Q3 2025 NorthWestern Corp Earnings Call

Speaker #1: Thank you for standing by. Welcome to the NorthWestern Energy third quarter 2025 financial results webinar. All lines have been placed on mute to prevent any background noise.

Operator: Thank you for standing by. Welcome to the NorthWestern Energy Group Inc. Q3 2025 financial results webinar. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. If you would like to ask a question during this time, simply press the star followed by the number one on your telephone keypad. If you would like to withdraw your question, please press the star one again. Thank you. I would now like to turn the conference over to Travis Meyer, Director of Corporate Development and Investor Relations Officer. You may begin.

Speaker #1: After the speakers remarks , there will be a question and answer session . If you would like to ask a question during this time , simply press star , followed by the number one on your telephone keypad .

Speaker #1: If you would like to withdraw your question , please press star one again . Thank you . I would now like to turn the conference over to Travis Meyer , Director of Corporate Development and Investor Relations Officer .

Speaker #1: You may begin .

Speaker #2: Thank you, and good afternoon. Thank you again for joining NorthWestern Energy Group's financial results webcast for the quarter ended September 30, 2025.

Travis Meyer: Thank you, Priscilla. Good afternoon, and thank you again for joining NorthWestern Energy Group Inc.'s financial results webcast for the quarter ended September 30, 2025. Joining us on the call today are Brian Bird, President and Chief Executive Officer, and Crystal Lail, Chief Financial Officer. They'll walk you through our financial results and provide an overall update on the progress this quarter. NorthWestern's results have been released, and our release is available on our website at northwesternenergy.com. We also released our 10Q pre-market this morning. Please note that the company's press release, this presentation, comments by presenters, and responses to your questions may contain forward-looking statements. As such, I'll direct you to the disclosures contained within our SEC filings and safe harbor provisions included on the second slide in this presentation. Also note that this presentation includes non-GAAP financial measures and information regarding the pending merger transaction.

Speaker #2: Joining us on the call today are Brian Bird, President and Chief Executive Officer, and Crystal Lail, Chief Financial Officer. They'll walk you through our financial results and provide an overall update on the progress this quarter.

Speaker #2: NorthWestern results have been released, and our release is available on our website at NorthWestern Energy Group, Inc. We also released our 10-Q pre-market this morning.

Speaker #2: Please note that the company's press release this presentation , comments by presenters and responses to your questions may contain forward looking statements . As such , I'll direct you to .

Speaker #2: Disclosures contained within our SEC filings and safe harbor provisions included on the second slide in this presentation. Also note that this presentation includes non-GAAP financial measures and information regarding the pending merger transaction.

Speaker #2: Please see the non-GAAP disclosures , definitions , reconciliations , and merger related disclosures . Disclosures included in the appendix of the presentation webcast is being recorded .

Travis Meyer: Please see the non-GAAP disclosures, definitions, reconciliation, and merger-related disclosures included in the appendix of the presentation. The webcast is being recorded. The archived replay will be available today shortly after the event and remain active for one year. Please visit the financial results section of our website to access the replay. With those formalities behind us, I'll hand the presentation over to Brian Bird for his opening remarks.

Speaker #2: The archived replay will be available today, shortly after the event, and will remain active for one year. Please visit the Financial Results section of our website to access the replay.

Speaker #2: With those formalities behind us , I'll hand the presentation over to Brian Burke for his opening remarks . Thank you Travis . On our recent highlights , we reported GAAP diluted EPs of $0.62 per share .

Brian Bird: Thank you, Travis. Our recent highlights: we reported GAAP diluted EPS of $0.62 per share, non-GAAP diluted EPS of $0.79 per share for the quarter. We are affirming our 2025 earnings guidance range of $3.53 to $3.65. During the quarter, we integrated our Energy West acquisition of natural gas assets. We've also integrated the customers and employees, and we've really tucked that business in seamlessly. Very, very excited about that opportunity. I'll tell you what, something even a bit more excited about is the announcement of our agreement with Black Hills Corporation for an all-stock merger of equals. Even though we did that announcement in mid-August, we have already filed our joint applications for the transaction approval with the regulatory commissions in Montana, Nebraska, and South Dakota.

Speaker #2: Non-GAAP diluted EPS of $0.79 per share for the quarter. We are affirming our 2020 earnings guidance range of $3.53 to $3.65.

Speaker #2: We during the quarter , we integrated our energy West acquisition of natural gas assets . We've also integrated the customers and employees , and we've really tucked that business in seamlessly .

Speaker #2: Very, very excited about that opportunity. I'll tell you what. Something I’m even a bit more excited about is the announcement of our agreement with Black Hills Corporation for an all-stock merger of equals.

