses, excluding fuel, purchased supply and direct transmission expense, were $203.7 million for the three months ended March 31, 2025, as compared with $198.5 million for the three months ended March 31, 2024. Primary components of the change include the following (in millions):

Previous wording

Consolidated operating income for the three months ended September 30, 2024 was $67.9 million as compared with $55.6 million in the same period of 2023. This increase was primarily due to new base rates in Montana and South Dakota, electric transmission revenues, electric retail volumes, Montana property tax tracker collections, and lower non-recoverable Montana electric supply costs. These were offset in part by natural gas retail volumes, depreciation, operating, and administrative and general expenses.

Current wording

Consolidated operating income for the three months ended March 31, 2025 was $124.7 million as compared with $102.1 million in the same period of 2024. This increase was primarily due to rates, electric retail volumes, natural gas retail volumes, electric transmission revenues, and natural gas transportation revenues. These were offset in part by Montana property tax tracker collections, depreciation, operating, administrative and general costs.

Previous wording

Consolidated interest expense was $33.4 million for the three months ended September 30, 2024 as compared with $28.7 million for the same period of 2023. This increase was due to higher borrowings and interest rates, partly offset by higher capitalization of Allowance for Funds Used During Construction (AFUDC).

Current wording

Consolidated interest expense was $36.5 million for the three months ended March 31, 2025 as compared with $31.0 million for the same period of 2024. This increase was due to higher borrowings and interest rates and lower capitalization of Allowance for Funds Used During Construction (AFUDC).

Previous wording

Consolidated other income was $19.6 million for the nine months ended September 30, 2024 as compared to $12.9 million during the same period of 2023. This increase was primarily due a $2.3 million reversal of a previously expensed Community Renewable Energy Project penalty due to a favorable legal ruling, higher capitalization of AFUDC, a decrease in the non-service component of pension expense, and an increase in the value of deferred shares held in trust for deferred compensation, partly offset by a $2.5 million non-cash impairment of an alternative energy storage equity investment.

Current wording

Consolidated other income was $3.9 million for the three months ended March 31, 2025 as compared with $4.3 million for the same period of 2024. This decrease was primarily due to lower capitalization of AFUDC and a prior year reversal of $2.3 million from a previously expensed Community Renewable Energy Project penalty due to a favorable legal ruling. This was partly offset by an increase of $2.5 million driven by a prior year non-cash impairment of an alternative energy storage equity investment and an increase in the value of deferred shares held in trust for deferred compensation.

Previous wording

Higher electric retail volumes were driven by favorable weather in Montana impacting residential demand, higher commercial and industrial demand, and customer growth in all jurisdictions, partly offset by unfavorable weather in South Dakota impacting residential demand.

Current wording

Higher electric retail volumes were driven by favorable weather in all jurisdictions impacting residential demand, higher commercial demand, and customer growth in all jurisdictions, partly offset by lower industrial demand.

Previous wording

Under the PCCAM, net supply costs higher or lower than the PCCAM base rate (PCCAM Base) (excluding qualifying facility (QF) costs) are allocated 90 percent to Montana customers and 10 percent to shareholders. For the three months ended September 30, 2024, we over-collected supply costs of $5.9 million resulting in a reduction to our under collection of costs, and recorded an increase in pre-tax earnings of $0.7 million (10 percent of the PCCAM Base cost variance). For the three months ended September 30, 2023, we over-collected supply costs of $1.0 million resulting in a reduction to our under collection of costs, and recorded an increase in pre-tax earnings of $0.1 million.

Current wording

Under the PCCAM, net supply costs higher or lower than the PCCAM base rate (PCCAM Base) (excluding qualifying facility (QF) costs) are allocated 90 percent to Montana customers and 10 percent to shareholders. For the three months ended March 31, 2025, we under-collected supply costs of $24.3 million resulting in an increase to our under collection of costs, and recorded a decrease in pre-tax earnings of $2.7 million (10 percent of the PCCAM Base cost variance). For the three months ended March 31, 2024, we under-collected supply costs of $27.1 million resulting in an increase to our under collection of costs, and recorded a decrease in pre-tax earnings of $3.0 million.

Previous wording

As of September 30, 2024, our total net liquidity was approximately $316.5 million, including $2.5 million of cash and $314.0 million of revolving credit facility availability with no letters of credit outstanding.

Current wording

As of March 31, 2025, our total net liquidity was approximately $630.0 million, including $56.0 million of cash and cash equivalents and $574.0 million of revolving credit facility availability with no letters of credit outstanding.

Previous wording

As of September 30, 2024, cash, cash equivalents, and restricted cash were $27.9 million as compared with $25.2 million as of December 31, 2023 and $21.7 million as of September 30, 2023. Cash provided by operating activities totaled $343.9 million for the nine months ended September 30, 2024 as compared with $427.0 million during the nine months ended September 30, 2023. As shown in the table below, this decrease in operating cash flows is primarily due to significant net cash inflows in the prior period from the recovery of previously under-collected energy supply costs, compared to minimal net cash inflows for energy supply costs in the current period due to the timely recovery of energy supply costs.

