Slide 1: Q2 2022 Earnings Conference Call
Q2 2022 EARNINGS CONFERENCE CALL August 2, 2022
Slide 2: Forward-Looking Statement
FORWARD-LOOKING STATEMENT Except for historical information contained here, the statements in this presentation are forward-looking and made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The words “anticipate,” “believe,” “could,” “estimate,” “expect
Slide 3: Company Overview
COMPANY OVERVIEW MANUFACTURING PLATFORM ELECTRIC PLATFORM MANUFACTURING SEGMENT PLASTICS SEGMENT Electric Platform Expected 2022 Earnings Mix Long-term Earnings Mix Manufacturing Platform • Competitive low-cost • Long-term growth operations potential • Constructive • Capacity utilization regulatory
Slide 4: Q2 2022 Financial Summary and Highlights
Q2 2022 FINANCIAL SUMMARY AND HIGHLIGHTS • Q2 2022 diluted earnings per share of $2.05, up 104% from 2021 • Increased the 2022 diluted earnings per share guidance range Q2 2022 Q2 2021 to $6.83-$7.13 which reflects a 61%-69% increase from the 2021 reported annual diluted earnings per share of $4.23.
Slide 5: Earnings Per Share Growth
Earnings Per Share Growth $7.50 $6.98 $7.00 31.0% CAGR $6.50 $6.00 $5.50 $5.00 $4.50 $4.23 $4.00 $3.50 $3.00 $2.34 $2.50 $2.06 $2.17 $1.81 $1.89 $1.92 $2.00 $1.66 $1.67 8.8% CAGR $1.46 $1.50 $1.27 $1.00 $0.50 $— 2017 2018 2019 2020 2021 2022 Mid Point Consolidated EPS Consolidated EPS w/o Plastics*
Slide 6: CO2 Emissions
CLEANER ENERGY FUTURE OTP Energy Resource Mix Otter Tail Power Company CO2 Trend (Owned Resources) 2005 - 2025 Coal Renewable Purchased Gas/Oil 5.0 4.3 3.9 (million short tons) 3.7 CO2 Emissions 1% 4% 3% 2.9 2.6 2.5 2.1 23% 45% 30% 28% 9% 19% 45% 0.13 68% 69% 0.0 35% 2005 2009 2013 2017 2021 2025 20
Slide 7: ESG Highlights
ESG HIGHLIGHTS By 2025, We are Targeting: 50% 50% Our owned and contracted Our carbon emissions from energy generation will be owned generation more than 50% renewable resources will be 50% below (Does not include MISO 2005 levels. market purchases). Carbon emission reductions targeted to be 97% bel
Slide 8: ESG Highlights
ESG HIGHLIGHTS Safety - Safety is one of our core values. We focus on the safety of our employees and have implemented safety programs and management practices to promote a culture of safety. Safety is also a metric used and evaluated in determining annual incentive compensation. Human Capital We ar
Slide 9: Electric Platform
ELECTRIC PLATFORM OrEnian POWER COMPANY
Slide 10: Electric Operations
ELECTRIC OPERATIONS Operating Revenue (in millions) $600 $511.8 $480.3 $446.1 $400 $200 Highlights • Rate base growth opportunities: $0 • Renewable generation - Hoot Lake Solar and 2020 2021 06/30/22 LTM Ashtabula Wind III purchase Net Income (in millions) • Technology & infrastructure - Advanced Me
Slide 11: Hoot Lake Solar
HOOT LAKE SOLAR Project Hoot Lake Solar Description 49-MW self-build solar Schedule 2020-2023 Otter Tail Power Cost ~ $60 million Project Summary • Qualifies for investment tax credit of 26%; safe harbor equipment secured • Eligible to meet utility scale portion of MN Solar Energy Standard (1.5% of
Slide 12: Ashtabula Wind III Purchase
ASHTABULA WIND III PURCHASE Project Ashtabula Wind III Description 62.4-MW wind farm Schedule Expected closing in early 2023 Otter Tail Power Cost ~ $50 million Project Summary • Purchase power agreement (PPA) with NextEra Energy began in 2013 • Exercised option to purchase operational assets of AWI
Slide 13: MISO Long Range Transmission Planning (LRTP)
MISO Long Range Transmission Planning (LRTP) OTP investment opportunity up to 50% Source: MISO, Reliability Imperative: Long Range Transmission Planning, July 25, 2022 13
Slide 14: MN Integrated Resource Plan/ND Regional Haze Plan