Speaker #2: You know , even though we did that announcement in mid-August , we have already filed our joint applications for the transaction approval with the regulatory commissions in Montana , Nebraska and South Dakota .

Speaker #2: In addition, during the quarter, we filed a tariff waiver request with the MPSC for recovery of our operating costs associated with the Vista Colstrip interest.

Brian Bird: In addition, during the quarter, we filed a tariff waiver request with the MPSC for recovery of our operating costs associated with the Avista Colstrip interest. Recently, we submitted a 131-megawatt natural gas generation project in the Southwest Power Pool Expedited Resource Adequacy Study. That project, if we move forward, will be approximately a $300 million project, which is currently not included in our five-year CapEx plan. Lastly, a dividend declared during the quarter of $0.66 per share payable December 31, 2025, to shareholders of record as of December 15, 2025. Moving forward to the NorthWestern value proposition with a dividend yield between 4% to 5%. Add that to a base capital plan providing a 4% to 6% EPS growth gives us a total return of 8% to 11% total return.

Speaker #2: And recently , we submitted a 131 megawatt natural gas generation project in the Southwest Power Pool . Expedited resource Adequacy Study . And that project , if we move forward , we'll be approximately a $300 million project , which is currently not included in our five year CapEx plan .

Speaker #2: And lastly, a dividend declared during the quarter is 66%, $0.66 per share, payable December 31, 2025, to shareholders of record as of December 15, 2025.

Speaker #2: Moving forward to the northwestern value proposition with a dividend yield between 4 to 5% and that to a base capital plan providing a 4 to 6% EPs growth , gives us a total return of 8 to 11% total return .

Speaker #2: And if you think about that CapEx plan, the majority, the vast majority of that is in a tad investment throughout our total system on both the gas and electric side of our business.

Brian Bird: If you think about that CapEx plan, the vast majority of that is in a T&D investment throughout our total system on both the gas and electric side of our business, obviously necessary to serve our customers. If you consider the incremental opportunities we have, certainly with data centers and large load customers, FERC regional transmission, and any incremental generating capacity, some of which I just spoke to, you could see the dividend yield plus that greater than 6% EPS growth giving a total return even greater than 11%. With that, I'm going to turn it over to Crystal to talk about the Q3 financial review.

Speaker #2: Obviously necessary to serve our customers . If you consider the incremental opportunities we have , certainly with data centers and large load customers , Ferc regional transmission and any incremental generating capacity , some of which I just spoke to , you could see the dividend yield plus that greater than 6% EPs growth , giving a total return even greater than 11% .

Speaker #2: And with that, I'm going to turn it over to Crystal Lail to talk about the third quarter financial review.

Speaker #3: Thank you , Brian , and good afternoon , everyone . We are coming to you from beautiful Butte , America today following a board meeting here .

Crystal Lail: Thank you, Brian, and good afternoon, everyone. We are coming to you from beautiful Butte, America today following a board meeting here. Based off those highlights, it feels like we might have had a little bit of a busy quarter. I will cover and update you on our Q3 results and outlook for closing out the year and then turn it back to Brian for some really exciting strategic updates and where we're at otherwise with the business. We are pleased to deliver a solid quarter in line with our expectations here for Q3 2025 and are on track to deliver on our earnings guidance and financial targets for the year. For the quarter, earnings were $0.62 on a GAAP basis compared to $0.76 in the prior period. On an adjusted basis, we delivered $0.79 as compared with $0.65.

Speaker #3: And based off those highlights, it feels like we might have had a little bit of a busy quarter. I will cover and update you on our third quarter results.

Speaker #3: And outlook for closing out the year, and then turn it back to Brian for some really exciting strategic updates. And where we’re at otherwise with the business.

Speaker #3: We are pleased to deliver a solid quarter in line with our expectations here for the third quarter of 2025 and are on track to deliver on our earnings guidance and financial targets for the year.

Speaker #3: For the quarter , earnings were $0.62 . On a GAAP basis , compared to $0.76 in the prior period . On an adjusted basis , we delivered $0.79 as compared with $0.65 in the upcoming slides .

Crystal Lail: In the upcoming slides, I'll dig in a bit on the detail of those drivers, but I would note and highlight what you just caught, which is comparability year over year. There are a couple of items I would just highlight that are impacting that. That includes the merger-related costs that are included in Q3 2025 and also remind you that in Q3 2024, we had a tax benefit. Moving to slide nine from a year-to-date perspective, that leaves us at $2.22 from a GAAP basis compared to $2.34 last year. Again, on an adjusted basis, that's $2.41 in 2025 year-to-date compared to $2.27 in 2024. Slide 10 shows you the Q3 drivers of EPS compared to that same period in 2024.

