NorthWestern (NWE) Arbitration Decision Results in $49.8M Liability Reduction, Maintains Guidance
Tweet
Share
E-mailGet Alerts NWE Hot Sheet
Join SI Premium – FREE
NorthWestern Corporation (NYSE: NWE) today announced that it received a favorable arbitration decision related to a dispute over energy and capacity rates with the Colstrip Energy Limited Partnership ("CELP").
The dispute related to certain inputs used in setting long-term rates for the period July 1, 2003, through June 30, 2006. CELP is a Qualifying Facility (QF) with which we have a power purchase agreement through June 2024. Under the terms of the power purchase agreement (PPA) with CELP, energy and capacity rates were fixed through June 30, 2004 and beginning July 1, 2004 through the end of the contract, energy and capacity rates are to be determined each year pursuant to a formula, with the rates to be used in that formula derived from the annual Montana Public Service Commission QF rate review.
On November 1, 2012 an arbitration panel issued a final award in our favor confirming that the rate methodology used by NorthWestern for calculating the rates for the July 1, 2006 to June 30, 2007 was consistent with the PPA and a Final Award of Arbitrators issued October 30, 2009. Based on the clarity provided by the final award regarding rate calculation for 2006 through the remainder of the PPA, we are updating the calculation of our QF liability and expect to record a pre-tax gain of approximately $49.8 million during the fourth quarter of 2012. This gain is largely due to recalculating the present value of our future QF liability based on the final award, net of approximately $7.3 million owed to CELP for contract years July 1, 2006 through June 30, 2012. As a result of reducing the liability, we also anticipate non-cash interest expense for the full year of 2013 will be approximately $2.3 million lower than comparable expense in 2012.
While we estimate the after-tax impact of this decision to increase our earnings per share (EPS) reported in accordance with generally accepted accounting principles (GAAP) by approximately 83 cents per fully diluted share, NorthWestern is maintaining its adjusted EPS guidance for 2012 in the range of $2.30-$2.40 per fully diluted share.
A reconciliation of items not factored into our 2012 earnings guidance of $2.30 to $2.40 per fully diluted earnings per share is as follows (net of tax). The calculation of adjusted EPS below represents a non-GAAP measure that may provide users of this financial information with additional meaningful comparisons between current results and results the Company originally contemplated in 2012 guidance. The Company believes the following presentation is more representative to our ongoing earnings than the estimated GAAP EPS, also represented below. Non-GAAP financial measures should be viewed in addition to, and not as an alternative to, the reported operating results or cash flows from operations or any other measure of performance prepared in accordance with GAAP. In addition, the presentation of these measures may not be comparable to similarly titled measures other companies use.
The dispute related to certain inputs used in setting long-term rates for the period July 1, 2003, through June 30, 2006. CELP is a Qualifying Facility (QF) with which we have a power purchase agreement through June 2024. Under the terms of the power purchase agreement (PPA) with CELP, energy and capacity rates were fixed through June 30, 2004 and beginning July 1, 2004 through the end of the contract, energy and capacity rates are to be determined each year pursuant to a formula, with the rates to be used in that formula derived from the annual Montana Public Service Commission QF rate review.
On November 1, 2012 an arbitration panel issued a final award in our favor confirming that the rate methodology used by NorthWestern for calculating the rates for the July 1, 2006 to June 30, 2007 was consistent with the PPA and a Final Award of Arbitrators issued October 30, 2009. Based on the clarity provided by the final award regarding rate calculation for 2006 through the remainder of the PPA, we are updating the calculation of our QF liability and expect to record a pre-tax gain of approximately $49.8 million during the fourth quarter of 2012. This gain is largely due to recalculating the present value of our future QF liability based on the final award, net of approximately $7.3 million owed to CELP for contract years July 1, 2006 through June 30, 2012. As a result of reducing the liability, we also anticipate non-cash interest expense for the full year of 2013 will be approximately $2.3 million lower than comparable expense in 2012.
While we estimate the after-tax impact of this decision to increase our earnings per share (EPS) reported in accordance with generally accepted accounting principles (GAAP) by approximately 83 cents per fully diluted share, NorthWestern is maintaining its adjusted EPS guidance for 2012 in the range of $2.30-$2.40 per fully diluted share.
A reconciliation of items not factored into our 2012 earnings guidance of $2.30 to $2.40 per fully diluted earnings per share is as follows (net of tax). The calculation of adjusted EPS below represents a non-GAAP measure that may provide users of this financial information with additional meaningful comparisons between current results and results the Company originally contemplated in 2012 guidance. The Company believes the following presentation is more representative to our ongoing earnings than the estimated GAAP EPS, also represented below. Non-GAAP financial measures should be viewed in addition to, and not as an alternative to, the reported operating results or cash flows from operations or any other measure of performance prepared in accordance with GAAP. In addition, the presentation of these measures may not be comparable to similarly titled measures other companies use.
Serious News for Serious Traders! Try StreetInsider.com Premium Free!
You May Also Be Interested In
- Tesla plans 'flying' Roadster stunt at SpaceX Texas site as early as August
- Optimum Communications gets NYSE non-compliance notice over stock price
- Reading (RDI) Tops Q2 EPS by 4c
Create E-mail Alert Related Categories
Guidance, LitigationRelated Entities
EarningsSign up for StreetInsider Free!
Receive full access to all new and archived articles, unlimited portfolio tracking, e-mail alerts, custom newswires and RSS feeds - and more!
