EX-99.3 5 a2065702zex-99_3.txt EXHIBIT 99.2 Exhibit 99.3 MONTANA POWER COMPANY UTILITY UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL DATA The following presents unaudited pro forma combined financial data for the utility business of The Montana Power Company ("Montana Power"), which includes regulated electric and natural gas distribution and transmission operations and certain unregulated, energy-related businesses that provide products and services to industrial, institutional and commercial customers ("The Utility of The Montana Power Company") as of September 30, 2001 and for the year ended December 31, 2000 and for the nine months ended September 30, 2001 to reflect the portion of The Utility of The Montana Power Company that NorthWestern Corportion ("NorthWestern") has agreed to purchase pursuant to a Unit Purchase Agreement, dated as of October 29, 2000, as amended (such portion of The Utility of The Montana Power Company, the "MPC Utility"). The pro forma statements of income for the year ended December 31, 2000 and the nine months ended September 30, 2001 give effect to the following as if each transaction had occurred as of the beginning of the period presented and the pro forma combined condensed balance sheet as of September 30, 2001 gives effect to the following as if each transaction had occurred on September 30, 2001: - the exclusion of revenues and costs under an industrial power supply contract that is contractually excluded from the MPC Utility; - the implementation of the termination of a special retirement incentive plan that was contractually required to be terminated as part of the acquisition of the MPC Utility; - the elimination of certain regulatory liabilities relating to the sale by Montana Power of its oil and gas businesses, which liabilities are being retained by Montana Power and for which Montana Power is fully indemnifying NorthWestern as part of the acquisition of the MPC Utility; - the elimination of dividends paid on Montana Power's preferred stock, which stock is being retained by Montana Power as part of the acquisition of the MPC Utility; and The Unaudited Pro Forma Combined Condensed Statements of Income as presented include - the impact of an interim combined general electric and natural gas rate increase of $19.8 million per annum, granted on November 28, 2000 and lasting until May 8, 2001; and - the impact of a final combined general electric and natural gas rate increase of $20.3 million per annum approved by the MPSC on May 8, 2001. This final rate increase replaced the interim rate increase described above. In addition, as a result of legislation enacted in Montana in 2001, recovery of that portion of power supply costs related to certain qualified facilities which are currently not recovered in rates, as reflected in the Unaudited Consolidated Pro Forma Statements of Income, are anticipated to be recovered in rates in future periods. The Unaudited Consolidated Pro Forma Statements of Income for the nine months ended September 30, 2001 reflect an offsetting one-time adjustment related to the recording of a regulatory asset which resulted from the final settlement of the aforementioned general rate increase approved by the MPSC on May 8, 2001. The pro forma adjustments are based upon currently available information and certain assumptions that our management believe are reasonable. The unaudited pro forma financial information is prepaid for illustrative purposes only and is not necessarily indicative of the operating results or financial condition of the MPC Utility that would have occurred had the transactions occurred at the periods presented, nor is the unaudited pro forma financial information necessarily indicative of future operating results or the future financial position of the MPC Utility. Pro forma results for the nine months ended September 30, 2001 are not necessarily indicative of the results that may be expected for a full year. Certain pro forma adjustments are based, in part, on the impact of the terms and conditions of the Unit Purchase Agreement governing our acquisition of the MPC Utility, and we cannot assure you that such terms and conditions will remain unchanged. Pro forma adjustments exclude certain cash accounts representing excess proceeds from the Montana Power's previous sale of generation assets, which cash will be applied to reduce transition and stranded costs under the jurisdiction of the Montana Public Service Commission and the Federal Energy Regulatory Commision. S-63 MONTANA POWER COMPANY UTILITY UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL DATA You should read the following tables in conjunction with the combined financial statements and notes thereto of The Utility of The Montana Power Company as of December 31, 2000 and 1999 and for each of the years in the three-year period ended December 31, 2000 the unaudited combined financial statements and the notes thereto of The Utility of The Montana Power Company as of September 30, 2001 and for the nine months ended September 30, 2001 included in NorthWestern's Current Report on Form 8-K, dated December 12, 2001, included in Exhibit 99.1 hereto. S-64 MONTANA POWER COMPANY UTILITY UNAUDITED COMBINED CONDENSED PRO FORMA STATEMENTS OF INCOME (in thousands)