Speaker #3: I'll dig in a bit on the detail of those drivers, but I would note and highlight what you just caught, which is comparability year over year.

Speaker #3: There's a couple of items I would just highlight that are impacting that. That includes the merger-related costs that are included in third quarter 2025.

Speaker #3: And also remind you that in the third quarter of 2024 , we had a tax benefit . Moving to slide nine from a year to date perspective , that leaves us at $2.22 from a GAAP basis , compared to $2.34 last year .

Speaker #3: Again , on an adjusted basis , that's $2.41 in 2025 . Year to date , compared to $2.27 in 2024 . Slide ten shows you the third quarter drivers of EPs compared to that same period in 2024 .

Speaker #3: I would note that despite mild weather margin improvement , drove $0.52 , which was offset in some regards by higher operating costs . Again , including those $0.12 of merger related costs .

Crystal Lail: I would note that despite mild weather, margin improvement drove $0.52, which was offset in some regards by higher operating costs, again, including those $0.12 of merger-related costs I referred to, higher depreciation and interest, and inclusion again in the prior year of an $0.11 tax benefit. Moving to slide 11. For further detail on margin, again, I highlighted that that was $0.52 of improvement. Of that $0.52, rate drove $0.35 of margin improvement. As a reminder, we worked really hard on that regulatory execution to be able to recover our costs and close that gap on earning returns. That $0.35 is certainly key to that, and we are currently awaiting our outcome in our Montana rate review, and I'll address that a little bit later. Also, customer usage provided $0.08 of improvement, and electric and gas transmission and transportation provided another $0.05.

Speaker #3: I referred to higher depreciation and interest and inclusion again in the prior year of an 11-cent tax benefit. Moving to slide 11.

Speaker #3: Slide 11 . For further detail on margin . Again , I highlighted that that was $0.52 of improvement . Of that $0.52 rate , drove $0.35 of margin improvement .

Speaker #3: As a reminder, we worked really hard on that regulatory execution to be able to recover our costs and close that gap on earning returns.

Speaker #3: That $0.35 is certainly key to that , and we are currently awaiting our outcome in our Montana rate review , and I'll address that in a little bit later .

Speaker #3: Also, customer usage provided $0.08 of improvement, and electric and gas transmission and transportation provided another $0.05. These were offset by a couple of things we had highlighted previously regarding trends for 2025.

Crystal Lail: These are offset by a couple of things we had highlighted previously of trends for 2025, and that includes the market sales impact in our PCAM, and that is a detriment during the quarter as well as the effects of Montana property tax legislation that are also a detriment to us in the quarter, reducing some of that favorability in the margin line. Moving to slide 12, I'll discuss again those adjusted items to hopefully make the quarter make a bit more sense for Q3 2025 versus Q3 of 2024. Again, mild weather in this Q3 impacted us by about $0.05, and that's compared to, again, an add-back of $0.05, an add-back of $0.01 in the Q3 of 2024. Also, in 2025, we've incurred $0.12 of merger-related costs.

Speaker #3: And that includes the market sales impact in our PCM. That is a detriment during the quarter, as well as the effects of Montana property tax legislation, which are also a detriment to us.

Speaker #3: In the quarter, reducing some of that favorability in the margin line. Moving to slide 12, I'll discuss again those adjusted items.

Speaker #3: To hopefully make the quarter make a bit more sense for third quarter , 25 versus third quarter of 24 . Again , mild weather in this third quarter impacted us by about $0.05 .

Speaker #3: And that's compared to , again , an advocate $0.05 . And add back of $0.01 in the third quarter of 2024 . Also in 2025 , we've incurred $0.12 of merger related costs .

Speaker #3: And then , as I mentioned earlier , the 2024 results included an 11 cent tax benefit related to prior year gas repairs . Once that final guidance came out , all of that gets us to if you look at the adjusted columns , $0.79 of earnings in the third quarter of 2025 , compared with $0.65 in 2024 .

Crystal Lail: As I mentioned earlier, the 2024 results included an $0.11 tax benefit related to prior year gas repairs once that final guidance came out. All of that gets us to, if you look at the adjusted columns, $0.79 of earnings in the Q3 of 2025 compared with $0.65 in 2024. Moving to slide 13, you've heard our commitment to credit quality and maintaining that. We've largely executed on our financing plans, and those remain unchanged as we continue to focus on making sure we're keeping that FFO to debt number where it needs to be and expect to see a bit of improvement even on that as we close out the year for 2025. Moving to slide 14.

