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NorthWestern Corp (NYSE:NWE)

Annual General Meeting

April 25, 2013 11:00 AM ET

Executives

Bob Rowe - President and CEO

Linn Draper - Retired President and CEO, American Electric Power

Patrick Corcoran - VP, Government and Regulatory Affairs

Analysts

Bob Rowe

Good morning everyone. On behalf of the Board of Directors and management of Northwestern Corporation, I welcome all of you to a beautiful we think spring morning here in Huron, South Dakota at our Annual Stockholders Meeting. I am Bob Rowe. I am President and CEO and also amember of the Board of Directors and thank you for being here today in person and also over our webcast.

A few years ago we decided to hold almost all of our Board meetings and all of our annual meetings (audio gap) by Board of Directors to get out and really please our customers and to commute (inaudible) finding us here (audio gap) through the special group of people, somewhat well over 30 years of (audio gap) South Dakota and Montana, all kinds (audio gap) Dakota (audio gap) morning everyone here in person should have signed in at the registration desk right outside the meeting, who didn’t sign in please do so at this time. And if you don’t have a copy of the agenda for the meeting please raise your hand and one will be brought (audio gap).

Now I am honored to introduce the other members of (audio gap) our independence (audio gap) actually have a remarkable Board all of whom are recognized as government fellows but (audio gap) training for several days so I feel we should stand as I introduce you first Dr. Linn Draper,retired Chairman, President and CEO of American Electric Power. Second Steve Adik, Chairman of the Board’s Audit Committee and Steve is a retired Vice Chairman of NiSource. Next Dorothy Bradley. Dorothy is the retired District Court Administrator for the 18th (audio gap) Dykhouse is (audio gap) PREMIER (ph) Bank which is headquartered in (audio gap) Governance Committee and Julia is President of NetCommunications (audio gap) Maslowe, Chairman of the Board, (inaudible) Vice President and Chief Financial -- our Chief Executive Officer and Vice Chairman of the Board (inaudible) Board and we are very fortunate to have their service.

Next, I am really delighted to introduce the other members of Northwestern Executive team. I am happy everyday that I go to work, knowing I will be working with this great group of people. They do a good job keeping inline other than and they do a wonderful job serving both our customers and our investors.

I will start with Brian Bird. Brian is our Vice President and Chief Financial Officer, also heads our business technology aspect. Michael Cashell, Vice President - Transmission; Patrick Corcoran Vice President of Government and Regulatory Affairs; Heather GrahameVice President and General Counsel; John Hines Vice President of Supply; Kliewer Vice President and Controller; Curtis Pohl Vice President of Distribution; Bobbi Schroeppel Vice President of Customer Care, Communications and Human Resources and in addition representing Deloitte &Touche LLP,our registered independent public accounting firm are Van (inaudible) and Judy (inaudible).

I would like to recognize our corporate secretary and our inspector of election. Seated at this table to my right is our corporate secretary Tim Olson and with him is Crystal Lyle, our Assistant Controller who is serving as the Inspector of Election for today’s meeting. Now it’s really an honor to introduce Dr. Draper our Chairman of The Board and he will conduct the business portion of the meeting.

As Linn comes forward I remind everyone that one of the key features of property governance at Northwestern Energy is the fact that our entire Board other than me is independent and particularly our Board’s chair is independent and we believe that adds tremendous value to our corporate (inaudible).

Linn Draper

Thanks Bob and good morning. Before I call the business portion of the meeting to order, let me give you the plot for what happens over the next few minutes. We will have a formal business portion of the meeting at which time people will have an opportunity to vote on various matters. Those votes will be given to the inspectors of election to be counted and during that time when they are counting your votes, we will have a pause in the business part of the meeting and Bob will give a presentation on the state of the company and that will be followed by your opportunity to ask questions on anything that is relevant to the company. Then we will resume the business portion of the meeting by counting the votes and announcing the results.

