Marking 100 years, NorthWestern has new CEO, makes plans for future power supply

March 27, 2023

When Brian Bird joined NorthWestern Corp. nearly 20 years ago, it was going through Chapter 11 bankruptcy.

“I thought I would help get them out of bankruptcy and go back to either Minneapolis or Chicago where I worked previously,” said Bird, who relocated to become the company’s chief financial officer.

Instead, he’s now NorthWestern’s CEO, a role he took on at the beginning of the year following the retirement of Bob Rowe.

In between is a company “that did a masterful job of configuring,” said Dana Dykhouse, CEO of First Premier Bank, who has served on the NorthWestern board of directors since 2009.

“I thought, ‘Well, this is going to be an interesting rescue.’ We had people out climbing poles in the middle of winter their whole careers, and the rank-and-file staff had nothing to do with the bankruptcy. It was all separate business activity, but they lost a big chunk of retirement. They were vested in stock, and it went to zero.”

After restructuring to become solely an electricity and natural gas provider, the company now is valued at more than $3.4 billion, with stock that’s traded between $48.68 and $63.06 per share over the past 12 months.

“I give a lot of credit to the management team,” Dykhouse said. “Bob and Brian … said we’re going to focus on what we’re good at. We’re going to focus on providing reliable, low-cost electricity and gas to our customers.”

That’s still the focus, said Bird, as he takes over leadership of the Sioux Falls-based utility, which marks its 100th anniversary this year.

Later this year, the plan is to ring the opening buzzer on the Nasdaq stock exchange.

“When I came here, my colleagues said: ‘It’s a utility. You’re going to be bored.’ And I’ve never been bored a single day at NorthWestern,” Bird said. “This industry is changing so much.”

Career journey

A Wisconsin native, Bird began his career in internal audit at Land O’Lakes, followed by a role in cash management at Northwest Airlines “where I cut my teeth,” he said.

He then spent three years as finance manager at the Minnesota Vikings before becoming director of finance at check provider Deluxe Corp. In 1997, he joined NRG Energy as vice president and treasurer, which then was a subsidiary of Xcel Energy, bringing him into the utility industry.

“That’s where I fell in love with this industry,” he said. “One thing I appreciate and appreciate more every year and I think our citizens and communities start to appreciate is the purpose of what we do. Without electricity and gas in our part of the country, life could be impacted substantially.”

As CEO, Bird brings the experience of having gone through NorthWestern’s emergence from bankruptcy and subsequent growth, Dykhouse said.

“He just has what it takes,” he said. “He’s got probably a five-to-10-year runway to install his vision into the future of the company. Bob got it back on solid footing, and the challenge Brian has is where do we go from here.”

NorthWestern’s net income for 2022 was $183 million, or $3.25 per share, compared with $186.8 million, or $3.60 per share, in 2021. High operating expenses and interest expense combined with lower transmission revenue and higher nonrecoverable electric supply costs in Montana contributed to the slight decrease in earning, though impacts will be partially offset by increased revenue from higher electric and natural gas retail volumes because of favorable weather, customer growth and Montana electric and natural gas interim rates. The decrease in per share earnings also was affected by equity issuances during 2022, which increased average common shares outstanding.

This year, like more than 100 utilities across the country, NorthWestern is bringing forward a request to raise rates in Montana, while it’s still evaluating the need to do so in South Dakota.

“We are seeing inflationary pressure, higher interest rates, high commodity costs, just inflation in general,” Bird said. “We’re seeing decent customer growth, one-ish-plus percent customer growth and 1 percent volumetric growth, so not a huge lift in revenues from that perspective.”

Eighty percent of the customers are in Montana, where construction began in 2022 on an estimated $275 million natural gas plant. The generating station also is the subject of a lawsuit from the Montana Environmental Information Center and the Sierra Club, which filed against NorthWestern and the Montana Department of Environmental Quality, alleging that the environmental analysis conducted before issuance of the plant’s air quality permit was inadequate. A decision is expected this year, and while construction continues, potential legal challenges could delay the project, the company said in its earnings report.

In the meantime, NorthWestern entered into an agreement early this year with Avista Corp. to acquire its interest in the Montana Colstrip Generating Station, a coal-fired, base-load electric generation facility in Colstrip, Montana.

Avista, which is based in Washington, will be precluded by state law from serving customers in that state after 2025 because of a clean energy act. So NorthWestern is receiving the power for nothing as of Jan. 1, 2026.

