73088--3/3/2006--NORTHWESTERN

related topics

{financial, litigation, operation}

{operation, natural, condition}

{cost, regulation, environmental}

{debt, indebtedness, cash}

{capital, credit, financial}

{investment, property, distribution}

{interest, director, officer}

{stock, price, share}

{condition, economic, financial}

We have incurred, and expect to continue to incur, significant costs associated with outstanding litigation, which may adversely affect our results of operations and cash flows. Certain of our prepetition creditors received NorthWestern common stock pursuant to our Plan and may have the ability to influence certain aspects of our business operations. We are the subject of a formal investigation by the SEC relating to the restatement of our 2002 quarterly financial statements and other accounting and financial reporting matters. If the investigation was to result in a regulatory proceeding or action against us, then our business and financial condition could be harmed. We are subject to extensive governmental regulations that affect our industry and our operations. Existing and changed regulations and possible deregulation have the potential to impose significant costs, increase competition and change rates which could have a material adverse effect on our results of operations and financial condition. To the extent our incurred supply costs are deemed imprudent by the applicable state regulatory commissions, we would under-recover our costs, which could adversely impact our results of operations. Our obligation to supply a minimum annual quantity of qualifying facility (QF) power to the Montana default supply could expose us to material commodity price risk if we are required to supply any quantity deficiency during a time of high commodity prices. The value of our Colstrip Unit 4 leasehold improvements could be impaired if we are unable to obtain adequate terms on 132 megawatts of power that are not under contract after 2010. Our electric and natural gas distribution systems are subject to municipal condemnation. Seasonal and quarterly fluctuations of our business could adversely affect our results of operations and financial condition. Our utility business is subject to extensive environmental laws and regulations and potential environmental liabilities, which could result in significant costs and liabilities. Our non-investment grade credit ratings has impacted our borrowing costs and liquidity, and we expect that our non-investment grade status will continue to affect our cash flows and liquidity. Our ability to access the capital markets is dependent on our ability to obtain certain regulatory approvals and constrained by the covenants contained in our debt instruments. We may receive, respond to and not pursue, as appropriate, unsolicited indications of interest, proposals or offers to acquire us or some or all of our assets, and if not pursued, our shareholders may not be able to obtain a premium for their shares of common stock offered in the proposed transaction.

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73088--3/3/2006--NORTHWESTERN_CORP