NorthWestern Energy Q3 EPS Falls to $0.50 as Colstrip Costs Bite

# NorthWestern Energy Q3 EPS Falls to $0.50 as Colstrip Costs Bite

NorthWestern Energy Group, Inc. (Nasdaq: NWE) reported third-quarter 2026 net income of $30.7 million, or $0.50 per diluted share, on November 4, 2026, down from $38.2 million and $0.62 per diluted share a year earlier. Adjusted non-GAAP diluted EPS came in at $0.58 versus $0.79 in 2025. The company attributed the decline primarily to a $6.1 million net loss tied to its additional ownership interests in Colstrip Units 3 and 4, alongside higher depreciation and interest expense, partly offset by lower non-recoverable Montana electric supply costs and lower merger-related costs.

Context — why the Colstrip drag matters now

NorthWestern closed its acquisitions of Avista's and Puget Sound Energy's respective interests in Colstrip Units 3 and 4 on January 1, 2026, at a stated price of $0. The company now carries the associated operating costs but cannot recover them through utility base rates until a future Montana rate review. That mismatch is the core of the third-quarter earnings shortfall.

The Avista Interests add 222 megawatts of generation capacity. The Puget Interests add 370 megawatts and lift NorthWestern's ownership share of the facility to 55 percent, which the company says increases its voting share in strategic decisions at the plant. Unlike the Avista stake, NorthWestern says it does not currently need the Puget capacity to serve existing Montana customers, so those interests sit inside its FERC-regulated subsidiary.

The company has been pursuing cost-recovery mechanisms. In August 2025 it filed a temporary PCCAM tariff waiver request with the Montana Public Service Commission covering roughly $18.0 million in annual incremental operating and maintenance costs tied to the Avista Interests. The MPSC approved that waiver on an interim basis in January 2026, with final approval or denial left to the ongoing PCCAM docket.

For the Puget Interests, NorthWestern signed a contract in October 2025 to sell the dispatchable capacity and associated energy from January 1, 2026, through late 2027. Revenue from that agreement is expected to largely offset an estimated $30.0 million in annual incremental operating and maintenance costs.

Separately, NorthWestern is working toward a merger of equals with Black Hills Corporation, announced August 18, 2025. The combined parent would be named Bright Horizon Energy Corporation. Shareholders of both companies approved the deal in April 2026, and the Hart-Scott-Rodino waiting period expired. FERC and the Nebraska Public Service Commission approved it in May 2026, and the South Dakota Public Utilities Commission followed in June 2026.

Data — what the numbers show

The headline comparison is stark. Third-quarter GAAP diluted EPS fell 19.4 percent year over year, from $0.62 to $0.50. Adjusted non-GAAP diluted EPS fell further in percentage terms, down 26.6 percent from $0.79 to $0.58.

Metric	Q3 2026	Q3 2025
GAAP diluted EPS	$0.50	$0.62
Adjusted non-GAAP diluted EPS	$0.58	$0.79
Net income	$30.7M	$38.2M
Non-GAAP net income	$35.6M	$48.4M

Merger-related costs totaled $3.2 million for the quarter and $9.9 million for the nine months ended September 30, 2026, booked inside Administrative and general expenses. Those costs are excluded from the non-GAAP figures, which is why the adjusted number is higher than GAAP in absolute terms.

The company affirmed its full-year 2026 non-GAAP earnings guidance of $3.68 to $3.83 per diluted share. That range assumes normal weather, an effective income tax rate of roughly 14 percent to 18 percent, and diluted average shares outstanding of about 61.8 million. NorthWestern also reaffirmed a $3.2 billion capital investment plan for 2026-2030 and a long-term diluted EPS growth target of 4 percent to 6 percent, measured off a 2024 adjusted non-GAAP baseline of $3.40 per share.

The board declared a quarterly dividend of $0.67 per share, payable December 1, 2026, to holders of record November 17, 2026. The company said it revised those dates from its earlier disclosed schedule in connection with the pending merger and the dividend coordination provisions of the merger agreement.

Analysis — what it means for markets and sectors

NorthWestern's quarter reflects a structural problem common to regulated utilities absorbing generation assets ahead of rate recovery. The Colstrip acquisitions were struck at $0, but zero purchase price does not mean zero cost. The company is carrying the operating expense now while the revenue side waits on regulators.

The Puget Interests are the better-hedged piece. The October 2025 capacity sale contract is designed to offset roughly $30.0 million of annual costs, and FERC approved both cost-based rates and contract rates retroactive to January 1, 2026. But the Avista Interests are exposed to Pacific Northwest power prices, and the company said those prices were insufficient during the quarter to contribute to recovering the associated operating and maintenance expenses.

That is the risk to watch: the PCCAM waiver only works if power prices cooperate. The MPSC approved it on an interim basis, and final resolution sits in a separate PCCAM docket expected to conclude in the first half of 2027.

There is also litigation overhang. Two MPSC commissioners filed a FERC rehearing motion in their individual capacity in March 2026, which FERC denied by operation of law. The commissioners appealed to the Ninth Circuit in June 2026. The court granted NorthWestern's intervention and held the case in abeyance until December 11, 2026. That timeline matters because it overlaps with the expected merger close.

The counter-argument is that the Colstrip headwind is temporary and self-correcting. The company frames the acquisitions as resource-adequacy insurance for Montana customers and a foundation for serving large new loads, including data centers. If rate recovery and power sales land as planned, the drag reverses.

The merger is the larger flow driver. Completion would convert NWE shares into 0.98 shares of Black Hills common stock, with cash for fractional shares, and Black Hills would be renamed Bright Horizon Energy Corporation. That exchange ratio is the reference point arbitrage desks are tracking against the pending Montana Public Service Commission order.

Outlook — what to watch next

The single nearest catalyst is the MPSC's consideration of the merger, which the company expects prior to November 12, 2026. CEO Brian Bird said the company is awaiting final, satisfactory approval from that commission. If approval lands and the deal closes before the November 17 record date, former NorthWestern holders who become Bright Horizon shareholders would be eligible for a $0.703 per share dividend declared by Black Hills on October 28, 2026. If the merger closes after that date, NorthWestern holders of record receive the $0.67 dividend.

The second catalyst is the PCCAM docket, where resolution on the suspended 90/10 cost-sharing mechanism is expected in the first half of 2027. That outcome determines whether the Avista Interests can recover costs through the tracker.

Third is the South Dakota PIRP filing, still pending before the SDPUC, requesting roughly $11.8 million of revenue for July 2026 through June 2027, a $7.4 million increase over the prior approved amount.

On the regulatory front, the Ninth Circuit abeyance runs to December 11, 2026. The company's Large New Load tariff application remains in discovery with no settlement or hearing dates set.

Frequently Asked Questions

What does the NorthWestern Energy Q3 2026 earnings miss mean for retail investors?

The quarter showed GAAP diluted EPS of $0.50 against $0.62 a year earlier, with adjusted EPS at $0.58 versus $0.79. The company nonetheless affirmed full-year guidance of $3.68 to $3.83 per share and kept its dividend at $0.67 quarterly. For income-focused holders, the affirmed dividend and guidance are the operative facts, not the single-quarter decline.