Speaker #3: Moving to slide 13. You've heard our commitment to credit quality and maintaining that we've largely executed on our financing plans, and those remain unchanged as we continue to focus on making sure we're keeping that FFO to debt number where it needs to be, and expect to see a bit of improvement even on that.

Speaker #3: As we close out the year for 2025 , moving to slide 14 . Our financial performance year to date reinforces our confidence in delivering on the financial commitments that we've made .

Crystal Lail: Our financial performance year-to-date reinforces our confidence in delivering on the financial commitments that we've made, and we expect a final outcome in our Montana rate review, as I alluded to earlier, during the Q4. As such, we continue to maintain a wider range of $0.15 as we look to close out 2025. We also expect to provide our 2026 outlook during our year-end call in February, so you can all look forward to that. Moving to slide 16. You'll see that our capital investment slide and forecast here remains unchanged from what you've seen from us before. Brian mentioned the opportunities, and we talked many times about what might be incremental to our current plan, but the opportunity for incremental generation investment in South Dakota under the SEP Expedited Resource Adequacy Study, that is not reflected in these amounts.

Speaker #3: And we expect a final outcome in our Montana rate review . As I alluded to earlier during the fourth quarter . And as such , we continue to maintain a wider range of $0.15 as we look to close out 2025 .

Speaker #3: We also expect to provide our 2026 outlook during our year-end call in February, so you can all look forward to that.

Speaker #3: Moving to slide 16, you'll see that our capital investment slide and forecast here remains unchanged from what you've seen from us before.

Speaker #3: Brian mentioned the opportunities, and we talked many times about what might be incremental to our current plan. However, the opportunity for incremental generation investment in South Dakota under the QCP expedited resource adequacy study is not reflected in these amounts.

Speaker #3: And as I just alluded to with our 2026 earnings outlook, we expect to roll forward and update our capital plan. Also on the Q4 call in February.

Crystal Lail: As I just alluded to with our 2026 earnings outlook, we expect to roll forward and update our capital plan also on the Q4 call in February. With that, I will turn it back to Brian.

Speaker #3: So with that, I will turn it back to Brian.

Speaker #2: Thanks, Crystal. On the 18th, we talked about our merger with Black Hills Update, and while August 18 seems like a long time ago, it was only about two months ago.

Brian Bird: Thanks, Crystal. On 18, we talked about our merger with Black Hills update, and August 18 seems like a long time ago, but it was about two months ago. In that short period of time, we with our Black Hills friends have worked collectively to make three filings with each of the three states that we needed to make filings in. We filed with the MPSC, the North Dakota Public Service Commission, and the South Dakota PUC. Those filings were made, and we continue to work on other filings necessary for the transaction. We continue to work on the S-4 and joint proxy statement, expect to release that in Q1 of 2026. In terms of shareholder meetings, sometime in Q2 or Q3, our respective companies would hold shareholder meetings on a vote on the transaction.

Speaker #2: And in that short period of time, we, along with our Black Hills friends, have worked collectively to make three filings with each of the three states where we needed to make filings.

Speaker #2: We filed with the MPSC and the North Dakota Public Service Commission, as well as the South Dakota PUC. Those findings were made, and we continue to work on other filings necessary for the transaction. We are also continuing to work on the S-4 and the joint proxy statement.

Speaker #2: Expect to release that in Q1 of 2026. In terms of the shareholder meeting, sometime in Q2 or Q3, our respective companies would hold shareholder meetings to vote on the transaction and then develop transition integration implementation plans.

Brian Bird: Developing transition integration implementation plans, what I'd say there is we collectively are talking to independent integration consultants, hope to make a decision relatively soon there. We are just really in early planning stages, things are really getting going here, I'd argue, in the December, January timetable as we continue planning moving forward. Lastly, we're saving approvals and closing the merger. I'd like to think that can happen sometime in the second half of 2026. Moving on to the next page regarding large load customers off to the right, I think all of you are well aware of the three LOIs that we currently have with SABY, Atlas, and Quantica. I'll mention the development agreement with SABY here shortly. On the left-hand side of the page, just a quick focus on Montana and South Dakota.

Speaker #2: What I'd say is that we collectively are talking to independent integration consultants, hoping to make a decision relatively soon. And we're really in the early planning stages.

Speaker #2: Things are really get going here at our June , the December , January timetable . As we continue planning moving forward . And lastly , receiving approvals and closing the merger .

Speaker #2: I'd like to think that can happen sometime in the second half of 2026. Moving on to the next page regarding large load customers.

Speaker #2: Off to the right. I think all of you are well aware of the three alloys that we currently have with Sabey, Atlas, and Quantica.