In order to conduct an orderly meeting, we ask that all participants follow the rules of conduct. They appear on the backside of the agendas that you have been presented. As stated in the rule; stockholders should not address the meeting until they are recognized. There will be a formal question and answer period immediately following Bob's presentation and I would ask that you hold questions until that time.

Let me now ask the corporate secretary for his report.

Patrick Corcoran

Thank you Chairman Draper. I have with me four items. Number one; a note of inspector for the inspector of election serving at thus meeting. Number two; a copy of the minutes of the last annual meeting of stock holders which was held on April 25th 2012.

Number three; a list of the registered holders of common stock of the company as of February 25, 2013, which was the record date. A copy of this listed stock holders has been on file and available for inspection by stock holders for 10 days prior to this meeting.

Finally, number four, an affidavit distributions for the proxy materials, indicating that the initial proxy materials were mailed to stock holders commencing March 8, 2013. A list of registered stock holders will be available during this meeting and each of this four items will be made a part of the record of this meeting.

In accordance with the Company's bylaws, to establish a quorum for this annual meeting, we need atleast the holders of majority of the shares of our common stock that are entitled to vote on the record date to be present at this meeting either in person or by proxy.

On the record date, we had 37,327,939 shares of common stock entitled to vote this annual meeting. Therefore at least 18,663,970 shares of our common stock must be present; either in person or represented by proxy at this Annual Meeting for there to quorum.

Today, there are 34,742,888 shares or more than 93% of our outstanding common stock represented by proxy at this meeting. Accordingly, more than majority of our outstanding common stock is present at today's annual meeting and we have established a quorum.

Linn Draper

Pursuant to the foregoing report of the corporate secretary, I hereby declare that a quorum is present at this annual meeting and that we may proceed with the business portion of the meeting. A copy of the printed notice of the annual meeting of stockholders stating the time, place and purpose of the Annual Meeting was mailed on or about March 8, 2013 to each stock holder of record as of February 25, 2013.

In the interest of time, I wouldindicate a motion to wave the reading of the notice of annual meeting to stockholder. It has been moved. Is there a second? All those in favor say aye, opposed nay. The motion is carried.

The next agenda item is the reading of the minutes of the last stockholders meetings which was held on April 25, 2012. As Mr. Olsen noted, a copy of those minutes is available for inspection at the secretary's table. Those minutes could be publically read to you at this meeting but again in the interest of time, I would entertain a motion to wave such reading. Been moved. Is here in second? All those in favor please say aye, opposed? The motion is carried.

We can now turn to the items of business for today’s annual meeting. Our business today is to act on three proposals that were brought before our stockholders in the proxy statements. Those proposals are as follows.

Proposal one; the election of eight members to serve on the board for a one year term. Nominees are Stephen P. Attic, Dorothy M. Bradley, Elian Draper Jr., Ana J. Dykehouse, Julia L. Johnson, Philip L. Maslow, Denton Louis Peoples, Robert C. Row. The Board of Directors has recommended a vote for the election of these eight nominees.

Proposal number two; ratification of Deloitte &Touche LLP as registered independent public accounting firm for the company for the year ending December 31, 2013.Although action of the stockholders is not required by law, the board has determined that it’s desirable to request approval on our selection of an independent public accounting firm by the stockholders.Board of directors has recommended a vote for the ratification of Deloitte &Touche LLP as Northwestern'sregistered independent public accounting firm.

Proposal number three, an advisory vote to approve the named executive officers compensation. The resolution concerning the approval of compensation paid to the company’s named executive officers was set forth in the proxy statement for this meeting.

The resolution reads as follows: resolve that the compensation paid to the company’s named executive officers as disclosed pursuant to the compensation disclosure rules of the Securities & Exchange Commission including the compensation discussion and analysis, the compensation table and any related material disclosed in this proxy statement is hereby approved. The Board of Directors has recommended a vote for adoption of the resolution approving on an advisory basis, the compensation of the company’s named executive officers as described in the proxy statement for this meeting.

