NorthWestern Reports Second Quarter 2008 Financial Results

Reports significant improvement in net income

SIOUX FALLS, S.D., July 31 /PRNewswire-FirstCall/ -- NorthWestern
Corporation d/b/a NorthWestern Energy (NYSE: NWE) reported financial results
for the quarter ended June 30, 2008.
Highlights for the quarter include:

* Net income improved to $9.5 million in the second quarter of 2008
compared with $2.4 million in the second quarter of 2007;
* The stipulated agreement for electric and natural gas rate case was
approved by the Montana Public Service Commission ("MPSC");
* A purchase and sale agreement with Bicent (Montana) Power Company,
LLC ("Bicent") to sell the Company's 30% interest in Colstrip Unit 4
for $404 million was signed;
o The agreement allows NorthWestern to work with the MPSC to
explore the viability of placing the asset in rate base instead
of selling to Bicent;
o The application for consideration of rate base was filed;
o If the asset is placed in rate base, the agreement with Bicent
would be terminated;
* Announced a share buyback program for approximately 3.1 million
shares, equal to the number of shares in the Company's disputed
claims reserve;
* Moody's Investor Service ("Moody's") upgraded the Company's senior
secured and unsecured credit ratings;
* Refinanced $55 million of South Dakota First Mortgage Bonds at a
fixed rate of 6.05% maturing May 1, 2018, resulting is an annual
interest savings of approximately $.5 million;
* Began trading on the NYSE Euronext ("NYSE") under ticker symbol NWE
on May 1, 2008.