Speaker #2: I'll mention the development agreement with Seabee here shortly, but on the left-hand side of the page, just a quick focus on Montana and South Dakota.

Speaker #2: We do anticipate making a filing with the MPSC to propose a large load tariff in the fourth quarter of 2025, and we'd like to do that in conjunction with an ESA with Sabey.

Brian Bird: We do anticipate making a filing with the MPSC to propose a large load tariff in Q4 of 2025, and we'd like to do that in conjunction with an ESA with SABY, going in arm in arm, making sure that we're protecting customers in essence, but also providing what we need to move forward with data centers in the state. In South Dakota, there continues to be significant indications of interest, and any new large load customers require incremental capacity, and in South Dakota, PUC already has an established process for large load customers. The other thing I'd just say in South Dakota, we and certainly other utilities of the state have seen good progress in between legislative sessions on a sales tax exemption bill.

Speaker #2: So, going in arm in arm, making sure that we're protecting customers, in essence, but also providing what we need to move forward with data centers in the state.

Speaker #2: In South Dakota, there continue to be significant indications of interest, and any new large customers would require incremental capacity. Additionally, in South Dakota, the PUC already has an established process for large load customers.

Speaker #2: The other thing I'd just say in South Dakota is that we, and certainly other utilities in the state, have seen good progress between legislative sessions on the sales tax exemption bill.

Speaker #2: I just saw draft one here shortly, not too long ago. I am excited about that opportunity, and hopefully, we can deal with that issue in the next legislative session.

Brian Bird: I just saw a draft of one here shortly not too long ago, and I'm excited about that opportunity, and hopefully we can deal with that issue in the next legislative session so we can have a better means to attract data centers in the state of South Dakota. I think really good progress in both states. Regarding that process on slide 20, we continue to lay out for you kind of left to right the process. We have seen good progress here. From a data center request, we've moved three of those parties into a high-level assessment. As a matter of fact, of the LOIs, what we've done here recently of our three LOI parties, we've entered into a development agreement. What's that? We notice we show those kind of hand in hand here, maybe an incremental step of the LOI portion, if you will.

Speaker #2: And so we can have a better means to attract data centers in the state of South Dakota. So I think there has been really good progress in both states regarding that process.

Speaker #2: On slide 20 , we continue to lay out for you kind of left to right the process , and we have we have seen good progress here from a data center request .

Speaker #2: We've moved three of those parties into a high-level assessment. As a matter of fact, regarding the LOI, what we've done here recently with our three LOI parties is that we've entered into a development agreement.

Speaker #2: What's that ? We notice we show those kind of hand in hand here , maybe an incremental step of the Loi portion , if you will .

Speaker #2: But the development agreement is primarily to make sure that we have a commitment, in essence, to fund the studies. And we've received development deposits along the way to fund those studies.

Brian Bird: The development agreement is primarily to make sure that we have a commitment, in essence, to fund the studies, and we've received development deposits along the way to fund those studies necessary, impact studies, facility studies. That's an important step we anticipate. The other two LOIs, we could see development agreements with those other two LOIs before the end of the year as well, all with the hopes of getting to energy service agreements as quickly as we can. Moving forward, Colstrip transaction overview, I'm just in the far right. I think I need to provide a bit of a history lesson for folks. Back in January of 2023, we acquired the Avista piece, and you may recall that our IRP talked about the necessity of incremental 200-plus megawatts of capacity. That Avista portion provided resource adequacy for us in Montana.

Speaker #2: Necessary impact studies, facility studies. And that's an important step. We anticipate the other two alloys; we could see development agreements with those other two.

Speaker #2: Lois, before the end of the year as well, all with the hopes of getting to energy service agreements as quickly as we can moving forward.

Speaker #2: On Colstrip . Transaction overview I'm just in the far right . I think I need to provide a bit of a history lesson for folks back in January of 2023 , we acquired the Avista piece , and you may recall that our IRP talked about the necessity of incremental 200 plus megawatts of capacity and that of Avista portion , provided resource adequacy for us in Montana .

Speaker #2: And it also brought our ownership interests in the Colstrip facility from 15% to 30%. Unfortunately, a 30% interest wasn't going to be high enough.

Brian Bird: It also brought our ownership interests in the Colstrip facility from 15% to 30%. Unfortunately, 30% interest wasn't going to be high enough, if you will, to protect ourselves from other owners of the plant for various reasons. Their states didn't necessarily want them to own coal-fired generation, and thus there could have been an incentive for them to actually close down the Colstrip facility. For us to protect our existing interest, 222 megawatts and the Avista interest in Colstrip, in July of 2024, we acquired Puget's 370 megawatts. What that did is it allowed us to move from a 30% ownership to 55% ownership, providing us a clear advantage to provide the direction for where Colstrip's going to go on a going forward basis and protecting ourselves and our customers from a capacity standpoint. We're excited that. January 1, 2026, is not too far away.

