NorthWestern : Reports Third Quarter 2021 Financial Results

NorthWestern Corporation d/b/a NorthWestern Energy 3010 W. 69th Street Sioux Falls, SD 57108 www.northwesternenergy.com

FOR IMMEDIATE RELEASE

NorthWestern Reports Third Quarter 2021 Financial Results

Company reports GAAP diluted earnings per share of $0.68 for the quarter, affirms 2021 earnings guidance range, and announces a $0.62 per share quarterly dividend payable December 31, 2021

BUTTE, MT / SIOUX FALLS, SD - October 24, 2021 - NorthWestern Corporation d/b/a NorthWestern Energy (Nasdaq: NWE) reported financial results for the three months ended September 30, 2021. Net income for the period was $35.2 million, or $0.68 per diluted share, as compared with net income of $29.5 million, or $0.58 per diluted share, for the same period in 2020. This increase was primarily driven by higher Montana transmission loads and rates and warmer summer weather, partly offset by higher operating costs, lower supply cost recovery, an unfavorable QF liability adjustment compared with the prior period, and higher income tax expense.

"We are pleased to report strong financial results this quarter. However, inflationary and supply chain pressures have left their mark. We made the decision to accelerate construction of the 175 megawatt facility near Laurel, Montana. At the same time, we decided not to move forward with construction of a 30-40 megawatt facility near Aberdeen, South Dakota, as originally proposed. Alternative options for the Aberdeen project will be evaluated in the 2022 Integrated Resource Plan. The 60 megawatt project near Huron, South Dakota continues, with minimal interruption, and should be online by early 2022," said Bob Rowe, Chief Executive Officer. "As we have consistently warned, we continue to be concerned about our customers' exposure to high energy prices and scarcity. Due to high prices, the cost of market power purchases for our Montana customers in July alone was nearly six times what we spent in the same month last year.

Rowe continues, "We are glad to have the Laurel project advancing. Expected online in the winter of 2023-2024, this new resource will alleviate a significant amount of the price and availability risk that our customers and investors are currently experiencing. Laurel is our first dispatchable resource addition in Montana, and also our first thermal resource, since 2011. It is part of a set of resources resulting from a request for proposal that also included a hydro-based purchase power agreement and our first large battery storage agreement."

Additional information regarding this release can be found in the earnings presentation found at https://www.northwesternenergy.com/about-us/investors/financials/earnings

NorthWestern Reports Third Quarter 2021 Financial Results

October 24, 2021

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		Three Months Ended			Nine Months Ended
		September 30,			September 30,
(in thousands, except per share amounts)		2021			2020			2021			2020
Revenues	$	325,955	$	280,610		$	1,024,975		$	885,225
Cost of sales		98,659			68,038			311,137			220,353
Gross Margin (1)		227,296			212,572			713,838			664,872
Operating, general and administrative		80,948			73,322			238,913			224,042
Property and other taxes		43,572			45,306			138,337			136,786
Depreciation and depletion		47,112			44,289			140,896			134,336
Total Operating Expenses (excl. Cost of sales)		171,632			162,917			518,146			495,164
Operating income		55,664			49,655			195,692			169,708
Interest expense, net		(23,283)			(23,677)			(70,266)			(72,298)
Other income (expense), net		5,326			785			13,932			(973)
Income before income taxes		37,707			26,763			139,358			96,437
Income tax (expense) benefit		(2,511)			2,703			(3,854)			5,227
Net Income		35,196			29,466			135,504			101,664
Basic Shares Outstanding		51,892			50,577			51,175			50,551
Earnings per Share - Basic	$	0.68	$	0.58	$	2.65		$	2.01
Diluted Shares Outstanding		52,028			50,674			51,312			50,657
Earnings per Share - Diluted	$	0.68	$	0.58	$	2.64		$	2.01
Dividends Declared per Common Share	$	0.62		$	0.60		$	1.86		$	1.80

1. Gross Margin, defined as Revenues less Cost of Sales, is a non-GAAP financial measure. See "Non-GAAP Financial Measures" section below for more information.

Significant Items

Electric Resource Planning - Montana

We are currently 630 MW short of our peak needs and we cover the shortfall through market purchases. Absent resource additions, we forecast that our portfolio will be 725 MW short by 2025, considering expiring contracts and a modest increase in customer demand. We issued an all-source competitive solicitation request in January 2020 for up to 280 MWs of peaking and flexible capacity to be available for commercial operation in late 2023 or early 2024 (the January 2020 request for proposal (RFP)). Further, we expect to issue additional all-source competitive solicitation requests during 2022.

