Coal plants for free, but the operating costs are real.
In the long arc of American energy infrastructure, utilities periodically reach moments where the weight of transformation — mergers, new technologies, shifting demand — presses visibly against the quarterly ledger. NorthWestern Energy finds itself at such a crossroads in the autumn of 2025, reporting a decline in third-quarter earnings to $38.2 million even as its underlying operations quietly strengthen. From its service territories spanning Montana, South Dakota, and Nebraska, the company is simultaneously absorbing new customers, pursuing a landmark merger with Black Hills Corporation, and positioning itself to power the data centers that may define the next era of regional electricity demand.
- Headline earnings fell 18% year-over-year to $0.62 per share, masking an adjusted improvement to $0.79 that suggests the business beneath the merger noise is actually gaining ground.
- A $7.6 million quarterly bill for merger-related costs, rising interest expenses, and accelerating depreciation are compressing reported profits even as NorthWestern adds customers and raises rates.
- The pending merger with Black Hills Corporation — filed with regulators in three states in October — represents the company's largest strategic bet, consuming capital and attention while promising a combined utility of greater scale by late 2026.
- Data center developers have signaled appetite for up to 1,100 megawatts of power by 2030, a demand wave NorthWestern is racing to meet through coal plant acquisitions, a proposed $300 million gas facility in South Dakota, and new federal rate filings.
- With net liquidity shrinking to $262 million and a $2.7 billion five-year capital plan in motion, the company is threading a careful path between growth investment and financial discipline, anchored by reaffirmed full-year guidance of $3.53 to $3.65 per share.
NorthWestern Energy closed its third quarter of 2025 with net income of $38.2 million, or 62 cents per diluted share — a meaningful step down from the 76 cents it earned in the same period a year ago. The decline arrived despite new customer rates and expanded service territory, including the July acquisition of roughly 33,000 natural gas customers from Energy West Montana for $35.9 million. What weighed on results was a combination of merger-related expenses, higher depreciation from infrastructure buildout, and rising interest costs tied to increased borrowing.
Stripped of one-time items, the picture looked different. Adjusted earnings rose to 79 cents per share from 65 cents a year earlier, a signal that core operations are improving even as transformation costs cloud the headline. CEO Brian Bird pointed to the Energy West integration and the company's larger pending transaction — a merger with Black Hills Corporation announced in August — as evidence of strategic momentum. Regulatory filings seeking approval in Montana, South Dakota, and Nebraska were submitted in October, with a targeted close in the second half of 2026.
The merger is not cheap in the near term. NorthWestern spent $7.6 million on deal-related costs in the quarter alone, with more to come through 2026. The company is holding firm on full-year 2025 guidance of $3.53 to $3.65 per share and a long-term annual growth target of 4 to 6 percent, underpinned by a $2.7 billion five-year capital investment plan.
Beyond the merger, the company is navigating a Montana rate review pending since July 2024 and fielding extraordinary interest from data center developers. Three companies — including Quantica Infrastructure and Sabey — have signed nonbinding letters of intent representing potential demand of 175 megawatts by late 2027, scaling to more than 1,100 megawatts by 2030. To meet that load, NorthWestern is acquiring coal generation capacity at Colstrip Units 3 and 4 from Avista and Puget Sound Energy at no upfront cost, while managing the associated operating expenses through power sales agreements and regulatory filings.
Looking further out, the company submitted a proposal in October to build a 131-megawatt natural gas plant in Aberdeen, South Dakota, at an estimated $300 million — a project aimed at meeting regional reliability standards by 2030. Net liquidity stood at $262 million at quarter's end, down from $316 million a year prior, reflecting the capital intensity of a utility in active transformation. The board declared a quarterly dividend of 66 cents per share, consistent with the company's commitment to a 60 to 70 percent long-term payout ratio.
NorthWestern Energy reported third-quarter earnings of $38.2 million, or 62 cents per diluted share, a decline from the 76 cents it earned in the same quarter a year earlier. The drop came despite new customer rates and increased usage across its service territories—the company added roughly 33,000 natural gas customers in July when it completed its acquisition of Energy West Montana operations for $35.9 million. What pulled earnings down was the weight of merger-related expenses, higher depreciation costs tied to infrastructure investments, and a jump in interest expense from increased borrowing and rising rates.
The company's adjusted non-GAAP earnings, which strip out one-time items, actually improved to 79 cents per share from 65 cents a year ago, a signal that underlying operations are performing better than the headline numbers suggest. Chief Executive Brian Bird framed the quarter as a success, pointing to the integration of Energy West's natural gas assets and the progress on a far larger transaction: a merger with Black Hills Corporation announced in August. The two utilities filed applications in October with regulators in Montana, South Dakota, and Nebraska seeking approval for what the company describes as a merger of equals. If approved, the deal would close in the second half of 2026.