Speaker #2: If you will, to protect ourselves from other owners of the plant for various reasons. There were states that didn't necessarily want them to own coal-fired generation, and thus there could have been an incentive for them to actually close down the Colstrip facility for us to protect our existing interest.

Speaker #2: 222 MW and the Avista interests us in Colstrip. In July of 2024, we acquired Puget's 370 MW. What that did is it allowed us to move from a 30% ownership to a 55% ownership, providing us a clear advantage to provide the direction for where Colstrip is going to go going forward.

Speaker #2: Basis in protecting ourselves and our customers from a capacity standpoint . And so we're excited that , you know , January 1st , 2026 is not too far away .

Speaker #2: I think we'll sleep better . Knowing we have those resources to serve our customers on the coldest days of the year , those combined interests , of course , will deliver substantial benefits to our existing customers , communities and investors .

Brian Bird: I think we'll sleep better knowing we have those resources to serve our customers on the coldest days of the year. Those combined interests, of course, will deliver substantial benefits to our existing customers, communities, and investors, but also support now the integration of some large load customers. Primarily, that would be the Puget issue. Two things we did to protect ourselves, starting on 1/1/26 as quickly as we can here. For the Avista portion, we filed a temporary PCAM tariff waiver request with the MPSC. We did that in August to provide a near-term cost recovery mechanism that is expected to largely offset the $18 million of incremental annual operating costs resulting from the transfer. The decision is expected on that in Q1 of 2026.

Speaker #2: But also support now the integration of some large customers, and primarily that would be the Puget issue. So why don't we think about two things we did to protect ourselves, starting on 126 as quickly as we can here for the Vista portion? We filed a temporary PCAM tariff waiver request with the MPSC.

Speaker #2: We did that in August, and we provide a near-term cost recovery mechanism that is expected to largely offset the $18 million of incremental annual operating costs resulting from the transfer decision, which is expected in the first quarter of 2026.

Speaker #2: I think it's clear you understand where the historic test year is in Montana. If we hadn't done this, we would be at risk of not recovering our operating costs for that new unit, if you will.

Brian Bird: I think it's clear you understand with a historic test year in Montana, if we'd not have done this, we would be at risk of not recovering our operating costs of that unit, if you will, those incremental 222 megawatts until our next rate review. This is a prudent means to try to make sure we protect our financial integrity, and hopefully we'll see a good outcome from the Montana Commission. I think they will respect the concept of we are buying incremental capacity to serve our customers at a zero upfront cost. All we're asking here is to get recovery of our operating costs to a point where offsetting, if you will, sales from that unit to offset those, at least to have those sales cover our operating costs before we actually move into the 90/10 sharing mechanism.

Speaker #2: Those incremental 222 MW will be implemented until our next rate review. This is a prudent means to help protect our financial integrity, and hopefully, we'll see a good outcome from the Montana Commission.

Speaker #2: I think they will respect the concept of we are buying incremental capacity to serve our customers at a zero upfront cost . And all we're asking here is to get recovery of our operating costs and to a point where offsetting , if you will , sales from that unit to offset those at least to have those sales cover our operating costs before we actually move into the 9010 sharing mechanism .

Speaker #2: I think it's a very reasonable ask, and hopefully the Montana Public Service Commission will see that as well. Hopefully, we'll have their decision as quickly as we get into 2026.

Brian Bird: I think it's a very reasonable ask, and hopefully the Montana Public Service Commission will see that as well and hope they see it as quickly as we get into 2026. On the Puget piece, we anticipate signing a contract in Q4 2025 to sell electricity through late 2027. The revenue from that contract is expected to largely offset the $30 million of incremental operating costs from that transfer. We've already filed with FERC for cost-based rates in October 2025 for that portion and expect approval during Q4 of 2025. I want to spend a little bit more time on Puget. I think the question could be asked, why FERC regulated and not MPSC regulated for that 370 megawatts, the Puget portion? We've received comments through the MPSC that provides uncertainty around how we will or can serve large load customers in Montana. Clearly, the 370 megawatts were not identified.

Speaker #2: And the Puget piece, we anticipate signing a contract in Q4 2025 to sell electricity through late 2027. The revenue from that contract is expected to largely offset the $30 million of incremental operating costs from that transfer.

Speaker #2: We've already filed with FERC for cost-based rates in October 2025. For that portion, we expect approval during the fourth quarter of 2025.