Initial bids for the January 2020 RFP were received in July 2020. A third-party RFP Administrator evaluated the bids with the following portfolio of projects selected:

• Laurel Generating Station- the construction of a 175 MW natural gas-fired generation plant near Laurel, Montana, at a cost of approximately $275 million, including Allowance for Funds Used During Construction (AFUDC), which we will own;
• Beartooth Battery- A 20-year agreement to purchase capacity and ancillary services produced from a 50 MW battery energy storage facility that will be constructed in Yellowstone County, Montana; and
• Powerex Transaction- a 5-year power purchase agreement for 100 MWs of capacity and energy products originating predominately from hydroelectric resources.

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October 24, 2021

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On May 19, 2021, we filed an application with the Montana Public Service Commission (MPSC) for advanced approval to acquire the Laurel Generating Station and Beartooth Battery agreement as new capacity resources. These resources, together with the Powerex Transaction, will help address our identified capacity shortage. The Powerex Transaction, was not included in the application for advanced approval filed with the MPSC. Recent upheaval in the construction market and, specifically, timely availability of critical components and escalating labor and construction costs, has necessitated the flexibility to expend capital and make commercial decisions in advance of the timeline established by the MPSC advanced approval docket. Accordingly, we withdrew our application on September 23, 2021 and intend to seek approval from the MPSC to place the Laurel Generating Station in rate base through a future filing. We currently intend to file a separate application for advanced approval of the Beartooth Battery agreement.

On October 21, 2021 the Montana Environmental Information Center and the Sierra Club filed a lawsuit in Montana State Court, against the Montana Department of Environmental Quality (MTDEQ) and us, alleging the environmental review of our Laurel Generating Station project was unlawful. This lawsuit could delay the Laurel project if the Court were to require a full Environmental Impact Study regarding the project, set aside the air quality permit granted for the Laurel Generating Station, or determine that the underlying environmental statute violates the Montana Constitutional guarantee of a "clean and healthful environment."

Electric Resource Supply - South Dakota

Our energy resource plans identify portfolio requirements including potential investments resulting from a completed competitive solicitation process in South Dakota. Our estimated capital expenditures discussed in our Annual Report on Form 10-K for the year ended December 31, 2020 within the Management's Discussion and Analysis of Financial Condition and Results of Operations section includes approximately $60 million for a 30-40 MW flexible natural gas plant near Aberdeen, South Dakota, which was expected to be in service in early 2024. During the third quarter of 2021, we decided to discontinue our plans to build this project as a result of significant increases in estimated construction cost as a result of global supply chain challenges. As a result of the project discontinuance, we recorded a $1.2 million pre-tax charge in the three months ended September 30, 2021, for the write-off of preliminary construction costs.

Construction continues for a 60MW reciprocating internal combustion engine project in Huron, SD to be online in early 2022 with total construction costs of approximately $80 million.

With the acceleration of the Laurel generation project and the discontinuation of the Aberdeen generation project, we anticipate providing an updated 5 Year capital forecast at the Edison Electric Institute Financial Conference early next month.

Regulatory Update

We have recently filed several regulatory filings, primarily in our Montana jurisdiction, including:

• An April 15, 2021 filing of a motion requesting to delay the implementation of our fixed cost recovery mechanism pilot in our Montana jurisdiction for another year until July 2022 or beyond, due to the continued uncertainties created by the COVID-19 pandemic. On June

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29, 2021, the MPSC granted our motion. Opponents to the delay requested reconsideration and the Commission denied their request on September 15, 2021; and

• An April 21, 2021 filing requesting approval to increase the Power Cost and Credit Adjustment Mechanism (PCCAM) Base forecasted costs used to develop rates for the recovery of electric power costs through our PCCAM by approximately $17 million, or potentially a greater increase to reflect current market prices and new capacity contracts. On June 29, 2021, the MPSC approved implementing our request for interim rates reflecting the $17 million increase, subject to refund. The Montana Consumer Counsel (MCC) filed a motion arguing that the PCCAM Base cannot be updated except in a general rate case and asked the MPSC to dismiss the application. On October 5, 2021, the MPSC voted to grant the MCC's motion to dismiss and we await the final written order.

We are subject to FERC's jurisdiction and regulations with respect to rates for electric transmission service in interstate commerce and electricity sold at wholesale rates, the issuance of certain securities, and incurrence of certain long-term debt, among other things. The Division of Audits and Accounting in the Office of Enforcement of FERC has initiated a routine audit of NorthWestern Corporation for the period of January 1, 2018 to the present to evaluate our compliance with FERC accounting and financial reporting requirements. We have responded to several sets of data requests as part of the audit process. An audit report has not yet been received from FERC, but is expected within the next six months. Management is unable to predict the outcome or timing of the final resolution of the audit.

