Mdu Resources Group, Inc. · NYSE:MDU

Mdu Resources — Investor Presentation (May 2019)

51 slides from Mdu Resources's investor presentation, May 22, 2019

  1. Slide 1: Investor Relations May 2019

    MAY 2019 INVESTOR RELATIONS _

  2. Slide 2: Forward-Looking Statements

    FORWARD-LOOKING STATEMENTS During the course of this presentation, we will make certain “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934. Although the company believes that its expectations and beliefs are based on reasonable assumptions, actual r

  3. Slide 3: MDU Resources is Building a Strong America

    MDU Resources is Building a Strong America® ior 24 46 & With integrity, create superior shareholder value by expanding upon our expertise to be the supplier of choice in all of our markets while being a safe and great place to work. Company founded in 1924 | * | Headquartered in Bismarck, ND Conduct

  4. Slide 4: Company Overview

    COMPANY OVERVIEW DAVE GOODIN PRESIDENT & CEO

  5. Slide 5: Company Overview

    COMPANY OVERVIEW A strong infrastructure is the heart of the American economy. It is the natural gas and electricity that power business, industry and our daily lives. It is the pipes and wires that connect our homes, factories, offices and stores to bring them to life. It is the transportation netw

  6. Slide 6: First Quarter Highlights

    FIRST QUARTER HIGHLIGHTS  Earnings of $40.9 million or 21 cents per share, compared to $42.4 million or 22 cents per share in 2018; Narrowed 2019 EPS guidance range to $1.40 - $1.55  Utility: Earnings of $52.0 million, up from $45.7 million in 2018 – 12% higher natural gas retail sales volumes – H

  7. Slide 7: First Quarter Earnings

    FIRST QUARTER EARNINGS EARNINGS EPS $50 $0.25 $0.22 $45 $42.4 $0.21 $40.9 $40 $0.20 $35 $30 $0.15 millions $25 $20 $0.10 $15 $10 $0.05 $5 $0 $0.00 2018 2019 2018 2019 7

  8. Slide 8: Earnings Contributions

    EARNINGS CONTRIBUTIONS TRAILING TWELVE MONTH ENDING MARCH 31, 2019 EARNINGS Regulated Energy Construction 45% 55% EBITDA1 Regulated Construction Energy 48% 52% 1 - See Appendix for reconciliation of NON-GAAP financial measures 8

  9. Slide 9: Utility Electric & Natural Gas

    INVESTOR RELATIONS MAY 2019 UTILITY ELECTRIC & NATURAL GAS

  10. Slide 10: Electric and Natural Gas

    ELECTRIC AND NATURAL GAS WA 218,400 Customers MT ND 111,000 Customers 205,300 Customers MN OR 22,000 Customers 76,000 Customers ID SD 367,900 Customers 69,700 Customers WY 34,900 Customers  1,105,200 electric and natural gas customers in 459 communities Electric Natural Gas  143,000 customers  96

  11. Slide 11: Strategy

    STRATEGY  Grow the business by investing in the safety and reliability of our existing system  Focus on organic growth first while managing operating costs  Look to expand into areas where similar operating and growth objectives exist  Pillars to success –Integrity, safety, employees, customers

  12. Slide 12: Rate Base Growth

    RATE BASE GROWTH FOR YEAR ENDED DECEMBER 31 $2.5 $2.3 $2.1 $2.0 $1.9 $1.8 $1.5 $1.5 Billions $1.0 $0.5 $0.0 2014 2015 2016 2017 2018 12

  13. Slide 13: Customer Growth

    CUSTOMER GROWTH FOR YEAR ENDED DECEMBER 31 1,150,000 1,100,000 1,050,000 1,000,000 Customer Growth CAGR 2014-2018  Montana-Dakota Utilities – 1.0% 950,000  Intermountain Gas – 2.3% 900,000  Cascade Natural Gas – 1.8% 850,000 800,000 750,000 700,000 2014 2015 2016 2017 2018 13

  14. Slide 14: Transitioning Our Electric Resources

    TRANSITIONING OUR ELECTRIC RESOURCES BASED ON NAME PLATE RATING 11% 27% 20% 46% 2013 2018 69% 27% Coal Gas Renewables 14

  15. Slide 15: Electric Generation Fleet Update

    ELECTRIC GENERATION FLEET UPDATE  Announced Feb. 19 results of integrated resource plan  Intend to retire three coal-fired units at two locations; one by around the end of 2020; two by around the end of 2021  Intend to construct an 88-megawatt simple-cycle natural gas combustion turbine in Mandan

  16. Slide 16: Electric Regulatory Mechanisms

    ELECTRIC REGULATORY MECHANISMS MT ND SD WY Fuel Clause Adjustment Transmission Rider Environmental/ Renewable Rider Generation Rider Property Tax Tracker Interim Rate Relief Forecasted Test Period Forward Year Test Period 16

  17. Slide 17: Natural Gas Regulatory Mechanisms

    NATURAL GAS REGULATORY MECHANISMS MN MT ND SD WY ID WA OR Purchased Gas Adjustment Full Decoupling Weather Normalization Full Fixed General Service Rate Pipeline Replacement / Integrity Tracker Property Tax Tracker Earnings Sharing Interim Rate Relief Forecasted Test Period Forward Year Test Period

