Good morning and thank you for joining NorthWestern Corporation's financial results webcast for the June 30, 2023 second quarter results. My name is Travis Meyer, and I am the Corporate Development and Investor Relations Officer for NorthWestern. Joining us today to discuss the results and provide an overall update are Brian Bird, President and Chief Executive Officer, and Crystal Lail, Chief Financial Officer. All participants' lines are currently muted, and we will have a Q&A session after the presentation. I will provide instructions for asking questions at that time. NorthWestern's results have been released, and the release is available on our website at northwesternenergy.com. We also issued our 10-Q premarket on Tuesday morning. Please note that the company's press release, this presentation, comments from the presenters, and responses to your questions may include forward-looking statements. I will direct you to the disclosures in our SEC filings and our Safe Harbor provisions included in the second slide of this presentation. Additionally, this presentation contains non-GAAP financial measures. Please refer to the non-GAAP disclosures, definitions, and reconciliations provided in today's presentation. The webcast is being recorded, and an archived replay will be available for one year starting at 6:00 p.m. Eastern Time today in the Financial Results section of our website. With that, I will turn the presentation over to NorthWestern's CEO, Brian Bird.

Thanks, Travis. Good morning, folks. I know many of you would've liked to have heard from us yesterday. But the reason we're having the call this morning is to diminish the amount of travel necessary on Sunday. Our Board meeting ran late on Tuesday, and so we decided to have the call here on Wednesday morning. To start, regarding the second quarter, we are very, very busy on the regulatory front. As you're well aware, we have recently filed a South Dakota electric rate review and obviously we're waiting for a decision on our multi-party settlement in the Montana rate review. And so hopefully we'll hear from that real soon. Regarding Yellowstone County Generating Station, a lot has happened since the first quarter. So during the second quarter, we had a tremendous amount of support from the Governor and the legislature in Montana, which helped us resume construction of the facility and we're ramping up that construction as we speak. We have invested over $200 million of the estimated $275 million in the project itself. We continue to operate in strong and growing service territories, as seen by very low unemployment, some of the lowest in the country. As a result, we're also seeing very good customer growth, which didn't necessarily help us here in the second quarter but will help us on a going-forward basis for our business. Lastly, on this page, it's important to point out one of the great things about NorthWestern: the workforce we have here and the culture we have here. Being acknowledged by Newsweek as one of America's great workplaces in 2023 is a pretty cool announcement for us. Only 11 utilities were acknowledged, and NorthWestern Energy was the only one in the mid-cap space. This came on the heels of 2022 when we were also recognized as a great place to work. So it's a great tribute to our employees, and we're very excited about that acknowledgment. With that, I'm going to hand it over to Crystal.

Thank you, Brian. I'll begin my comments on Slide 4 here. Just to conclude Brian's comments on working with a great team, the Newsweek acknowledgment of the work we do and the great people we work with is a pretty fantastic thing. So then I'll turn to second quarter performance. Before getting into detail, we've added a couple of slides to hopefully give you a bit of color on how we're thinking about the quarter. While Brian acknowledged our results were a little lower than we had hoped for the quarter, they were in line with our expectations and how we think about the year. Q2 results were lower on a GAAP basis by $10.7 million, or $0.22 of EPS versus the prior year second quarter. We were impacted by shoulder season weather; you all know Q2 is our lightest quarter from an earnings perspective, which can show variability based on weather. This year, Q2 2023 was influenced by unfavorable weather, while last year we had more favorable conditions. The swing in our earnings due to weather was $0.07 period over period for the second quarter. In addition, our equity issuances added about $0.03 of drag due to the increased shares outstanding impacting results for Q2 2023 versus 2022. We do not have guidance out for 2023 and won't update you on our expectations until we see an outcome from the Montana Commission, but we quantified the impacts of the Montana settlement to both our Q1 and Q2 2023 earnings if it were approved as is. This includes impacts on both the revenue line and tax implications and would contribute about $0.15 to our Q2 earnings, assuming this settlement is approved without adjustments. Slide 4 provides color comparing quarter two of 2023 versus 2022, and you can see the variability in weather's impact. I’ll dig into that in a bit more detail in upcoming slides, but in addition to the previously mentioned factors, we experienced several operating costs, interest, and depreciation that lead to $0.32 of earnings contribution for the second quarter. From a net income basis, $19.1 million was recorded as compared to $29.8 million in Q2 of 2022, which reflects a $10.7 million reduction. On an earnings per share basis, we reported $0.32 compared to $0.54, a $0.22 difference. Slide 7 breaks that down. We had favorable utility margin overall of what actually falls to the bottom line for us, driven by favorable on the electric side offset by unfavorable on the natural gas side. There are various factors impacting our results. I've a slide upcoming that will give you more detail on that. Our operating costs continue to push through from the cost of running the business, which has increased due to compensation and benefits of our workforce, a significant driver in our operating costs relative to 2022. In Slide 10, I highlighted the cash flows and financing plans. The impact of interim rates has been significant to us based on what we've been able to recoup. As we had indicated earlier, we'd begun a program of $75 million in equity using our ATM and we issued approximately $10.8 million, expecting to issue the remainder in 2023.