“They can’t receive any power via coal. They no longer have a reason for this plant,” Bird said. “And that’s an asset where, if I were to build today, it would cost $500 million, but we’re getting it for zero. And it’s a coal plant with useful life into the 2040s. So I’m doubling my capacity in the plant, and I’m paying zero … that’s a great thing for customers. They certainly are comfortable with us owning more coal, and our investors are comfortable because longer term I don’t have to buy a gas plant. That plant is in our service territory, and it’s perfect to serve our customers, and we have transmission rights to use it.”

Building for the future

Put simply, at NorthWestern, “we need to generate more power,” Dykhouse said. “We can’t just rely on the open market to provide customers power. The switch to less carbon-intensive energy needs to be a thoughtful process, a realistic process, and Brian understands that.”

NorthWestern gets 60 percent of its energy from carbonless or noncarbon-emitting energy already, he said.

“We’re one of the cleanest companies in the country,” Dykhouse said. “This whole green energy push is fine, but there’s a real gap between what green energy can do and what is needed, reliability and cost. You take the coldest day of the year, and if the wind doesn’t blow and the sun doesn’t shine, you have to have something.”

For Bird, the future of energy generation likely is multifold. There’s supply coming through the company’s investments and the Avista agreement, but there’s also continued consideration of alternative power sources, including nuclear.

NorthWestern is evaluating the potential of nuclear power in South Dakota and Montana, driven partially by a federal incentive that would offer a 2 percent reduction in interest costs to utilities that build a nuclear facility by 2030.

“We’re talking a small, modular reactor, and we’re evaluating. We’re a long ways away from even deciding to move forward or put a shovel in the ground,” Bird said. “It’s cheaper if we can find partners, and there are parties inside and outside the state we’re talking about. The study has to be done by May to continue the loan process.”

While wind and solar offer options, “they’re great energy. They’re not great capacity,” Bird said. “Capacity means I can turn energy on and off with a switch. I can’t turn wind and solar on and off with a switch. When we have peak days, we don’t have four-hour peak days. Montana this year had four days of minus 30 degree temperatures Christmas week. We had peaks in South Dakota in the winter and summer.”

With coal plants, “I have fuel. I can run them. Gas plants, as long as I have fuel, I can run them 24/7. That’s what I’m looking for. But nuclear is the only one that’s self-sufficient. Hydrogen you need another generation source. So nuclear feels like the best option, and we continue to look at that. But we’re a small utility. We’re watching the big folks.”

Culturally, the company has a collaborative feel, Bird said. Of its 1,500 employees, about 45 are in the Sioux Falls corporate office, and more than 80 percent work from the office or in the field instead of remotely.

“I always felt we should be in the office because our folks in the field have to go out every day, and I didn’t want to have an us-versus-them culture,” Bird said.

Dykhouse points to an internal program started post-bankruptcy called Leadership NorthWestern as a cultural win, bringing representatives from various areas of the company together to get to know the company and each other.

“And they deal with a problem or challenge or opportunity the company has,” he said. “How are we going to solve it? It refocused the company and brought everyone together around that, and they had success.”

While 80 percent of NorthWestern’s customers are in Montana, the utility also serves South Dakota customers from Aberdeen to Huron, Mitchell and Brookings and south to Yankton.

In 2019, NorthWestern received a franchise agreement to begin serving customers in Tea and Harrisburg.

“I call us an East River utility,” Bird said. “Xcel has the service territory (in Sioux Falls) on the electric side, and you don’t want to lay pipes on top of each other. So MidAmerican has the Sioux Falls footprint, and it’s just the area south of Sioux Falls that’s still growing and a lot of pipe isn’t laid. So there’s good competition (there) between us and MidAmerican.”

Priorities for the year ahead include continued investing in technology, both in meters and on poles to help pinpoint problems, in addition to continuing to tackle the need for capacity.

Reflecting on the milestone year ahead, “we’re certainly proud of the fact we’ve been in business 100 years, and I don’t see a reason we aren’t going to be in business another 100,” Bird said. “That could be naive, we understand the changes in technology and people being able to provide their own power in ways, but I think it’s cost-effective for customers. So much that they forget we’re even there.”

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Marking 100 years, NorthWestern has new CEO, makes plans for future power supply

At 100 years old and with a new CEO, Sioux Falls-based NorthWestern Energy looks to the next century.

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