NorthWestern Energy Group, Inc.

Previous wording

On August 18, 2025, we entered into the Merger Agreement with Black Hills and Merger Sub that provides for an all-stock merger of equals between NorthWestern and Black Hills. The Merger Agreement provides for Merger Sub to merge with and into NorthWestern, with NorthWestern continuing as the surviving entity and a direct wholly owned subsidiary of Black Hills, which would assume a new corporate name of Bright Horizon Energy as the resulting parent company of the combined corporate group. The Merger will combine the strengths of both companies, resulting in an organization with greater scale, financial stability, and operational expertise. It is designed to create a stronger, more resilient energy company focused on delivering safe, reliable, and affordable energy solutions to customers. Under the provisions of Accounting Standards Codification Topic 805, which requires the identification of an acquirer in a business combination, Black Hills is the accounting acquirer. Pursuant to the Merger Agreement, at the effective time of the Merger, each share of common stock of NorthWestern issued and outstanding as of immediately prior to closing will be converted into the right to receive 0.98 validly issued, fully paid and non-assessable shares of Black Hills Common Stock. See Note 2 - Pending Merger with Black Hills Corporation to the Condensed Consolidated Financial Statements included herein for additional information regarding this pending Merger.

Current wording

On August 18, 2025, we entered into the Merger Agreement with Black Hills and Merger Sub that provides for an all-stock merger of equals between NorthWestern and Black Hills. The Merger Agreement provides for Merger Sub to merge with and into NorthWestern, with NorthWestern continuing as the surviving entity and a direct wholly owned subsidiary of Black Hills, which would assume a new corporate name of Bright Horizon Energy as the resulting parent company of the combined corporate group. The Merger will combine the strengths of both companies, resulting in an organization with greater scale, financial stability, and operational expertise. It is designed to create a stronger, more resilient energy company focused on delivering safe, reliable, and affordable energy solutions to customers. Under the provisions of Accounting Standards Codification Topic 805, which requires the identification of an acquirer in a business combination, Black Hills is the accounting acquirer. Pursuant to the Merger Agreement, at the effective time of the Merger, each share of common stock of NorthWestern issued and outstanding as of immediately prior to closing will be converted into the right to receive 0.98 validly issued, fully paid and non-assessable shares of Black Hills Common Stock. Subject to the approval of the Merger from the MPSC and satisfaction or waiver of the other remaining closing conditions, we anticipate the transaction closing by year-end 2026. See Note 2 - Pending Merger with Black Hills Corporation to the Condensed Consolidated Financial Statements included herein for additional information regarding this pending Merger.

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 months ended March 31, 2026 and 2025.

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 and six months ended June 30, 2026 and 2025.

Previous wording

HOW WE PERFORMED AGAINST OUR FIRST QUARTER 2025 RESULTS

Current wording

HOW WE PERFORMED AGAINST OUR SECOND QUARTER 2025 RESULTS

Previous wording

In January 2026, we filed a Motion for Reconsideration (Motion) as it relates to this final order. Among other things, our Motion requests that the MPSC reconsider their prudence conclusions regarding the capital costs associated with the construction of YCGS and clarification as to the effective date of the PCCAM sharing mechanism suspension, for which we have requested an effective date of July 1, 2025, to align with the PCCAM tracker year. Any subsequent modifications by the MPSC to their final order will be reflected in our 2026 results.

Current wording

In January 2026, we filed a Motion for Reconsideration (Motion) as it relates to this final order. Among other things, our Motion requests that the MPSC reconsider their prudence conclusions regarding the capital costs associated with the construction of YCGS and clarification as to the effective date of the PCCAM sharing mechanism suspension, for which we have requested an effective date of July 1, 2025, to align with the PCCAM tracker year. Any subsequent modifications by the MPSC to their final order are expected to be reflected in our 2026 results.

Previous wording

During the three months ended March 31, 2026, power prices in the Pacific Northwest associated with these designated power sales contracts included within our PCCAM tariff waiver were insufficient to contribute to the recovery of the operating and maintenance expenses associated with the Avista Interests.