  18. Slide 18: Utility Electric & Natural Gas Outlook

    UTILITY ELECTRIC & NATURAL GAS OUTLOOK  Safely meet customer demand by upgrading and expanding infrastructure and facilities  Customer base expected to continue growing by 1-2% annually  Expects to grow rate base by 5% compounded annually over the next five years  Focused on timely regulatory re

  19. Slide 19: Pipeline & Midstream

    INVESTOR RELATIONS MAY 2019 PIPELINE & MIDSTREAM

  20. Slide 20: WBI Energy Assets

    WBI ENERGY ASSETS  Regulated operations – Approx. 4,000 miles of pipe – Over 1.8 Bcf/d system capacity – 14 Interconnecting points – Largest storage field in N. America  Non-regulated operations – Gas gathering – Cathodic protection – Energy management 20

  21. Slide 21: Strategy Statement

    STRATEGY STATEMENT Building upon our core strengths and expertise, WBI Energy will become a leader in the Mid-Continent and Rocky Mountain regions in meeting North America’s energy needs BUILDING A STRONG AMERICA® 21

  22. Slide 22: Our Strengths

    OUR STRENGTHS  Low risk, stable returns with regulated business  Integrated pipeline, storage and interconnects in heart of Bakken  Experienced, talented team  Design, engineer, construct and operate capability BUILDING A STRONG AMERICA® 22

  23. Slide 23: WBI in the Bakken

    WBI Energy-Transmission Non-WBI Transmission Pipeline Gas storage field Pipeline Interconnect Non-WBI Gas Plants WBI in the Bakken  Service to 23 of 30 natural gas plants  6 Bakken interconnects  WBI moves over 50% of Bakken gas  More takeaway capacity needed 23

  24. Slide 24: Upcoming Growth Projects

    WBI Energy-Transmission Non-WBI Transmission Pipeline Gas storage field Demicks Lake Projects Pipeline Interconnect Expansion Projects Upcoming Growth Projects In-Service Est. Project MMcf/d Date Cost* Demicks Lake 2019 175 $30M Billings (LS 22) 2019 22.5 $12M Demicks Lake 2020 175 $12M Expansion No

  25. Slide 25: Pipeline & Midstream Outlook

    PIPELINE & MIDSTREAM OUTLOOK  14-mile Demicks Lake project; estimated cost of $30 million – Will increase capacity, as designed, by 175 million cubic feet per day – Expected to be in service in fall 2019  Demicks Lake Expansion project; estimated cost of $12 million – Will increase capacity, as de

  26. Slide 26: Construction Services

    INVESTOR RELATIONS MAY 2019 CONSTRUCTION SERVICES

  27. Slide 27: Construction Services

    CONSTRUCTION SERVICES Outside Inside  Power lines  Electrical (43)  Substations  Mechanical  Excavation &  Fire suppression underground  Refineries utilities  Automotive  Equipment & tools  Water treatment rentals and sales Ranked 11th on ENR’s Top 600 Specialty Contractors List 27

  28. Slide 28: Strategy

    STRATEGY  Industry-best safety results  Organic & M&A growth  Earnings growth  Strong cash flow  Retain and attract top talent  Strong customer base, locally and nationally 28

  29. Slide 29: Outside Companies

    OUTSIDE COMPANIES  Capital Electric Line Builders  International Line Builders  Lone Mountain Excavation  Loy Clark Construction  Rocky Mountain Contractors  Wagner-Smith Equipment 29

  30. Slide 30: Inside Companies

    INSIDE COMPANIES  Bell Electrical  ESI Electrical Contractors Contractors  Bombard  Lone Mountain Electric Excavation  Bombard  OEG, Inc Mechanical  USI Industrial  Capital Electric  Wagner Construction Industrial Electric  Desert Fire Protection  Duro Electric 30

  31. Slide 31: Customer Satisfaction: Backlog

    CUSTOMER SATISFACTION: BACKLOG FOR QUARTER ENDED MARCH 31 $1,200 $1,000 $1,022 $800 millions $600 $675 $530 $529 $400 $465 $397 $333 $321 $200 $0 2012 2013 2014 2015 2016 2017 2018 2019 31

  32. Slide 32: Outlook

    OUTLOOK  $1.02 billion of backlog, up 51% from 2018 – All-time record backlog  2019 revenue guidance $1.40 billion to $1.55 billion – Increased range from initial 2019 guidance – Margins expected to be comparable to 2018  Currently staffing at record levels with over 6,000 employees  High demand

  33. Slide 33: Construction Materials

    INVESTOR RELATIONS MAY 2019 CONSTRUCTION MATERIALS

  34. Slide 34: Who We Are

    WHO WE ARE  Top 10 U.S. aggregate producer – 6th sand and gravel – 1.0B tons of reserves  Operations in 15 states  5,400 employees in peak season  $2.00B - $2.15B in revenue projected for 2019 34