Financial Results:
Consolidated net income was $9.5 million or $.24 per diluted share for the
quarter ended June 30, 2008, a 295.8% increase compared with consolidated net
income of $2.4 million or $.06 per diluted share for the quarter ended June
30, 2007.
Consolidated net income for the six months ended June 30, 2008 was $33.0
million, an increase of $11.4 million, or 52.8%, over $21.6 million in 2007.
"We had a great quarter where we benefited from customer growth, rate
relief and colder weather than last year," said Mike Hanson, President and
CEO. "We continue our focus on core operations and are well poised to move
forward on our generation and transmission growth projects."
Consolidated gross margin for the second quarter of 2008 was $127.2
million compared with $118.4 million for the second quarter of 2007.
Improvements in margin were due to regulated electric and gas rate increases,
increases in volumes from customer growth and usage, and lower qualifying
facility (QF) supply costs based on actual QF pricing and output. Gross
margin in the regulated electric segment increased $9.1 million from the
second quarter of 2007. Gross margin in the regulated natural gas segment
increased $5.5 million from the second quarter of 2007. Gross margin in the
unregulated electric segment decreased $5.5 million from the second quarter of
2007.
Consolidated gross margin for the six months ended June 30, 2008 was
$284.0 million, an increase of $18.4 million over the first six months of
2007.
Consolidated operating, general and administrative expenses were
$53.9 million for the second quarter of 2008 compared with $58.7 million for
the second quarter of 2007. The decrease was due to reduced operating lease
expense related to the purchase of our previously leased interest in Colstrip
Unit 4 and lower legal and professional fees.
Consolidated operating, general and administrative expenses were
$113.9 million for the six months ended June 30, 2008 as compared with
$121.1 million in same period of 2007.
Property and other taxes were $20.5 million in the second quarter of 2008
compared with $20.6 million in the same period of 2007. For the six months
ended June 30, 2008, property and other taxes were $44.2 million compared with
$41.3 million in the same period of 2007.
Depreciation expense was $21.2 million in the second quarter of 2008
compared with $20.8 million in the same period of 2007. The increase in
depreciation expense was related primarily to the purchase of the previously
leased interest in Colstrip Unit 4. For the six months ended June 30, 2008,
depreciation expense was $42.3 million compared with $40.7 million in the same
period of 2007.
Interest expense was $15.8 million for the second quarter of 2008 compared
with $14.5 million for the second quarter of 2007, primarily related to the
additional debt incurred for the purchase of the previously leased interest in
Colstrip Unit 4. For the six months ended June 30, 2008, interest expense was
$31.8 million compared with $27.7 million in the same period of 2007.
Results from Regulated Operations
Regulated electric gross margin for the second quarter of 2008 was
$91.8 million, up 11.0 percent, compared with $82.7 million for the same
period in 2007. This $9.1 million increase was primarily due to an annual
adjustment to QF related supply costs to reflect actual QF pricing and output
which was lower than our estimate, rate increases, better wholesale margin due
to increased plant availability in South Dakota, offset in part by lower
transmission volumes.
Regulated retail electric volumes for the second quarter of 2008 totaled
2,370,000 megawatt hours compared with 2,302,000 megawatt hours for the second
quarter of 2007, a 3.0% increase. The increase was due primarily to customer
growth. Wholesale electric volumes were 82,000 megawatt hours for the second
quarter 2008, an increase from 33,000 megawatt hours for the same period of
2007 due primarily to increased plant availability in the South Dakota
generation facilities.
Regulated electric gross margin for the six months ended June 30, 2008
increased $16.9 million as compared with the same period in 2007.
Regulated retail electric volumes for the six months ended June 30, 2008
totaled 5,005,000 megawatt hours, an increase of 3.5% as compared with the
same period in 2007. Regulated wholesale electric volumes for the first six
months in 2008 were 131,000 megawatt hours, an increase from 65,000 megawatt
hours in the same period in 2007.
Regulated natural gas gross margin was $30.6 million for the second
quarter of 2008 compared with $25.1 million for the second quarter in 2007.
The increase was primarily due to increased volumes due to colder weather and
1.3% customer growth along with rate increases.
Regulated retail natural gas volumes were 6,055,000 dekatherms for the
second quarter of 2008, an increase of 26.8% compared with 4,775,000
dekatherms for the same period in 2007. The increase in volumes was primarily
due to colder weather and customer growth.
Regulated natural gas gross margin for the first six months of 2008 was
$81.0 million compared with $68.1 million for the same period in 2007. The
increase was primarily due to increased volumes due to colder weather and 1.3%
customer growth along with rate increases.
Regulated retail natural gas volumes were 20,227,000 dekatherms for the
first six months of 2008 compared with 17,811,000 dekatherms for the same
period in 2007.
Results from Unregulated Operations
Gross margin from unregulated electric operations was $4.9 million for the
second quarter of 2008, a decrease from $10.4 million for the second quarter
of 2007 primarily due to lower average contracted prices and higher fuel
supply costs, offset by an increase in volumes at Colstrip Unit 4. In
addition, the Company recorded an unrealized loss of $5.2 million during the
second quarter of 2008 on forward contracts due to changes in forward prices
of electricity. These contracts economically hedge a portion of our Colstrip
Unit 4 output through 2009. Unrealized gains and losses will be recorded,
based on market prices through the duration of these contracts; however, they
will ultimately reverse as the power is delivered.
Unregulated electric volumes were 416,000 megawatt hours in the second
quarter of 2008 compared with 307,000 megawatt hours in the same period in
2007. Electric volumes at Colstrip Unit 4 increased primarily due to
increased plant availability.
Unregulated electric gross margin for the six months ended June 30, 2008
decreased $10.1 million as compared with the same period in 2007.
Unregulated retail electric volumes for the six months ended June 30, 2008
totaled 891,000 megawatt hours, an increase of 21.2% as compared with the same
period in 2007.
Liquidity and Capital Resources
As of June 30, 2008, cash and cash equivalents were $24.2 million compared
with $12.8 million at Dec. 31, 2007. The Company had revolver availability of
$178.4 million at June 30, 2008 compared with $158.7 million at Dec. 31, 2007.
Cash provided by operating activities totaled $124.6 million during the
first six months of 2008, compared with $136.2 million during the six months
ended June 30, 2007. This decrease was primarily due to the timing of
accounts receivable collections, partially offset by decreased purchases of
storage gas and higher net income.
The Company used $43.1 million for investment activities during the six
months ended June 30, 2008 compared with $92.2 million for the six months
ended June 30, 2007. Capital expenditures for the six months ended June 30,
2008 were $43.1 million as compared with $52.6 million in 2007. In addition,
in 2007 the Company used $40.2 million to complete the purchase of a portion
of our previously leased interest in the Colstrip Unit 4 generating facility.
The Company used $70.1 million in financing activities during the six
months ended June 30, 2008 compared with $45.9 million for the six months
ended June 30, 2007. During the six months ended June 30, 2008 the Company
made net debt repayments of $42.9 million and paid dividends on common stock
of $25.7 million. During the six months ended June 30, 2007 the Company made
debt repayments of $33.9 million and paid dividends on common stock of $22.3
million.
Dividend
NorthWestern's Board of Directors declared a quarterly common stock
dividend of 33 cents, payable on Sept. 30, 2008, to common shareholders of
record as of Sept. 15, 2008.
2008 Earnings Outlook
Northwestern reaffirms its estimate for earnings per share in 2008 to be
in the range of $1.60 - $1.75 per fully diluted share. The guidance
assumptions for 2008 include:
* Impact of rate relief in the Company's service territories;
* Decreased lease expense and increased depreciation and interest
expense related to the purchase of the previously leased interest in
Colstrip Unit 4;
* Lower average pricing on forward sales contracts and anticipated
output volumes of 1.7 million megawatt hours at Colstrip Unit 4;
* Fully diluted average shares outstanding of 39.5 million; and
* Normal weather in the Company's electric and natural gas service
territories for 2008.