Ladies and gentlemen, I would now like to open the polls for voting. I will ask the Inspector of Election to open the polls for proposals one through three and count the votes. If anyone would like to vote in person this meeting, please raise your hand. We’ll take your proxy or completed ballot to the Inspector of Election at this time.

If you have previously voted your proxy and do not wish to change your vote, you need not do anything. If you need a ballot, you can obtain one from inspector by raising your hand. Anyone need a ballot?

I will now close the polls with respect to proposals one through three. While the Inspector of Elections is tabulating the ballot, I will call Bob to come and give a presentation on the status of company.

Bob Rowe

Thank you, Linn. While the ballots are being tabulated, I will run through the presentation. This is available online as well of course and I will try to move through this reasonably quickly. The forward-looking statement of course, we start every discussion of the company with our vision, mission, values, to decide our vision enriching lives through a safe, sustainable energy future. You also see then the depiction of our sense of system in the tremendous part of the country that we’re very privileged through, transmission, distribution and planned production.

We consider ourselves to be an investment for the long term through fully regulated financially solid utility, diversity across states we serve for the tight customer service, a 100 year history of providing good service and high customer satisfaction at competitive rates. We had five years of significant earnings and dividend growth, we have strong cash flows and operating loss carryforward and we have solid investment grade credit ratings. The presentation goes into more detail on each of these.

I’m very proud of our commitment to best practice, corporate governance one of the keysto our success. We have been recognized again by Forbes Magazine as one of the most trustworthy companies of America and we are pleased with our future growth prospects which will investing back in the system (inaudible) distribution, transmission (inaudible) secured services.

Now this is point of the tail of the repeat in terms of our energy supplied portfolio, our expensive gas, electric, transmission systems, our extensive broad collect institutional system. For those of you who are listening through the web, people who do the work every day, maintaining and building operating these systems are here in the room with us some of these leadership progressed.

This is a depiction of the real value that we’ve been able to provide our customers. That story of this slid, you will see small box top to the left, the poster that Northwestern public service for all around the service territory at about 1927, when the systems were interconnected across eastern South Dakota.As a result of that we’re able to provide greater reliability and better rates. So there is a post here is up announcing the change in the rates.

So, that led to the question, what would that rate be in today’s dollars? In Montana side we went back to 1912 when Montana power discounted. It turns our customers are paying then in terms of the dollars and cents and bills and coins at are the same rate now that they were paying on 1912 to 1927. That’s the nominal rate.

The real rate if the prices were carried forward, it would have been much, much higher than that. How we take a look that what (inaudible) would have cost the 1912 and 1927 bring a lot of more for (inaudible) than you were then, saying about the same to electricity. Electricity is essential to mostly everything we do in society and we use so much more than we could have done then, that’s a tremendous accomplishment by the industry and truly accomplished by our employees.

I mentioned before the tremendous Board of Directors, great executive team we have with us. A little bit more about them with photographs, they have provided tremendous service to our employees and to our customers and shareholders.

Talk about the 80/20 rule at Northwestern and what we mean by that is the diversification between South Dakota, Nebraska, and Montana between electric and natural gas, between residential and commercial and industrial. We consider ourselves by opportunities in each of these areas to prove service then you can grow.

A couple of financial slides and these are pie chart in a sense and they are available up on the web. The first slide hereshows our GAAP earnings per share, our initial guidance range for each year from ’08, estimate for ’13 and then our non-GAAP adjusted EPS and then sets out our primary assumption for this year and our guidance range of 240-255.

But a five year track record of very, very good results over that period of time an average of about a 9-9.8% return on equity and a good stable dividend, the chart the bottom, the blue bar is our dividend and our estimate for '13. The green bar shows our payout ratio and the redline is our actual payout. We’ve done a good job in the last few years by staying reasonably close to our payout range and then continuing to provide values for our shareholders.