Speaker #2: I want to spend a little bit more time on Puget. I think the question could be asked, you know, why is FERC regulated and not MPSC regulated for that 370 MW?

Speaker #2: The Puget portion? Well, we received comments through the MPSC that provide uncertainty around how we will or can serve large customers in Montana.

Speaker #2: And clearly , the 370MW were not identified . In our IRP as needed for resource adequacy . On one , one , 26 .

Brian Bird: In our IRP as needed for resource adequacy on 1/1/2026. That's reason enough to move things from a FERC-regulated to a FERC-regulated perspective. I think the other question you might have is, why would you plan to enter into a PPA with another party for the full 370 megawatt output of the Puget portion? First and foremost, that really avoids any affiliate issues that we'd have with our regulated business. Secondly, having a FERC-regulated, fully contracted output with an investment-grade counterparty not only reduces market risk, but it allows us to largely offset our operating costs at the facility. Lastly, the term of that agreement would be through Q3 2027 in order to have 370 megawatts available for large load customers in Q4 2027.

Speaker #2: And so that that's reason enough to move things from Ferc regulated to Ferc regulated perspective . And I think the other question you might have is , why would you plan to enter into a PPA with another party for the full 370 megawatt output of the Puget portion ?

Speaker #2: Well , first and foremost , that really avoids any affiliate issues that we'd have with our regulated business . Secondly , having a Ferc regulated , fully contracted output with an investment grade counterparty not only reduces market risk , but it allows us to largely offset our operating costs at the facility .

Speaker #2: And lastly , the term of that agreement would be through Q3 of 2027 . In order to have 370MW available for large load customers in Q4 of 2027 , and ideally , this 370MW , we will ultimately like to move that into our mpsc regulated business sometime in 2027 and beyond or beyond .

Brian Bird: Ideally, this 370 megawatts, we would ultimately like to move that into our MPSC-regulated business sometime in 2027 or beyond, but we certainly need to persuade the MPSC that it is in the best interest of not only all of the customers in Montana, but also make sure for their existing customers in Montana. With that, I'll conclude just by saying I want to thank all of you for your interest. As Crystal pointed out here earlier, we've been extremely busy.

Speaker #2: But we certainly need to persuade the MPSC that it is in the best interest of not only all of the customers in Montana, but also our existing customers in Montana.

Speaker #2: So with that , I'll conclude just by saying I want to thank all of your interests . As Crystal pointed out here earlier , we've been extremely busy , and I just want to point out I'm pretty proud of this company for our ability to not only handle our day to day jobs , to not only run this business , but work with our friends at Black Hills .

Brian Bird: I just want to point out I'm pretty proud of this company for our ability to not only handle our day-to-day jobs, to not only run this business, but work with our friends at Black Hills to, we think, put together a company that'll be better together, certainly much larger, much more financially strong, have the scale, if you will, to better serve not only our shareholders, but equally importantly, our customers and our employees as well. With that, Meyer to handle Q&A.

Speaker #2: So we think put together a company that would be better together . Certainly much larger , much more financially strong . Have the scale , if you will , to better serve our shareholders .

Speaker #2: But equally important , our customers and our employees as well . And with that , Meyer , to handle Q&A . Thank you Brian .

Crystal Lail: Thank you, Brian. That was a good update. Crystal will open the lines for Q&A.

Speaker #2: That was a good update. I will open the lines for Q&A.

Speaker #1: Thank you . We will now begin the question and answer session . If you have dialed in and would like to ask a question , please press star one on your telephone keypad to raise your hand and join the queue .

Operator: Thank you. We will now begin the question and answer session. If you have dialed in and would like to ask a question, please press the star one on your telephone keypad, raise your hand, and join the queue. If you would like to withdraw your question, simply press the star one again. If you're called upon to ask a question and are listening via loudspeaker on your device, please pick up your handset and ensure that your phone is not on mute when asking your question. Your first question comes from the line of Aiden Kelly with JPMorgan. Please go ahead.

Speaker #1: If you would like to withdraw your question, simply press star one again. You are called upon to ask a question, and we are listening via loudspeaker on your device.

Speaker #1: Please pick up your handset and ensure that your phone is not on mute when asking your question. Your first question comes from the line of Aidan Kelly with J.P. Morgan.

Speaker #1: Morgan: Please go ahead.

Speaker #4: Hey , Aidan , can you hear us ? Yeah . Hey , hey , can you hear us ? Can you hear me ?

[Analyst]: Hey, Aiden. Can you hear us?

[Analyst]: Hey, there you go.

[Analyst]: Hey, can you hear me?

Speaker #4: Yeah , yeah . Just just want to hone in on the data center front first . Looks like there is some activity in the request in high level assessment stages .