The Company plans to update guidance, if appropriate, after the financial
results of the third quarter of 2008 and when there is more clarity on the
Company's share buyback program.
Company Hosting Investor Conference Call
NorthWestern will host an investor conference call today (July 31) at
11:00 am Eastern Time (10:00 a.m. Central Time) to review its financial
results for the quarter ended June 30, 2008.
The conference call will be webcast live on the Internet at
http://www.northwesternenergy.com under the "Investor Information" heading.
To listen, please go to the site at least 10 minutes in advance of the call to
register. An archived webcast will be available shortly after the call.
A telephonic replay of the call will be available beginning at noon ET on
July 31, 2008, through August 31, 2008, at 800-475-6701, access code 954803.
About NorthWestern Energy
NorthWestern Energy is one of the largest providers of electricity and
natural gas in the Upper Midwest and Northwest, serving approximately 650,000
customers in Montana, South Dakota and Nebraska. More information on
NorthWestern Energy is available on the Company's Web site at
http://www.northwesternenergy.com.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This press release contains forward-looking statements within the meaning
of the "safe harbor" provisions of the Private Securities Litigation Reform
Act of 1995, including, without limitation, the information under "2008
Earnings Outlook". Forward-looking statements often address our expected
future business and financial performance, and often contain words such as
"expects," "anticipates," "intends," "plans," "believes," "seeks," or "will."
These statements are based upon our current expectations and speak only as of
the date hereof. Our actual future business and financial performance may
differ materially and adversely from those expressed in any forward-looking
statements as a result of various factors and uncertainties, including, but
not limited to:
* potential additional adverse federal, state, or local legislation or
regulation or adverse determinations by regulators could have a
material adverse effect on our liquidity, results of operations and
financial condition;

* unanticipated changes in availability of trade credit, usage,
commodity prices, fuel supply costs or availability due to higher
demand, shortages, weather conditions, transportation problems or
other developments, may reduce revenues or may increase operating
costs, each of which would adversely affect our liquidity;

* unscheduled generation outages or forced reductions in output,
maintenance or repairs, which may reduce revenues and increase
operating costs or may require additional capital expenditures or
other increased operating costs; and

* adverse changes in general economic and competitive conditions in
our service territories.