This is one of our real key features as a company that does distinguish, chart at the bottom and that operating loss carry forward we do expect to continue to provide the benefits at 2016 and then at the top the components that will allow us to first of all continue to invest in our maintenance capital expenditure, continue to pay attractive dividends, but as a result of fixed volume cash from operation we continue to have adequate free cash flow, fixed notes at the bottom to fund a significant portion of our investments in serving our customers, (inaudible) very many other companies.

These are some of the key metrics. You see the story of our credit ratings, you'll credit ratings moving up where many in the industry are in fact moving in the opposite direction, (inaudible) to a refinance debt at attractive rate than producing more value for the customers as well.

Our consistent success in achieving our $700 million (ph) liquidity target and then our ability to stay within our announced debt to capital ratio, 50-55%. Like the fact that our value in the marketplace is closely tied to the value of our asset), tied to the work we're doing rather than to speculation. At the top you see a chart depicting our gross net property plant and equipment. Again as we continue to invest, enterprise value moves up, the market cap moves up through the end of 2012. This has been an exciting year already.

For the three years and five years Northwestern Energy has consistently beat the (inaudible) average, the S&P 600 and the Dow Jones (inaudible) as well, so again stable sustainable performance over the long term, story of great pace and earnings per share continue to invest in infrastructure that serves our customers our earnings have corresponded in the bottom you see our retail revenue per megawatt hour for (inaudible) of delivery gap. One of areas of focus I will say a little bit more about this is continuing to invest in the underlying supply for our customers, for our shareholders as well it is a word here that is the slide we prepared initially to train our Montana natural gas rate case that we filed late last year this case was really all about our perspective of investments we were making the safety the adequacy our natural infrastructure in Montana as a result of our best access in the debt market managing the portfolio of gas supplies we were able to actually come in the front door in that case for the lower overall rate of return and buying of an equity are really in the commission it is been years.

We are also very successful in that case we are working ultimately with other parties to the case to achieve two important situations we received an interim increase with a temporary potentially refundable increase April 1st several weeks ago we entered in first an overall our revenue requirement stipulation with an $11.5 million redefined revenue requirement of 9.8% stipulated ROE the Montana commission held a two day hearing last week on that matter very lively interchanged session between the commissioner and each of the parties witnesses probably this week Montana commission approves the revenue requirement stipulation also through this separate stipulation, the specified cost allocation and base design for each (inaudible) as a result of that the final rates will be affect after going back to the April from the interim into those (inaudible) with a positive fourth quarter adjustment in our system and we are very pleased that we are able to work with the fed authorities through that case.

Looking forward in terms of our future investment opportunities we are focused right now on the South Dakota now the (inaudible) science that have redeemed which is going to be online in time for the summer season. Tomorrow we will be joining with our colleague from MBU (inaudible) great ground at our metal investments at (inaudible) and coal plant here in South Dakota, four plants here in South Dakota. In Montana the Spion Kop wind facility is completed and performing exceptionally well and then we do look forward to other opportunities in Montana to build a required electric and natural gas supply.

In our transmission operations we operate over 2,000 miles of natural gas transmissions or 8,000 miles of electric transmissions. We have some important projects, two in particular, on the electric side, coupled with the ongoing investment ensuring that those are safe and reliable as it can be.

Our distribution system infrastructure plan, it is a very structured comprehensive approach to the investment in our system in Montana, very important to note that we are finding the same kind of effort, same kind of resources in Nebraska and South Dakota. This is as we find it, the private financial community I think particularly appreciates, we try to be as transparent as we can in one side setting out all of our concrete identified closable industrial opportunity.

These are divided by supply, transmission and distribution by jurisdiction. It’s Federal South Dakota and Montana and the range of capitals and then the timings. It’s kind of red lights/green lights. And here you see again in summary, a project that’s similar to smaller (inaudible) our seeking plant dimension, the (inaudible) is now already completed, and then our ongoing work to acquire that.

The Colstrip 500kV upgrade is a project, which is tied to the project of one of our power side of the system and then finally our distribution systems infrastructure plan. It doesn’t include maintenance capital ongoing in our system and doesn’t include other projects that may be under development but are not sufficiently for a concrete to announce.