MN INTEGRATED RESOURCE PLAN/ND REGIONAL HAZE PLAN Project Summary • Filed September 2021, jointly in MN, ND, & SD • Required filing in Minnesota. North Dakota recently passed legislation requiring an IRP filing, but specific rulemaking is not complete. Delays anticipated with filing. • Preferred 5-y
Slide 15: Minnesota Rate Case
Minnesota Rate Case • Previous Minnesota rate case filed in 2016. • Compliance filing approved by the PUC on May 12, 2022. Final rates were implemented July 1, 2022. • Effective increase requested after intervenor testimony was 3.83%. Cost changes such as additional Production Tax Credits resulted i
Slide 16: 2022 Key Regulatory Matters
2022 KEY REGULATORY MATTERS Estimated Regulatory Matter MN ND SD Date Minnesota Electric Utility Infrastructure Costs (EUIC) Rider for Advanced Metering X Q3 2022 Infrastructure & Outage Management System Minnesota Rate Review Finalized/Final Rate Implemented X Q3 2022 Minnesota Integrated Resource
Slide 17: Rate Base Growth
RATE BASE GROWTH Rate Base $978M of Capital Spending from 2022 to 2026 Renewables & Natural Gas, 46% in billions $2.10 $1.98 $1.86 $1.75 $1.63 2022-2026 $1.58 Other, 15% Total 5 .9% R of 26 CAG 1 - 20 Transformative 202 Technology & Infrastructure, 8% Transmission (incl. replacement), 13% Distributi
Slide 18: Regulatory Framework
REGULATORY FRAMEWORK Minnesota North Dakota South Dakota Renewable Riders Rider recovery / Rate case Rider recovery / Rate case Phase-in rider / Rate case Transmission Riders Rider recovery / Rate case Rider recovery / Rate case Rider recovery / Rate case A constructive regulatory environment In sta
Slide 19: Rate Base Projects
RATE BASE PROJECTS Our Investment Project (millions) In Service % Complete Recovery Mechanisms Hoot Lake Solar ~ $60 2023 ~ 30% Rider/General Rate Case - MN Advanced Metering Infrastructure and Grid Rider/General Rate Case - MN ~ $145 2019 - 2024 ~ 25% Modernization (Innovation 2030) General Rate Ca
Slide 20: Electric Rates Cents per KWH
Electric Rates Average Summer Residential Rate per KWH 15.0 Otter Tail Power has maintained rates 13.1 13.2 13.2 13.5 lower than the national average in 13.0 13.1 recent years while major projects 12.5 have been constructed and put in Cents per KWH service. 10.0 10.5 10.0 10.2 9.8 9.5 9.7 Continuous
Slide 21: Manufacturing Platform
MANUFACTURING PLATFORM BTD TO. PLASTICS p northern pipe products VINYLTECH Vil EV Gerlee 21
Slide 22: Manufacturing Operations
MANUFACTURING OPERATIONS Operating Revenue (in millions) • Contract metal fabrication – stamping, machining, tube bending, tool & die, laser cutting, welding, painting, assembly. A one stop shop for customer needs. $500 • Growth opportunities with existing customer base and expansion with new $400 $
Slide 23: Manufacturing Sales by End Markets
MANUFACTURING SALES BY END MARKETS Agriculture, 13% Energy, 3% 2020 Agriculture, 15% Energy, 1% 2021 Rec. Vehicle, 34% Rec. Vehicle, 41% Lawn & Garden, 16% Lawn & Garden, 20% Construction, 14% Industrial, 12% Industrial, 13% Construction, 18% 2020 2021 Other, 1% Other, 1% Industrial, 4% Industrial,
Slide 24: Plastics Operations
PLASTICS OPERATIONS Operating Revenue (in millions) $600 • Manufactures and sells PVC (polyvinyl chloride) pipe to $528.3 distributors. Pipe is used in municipal water, rural water, wastewater, and storm drainage systems. $400 $380.2 • Plants located Fargo ND & Phoenix AZ. • Approximate production c
Slide 25: Historical Resin, Pipe Price and Spreads
HISTORICAL RESIN, PIPE PRICE AND SPREADS Continued strong domestic demand and increased export market demand drive further margin expansion. Resin shortages, driven by Hurricane Ida, COVID and a polar vortex, drives margins to record levels. Hurricane Harvey, followed by a series of resin disruption
Slide 26: Financial Update
FINANCIAL UPDATE 26
