NorthWestern Energy reaches settlement on rate review

BUTTE, Mont. & SIOUX FALLS, S.D. - NorthWestern Energy Group, Inc. (NASDAQ:NWE) has announced settlement agreements in its regulatory rate review process that could lead to increased monthly bills for its customers in Montana. The agreements, which involve the Montana Consumer Counsel, large customer groups, Federal Executive Agencies, and Walmart Inc., are pending approval by the Montana Public Service Commission.

If the settlements are authorized, natural gas customers using 65 therms per month would see their bills rise by $4.74, or 9.14%, effective from July 1, 2024. Similarly, electric customers could experience a $4.63, or 4.21%, increase in their monthly bills, also from the rates effective July 1, 2024. The proposed adjustments are part of NorthWestern Energy’s effort to cover the costs of maintaining its natural gas and electric infrastructure network.

The financial impact of these settlements, if approved, would result in an increase of approximately $18 million in annual natural gas base revenues and $66.4 million in annual electric base revenues, excluding contributions from the Yellowstone County Generating Station. This revenue adjustment comes as the company reports annual revenue of $1.51 billion with a gross profit margin of 56.3%. InvestingPro analysis shows the company currently trades at a P/E ratio of 14.7, suggesting it may be overvalued relative to its near-term earnings growth potential. Including the unsettled requests related to the generating station, NorthWestern Energy’s base revenue request totals $110.3 million. However, considering the proposed reduction to the Power Cost and Credit Adjustment Mechanism and the property tax tracker, the net increase in revenues impacting customer electric bills would be $14.6 million.

The natural gas settlement includes an authorized return on equity of 9.60% with a 47.8% equity component of the capital structure. The partial electric settlement maintains an authorized return on equity of 9.65% for electric operations, consistent with the current authorized rate, and the same equity component.

Additional terms of the settlement include standby rates for customers who primarily generate their own power but rely on NorthWestern Energy for backup, and a transition plan for the Colstrip Plant involving the Northern Cheyenne Tribe, recognizing NorthWestern Energy’s majority ownership of the plant.

The settlements have been submitted for consideration to the Montana Public Service Commission, with public hearings scheduled to begin on April 22, 2025. The proposals for the Yellowstone County Generating Station and supply costs are not included in these settlements. NorthWestern Energy asserts that the generating station has already contributed to a rate decrease for Montana customers, with rates dropping more than 5% from December 1, 2024.

This report is based on a press release statement from NorthWestern Energy Group, Inc. The company currently offers a dividend yield of 4.62%, making it an interesting option for income-focused investors. For deeper insights into NorthWestern Energy’s financial health and future prospects, including additional ProTips and comprehensive analysis, investors can access the full company research report on InvestingPro.

In other recent news, NorthWestern Energy Group, Inc. has issued $400 million in Montana First Mortgage Bonds with a 5.073% interest rate, maturing in 2030. The proceeds from this bond issuance are earmarked for redeeming existing bonds, funding future capital expenditures, and addressing general corporate needs. Additionally, KeyBanc Capital Markets maintained a Sector Weight rating on Northwestern Corp. after a settlement in a natural gas rate case, which is expected to increase revenue by $18 million. However, the firm remains cautious about the company’s upcoming electric rate case.

Barclays has revised its price target for Northwestern Corp. to $56, down from $57, while maintaining an Overweight rating. Despite the adjustment, Barclays remains optimistic about Northwestern’s long-term growth potential. Meanwhile, Ladenburg Thalmann upgraded Northwestern’s stock to Buy, citing the company’s new data center agreements as a significant growth opportunity. The agreements are expected to introduce substantial energy loads to Northwestern’s portfolio, enhancing its future revenue prospects.

These developments highlight the company’s strategic initiatives and ongoing financial maneuvers, which are crucial for investors to consider.

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