This is an explanation of what we are doing on the natural gas side in Montana. Unique opportunity among utilities, Montana power owned extensive natural gas production provided about 15% of our own needs from own resources. That was divested as part of society regulations. We are interested in providing with our customers stability, price stability, with security of own resources and made two relatively small purchases, so far we are pleased with that. We are out kicking the tires and looking for additional opportunities to grow there and take the, what I refer to as the roller coaster the red roller coaster off of the chart the lower left facility.

On the electric side most utilities owned over 80% of the resources that they use to divide; out of their customers.

South Dakota, we own about 88% and we're really very-very efficient to North Dakota. In Montana, gas grown about 17% of the resources served lot over our systems and only about 31% of the resources to serve the primarily retail customers; retail customers; when we have the obligation deserved.

Major contract flowing off over the next year, our supply group is actively planning out to meet that load but what we have identified in our last one and a resource plan, we'd like to meet for combined cycles, combustion turban coming online; 2018 (inaudible)

So our distribution; there's some infrastructure program; gas and electric comprehensive approach, this finished two years of ramp-up forth getting in place all of the systems, the process, of doing the analysis, the part of the year and the Spion Kop in removing in the five years of full production.

Here to say is that in operations all across up the territory there; as busy as they have ever been; very-very exciting. A roll-up on one side of all of our hesitated capital standing 2013-2017, use to be ongoing maintenance CapEx in our system. On top of that the energy supplying investments. What's graphically portrayed in 13-15; where our South Dakota investments and as it is noted at the top of the real potential for future investments for both in electric and gas supply and our gas in efficient infrastructure project which could now need early stages in our core efficient part.

But the work that you have been working for in conclusion, we are a fully regulated utility focused on what we do best and what we are passionate about, very proud of our best to corporate governing practice. We do want to highlight, we were just recognized couple of a weeks ago, by Forbes magazine again in front of the 100 most gas released companies; three times in a row only one of these facilities recognized and secure; very proud of that; we are financial stable; strong cash flows and effective and it is sustainable dividend with realistic investment opportunities to invest our free cash flow. And that concludes my presentation and now we will open the floor for any questions.

Question-and-Answer Session

Operator

(Operator Instructions). Are there any questions or comments? So I turn the meeting back over to our chairman.

Robert Rowe

Thanks, Bob. May I have the report on proposals one, two, three from the corporate sector please.

Linn Draper

Inspector of election has certified the results for the proposals presented at this meeting. For the first proposal to elect the eight nominees for directors for a one year term, the results are as follows. Each nominee receives votes for election of more than 99% of the total shares represented by proxy at this meeting.

For the second proposal, to ratify Deloitte (inaudible) as a company’s registered independent public attorney firm for 2013. The results are as follows. The votes for the proposals were 33,438,470 or more than 99% of the total shares represented by proxy or in persons this meeting.

The votes against were 278,492 or less than 1%. The votes absenting were 25,926 votes or less than 110 of 1%.

For the third and final proposal, the advisory Board on executive compensations, the results are as follows. The votes for were 30,788,923 or more than 94% of the total shares represented by proxy or in person at this meeting. The votes against were 143,670 votes or less than one half of 1%. The votes absenting were 1,669,865 or just more than 5%.

Robert Rowe

Thanks, Tim. As a result of the election report, Stephen P. Adik, Dorothy M. Bradley, E. Linn Draper Jr., Dana J. Dykhouse, Julia L. Johnson, Philip L. Maslowe, D. Louis Peoples and Robert C. Rowe has been elected through another term. The selection of Deloitte Intuit as the company is registered independent public accounting firm, for 2013 has been ratified. Compensation of the company’s name executive officers has set forth in this proxy statement for this meeting has been approved on an advisory basis and as there is no other business to be conducted at the meeting, I would entertain a motion to adjourn. And move all those in favor please say, aye, those oppose nay.

Meeting is adjourned and on behalf of the Board of the Directors and the Management of company I thank you for your participation.

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