On Slide 13, we discussed the Montana rate review. We've spent a lot of time on earlier calls talking about this and reached a settlement. We're now waiting for the commission's outcome on that settlement. One point I want to emphasize is that all parties to the settlement provided testimony on revenue requirements. Those interveners opposed to the settlement did not provide testimony. That’s something the Commission is likely considering. Anticipating next steps, briefings have been completed, and we wait for a decision in the third quarter, possibly in August. Moving to Slide 14, we filed for our South Dakota rate review, our first since 2015. It’s overdue to receive recovery on the significant investments we've made in all of our jurisdictions. In South Dakota, we've invested $267 million during this time, with $30 million requested in our rate case. Nearly all of that increase is associated with investments made. We’ve managed our costs well, but we need returns on those investments. Regarding our capital investment, we have a five-year history showcasing impressive CAGR at 16% amounting to $2.1 billion. Going forward, our next five years look to be $2.4 billion, with two-thirds dedicated to T&D business. We have ongoing capacity challenges. We don’t know what investments will be specifics beyond Yellowstone County, but some will arise. So with that summary, we want to tell our customers we're aware and attentive to timely rate recovery. You'll see us managing our current rate reviews and trying to ensure closer alignment between actual returns and authorized returns, likely resulting in more frequent filings. With that, I will turn it over to Travis for Q&A.

Thank you, Brian. We'll take our first question from Shar Pourreza at Guggenheim. Shar, your mic is now open.

Hey guys, can you hear me?

Hey, Shar, we can.

Yes. Good morning.

Good morning. Brian, I want to dive into the Montana case a bit more. Why is the case getting delayed? How have the work sessions been going, and is there any indication that a final order could deviate from the settlement you entered into with the primary intervener? A little more color on the process would be great.

I wouldn't argue there's real delay associated. This timing is not unusual, and I expect we'll see something relatively soon. I don’t know when the schedule’s actually going to be for a decision, but I do expect to hear something. The commission did a fantastic job running the hearing, and I’ve seen good responses from them regarding other issues. I expect this will be reviewed efficiently. Regarding the settlement itself, I pointed out earlier that the settlement parties agreed on all revenue requirement matters, covering many different topics. I think it's compelling in front of the commission. That doesn’t mean adjustments can’t happen, but given the strong balance struck, it might be challenging for any adjustments.

Perfect. Lastly, Crystal, as you think about guiding, could South Dakota's rate case impact what guidance can be issued, maybe only rolling forward capital plans versus EPS growth? How should we balance South Dakota in the mix?

On South Dakota, I’ll clarify that there’s a statutory six-month waiting period after filing for interim rates. Since we filed mid-June, interim rates would apply at the earliest by mid-December 2023. It's really more of a 2024 item, which won't impact our 2023 guidance. The focus is primarily on the Montana decision regarding the $81 million in revenues versus the $31 million interim rates. While South Dakota is crucial too, it’s addressed as a 2024 item. We’re eager to provide guidance, but the Montana Commission's decision primarily dictates the timing and clarity we need. Until we receive the final order on Montana, we can’t finalize the guidance.

Okay, perfect. Lastly, Brian, do you have clear visibility now on Yellowstone? Is there anything else that could derail it, or should we assume it's been de-risked?

As we pointed out, we're not back to full staffing just yet. We're getting there, but the timing's been delayed. Anticipate still having the plant done by the third quarter and feel good about the process in completing the remaining work. The majority of expenses incurred are completed but primarily, we need the resource in time for peak weather, definitely before the winter season at the end of 2024.

Thanks for answering my questions. See you soon. Bye.

Thanks, Shar.

Thanks, Shar.

Okay. We'll take our next question from the line of Jeremy Tonet at JP Morgan.