The merger itself is consuming resources. NorthWestern spent $7.6 million on merger-related costs in the third quarter alone, and those expenses are expected to continue through 2026. The company is affirming its full-year 2025 earnings guidance of $3.53 to $3.65 per share and maintaining its long-term growth target of 4 to 6 percent annually, based on a $3.40 baseline from adjusted 2024 earnings. It is also sticking with its five-year capital investment plan of $2.7 billion, which should drive rate base growth of 4 to 6 percent from a 2024 base of approximately $5.4 billion.
Beyond the merger, NorthWestern is navigating several significant operational challenges and opportunities. The company is awaiting a final order from Montana regulators on a rate review that has been pending since July 2024; interim rates remain in effect on a refundable basis while the Public Service Commission deliberates. More intriguingly, NorthWestern is fielding substantial demand from data center developers. It has signed nonbinding letters of intent with three companies—Quantica Infrastructure, Sabey, and another unnamed developer—that could require 175 megawatts of power by late 2027, growing to as much as 1,100 megawatts or more by 2030. The company is working to execute formal service agreements and has filed a request with the Federal Energy Regulatory Commission for cost-based rates for a subsidiary that would serve these large loads.
To support this potential demand, NorthWestern is acquiring additional coal-generation capacity. It has agreed to take over Avista and Puget Sound Energy's interests in Colstrip Units 3 and 4—a combined 222 megawatts—for zero dollars on January 1, 2026. The acquisitions come with operating costs of roughly $18 million annually from the Avista stake and $30 million from the Puget stake. The company has filed a request with Montana regulators for a temporary tariff waiver that would allow it to recover the Avista costs through power sales, and it expects to sign a contract by year-end to sell excess capacity from the Puget interest through late 2027. It also submitted a request to federal regulators in October for approval of cost-based rates for the subsidiary owning the Puget interest, expecting approval by January 1, 2026.
Looking further ahead, NorthWestern submitted a proposal to the Southwest Power Pool in October to build a 131-megawatt natural gas generating facility in Aberdeen, South Dakota, at an estimated cost of $300 million. The project is designed to meet regional capacity requirements by 2030 in response to updated reliability standards. The company expects to update its capital forecast in the first half of 2026 once transmission interconnection studies are complete. The company's total net liquidity stood at $262.2 million as of September 30, down from $316.5 million a year earlier, reflecting the capital intensity of its growth plans and the costs of integration and merger preparation. The board declared a quarterly dividend of 66 cents per share, payable at year-end, and the company remains committed to maintaining a dividend payout ratio between 60 and 70 percent over the long term.
Citas Notables
We are excited about the announcement of the merger with Black Hills Corporation, creating a stronger regional utility better positioned to meet increasingly complex and rapidly growing energy demands.— Brian Bird, President and CEO of NorthWestern Energy
We expect to update our capital expenditures forecast in the first half of 2026 upon the completion of the transmission interconnection study regarding the necessary transmission upgrades needed for this additional generation capacity.— NorthWestern Energy, regarding the proposed 131-megawatt natural gas facility in South Dakota
La Conversación del Hearth Otra perspectiva de la historia
Why did earnings fall when the company added 33,000 customers and raised rates?
The math of utility regulation is counterintuitive. You can add customers and raise rates, but if your costs rise faster—depreciation on new assets, interest on debt, merger expenses—the bottom line shrinks. NorthWestern borrowed more money at higher rates, and that interest expense jumped from $33.4 million to $38.4 million in just one quarter.
What's the real story with the Colstrip coal plants?
It's a bet on data center demand. NorthWestern is acquiring coal capacity for free because it needs generation to serve potential 175-megawatt loads starting in 2027. But coal plants are expensive to run. They're asking regulators to let them sell excess power at market rates to offset those costs, essentially using data center demand to justify keeping coal online.
Is the Black Hills merger actually going to happen?
The regulatory path is clear—Montana, South Dakota, Nebraska, and federal approval. But mergers always carry risk. The company is already spending millions on integration costs, and if regulators impose unexpected conditions or the deal falls apart, that money is gone. They're betting on a stronger regional utility, but they're betting with shareholder capital.
Why are data centers suddenly such a big deal for a utility in Montana?
Massive computing power requires massive electricity. Three separate companies approached NorthWestern about 175 megawatts initially, potentially growing to over 1,100 megawatts by 2030. That's transformational for a utility that serves 842,000 customers across four states. It's also why they need Colstrip—coal plants provide the steady baseload power data centers demand.
What happens if the merger doesn't close?
NorthWestern continues as is, but it's already committed to $2.7 billion in capital spending through 2029 and is pursuing rate increases to fund it. Without the scale and financial strength of Black Hills, that becomes harder. The merger isn't essential to the business plan, but it makes the plan more achievable.