Current wording

As of March 31, 2025, cash, cash equivalents, and restricted cash were $80.1 million as compared with $29.0 million as of December 31, 2024 and $20.4 million as of March 31, 2024. Cash provided by operating activities totaled $153.4 million for the three months ended March 31, 2025 as compared with $161.7 million during the three months ended March 31, 2024. The changes in cash flows from operating activities generally follow the results of operations, as discussed above in the consolidated results of operations for the three months ended March 31, 2025, and are affected by changes in working capital. The decrease in cash provided by operating activities is primarily due to lower collections of accounts receivable balances due to timing of colder weather and greater uses of cash in accrued expenses and other due to timing of interest payments on long-term debt. This was partly offset by a decrease in our net cash outflows for energy supply costs, as shown in the table below.

Previous wording

Cash used in investing activities totaled $405.1 million during the nine months ended September 30, 2024, as compared with $411.0 million during the nine months ended September 30, 2023. Plant additions during the first nine months of 2024 include maintenance additions of approximately $216.5 million and capacity related capital expenditures of $184.0 million. Plant additions during the first nine months of 2023 included maintenance additions of approximately $235.0 million and capacity related capital expenditures of approximately $172.2 million.

Current wording

Cash used in investing activities totaled $96.7 million during the three months ended March 31, 2025, as compared with $109.0 million during the three months ended March 31, 2024. Plant additions during the first three months of 2025 include maintenance additions of approximately $55.6 million and capacity related capital expenditures of $36.5 million. Plant additions during the first three months of 2024 included maintenance additions of approximately $49.2 million and capacity related capital expenditures of approximately $59.6 million.

Previous wording

Cash provided by financing activities totaled $63.9 million during the nine months ended September 30, 2024, as compared with cash used in financing activities of $16.8 million during the nine months ended September 30, 2023. During the nine months ended September 30, 2024, cash provided by financing activities reflects proceeds from the issuance of debt of $215.0 million and short-term borrowings of $100.0 million, partly offset by payment of dividends of $118.9 million, repayment of 1.00 percent, $100.0 million of Montana First Mortgage Bonds, and net repayments under our revolving lines of credit of $32.0 million. During the nine months ended September 30, 2023, cash used in financing activities reflects net repayments under our revolving lines of credit of $273.0 million and payment of dividends of $115.0 million, partly offset by proceeds from the issuance of debt of $300.0 million and proceeds received from the issuance of common stock of $73.6 million.

Current wording

Cash used in financing activities totaled $5.6 million during the three months ended March 31, 2025, as compared with $57.5 million during the three months ended March 31, 2024. During the three months ended March 31, 2025, cash used in financing activities reflects net repayments under our revolving lines of credit of $362.0 million and payment of dividends of $40.3 million, partly offset by proceeds from the issuance of debt of $400.0 million. During the three months ended March 31, 2024, cash used in financing activities reflects net repayments under our revolving lines of credit of $132.0 million, repayment of 1.00 percent, $100.0 million of Montana First Mortgage Bonds and payment of dividends of $39.6 million, partly offset by proceeds from the issuance of debt of $215.0 million.

Previous wording

For further information on our credit facilities, see Note 10 - Unsecured Credit Facilities in the NorthWestern Energy Group Annual Report on Form 10-K for the year ended December 31, 2023.

Current wording

For further information on our credit facilities, see Note 10 - Short-Term Borrowings and Credit Arrangements in the NorthWestern Energy Group Annual Report on Form 10-K for the year ended December 31, 2024.

Previous wording

As of September 30, 2024 and 2023 the outstanding balances of our credit facilities were $286.0 million and $177.0 million, respectively. As of October 25, 2024, the availability under our credit facilities was approximately $335.0 million, and there were no letters of credit outstanding.

Current wording

As of March 31, 2025 and 2024, the outstanding balances of our credit facilities were $51.0 million and $186.0 million, respectively. As of April 25, 2025, the availability under our credit facilities was approximately $500.0 million, and there were no letters of credit outstanding.

Previous wording

(1)Represents cash payments for long-term debt and excludes $12.8 million of debt discounts and debt issuance costs, net.

Current wording

(1)Represents cash payments for long-term debt and excludes $15.1 million of debt discounts and debt issuance costs, net.

Previous wording

(3)Certain QFs require us to purchase minimum amounts of energy at prices ranging from $118 to $130 per MWH through 2029. Ourestimated gross contractual obligation related to these QFs is approximately $247.5 million. A portion of the costs incurred to purchase this energy is recoverable through rates authorized by the MPSC, totaling approximately $221.0 million.

Current wording

(3)Certain QFs require us to purchase minimum amounts of energy at prices ranging from $118 to $130 per MWH through 2029. Ourestimated gross contractual obligation related to these QFs is approximately $213.9 million. A portion of the costs incurred to purchase this energy is recoverable through rates authorized by the MPSC, totaling approximately $192.6 million.

Previous wording

(5)Contractual interest payments include our revolving credit facilities, which have a variable interest rate. We have assumed an average interest rate of 6.19 percent on the outstanding balance through maturity of the facilities.

Current wording

(5)Contractual interest payments include our revolving credit facilities, which have a variable interest rate. We have assumed an average interest rate of 5.67 percent on the outstanding balance through maturity of the facilities.

Previous wording

(7)The table above excludes potential tax payments related to uncertain tax positions as they are not practicable to estimate. Additionally, the table above excludes reserves for environmental remediation (See Note 10 - Commitments and Contingencies) and asset retirement obligations as the amount and timing of cash payments may be uncertain.

Current wording

(7)The table above excludes potential tax payments related to uncertain tax benefits as they are not practicable to estimate. Additionally, the table above excludes reserves for environmental remediation and asset retirement obligations as the amount and timing of cash payments may be uncertain.