Current wording

During the three and six months ended June 30, 2026, power prices in the Pacific Northwest associated with these designated power sales contracts included within our PCCAM tariff waiver were insufficient to contribute to the recovery of the operating and maintenance expenses associated with the Avista Interests.

Previous wording

Puget Interests - The 370 megawatts of generation capacity from Colstrip Units 3 and 4 acquired from Puget (Puget Interests) on January 1, 2026, increases our ownership share of the facility to 55 percent and provides an increase in voting share in determining strategic direction and investment decisions at the facility. Unlike the Avista Interests, we do not currently need this capacity to serve existing customers in Montana. As such, the Puget Interests are held by our FERC regulated subsidiary to isolate the costs associated with this acquired interest from our Montana retail customers. While we expect our future opportunity to serve growing customer demand, including large-load customers, may be supported by this resource, in October 2025, we signed a contract to sell the dispatchable capacity and associated energy from the Puget Interests beginning January 1, 2026, through late 2027. Revenues from this agreement are expected to largely offset the estimated $30.0 million of annual incremental operating and maintenance costs associated with the Puget Interests. In addition, in October 2025, we submitted a request to the FERC for approval of cost-based rates for our subsidiary that will own the Puget Interests. In February 2026, the FERC approved both the cost-based rates and the contract rates retroactive to January 1, 2026. In March 2026, two MPSC commissioners, in their individual capacity, filed a motion with the FERC requesting a rehearing that largely reiterated arguments previously rejected by the FERC. We anticipate that the FERC will rule on this motion in the second quarter of 2026. If the FERC denies the motion, its order will stand. If the FERC grants the motion, it could reopen all or some portion of the proceedings.

Current wording

Puget Interests - The 370 megawatts of generation capacity from Colstrip Units 3 and 4 acquired from Puget (Puget Interests) on January 1, 2026, increases our ownership share of the facility to 55 percent and provides an increase in voting share in determining strategic direction and investment decisions at the facility. Unlike the Avista Interests, we do not currently need this capacity to serve existing customers in Montana. As such, the Puget Interests are held by our FERC regulated subsidiary to isolate the costs associated with this acquired interest from our Montana retail customers. While we expect our future opportunity to serve growing customer demand, including large-load customers, may be supported by this resource, in October 2025, we signed a contract to sell the dispatchable capacity and associated energy from the Puget Interests beginning January 1, 2026, through late 2027. Revenues from this agreement are expected to largely offset the estimated $30.0 million of annual incremental operating and maintenance costs associated with the Puget Interests. In addition, in October 2025, we submitted a request to the FERC for approval of cost-based rates for our subsidiary that will own the Puget Interests. In February 2026, the FERC approved both the cost-based rates and the contract rates retroactive to January 1, 2026. In March 2026, two MPSC commissioners, in their individual capacity, filed a motion with the FERC requesting a rehearing that largely reiterated arguments previously rejected by the FERC. The FERC denied this motion by operation of law. In June 2026, the two MPSC commissioners appealed the decision to the Ninth Circuit. We have intervened in the case.

Previous wording

The SPP has recently updated its resource accreditation and PRM requirements in response to growing reliability concerns. As a result, SPP is requiring additional accredited capacity by 2030 to meet the updated PRM targets. In October 2025, we submitted a project with the SPP under their Expedited Resource Adequacy Study program for the construction of a 131 MW natural gas generating facility located in Aberdeen, South Dakota, to meet regional capacity needs by 2030. Anticipated costs for this project are approximately $300.0 million.

Current wording

The Southwest Power Pool (SPP) has recently updated its resource accreditation and planning reserve margin (PRM) requirements in response to growing reliability concerns. As a result, SPP is requiring additional accredited capacity by 2030 to meet the updated PRM targets. In October 2025, we submitted a project with the SPP under their Expedited Resource Adequacy Study program for the construction of a 131 MW natural gas generating facility located in Aberdeen, South Dakota, to meet regional capacity needs by 2030. Anticipated costs for this project are approximately $300.0 million. As of June 30, 2026, we have recorded $42.3 million within Other noncurrent assets on the Condensed Consolidated Balance Sheets for non-refundable milestone payments to secure the turbines that will be used at this facility.