February Cold Weather Event

The February 2021 prolonged cold spell resulted in record winter peak demand for electricity and natural gas. The broad reach of this event across the United States and other market factors resulted in an extreme price excursion for purchased power and natural gas. In our South Dakota and Nebraska service territories, natural gas costs for the month of February 2021 exceeded the total cost for all of 2020. Fuel and purchased power costs in these jurisdictions are recovered through fuel adjustment clauses. We've incorporated the liquidity impacts into our overall 2021 financing plans.

The Nebraska Public Service Commission (NPSC) opened a docket on March 2, 2021 to investigate the effect of this cold weather event on natural gas supply. In this docket, we proposed recovery of our costs for February 13, 2021 to February 18, 2021 over a two-year period, which was subsequently approved by the NPSC on May 11, 2021, and a regulatory asset of approximately $26.0 million was recorded for these costs, with a remaining balance of $25.2 million as of September 30, 2021.

The South Dakota Public Utilities Commission issued an order allowing recovery of natural gas costs for the same time period over a one-year period, effective March 2, 2021. A regulatory asset of approximately $22.0 million was recorded for these costs, with a remaining balance of $17.7 million as of September 30, 2021.

COVID-19 Pandemic and Global Economic Recovery

The COVID-19 pandemic has had widespread impacts on people, economies, businesses and financial markets. Beginning in March 2020, the pandemic and resulting economic conditions began impacting our business operations and financial results. Our 2020 financial results were impacted by lower sales volumes, an increase in reserves for uncollectible accounts and an

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increase in interest expense, partly offset by lower operating, general and administrative expenses. We have experienced improving conditions in our service territories during 2021, that have positively impacted our business as compared to 2020. The ultimate impact of the pandemic on our financial results for 2021 and beyond depends on the evolving landscape of the pandemic and the public health responses to contain it, as well as the substance and pace of the macroeconomic recovery. If health conditions deteriorate or the economic recovery stalls, it could have the result of lower demand for electricity and natural gas, as well as reduced ability of various customers, contractors, suppliers and other business partners to fulfill their obligations or provide the services we seek to support our business operations. These impacts could have a material adverse effect on our results of operations, financial condition and prospects. The Biden administration is also seeking to require large companies like us to have all of our employees vaccinated or undergo weekly COVID testing. Complying with either a vaccine mandate or weekly testing requirements (if there are even enough testing kits available) could be difficult and costly and it is possible that some employees may choose to leave employment over a vaccine or testing requirement.

We place significant reliance on our third-party business partners to supply materials, equipment and labor necessary for us to operate our utility and reliably serve current customers and future customers. As a result of current macroeconomic conditions, both nationally and globally, we have recently experienced issues with our supply chain for materials and components used in our operations and capital project construction activities. Issues include higher prices, scarcities/ shortages, longer fulfillment times for orders from our suppliers, workforce availability, and wage increases. Should these economic conditions and issues continue, we could have difficulty completing the operations activities necessary to serve our customers safely and reliably, and/or achieving our capital investment program, which ultimately could result in higher customer utility rates, longer outages, and could have a material adverse impact on our business, financial condition and operations.

Financing Activity

We anticipate financing our ongoing maintenance and capital programs with a combination of cash flows from operations, first mortgage bonds and equity issuances.

In March 2021, we issued and sold $100.0 million aggregate principal amount of Montana First Mortgage Bonds at a fixed interest rate of 1.00% maturing on March 26, 2024. The net proceeds were used to repay in full our outstanding $100.0 million one-year term loan that was due April 2, 2021.

In April 2021, we entered into an Equity Distribution Agreement pursuant to which we may offer and sell shares of our common stock from time to time, having an aggregate gross sales price of up to $200.0 million, through an ATM program, including an equity forward sales component.

During the three months ended September 30, 2021, we issued 1,040,085 shares of our common stock at an average price of $63.13, for net proceeds of $64.8 million. During the nine months ended September 30, 2021, we issued 1,919,394 shares of our common stock at an average price of $63.94, for net proceeds of $121.1 million. We expect a total of approximately $200.0 million of equity proceeds during 2021 to support our current capital program and maintain and protect our credit ratings. Financing plans are subject to change, depending on capital expenditures, regulatory outcomes, internal cash generation, market conditions and other factors.