FOR THE YEAR ENDED FOR THE NINE MONTHS ENDED DECEMBER 31, 2000 SEPTEMBER 30, 2001 ----------------------------------------- ---------------------------------------- MPC UTILITY PRO FORMA PRO FORMA MPC UTILITY PRO FORMA PRO FORMA ACTUAL(1) ADJUSTMENTS MPC UTILITY ACTUAL(1) ADJUSTMENTS MPC UTILITY ----------- ------------- ----------- ----------- ----------- ----------- OPERATING REVENUES.............. $676,053 $(47,909)(2) $628,144 $536,306 $(45,655)(2) $490,651 COST OF SALES................... 378,834 (59,329)(2) 319,505 379,916 (131,744)(2) 248,172 ---------- ----------- ---------- ---------- ---------- ---------- GROSS MARGIN.................... 297,219 11,420 308,639 156,390 86,089 242,479 ---------- ----------- ---------- ---------- ---------- ---------- OPERATING EXPENSES: Selling, general and administrative expenses..... 228,999 (10,267)(3) 186,183 148,417 (23,800)(4) 124,617 Depreciation and amortization................ 54,123 (32,549)(4) 54,123 42,765 42,765 ---------- ----------- ---------- ---------- ---------- ---------- 283,122 (42,816) 240,306 191,182 (23,800) 167,382 ---------- ----------- ---------- ---------- ---------- ---------- OPERATING INCOME (LOSS)......... 14,097 54,236 68,333 (34,792) 109,889 75,097 Interest expense................ (35,880) (35,880) (24,721) (24,721) Investment income and other..... 14,481 14,481 1,707 1,707 ---------- ----------- ---------- ---------- ---------- ---------- INCOME (LOSS) BEFORE INCOME TAXES AND MINORITY INTERESTS..................... (7,302) 54,236 46,934 (57,806) 109,889 52,083 Benefit (provision) for income taxes......................... 19,599 (35,761) (16,162) 20,015 (38,721) (18,706) ---------- ----------- ---------- ---------- ---------- ---------- NET INCOME (LOSS)............... 12,297 18,475 30,772 (37,791) 71,168 33,377 Minority interest on preferred securities of subsidiary trust......................... (5,492) (5,492) (4,119) (4,119) Dividends on cumulative preferred stock............... (3,690) 3,690(5) (2,847) 2,847(5) ---------- ----------- ---------- ---------- ---------- ---------- EARNINGS ON COMMON STOCK........ $3,115 $22,165 $25,280 $(44,757) $74,015 $29,258 ========== =========== ========== ========== ========== ==========
The accompanying notes are an integral part of these combined condensed pro forma financial statements. S-65 MONTANA POWER COMPANY UTILITY UNAUDITED COMBINED CONDENSED PRO FORMA BALANCE SHEET (in thousands)
AT SEPTEMBER 30, 2001 -------------------------------------------------- AS ADJUSTED FOR MPC UTILITY PRO FORMA ACQUISITION BY ACTUAL(1) ADJUSTMENTS(6),(7) NORTHWESTERN ----------- ------------------ --------------- ASSETS CURRENT ASSETS: Cash and cash equivalents......................... $6,504 $6,504 Accounts receivable, net.......................... 110,348 $(55,909) 54,439 Inventories....................................... 11,508 11,508 Other current assets.............................. 109,944 (3,563) 106,381 PROPERTY, PLANT AND EQUIPMENT, NET.................. 1,092,178 1,092,178 GOODWILL AND OTHER INTANGIBLE ASSETS, NET........... 7,561 7,561 OTHER ASSETS: Investments....................................... 25,439 25,439 Other assets...................................... 226,471 226,471 ---------- ---------- ---------- $1,589,953 $(59,472) $1,530,481 ========== ========== ========== LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Current maturities of long-term debt.............. $6,930 $(3,531) $3,399 Short-term debt--Unrelated........................ 74,600 (74,600) Short-term debt--Associated companies............. 49,811 (49,811) Accounts payable--Unrelated....................... 37,162 37,162 Accrued expenses--Associated companies............ 75,809 (75,809) Accrued expenses.................................. 135,016 (1,460) 133,556 ---------- ---------- ---------- 379,328 (205,211) 174,117 Long-term debt...................................... 306,188 113,413(6) 419,601 Deferred income taxes............................... 86,422 (86,422) Other noncurrent liabilities........................ 380,947 380,947 Company obligated mandatorily redeemable securities of trust holding solely parent debentures......... 65,000 65,000 SHAREHOLDERS' EQUITY: Preferred stock................................... 57,654 (57,654) Other equity...................................... 314,414 176,402 490,816 ---------- ---------- ---------- $1,589,953 $(59,472) $1,530,481 ========== ========== ==========