Slide 27: Financial Overview
FINANCIAL OVERVIEW Operating Revenues Operating Income Net Income in millions in millions in millions $1,500 $1,424.5 $400 $300 $365.1 2021 and 2022 earnings mix are impacted by strong Plastic $262.3 segment performance. $1,250 $1,196.8 $250 $300 $1,000 $249.7 $200 $890.1 $912.7 $176.8 $253.6 $716.5
Slide 28: Diluted EPS: Q2 2021 vs Q2 2022
DILUTED EPS: Q2 2021 vs Q2 2022 Electric Manufacturing Plastics Corporate Total Q2 2021 DILUTED EARNINGS PER SHARE $ 0.37 $ 0.14 $ 0.54 $ (0.04) $ 1.01 Increase in commercial and industrial customer sales 0.09 — — — 0.09 Finalization of Minnesota interim rates 0.07 — — — 0.07 Electric Coyote Station
Slide 29: Diluted EPS: YTD 2021 vs YTD 2022
DILUTED EPS: YTD 2021 vs YTD 2022 Electric Manufacturing Plastics Corporate Total YTD 2021 DILUTED EARNINGS PER SHARE $ 0.79 $ 0.26 $ 0.76 $ (0.08) $ 1.73 Increase in commercial and industrial customer sales 0.13 — — — 0.13 Finalization of Minnesota interim rates 0.07 — — — 0.07 Impact of favorable
Slide 30: Liquidity, Cap Structure & Credit Ratings
LIQUIDITY, CAP STRUCTURE & CREDIT RATINGS Liquidity: Line of Credit Availability Consolidated Capital Structure & ROE Otter Tail Corporation Otter Tail Power Company 120% ROE is TTM at 6/30/22 30% Borrowing Capacity of $170M in millions 26.2% 90% 25% Equity / Debt Percentage 43.3% Return on Equity 4
Slide 31: 2022 Earnings Guidance
2022 EARNINGS GUIDANCE 2022 Guidance 2022 Guidance 2022 Guidance Actual February 14, 2022 May 2, 2022 August 1, 2022 Diluted EPS 2020 2021 Low High Low High Low High Electric $ 1.63 $ 1.73 $ 1.81 $ 1.85 $ 1.81 $ 1.85 $ 1.84 $ 1.88 Manufacturing 0.27 0.41 0.42 0.46 0.42 0.46 0.42 0.46 Plastics 0.67 2
Slide 32: Pension Assumptions and Recovery
Pension Assumptions and Recovery Actuarial EPS Projected Allocation Assumptions Sensitivity Contributions ($mm) Funding Risk Return Discount Discount Status Management Enhancement Other Rate RoR Rate RoR 2022 2023 2024 93% 50% 47% 3% 3.03% 6.3% $0.03/25bps $0.02/25bps $20 NA NA Consideration Minneso
Slide 33: Five Year Financing Plan
FIVE YEAR FINANCING PLAN Long-Term Financing 2021 2022-2026 in millions (Actual) (Planned) LONG-TERM DEBT Otter Tail Power Issuances $ 140.0 $ 380.0 Retirements — (30.0) Otter Tail Corporation (Parent) Issuances $ — $ 80.0 Retirements (0.2) (80.0) Net Debt Increase $ 139.8 $ 350.0 EQUITY - No materi
Slide 34: Bond Maturity Schedule
BOND MATURITY SCHEDULE $150 in millions Balanced and manageable maturity schedule 7.00% 6.47% Weighted average interest 6.37% 6.15% rate of 4.29% $125 6.00% 5.47% $100 5.00% Debt Maturity Interest Rate 4.45% $75 4.07% 3.92% 3.82% 3.77% 4.00% 3.62% 3.69% 3.55% 3.52% $50 3.22% 2.74% 3.00% $25 $0 // //
Slide 35: Capital Expenditures
CAPITAL EXPENDITURES Total in millions 2021 2022 2023 2024 2025 2026 2022-2026 Electric Segment Renewables & Natural Gas Generation $ 30 $ 80 $ 92 $ 92 $ 160 $ 454 Technology & Infrastructure 26 30 18 — — 74 Distribution Plant Replacements 37 35 35 35 33 175 Transmission (incl. replacements) 26 28 2
Slide 36: History of Dividend Growth
HISTORY OF DIVIDEND GROWTH Our Dividend Story Dividend Growth & Payout Ratio CAGR = 5.2% • Paid annual dividend without interruption $1.65 since 1938 $1.56 $1.48 $1.40 $1.34 $1.28 • 5.8% increase, or $0.09/share, indicated for $1.21 $1.23 $1.25 2022 • Strong balance sheet, ample liquidity, history 7
Slide 37: OTTR Investment Theme
OTTR INVESTMENT THEME Financial Performance Targets Current New Total Shareholder Return1 8-10% 8-10% Long-Term EPS Growth Rate2 5-7% 5-7% Dividend Yield ~ 3% ~ 3% Long-Term Targeted Dividend Payout Ratio 60-70% 55-65% Dividend Growth Rate 5-7% 5-7% Equity Layer 51-54% 55-60% 1 Defined as EPS growth
Slide 38: www.ottertail.com
S OTIERTAIL W CORPORATION www.ottertail.com