  35. Slide 35: Knife River Strategy

    KNIFE RIVER STRATEGY  Create value by treating our people well and leading our markets in quality, service and safety  Enhance shareholder value by generating cash and continued meaningful growth  Grow through M&A and greenfield  Take advantage of our vertical integration 35

  36. Slide 36: Vertical Integration

    VERTICAL INTEGRATION  Aggregates-based  Asphalt, concrete, liquid asphalt, cement, construction  Advantage over competition  Adds margin 36

  37. Slide 37: Services

    SERVICES  General Contractor  Subcontractor  Aggregate Laydown  Asphalt Paving  Concrete Construction  Site Development  Underground Utilities  Railroad Work  Bridges  Marine Construction 37

  38. Slide 38: Construction Backlog

    CONSTRUCTION BACKLOG FOR QUARTER ENDED MARCH 31 $1,000.0 $900.0 $943 $800.0 $831 $700.0 $725 $692 $600.0 $664 millions $500.0 $400.0 $300.0 $200.0 $100.0 $0.0 2015 2016 2017 2018 2019 38

  39. Slide 39: Growing Our Operations

    GROWING OUR OPERATIONS Honey Creek Deposits 39

  40. Slide 40: Acquisition Activity

    ACQUISITION ACTIVITY Viesko Redi-Mix Molalla Redi-Mix  March 2019  July 2018  Salem, OR  Molalla, OR Honey Creek Deposits Tri-City Paving  February 2019  June 2018  Marble Falls, TX  Little Falls, MN Sweetman Const. Co. Teevin & Fischer  October 2018  April 2018  Sioux Falls, SD  Seaside

  41. Slide 41: Outlook

    OUTLOOK  Backlog of $943 million as of March 31, 2019, up 36 percent from first quarter 2018 − Record backlog  2019 revenue guidance range of $2.00 billion to $2.15 billion − Margins expected to be comparable to or slightly higher than 2018  Actively pursuing acquisition opportunities 41

  42. Slide 42: Financial Update

    MAY 2019 ANANCIAL UPDATE : | LISTED =MDU RESOURCES | Building a Strong America: INW7y= GROUP.

  43. Slide 43: Electric & Natural Gas Utility

    ELECTRIC & NATURAL GAS UTILITY FIRST QUARTER EARNINGS  Reported combined earnings of EARNINGS $52.0 million $60 – Higher natural gas retail sales volumes, $55 increased returns on investments and $52.0 higher electric revenues associated with $50 regulatory mechanisms $45.7 – Earnings partially off

  44. Slide 44: Pipeline & Midstream

    PIPELINE & MIDSTREAM FIRST QUARTER EARNINGS  Reported earnings of $6.8 million EARNINGS $8 – Increased transportation revenues driven by organic growth projects placed in $6.8 $7 service in the second half of 2018 – The increase was partially offset by $6 higher interest expense, higher $5.3 deprec

  45. Slide 45: Construction Services

    CONSTRUCTION SERVICES FIRST QUARTER EARNINGS  Reported record earnings of $20.0 million EARNINGS – Higher inside and outside specialty $25 contracting workloads – Higher equipment sales and rentals $20.0 – Earnings offset by higher selling, general and $20 administration expense  Record revenues o

  46. Slide 46: Construction Materials

    CONSTRUCTION MATERIALS FIRST QUARTER EARNINGS LOSS  Reported a seasonal loss of $34.4 million 2018 2019 $0 – Increased loss, as expected, reflects seasonal losses associated with companies -$5 acquired in 2018, and lower materials margins from less favorable weather -$10 conditions in certain regio

  47. Slide 47: Capital Program

    2019-23 Utility Construction Pipeline & Midstream CAPITAL $3,000 TOTAL CAPITAL FORECAST OF $2,702* PROGRAM $2,500 $435  Electric and natural gas utility − System infrastructure upgrades and replacements $2,000  Construction materials and $787 services millions − Equipment and plant replacements an

  48. Slide 48: 2019 EPS Guidance Updated

    2019 EPS GUIDANCE UPDATED $1.40 - $1.55 Consolidated EPS Guidance Note: As of April 30, 2019 5 - 8% Long-Term Compound Annual Growth Rate Target 48

  49. Slide 49: Dividend Growth

    DIVIDEND $0.85 GROWTH $0.81  81 consecutive years of $0.80 quarterly dividend payments  Dividend increased Annualized Dividend Rate November 2018, making 28 $0.75 consecutive years of increases  2018 annualized dividend $0.81 per share $0.70 $0.69  Member of S&P High-Yield Dividend Aristocrats i

  50. Slide 50: Questions

    INVESTOR RELATIONS QUESTIONS

  51. Slide 51: Appendix: Reconciliation of Non-GAAP Financial Measures: EBITDA

    APPENDIX RECONCILIATION OF NON-GAAP FINANCIAL MEASURES: EBITDA Trailing Twelve Month Ended March 31, 2019 (dollars in millions) Construction Construction Electric Natural Gas Pipeline Services Materials Earnings $49.4 $41.6 $30.0 $69.2 $81.7 Adjustments: Interest Expense 25.7 31.6 6.6 3.7 18.9 Incom

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