The accompanying notes are an integral part of these combined condensed pro forma financial statements. S-66 MONTANA POWER COMPANY UTILITY NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL DATA The Unaudited Pro Forma Combined Condensed Financial Data of the MPC Utility are based on the following assumptions: (1) MPC Utility reflects the electric and natural gas transmission and distribution utility operations and certain unregulated, energy-related businesses (including Colstrip Unit 4) of Montana Power that provide products and services to industrial, institutional and commercial customers. These operations and businesses are discussed in the audited financial statements for The Utility of the Montana Power Company that NorthWestern has filed with the SEC in its Current Report on Form 8-K, dated December 12, 2001, which are incorporated by reference herein. These entities represent the entities which will be part of the pending sale to NorthWestern and are collectively referred to as the MPC Utility. (2) Reflects the elimination of $47.9 million of revenues and $59.3 million of associated power supply costs for the year ended December 31, 2000 and $45.7 million of revenues and $131.7 million of associated power supply and other costs for the nine months ended September 30, 2001 under an industrial power supply contract. Pursuant to the Unit Purchase Agreement, these associated revenues and costs have been excluded. The Unit Purchase Agreement requires the power supply contract and all obligations related thereto to remain with Montana Power and is not part of the MPC Utility being acquired by Northwestern. Montana Power has terminated two other supply contracts which had combined revenues of $4.7 million and associated power supply costs of $10.0 million for the year ended December 31, 2000 and combined revenues of $4.3 million and associated power supply costs of $8.6 million for the nine months ended September 30, 2001. Because these contracts were not specifically required to be terminated by the Unit Purchase Agreement, the pro forma statements of income have not been adjusted to exclude the losses on these contracts. (3) Reflects $10.3 million of expense from a reduction in actual salary and benefit costs for the year ended December 31, 2000 resulting from the termination of a special retirement incentive plan. Montana Power is required to terminate this special retirement plan pursuant to the Unit Purchase Agreement. (4) On October 31, 2000, Montana Power sold its oil and natural gas businesses. As a result of the transaction, Montana Power recorded a regulatory liability of $32.5 million in the fourth quarter of 2000 representing the portion of the proceeds from the sale of oil and natural gas businesses, which Montana Power believed was attributable to properties previously included in the natural gas utility rate base. An additional $23.8 million liability was recorded in the third quarter of 2001. NorthWestern is specifically indemnified, pursuant to the Unit Purchase Agreement, of any impact relating to the regulatory treatment of the gain on the sale of the oil and gas businesses. Therefore, the pro forma adjustment reflects the reversal of the $32.5 million charge in 2000 and the $23.8 million charge in the nine months ended September 30, 2001. (5) Reflects the elimination of $3.7 million of dividends for the year ended December 31, 2000 and $2.8 million of dividends for the nine months ended September 30, 2001 on preferred stock which will not be assumed by NorthWestern pursuant to the Unit Purchase Agreement. (6) On November 27, 2001, Montana Power issued $150 million aggregate principal amount of its 7.30% First Mortgage Bonds due 2006. Pursuant to the Unit Purchase Agreement with NorthWestern, which requires that NorthWestern assume no more than $488 million in debt and preferred securities of the MPC Utility, the Unaudited Pro Forma Combined Condensed Balance Sheet does not reflect the proceeds from that offering. Instead, the Unaudited Pro Forma Combined Condensed Balance Sheet S-67 MONTANA POWER COMPANY UTILITY NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL DATA adjusts Long-Term Debt such that the aggregate amount of debt and preferred securities assumed by NorthWestern upon closing of the pending acquisition equals $488 million. (7) Reflects purchase adjustments to the assets and liabilities of the MPC Utility to reflect the effect of the pending acquisition accounted for as a business purchase and to exclude certain assets and liabilities pursuant to the Unit Purchase Agreement. (8) Certain pro forma adjustments are based, in part, on the impact of the terms and conditions of the Unit Purchase Agreement governing our acquisition of the MPC Utility, and we cannot assure you that such terms and conditions will remain unchanged. Pro forma adjustments exclude certain cash accounts representing excess proceeds from Montana Power's previous sale of generation assets, which cash will be applied to reduce transition and stranded costs under the jurisdiction of the MPSC and FERC. S-68