Previous wording

The South Dakota Legislature approved Senate Bill 36, and the Governor signed this bill into law, in March 2026. It precludes common law strict liability claims for utility operations alleged to have caused wildfire-related damages; establishes a statutory standard of care, supplanting common law causes of action and other theories of recovery; and creates a rebuttable presumption that a valid and current wildfire mitigation plan is reasonable preparation for, and mitigation of, wildfire risk. The legislation also defines the availability of damages by allowing noneconomic personal injury damages only when there is bodily injury and punitive damages only when an injured party proves by clear and convincing evidence that a qualified utility acted with willful and wanton misconduct and the qualified utility's willful and wanton misconduct was the actual and proximate cause of damages to the plaintiff. We anticipate filing our wildfire mitigation plan with the SDPUC in the second half of 2026.

Current wording

The South Dakota Legislature approved Senate Bill 36, and the Governor signed this bill into law in March 2026. It precludes common law strict liability claims for utility operations alleged to have caused wildfire-related damages; establishes a statutory standard of care, supplanting common law causes of action and other theories of recovery; and creates a rebuttable presumption that a valid and current wildfire mitigation plan is reasonable preparation for, and mitigation of, wildfire risk. The legislation also defines the availability of damages by allowing noneconomic personal injury damages only when there is bodily injury and punitive damages only when an injured party proves by clear and convincing evidence that a qualified utility acted with willful and wanton misconduct and the qualified utility's willful and wanton misconduct was the actual and proximate cause of damages to the plaintiff. We anticipate filing our wildfire mitigation plan with the SDPUC in the third quarter of 2026.

Previous wording

Consolidated gross margin for the three months ended March 31, 2026 was $160.3 million as compared with $166.2 million in 2025, a decrease of $5.9 million, or 3.5 percent. This decrease was primarily due to retail volumes, operating expenses, including costs associated with our additional ownership interests in Colstrip Units 3 and 4, and depreciation expense. These were offset in part by new rates, transmission revenues, and lower non-recoverable Montana electric supply costs.

Current wording

Consolidated gross margin for the three months ended June 30, 2026 was $106.6 million as compared with $94.5 million in 2025, an increase of $12.1 million, or 12.8 percent. This increase was primarily due to new rates and retail volumes. These were offset in part by higher operating, administrative, and general costs, including merger-related costs and costs associated with our additional ownership interests in Colstrip Units 3 and 4, and depreciation expense.

Previous wording

Consolidated utility margin for the three months ended March 31, 2026 was $352.0 million as compared with $328.4 million for the same period in 2025, an increase of $23.6 million, or 7.2 percent. Primary components of the change in utility margin include the following (in millions):

Current wording

Consolidated utility margin for the three months ended June 30, 2026 was $302.8 million as compared with $267.4 million for the same period in 2025, an increase of $35.4 million, or 13.2 percent. Primary components of the change in utility margin include the following (in millions):

Previous wording

Under the PCCAM, net supply costs higher or lower than the PCCAM base rate (PCCAM Base) (excluding qualifying facility (QF) costs) were allocated 90 percent to Montana customers and 10 percent to shareholders. Effective February 1, 2026 the cost sharing mechanism of the PCCAM was suspended on a temporary basis pending further review by the MPSC. For the three months ended March 31, 2026, we under-collected supply costs of $20.7 million resulting in an increase to our under collection of costs, and recorded a decrease in pre-tax earnings of $0.7 million (10 percent of the PCCAM Base cost variance for January 2026). 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).

Current wording

Under the PCCAM, net supply costs higher or lower than the PCCAM base rate (PCCAM Base) (excluding qualifying facility (QF) costs) were allocated 90 percent to Montana customers and 10 percent to shareholders. Effective February 1, 2026 the cost sharing mechanism of the PCCAM was suspended on an interim basis pending further review by the MPSC. For the three months ended June 30, 2025, we recorded a decrease in pre-tax earnings of $0.8 million (10 percent of the PCCAM Base cost variance).