In addition, we may not be able to complete the proposed Colstrip Unit 4
transaction due to a number of factors, including the failure to obtain
regulatory approvals, the MPSC issues an order providing the Colstrip Unit 4
interest will be included in NorthWestern's rate base, the exercise by
existing owners of rights of first refusal, the occurrence of a material
adverse effect, or failure to satisfy other closing conditions. Our Annual
Report on Form 10-K, recent and forthcoming Quarterly Reports on Form 10-Q,
recent Current Reports on Form 8-K and other Securities and Exchange
Commission filings discuss some of the important risk factors that may affect
our business, results of operations and financial condition.
We undertake no obligation to publicly update or revise any forward-
looking statements, whether as a result of new information, future events or
otherwise.

NORTHWESTERN CORPORATION
CONSOLIDATED BALANCE SHEETS
(in thousands)

June 30, December 31,
2008 2007
(Unaudited)
ASSETS
Current Assets $284,523 $278,354
Property, Plant, and Equipment, Net 1,798,735 1,770,880
Goodwill 355,128 355,128
Regulatory Assets 113,031 123,041
Other Noncurrent Assets 19,236 19,977
Total Assets $2,570,653 $2,547,380
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Maturities of Long-term Debt and
Capital Leases $21,121 $21,006
Current Liabilities 324,165 300,833
Long-term Capital Leases 37,412 38,002
Long-term Debt 744,432 787,360
Noncurrent Regulatory Liabilities 218,923 194,959
Deferred Income Taxes 100,987 74,046
Other Noncurrent Liabilities 291,648 308,150
Total Liabilities 1,738,688 1,724,356
Total Shareholders' Equity 831,965 823,024
Total Liabilities and Shareholders' Equity $2,570,653 $2,547,380

NORTHWESTERN CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(in thousands, except per share amounts)

Three Months Ended Six Months Ended
June 30, June 30,
2008 2007 2008 2007
OPERATING REVENUES $276,506 $259,608 $662,481 $626,173
COST OF SALES 149,354 141,255 378,438 360,534
GROSS MARGIN 127,152 118,353 284,043 265,639
OPERATING EXPENSES
Operating, general
and administrative 53,866 58,677 113,937 121,125
Property and other
taxes 20,540 20,660 44,180 41,252
Depreciation 21,225 20,793 42,316 40,687
TOTAL OPERATING
EXPENSES 95,631 100,130 200,433 203,064
OPERATING INCOME 31,521 18,223 83,610 62,575
Interest Expense (15,848) (14,527) (31,849) (27,747)
Other (Expense) Income (161) 359 422 737
Income Before Income
Taxes 15,512 4,055 52,183 35,565
Income Tax Expense (6,009) (1,621) (19,229) (13,989)
Net Income $9,503 $2,434 $32,954 $21,576
Average Common Shares
Outstanding 38,973 35,988 38,973 35,855
Basic Earnings per
Average Common Share $0.24 $0.07 $0.85 $0.60
Diluted Earnings per
Average Common Share $0.24 $0.06 $0.84 $0.57
Dividends Declared per
Average Common Share $0.33 $0.31 $0.66 $0.62

NORTHWESTERN CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)

Six Months Ended June 30,
2008 2007
Operating Activities:
Net Income $32,954 $21,576
Noncash Items 73,001 58,300
Changes in Operating Assets and Liabilities 18,699 56,361
Cash Provided by Operating Activities 124,654 136,237

Cash Used in Investing Activities (43,058) (92,263)

Cash Used in Financing Activities (70,127) (45,904)

Increase (decrease) in Cash and Cash Equivalents 11,469 (1,930)
Cash and Cash Equivalents, beginning of period 12,773 1,930

Cash and Cash Equivalents, end of period $24,242 $-

NORTHWESTERN CORPORATION
REGULATED SEGMENTS

REGULATED ELECTRIC SEGMENT
Three months ended June 30, 2008
(Unaudited)

Results
2008 2007 Change % Change
(in millions)
Total Revenues $179.0 $170.6 $8.4 4.9
Total Cost of Sales 87.2 87.9 (0.7) (0.8)
Gross Margin $91.8 $82.7 $9.1 11.0%
% GM/Rev 51.3% 48.5%