[Analyst]: Yeah. Just want to hone in on the data center front first. Looks like there was some activity in the request in high-level assessment stages. Could you just clarify if this was a simple pull forward of some of the request stage into the high-level assessment, and then maybe one just got added to the request stage?

Speaker #4: Could you just clarify if this was a simple pull forward of some of the request stage into the high-level assessment, and then maybe one just got added to the request stage?

Speaker #4: And then I just . curious , you know , on top of that , you know , what sort of timeline you might be able to kind of convert the high level assessments into incremental Lois .

[Analyst]: Yeah.

[Analyst]: On top of that, what sort of timeline you might be able to kind of convert the high-level assessments into incremental letters of intent?

Speaker #2: Great , great questions . I think the data center requests the queue count there went up one . But more importantly , we've net net , we've increased the queue count and high level assessment by three .

[Analyst]: They're great questions. I think the data center request, the queue count there went up one. More importantly, net-net, we've increased the queue count in the high-level assessment by three. I'll tell you that I can't give you a specific time. One thing I've learned through this process, it takes two to tango, in essence, to when things move to that next level. I do think there are at least one of those that could show up in that box here relatively soon, that LOI box, if you will, or directly to a development agreement.

Speaker #2: I'll tell you that , you know , I can't give you a specific time . I one thing I've learned through this process , it takes two to tango in essence to when things move to that next level .

Speaker #2: But I do think there are at least at least one of those that could show up in that box . You're relatively soon that Loy box , if you will , or directly to a development agreement .

Speaker #4: It's helpful to know and then maybe just pivoting to South Dakota . Also curious on timeline there for , you know , getting approval of the gas plan and then , you know , ultimately , how should we think about that kind of flowing into CapEx and the rate base ?

[Analyst]: That's helpful to know. Maybe just pivoting to South Dakota, also curious on timeline there for getting approval of the natural gas plan, and then ultimately, how should we think about that kind of flowing into CapEx and the rate base?

Speaker #3: I'll take that one. I think both MISO and SP put out this summer an expedited resource adequacy study window. We submitted, based on that study, a facility that would get us to resource adequacy and meet the requirements by 2030.

Crystal Lail: I'll take that one. I think both MISO and SPP put out this summer an expedited resource adequacy study window. We submitted, based off that study, a facility that would get us to resource adequate and meet the requirements by 2030. We've received initial feedback from SPP that what we've submitted meets their initial requirements, and we expect to hear on the transmission piece in early 2026. As such, we will wait to put it into our capital plan until we roll forward that refresh here in probably the Q4 call in the February timeframe.

Speaker #3: We've received feedback , initial feedback from QP that are what we've submitted meets their initial requirements , and we expect to hear on the transmission piece in early 2026 .

Speaker #3: As such, we will wait to put it into our capital plan until we roll forward. That refresh will occur in probably the fourth quarter.

Speaker #3: Call in the February time frame.

Speaker #4: Good color to hear. I appreciate it. I'll leave it there. Thanks.

[Analyst]: Good color to hear. Appreciate it. I'll leave it there. Thanks.

Speaker #5: Thank you .

Crystal Lail: Thank you.

Speaker #1: And again , if you would like to ask a question , please press star One on your telephone keypad . And I'm showing no further questions at this time .

Operator: If you would like to ask a question, please press the star one on your telephone keypad. I'm showing no further questions at this time. I would like to turn it back to Brian Bird for closing remarks.

Speaker #1: I would like to turn it back to Brian Bird for closing remarks.

Speaker #2: Well , thank you so much . I just again , I want to reiterate , reiterate tremendous support . We've had certainly since the announcement .

[Analyst]: Thank you so much. Again, I want to reiterate the tremendous support we've had, certainly since the announcement, and I think the feedback we've received, and I know that our friends at Black Hills have received tremendous support for the merger. I will just tell you that we both collectively seem to be working really well together to make things happen here and continue to move this process along. We both endeavor and understand the importance of this merger and will work really, really hard to make sure it happens. Like I said, hopefully, as soon as the second half of 2026. With that, I want to again thank you for your participation today.

Speaker #2: And I think the feedback we've received—I know our friends at Black Hills have received tremendous support for the merger. I will just tell you that we both collectively seem to be working really well together to make things happen here.

Speaker #2: And we will continue to move this process along. Both endeavor and understand the importance of this merger, and we'll work really hard to make sure it happens.

Speaker #2: And like I said , hopefully as soon as the second half of 2026 . And so with that , again , thank you for your participation today .

Operator: Thank you. This concludes today's conference call. Thank you all for joining. You may now disconnect.