Hey, this is Robin on for Jeremy. Can you hear me?

Hey Robin, yes. We can hear you.

So, you mentioned your goal to maintain sustainable operating costs. Was the negative $0.06 year-over-year headwind from increased labor and benefit costs driven more by one-time items or structural expenses? Any insight regarding the Montana rate case settlement and 2023 O&M expenses or O&M gross trends more broadly?

I’d take your question in two parts. It's definitely structural. I have not released guidance for 2023 and would refer back to my 2022 bridge, indicating the need for sustainable operating costs. We benchmark ourselves against our peers and even some larger caps. We know we need to maintain reasonable operating costs. We had structurally captured costs in the 2022 Montana rate review. What we’re seeing now is a structural increase in the base cost of labor. That’s the biggest driver moving forward and we will focus on recovering those costs as we progress. While I haven't given guidance, I expect a bit of moderation compared to last year's quarterly percentage increases.

Okay, thanks. On a year-to-date basis, estimating pro forma EPS at about $1.75 assuming Montana rate case approval, would it be reasonable to expect something similar for the back half for around $3.50 for the year? Any thoughts?

While we aren’t giving guidance, I’d say your assessment is probably reasonable math.

Thank you very much. My first question on the Supreme Court constitutional challenge for Yellowstone. What is the status now and any hearings scheduled?

From our perspective, we feel good about the decision the Supreme Court made on Yellowstone, which has been helpful. We already received a stay, which is positive. We’re continuing to move forward with coal strip while maintaining our permit. There could be future challenges on the plant but we’re focused on proceeding with the construction based on a supportive response from customers.

Just a follow-up, there has been no movement scheduled in the timeline from the Montana Supreme Court filing. We’ll provide updates once we have them.

In terms of guidance, when might that occur on the third-quarter call or will there be an update after the Montana Commission Acts?

It depends on the Montana Commission’s decision’s direction. While I can’t provide certainty, if we decide to do something before the Q3 call, we’ll notify everyone.

With the South Dakota rate case filing, will that impact your ability to give or delay guidance for 2024? Or will that move independent of it?

Paul, there is a statutory six-month waiting period on the filing before receiving interim rates. That won't impact our 2023 guidance timing but could influence 2024 depending on the resolution. We aim to expedite their decision for guidance clarity, but it may include assumptions if unresolved by that time.

On settlement approvals, should we consider any specific accounting adjustments or discrete items that might affect this quarter once received?

Sophie, I’d highlight that we received interim rates effective October 1, 2022. Hence, once the settlement is concluded, the impact will be retroactive, leading to adjustments related to 2022 results. I'll clarify distinctions between earlier and recent periods once we record them.

Got it, that helps. Regarding the weather impacts, you flagged the negative impacts from volumes and margins. Any insight on how the third quarter is shaping up so far with weather conditions?

The U.S. is experiencing extremely high temperatures overall. Yesterday, it reached the high 90s in Montana. July has been incredibly warm, which will positively impact our load perspective. But beyond that, I'm unable to provide a forecast on how this will play out overall.

How should we consider the potential implications of the Montana IRP, especially in regard to resource needs in the early 2030s? What processes need to occur before moving forward with an RFP?

We also need to attend to the EPA's proposed rules, which could impact our coal-fired fleet. We’ll collaborate with the EPA to understand how this affects our operations. While the timing of the IRP feels appropriate, we may need to accelerate plans in response to ongoing EPA pressures.

How close do you think you can earn to the authorized levels looking ahead to 2024, considering the historical test in Montana alongside recently filed South Dakota rate cases?

Absolutely, Crystal can better ascertain that, but our last reported figure was about 7.5% earned ROE compared to 9.65% authorized. We expect this rate case will bridge that gap, though I estimate it’ll take 100 bps of additional rate cases to close the distance to authorized levels. We’ll prioritize quicker rate reviews to align returns with what investors should expect.

Following up on the $1.75 annualized question, what does that suggest for the second half of the year regarding costs? I understand earnings are generally a bit first-half weighted.

While I appreciate the clever guidance angle, we haven’t given estimates or the exact shaping of the back half of the year. Once we have clarity on the Montana Commission results, we’ll have more context to share details.

Thank you all for joining today. We’ve exhausted the queue for questions. I’ll turn it back to Brian for any closing remarks.

Great questions. We appreciate your engagement and insights. Thank you for your ongoing support of the company.

That concludes our webcast for today. You may now disconnect.