NorthWestern Energy's Q3 2025: Contradictions Emerge on Data Center ESA Signings, Megawatt Ramps, and South Dakota Gas Plant Approval

Date of Call: October 30, 2025

Financials Results

• EPS: $0.62 GAAP diluted EPS (down from $0.76 in prior-year quarter); $0.79 adjusted diluted EPS (up from $0.65 in prior-year quarter). YTD GAAP $2.22 vs $2.34 prior year; YTD adjusted $2.41 vs $2.27 prior year.

Guidance:

• Affirmed 2025 EPS guidance of $3.53–$3.65.
• Maintaining a wider $0.15 range to close out 2025 and expect Montana REIT review outcome in Q4.
• 2026 outlook to be provided on the year-end call in February 2026.
• Capital plan unchanged; 131-MW SPP expedited resource adequacy project (~$300M) is incremental and not included in current 5-year plan.

Business Commentary:

* Earnings Performance and Guidance: - NorthWestern Energy reported GAAP diluted EPS of $0.62 per share and non-GAAP diluted EPS of $0.79 per share for the quarter. - The company affirmed its 2025 earnings guidance range of $3.53 to $3.65. - The earnings were impacted by mild weather, but rate-driven margin improvements and customer usage increases helped offset higher operating costs, depreciation, and interest expenses.

• Merger and Acquisition Activity:
• NorthWestern Energy integrated its Energy West acquisition of natural gas assets during the quarter, successfully integrating customers and employees.
• The company announced an agreement with Black Hills Corporation for an all-stock merger of equals, with joint applications for regulatory approval already filed.

• This merger is expected to enhance the combined company's financial strength and ability to serve shareholders, customers, and employees.

• Capital Expenditure and Investment:

• NorthWestern Energy's capital investment slide and forecast remain unchanged, with a focus on system-wide T&D investments.
• The company submitted a 131-megawatt natural gas generation project in the Southwest Power Pool's expedited resource adequacy study.

• This project, if approved, would add $300 million to the capital expenditure plan, representing a significant addition to capacity and facility improvements.

• Dividend and Shareholder Return:

• The company declared a dividend of $0.66 per share, payable on December 31, 2025.
• The dividend yield is projected to be between 4% and 5%, with a base capital plan providing 4% to 6% EPS growth, resulting in a total return of 8% to 11%.
• Additional opportunities, such as data centers and large load customers, could further enhance shareholder returns beyond the projected 11% total return.

Sentiment Analysis:

Overall Tone: Positive

• Management affirmed 2025 guidance and called the quarter "solid" and "in line with our expectations"; CEO: "very, very excited" about integrations and the Black Hills merger and said the companies are "better together"; CFO: on track to deliver earnings targets and confidence in financing/credit metrics.

Q&A:

• Question from Aidan Kelly (JPMorgan Chase & Co, Research Division): I just want to hone in on the data center front first. It looks like there was some activity in the request and 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? And then just on top of that, what sort of time line you might be able to kind of convert the high-level assessments into incremental LOIs?
  Response: Brian Bird: Queue increased — one new request and three additional projects moved into high-level assessment; timing to convert is uncertain but at least one could convert to an LOI relatively soon.

• Question from Aidan Kelly (JPMorgan Chase & Co, Research Division): That's helpful to know. And then maybe just pivoting to South Dakota. I am also curious on time line there for getting approval of the gas plant. And then ultimately, how should we think about that kind of flowing into CapEx in the rate base?
  Response: Crystal Lail: Submitted SPP expedited resource adequacy study; initial feedback indicates it meets requirements, expect transmission feedback early 2026 and will include the project in the capital plan during the Q4/February roll-forward.

Contradiction Point 1

Data Center ESA Signings

It involves the timeline for signing Energy Service Agreements (ESAs) for data centers under Letter of Intent (LOI), which are crucial for project progression and financial planning.

Was the activity in the data center's request and high-level assessment stages a pull forward or a new request? What is the timeline for converting high-level assessments into incremental LOIs? - Aidan Kelly(JPMorgan Chase & Co, Research Division)

2025Q3: We expect to sign at least one ESA by October. I'd like to see that occur. I'd like to think both of them will, very confident at least one of them. - Brian B. Bird(CEO)

Can you provide an update on the timing for signing the ESAs for the three data centers under LOIs? Are you waiting for the transmission service agreement study to conclude? Are there any other gating items to proceed with these projects? - Aidan Charles Kelly(JPMorgan Chase & Co, Research Division)

2025Q2: We're wrapping up on a transmission service issue side in the first 2. And I'd argue those are certainly in earlier stages from an LOI since we just signed Quantica, if you will, here recently. We expect to sign at least one ESA by October. - Brian B. Bird(CEO)

Contradiction Point 2

Data Center Megawatt Ramp

It involves the expected ramp-up of megawatts on the system due to data center additions, which is important for capacity planning and revenue projections.

What is the expected timeline for approval of the South Dakota gas plant and how will it impact CapEx and the rate base? - Aidan Kelly(JPMorgan Chase & Co, Research Division)

2025Q3: It's possible to be higher if we get more capacity online sooner and faster than we expect than we're anticipating. - Brian Bird(CEO)

What is the megawatt growth trajectory? Will it reach significant growth in 2026 or is it more likely to occur in 2027 and beyond? How are you forecasting this growth? - Nicholas Joseph Campanella(Barclays Bank PLC, Research Division)

2025Q2: I would say that the stuff in '26 is going to be relatively small, just in essence, from a construction standpoint, whatever megawatts are needed there. So I would stay focused on '27. - Brian Bird(CEO)

Contradiction Point 3

Data Center Request and Assessment Queue Movement

It involves the progress and timeline of data center project developments, which are crucial for understanding the company's growth strategy and potential revenue streams.

Did the data center request and high-level assessment stage activity represent a pull forward or new request? What is the timeline to convert high-level assessments into incremental LOIs? - Aidan Kelly(JPMorgan Chase & Co, Research Division)

2025Q3: The data center request queue count increased by 1, while net-net, the high-level assessment queue count increased by 3. There is a possibility that at least one high-level assessment could move to the LOI stage or directly to a development agreement soon, but the timeline depends on both parties involved. - Brian Bird(CEO, President & Director)

Regarding the tariff process, how long is it expected to take? Is completion required before announcing incremental data center updates? - Nicholas Campanella(Barclays)

2025Q1: There are nine parties in the initial stages in both Montana and South Dakota. Three are in the high-level assessment phase, and two, Atlas and Sabi, are in the contractual estimate phase. We expect to finalize contracts with these two by the end of Q2 or early Q3. - Brian Bird(President & CEO)

Contradiction Point 4

Gas Plant in South Dakota Approval and CapEx Impact

It concerns the timeline and impact of a gas plant project in South Dakota, which is relevant to the company's capital expenditure planning and potential revenue streams.

What is the timeline for approval of the South Dakota gas plant and its impact on CapEx and the rate base? - Aidan Kelly(JPMorgan Chase & Co, Research Division)

2025Q3: Both MISO and SPP have an expedited resource adequacy study window. A facility that meets resource adequacy requirements by 2030 was submitted. Initial feedback from SPP indicates the submission meets requirements, with transmission piece feedback expected in early 2026. This will be included in the capital plan during the next refresh, likely in the fourth quarter call in February. - Crystal Lail(VP & CFO)

How long will the tariff proceeding take? Must it be completed before data center announcements? - Nicholas Campanella(Barclays)

2025Q1: There are five stages to data center development: request, assessment, contractual estimate, contract, and construction. We are in various stages with different parties. - Brian Bird(President & CEO)