Volumes MWH
2008 2007 Change % Change
(in thousands)
Retail Electric
Montana 498 461 37 8.0%
South Dakota 105 103 2 1.9
Residential 603 564 39 6.9
Montana 756 754 2 0.3
South Dakota 200 193 7 3.6
Commercial 956 947 9 1.0
Industrial 773 746 27 3.6
Other 38 45 (7) (15.6)
Total Retail Electric 2,370 2,302 68 3.0%
Wholesale Electric 82 33 49 148.5%

Average Customer Counts 2008 2007 Change % Change
(in thousands)
Retail Electric
Montana 265,820 262,209 3,611 1.4%
South Dakota 47,882 47,603 279 0.6
Residential 313,702 309,812 3,890 1.3
Montana 59,449 58,106 1,343 2.3
South Dakota 11,522 11,373 149 1.3
Commercial 70,971 69,479 1,492 2.1
Industrial 71 70 1 1.4
Other 5,559 5,699 (140) (2.5)
Total Retail Electric 390,303 385,060 5,243 1.4%

2008 as compared with:
Cooling Degree-Days 2007 Historic Average
Montana 37% colder 21% colder

South Dakota 84% colder 75% colder

REGULATED ELECTRIC SEGMENT
Six months ended June 30, 2008
(Unaudited)

Results
2008 2007 Change % Change
(in millions)
Total Revenues $375.6 $349.1 $26.5 7.6
Total Cost of Sales 190.3 180.7 9.6 5.3
Gross Margin $185.3 $168.4 $16.9 10.0%
% GM/Rev 49.3% 48.2%

Volumes MWH
2008 2007 Change % Change
(in thousands)
Retail Electric
Montana 1,167 1,096 71 6.5%
South Dakota 264 251 13 5.2
Residential 1,431 1,347 84 6.2
Montana 1,555 1,542 13 0.8
South Dakota 422 396 26 6.6
Commercial 1,977 1,938 39 2.0
Industrial 1,534 1,480 54 3.6
Other 63 70 (7) (10.0)
Total Retail Electric 5,005 4,835 170 3.5%
Wholesale Electric 131 65 66 101.5%

Average Customer Counts 2008 2007 Change % Change
(in thousands)
Retail Electric
Montana 265,962 262,191 3,771 1.4%
South Dakota 47,895 47,634 261 0.5
Residential 313,857 309,825 4,032 1.3
Montana 59,299 57,912 1,387 2.4
South Dakota 11,427 11,279 148 1.3
Commercial 70,726 69,191 1,535 2.2
Industrial 71 71 - -
Other 5,106 5,146 (40) (0.8)
Total Retail Electric 389,760 384,233 5,527 1.4%

2008 as compared with:
Cooling Degree-Days 2007 Historic Average
Montana 37% colder 21% colder

South Dakota 84% colder 75% colder

NORTHWESTERN CORPORATION
REGULATED NATURAL GAS SEGMENT
Three months ended June 30, 2008
(Unaudited)

Results
2008 2007 Change % Change
(in millions)
Total Revenues $80.5 $62.0 $18.5 29.8%
Total Cost of Sales 49.9 36.9 13.0 35.2%
Gross Margin $30.6 $25.1 $5.5 21.9%
% GM/Rev 38.0% 40.5%

Volumes Dekatherms
2008 2007 Change % Change
(in thousands)
Retail Gas
Montana 2,523 1,955 568 29.1%
South Dakota 589 466 123 26.4
Nebraska 526 412 114 27.7
Residential 3,638 2,833 805 28.4
Montana 1,234 981 253 25.8
South Dakota 542 434 108 24.9
Nebraska 596 483 113 23.4
Commercial 2,372 1,898 474 25.0
Industrial 16 24 (8) (33.3)
Other 29 20 9 45.0
Total Retail Gas 6,055 4,775 1,280 26.8%