Previous wording

Consolidated operating expenses, excluding fuel, purchased supply and direct transmission expense, were $237.8 million for the three months ended March 31, 2026, as compared with $203.7 million for the three months ended March 31, 2025. Primary components of the change include the following (in millions):

Current wording

Consolidated operating expenses, excluding fuel, purchased supply and direct transmission expense, were $238.6 million for the three months ended June 30, 2026, as compared with $206.7 million for the three months ended June 30, 2025. Primary components of the change include the following (in millions):

Previous wording

Consolidated interest expense was $39.9 million for the three months ended March 31, 2026 as compared with $36.5 million for the same period of 2025. 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 $40.3 million for the three months ended June 30, 2026 as compared with $36.3 million for the same period of 2025. This increase was due to higher borrowings and interest rates partly offset by higher capitalization of Allowance for Funds Used During Construction (AFUDC).

Previous wording

Consolidated income tax expense was $13.8 million for the three months ended March 31, 2026 as compared to $15.2 million for the same period of 2025. Our effective tax rate for the three months ended March 31, 2026 was 17.9% as compared with 16.5% for the same period in 2025.

Current wording

Consolidated income tax expense was $3.5 million for the three months ended June 30, 2026 as compared to $3.4 million for the same period of 2025. Our effective tax rate for the three months ended June 30, 2026 was 12.2% as compared with 13.7% for the same period in 2025.

Previous wording

Effective February 1, 2026 the cost sharing mechanism of the PCCAM was suspended on a temporary basis pending further review by the MPSC. For the three months ended March 31, 2026, we under-collected supply costs of $20.7 million resulting in an increase to our under collection of costs, and recorded a decrease in pre-tax earnings of $0.7 million (10 percent of the PCCAM Base cost variance for January 2026). 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 decrease in pre-tax earnings of $2.7 million (10 percent of the PCCAM Base cost variance).

Current wording

Effective February 1, 2026 the cost sharing mechanism of the PCCAM was suspended on an interim basis pending further review by the MPSC. For the six months ended June 30, 2026, we recorded a decrease in pre-tax earnings of $0.7 million (10 percent of the PCCAM Base cost variance). For the six months ended June 30, 2025, we recorded a decrease in pre-tax earnings of $3.5 million (10 percent of the PCCAM Base cost variance).

Previous wording

Consolidated operating income for the three months ended March 31, 2026 was $114.1 million as compared with $124.7 million in the same period of 2025. This decrease was primarily due to retail volumes, operating, administrative, and general costs, including merger-related costs and costs associated with our additional ownership interests in Colstrip Units 3 and 4, and depreciation expense. These were offset in part by new rates, transmission revenues, and lower non-recoverable Montana electric supply costs.

Current wording

Consolidated operating income for the six months ended June 30, 2026 was $178.4 million as compared with $185.5 million in the same period of 2025. This decrease was primarily due to retail volumes, Montana property tax collections, operating, administrative, and general costs, including merger-related costs and costs associated with our additional ownership interests in Colstrip Units 3 and 4, and depreciation expense. These were offset in part by new rates, lower non-recoverable Montana electric supply costs, and transmission revenues.

Previous wording

Consolidated other income was $3.1 million for the three months ended March 31, 2026 as compared with $3.9 million for the same period of 2025. This decrease was primarily due to higher non-service component pension expense and a decrease in the value of deferred shares held in trust for deferred compensation partly offset by higher capitalization of AFUDC.

Current wording

Consolidated other income was $7.6 million for the six months ended June 30, 2026 as compared to $4.0 million during the same period of 2025. This increase was primarily due to an increase in the value of deferred shares held in trust for deferred compensation, a prior year $1.0 million expense accrual related to an estimated penalty for the previously disclosed CREP informed by a MPSC ruling, and higher capitalization of AFUDC, partly offset by higher non-service component pension expense.

Previous wording

As of March 31, 2026, our total net liquidity was approximately $230.9 million, including $5.9 million of cash and cash equivalents and $225.0 million of revolving credit facility availability with no letters of credit outstanding.

Current wording

As of June 30, 2026, our total net liquidity was approximately $339.2 million, including $4.2 million of cash and cash equivalents and $335.0 million of revolving credit facility availability with no letters of credit outstanding.

Previous wording

As of March 31, 2026, cash, cash equivalents, and restricted cash were $27.6 million as compared with $30.7 million as of December 31, 2025 and $80.1 million as of March 31, 2025. Cash provided by operating activities totaled $159.4 million for the three months ended March 31, 2026 as compared with $153.4 million during the three months ended March 31, 2025. 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, 2026, and are affected by changes in working capital. The increase in cash provided by working capital is primarily due to a decrease in our net cash outflows for energy supply costs, as shown in the table below.

Current wording

As of June 30, 2026, cash, cash equivalents, and restricted cash were $25.1 million as compared with $30.7 million as of December 31, 2025 and $26.5 million as of June 30, 2025. Cash provided by operating activities totaled $233.2 million for the six months ended June 30, 2026 as compared with $211.6 million during the six months ended June 30, 2025. 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 six months ended June 30, 2026, and are affected by changes in working capital. The increase in cash provided by working capital is primarily due to 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 $116.1 million during the three months ended March 31, 2026, as compared with $96.7 million during the three months ended March 31, 2025. Plant additions during the first three months of 2026 include maintenance additions of approximately $80.0 million and capacity related capital expenditures of $36.1 million. Plant additions during the first three months of 2025 included maintenance additions of approximately $55.6 million and capacity related capital expenditures of approximately $36.5 million.

Current wording

Cash used in investing activities totaled $305.8 million during the six months ended June 30, 2026, as compared with $226.8 million during the six months ended June 30, 2025. Plant additions during the first six months of 2026 include maintenance additions of approximately $218.7 million and capacity related capital expenditures of $86.1 million. Plant additions during the first six months of 2025 included maintenance additions of approximately $149.4 million and capacity related capital expenditures of approximately $71.6 million.

Previous wording

Cash used in financing activities totaled $46.4 million during the three months ended March 31, 2026, as compared with $5.6 million during the three months ended March 31, 2025. During the three months ended March 31, 2026, cash used in financing activities reflects payment of dividends of $41.0 million and net repayments under our revolving lines of credit of $4.0 million. 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 long-term debt of $400.0 million.

Current wording

Cash provided by financing activities totaled $67.0 million during the six months ended June 30, 2026, as compared with $12.7 million during the six months ended June 30, 2025. During the six months ended June 30, 2026, cash provided by financing activities reflects proceeds from the issuance of debt of $375.0 million, partly offset by net repayments under our revolving lines of credit of $114.0 million, payment of dividends of $82.1 million, repayment of $60.0 million

Previous wording

As of March 31, 2026 and 2025, the outstanding balances of our credit facilities were $400.0 million and $51.0 million, respectively. As of April 24, 2026, the availability under our credit facilities was approximately $240.0 million, and there were no letters of credit outstanding.

Current wording

As of June 30, 2026 and 2025, the outstanding balances of our credit facilities were $290.0 million and $310.0 million, respectively. As of July 24, 2026, the availability under our credit facilities was approximately $316.0 million, and there were no letters of credit outstanding.

Previous wording

(1)Represents cash payments for long-term debt and excludes $12.1 million of debt discounts and debt issuance costs, net.

Current wording

(1)Represents cash payments for long-term debt and excludes $12.5 million of debt discounts and debt issuance costs, net.

Previous wording

(3)One QF requires us to purchase minimum amounts of energy at prices ranging from $124 to $130 per MWH through 2028. Ourestimated gross contractual obligation related to this QF is approximately $154.7 million. A portion of the costs incurred to purchase this energy is recoverable through rates authorized by the MPSC, totaling approximately $141.3 million.

Current wording

(3)One QF requires us to purchase minimum amounts of energy at a price of $130 per MWH through 2028. Ourestimated gross contractual obligation related to this QF is approximately $140.9 million. A portion of the costs incurred to purchase this energy is recoverable through rates authorized by the MPSC, totaling approximately $129.7 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 5.02 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 4.99 percent on the outstanding balance through maturity of the facilities.