Average Customer Counts 2008 2007 Change % Change
(in thousands)
Retail Gas
Montana 155,546 152,968 2,578 1.7%
South Dakota 36,498 36,527 (29) (0.1)
Nebraska 36,344 36,109 235 0.7
Residential 228,388 225,604 2,784 1.2
Montana 21,770 21,308 462 2.2
South Dakota 5,760 5,732 28 0.5
Nebraska 4,519 4,513 6 0.1
Commercial 32,049 31,553 496 1.6
Industrial 305 312 (7) (2.2)
Other 139 141 (2) (1.4)
Total Retail Gas 260,881 257,610 3,271 1.3%

2008 as compared with:
Heating Degree-Days 2007 Historic Average
Montana 25% colder 10% colder
South Dakota 36% colder 12% colder
Nebraska 44% colder 10% colder

NORTHWESTERN CORPORATION
REGULATED NATURAL GAS SEGMENT
Six months ended June 30, 2008
(Unaudited)

Results
2008 2007 Change % Change
(in millions)
Total Revenues $252.2 $220.2 $32.0 14.5%
Total Cost of Sales 171.2 152.1 19.1 12.6%
Gross Margin $81.0 $68.1 $12.9 18.9%
% GM/Rev 32.1% 30.9%

Volumes Dekatherms
2008 2007 Change % Change
(in thousands)
Retail Gas
Montana 8,091 6,989 1,102 15.8%
South Dakota 2,196 1,992 204 10.2
Nebraska 1,931 1,794 137 7.6
Residential 12,218 10,775 1,443 13.4
Montana 3,991 3,510 481 13.7
South Dakota 1,920 1,615 305 18.9
Nebraska 1,880 1,707 173 10.1
Commercial 7,791 6,832 959 14.0
Industrial 136 96 40 41.7
Other 82 108 (26) (24.1)
Total Retail Gas 20,227 17,811 2,416 13.6%

Average Customer Counts 2008 2007 Change % Change
(in thousands)
Retail Gas
Montana 155,652 152,953 2,699 1.8%
South Dakota 36,706 36,708 (2) -
Nebraska 36,616 36,441 175 0.5
Residential 228,974 226,102 2,872 1.3
Montana 21,728 21,247 481 2.3
South Dakota 5,799 5,764 35 0.6
Nebraska 4,556 4,548 8 0.2
Commercial 32,083 31,559 524 1.7
Industrial 306 315 (9) (2.9)
Other 139 140 (1) (0.7)
Total Retail Gas 261,502 258,116 3,386 1.3%

2008 as compared with:
Heating Degree-Days 2007 Historic Average
Montana 14% colder 3% colder
South Dakota 11% colder 5% colder
Nebraska 12% colder 5% colder

NORTHWESTERN CORPORATION
UNREGULATED ELECTRIC SEGMENT
Three months ended June 30, 2008
(Unaudited)

Results
2008 2007 Change % Change
(in millions)
Total Revenues $16.5 $14.6 $1.9 13.0
Total Cost of Sales 11.6 4.2 7.4 176.2
Gross Margin $4.9 $10.4 $(5.5) (52.9)%
% GM/Rev 29.7% 71.2%

Volumes MWH
2008 2007 Change % Change
(in thousands)
Wholesale Electric 416 307 109 35.5%

NORTHWESTERN CORPORATION
UNREGULATED ELECTRIC SEGMENT
Six months ended June 30, 2008
(Unaudited)

Results
2008 2007 Change % Change
(in millions)
Total Revenues $37.0 $36.8 $0.2 0.5
Total Cost of Sales 18.7 8.4 10.3 122.6
Gross Margin $18.3 $28.4 $(10.1) (35.6)%
% GM/Rev 49.5% 77.2%

Volumes MWH
2008 2007 Change % Change
(in thousands)
Wholesale Electric 891 735 156 21.2%

SOURCE NorthWestern Corporation

Media, Claudia Rapkoch, 1-866-622-8081, claudia.rapkoch@northwestern.com, or
Investors, Dan Rausch, +1-605-978-2902, daniel.rausch@northwestern.com, both
of NorthWestern Corporation