Otter Tail Corporation · NASDAQ:OTTR
Otter Tail — KeyBanc Virtual Investor Meetings (May 2021)
39 slides from Otter Tail's conference presentation, May 20, 2021
Slide 1: KeyBanc Virtual Investor Meetings
KEYBANC VIRTUAL INVESTOR MEETINGS May 20, 2021
Slide 2: Forward-Looking Statement
FORWARD-LOOKING STATEMENT This presentation contains statements that may be considered forward-looking statements. The words “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “outlook,” “plan,” “possible,” “potential,” “should,” “will,” “would” and similar words and expression
Slide 3: Agenda
AGENDA • Business Overview • ESG Highlights • Electric Platform • Manufacturing Platform • Financial Update 3
Slide 4: Business Overview
BUSINESS OVERVIEW 4
Slide 5: Company Overview
COMPANY OVERVIEW MANUFACTURING PLATFORM MANUFACTURING SEGMENT PLASTICS SEGMENT Target earnings contributions Electric Manufacturing Electric Manufacturing • Competitive low-cost operations 75% 25% • Long-term growth potential • Constructive regulatory environment • Capacity utilization • Attractive
Slide 6: Strategic Outlook
STRATEGIC OUTLOOK • High performing electric utility • Strong pipeline of rate base growth for at least 5 years • Supportive regulatory treatment • Solid management in place • History of excellence • Disciplined, focused set of manufacturing companies • Incremental earnings growth • Premium return •
Slide 7: Q1 2021 Financial Summary and Highlights
Q1 2021 FINANCIAL SUMMARY AND HIGHLIGHTS Q1 2021 Q1 2020 • Based on our strong Q1 results and projections for the remainder of the year, we are raising our 2021 diluted earnings per share guidance range to $2.47-$2.62 from $2.39-$2.54 per diluted share. Operating Revenues $261.7 $234.8 • Electric Se
Slide 8: EPS Compared with Original EPS Guidance Ranges
EPS COMPARED WITH ORIGINAL EPS GUIDANCE RANGES $2.70 ↑ 8.9% $2.60 $2.55E Plastics Segment Out ’21 Midpoint $2.50 Performs Guidance ↑ 7.8% $2.40 $2.34A $2.30 Strong Performance in ↑ 5.3% Plastics Segment & $2.17A $2.20 ↑ 13.2% Impacts of Tax Reform $2.06A $2.10 $2.00 ↑ 13.8% Initiated 2021 EPS Guid
Slide 9: ESG Highlights
ESG HIGHLIGHTS Environmental Social Governance EEI Sustainability Templates These documents provide details of Otter Tail Corporation’s ESG practices. 9
Slide 10: Cleaner Energy Future
CLEANER ENERGY FUTURE Average Residential Rate per KWH OTP Energy Resource Mix 2023 15 2005 2020 13.0 13.0 13.3 13.2 13.1 12.8 27% Cents Per KWH 23% 34% 10.2 9.5 9.7 9.7 9.9 35% 10 9.0 45% 68% 10% 9% 19% 1% 35% 5 2015 2016 2017 2018 2019 2020 OTP USA Source: Typical Bills and Average Rates Report, E
Slide 11: Cleaner Energy Future
CLEANER ENERGY FUTURE CO₂ By 2023 our customers will receive By 2025 our carbon emissions will be approximately 35% of their energy from approximately 50% below 2005 levels. renewable resources. 11
Slide 12: Electric Platform
ELECTRIC PLATFORM oS im q POWER COMPANY
Slide 13: Electric Operations
ELECTRIC OPERATIONS Net Revenue ($ in millions) $500 $459.1 $446.1 $450.0 $400 Highlights $300 $200 • Rate base growth opportunities. $100 • Renewable generation. $0 2019 2020 3/31/21 • Technology & infrastructure. LTM Net Income ($ in millions) • Transmission assets. $80 • MN rate case in November
Slide 14: Electric Operations
ELECTRIC OPERATIONS Energy by Source - 2020 Service Area* Wind, Coal, 17.0% 38.0% Gas, 1.0% Purchased, 44.0% Hydro, 1.0% Revenues by State - 2020 Revenues by Customer - 2020 Residential, ND, Other, 1.9% 32.7% 37.9% MN, 52.6% Commercial & Industiral, SD, 9.5% 65.4% 14
Slide 15: Electric Operations
ELECTRIC OPERATIONS Net Revenue ($ in millions) $500 $459.1 $446.1 $450.0 $400 Highlights $300 $200 • Rate base growth opportunities. $100 • Renewable generation. $0 2019 2020 3/31/21 • Technology & infrastructure. LTM Net Income ($ in millions) • Transmission assets. $80 • MN rate case in November
Slide 16: Merricourt Wind Energy Center | Complete
MERRICOURT WIND ENERGY CENTER | COMPLETE Otter Tail Power’s Wind Portfolio Wind Resources Megawatts Merricourt 150.0 Langdon 40.5 Luverne 49.5 Ashtabula I 48.0 PPA’s 102.9 Total 390.9 • Merricourt was the single largest capital project in OTP’s history at approximately $260 million. • 150 MWs with a
Slide 17: Astoria Station Natural Gas Plant
ASTORIA STATION NATURAL GAS PLANT Project Description 245-MW simple-cycle unit Committed in the MISO market on Schedule April 30, 2021 OTP Cost $152.5 million • MN PUC approved 2017 Resource Plan. Requesting recovery in the current MN rate case. • ND PSC approved Advance Determination of Prudence an
Slide 18: Hoot Lake Solar
HOOT LAKE SOLAR Project Description 49.9-MW self-build solar Schedule 2020-2023 OTP Cost $60 million • 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 retail sales). • MPUC approved 100% of costs
Slide 19: 2021 Key Regulatory Matters
2021 KEY REGULATORY MATTERS Estimated Regulatory Matters MN ND SD Dates North Dakota Advance Determination of Prudence for AMI Filing X February 15, 2021 Minnesota Hoot Lake Solar Filing Rate Review Evidentiary Hearing & X March 25, Order 2021 Minnesota Depreciation Order X April 21, 2021 Minn
Slide 20: Minnesota Rate Case
MINNESOTA RATE CASE • Previous Minnesota rate case filed in 2016. • Request driven by new Astoria Station (MN IRP approved) and CIS system. Total initial request of $14.5 million, a 6.8% increase. • Incorporating approved lower depreciation rates and pension expense, amended rate case request on Apr
Slide 21: Rate Base Growth
RATE BASE GROWTH Capital spending of $653 million from 2021 to 2025 Rate Base In Billions Natural Gas Technology and Renewable Generation Addition Infrastructure Resource Investments Additions $125 $16 $109 $1.75 $1.77 19% 2% 17% $1.72 Other System $1.63 $128 $1.59 Replacements 20% $138 and Addition
Slide 22: Regulatory Framework
REGULATORY FRAMEWORK Minnesota North Dakota South Dakota A constructive Renewable Riders Rider recovery / Rate case Rider recovery / Rate case Phase-In Rider / Rate case regulatory environment Transmission Riders Rider recovery / Rate case Rider recovery / Rate case Rider recovery / Rate case provid
Slide 23: Rate Base Projects
RATE BASE PROJECTS Our Investment Percent Project In Service Recovery Mechanisms (Millions) Complete Merricourt Wind Energy Center $260 2020 100% Rider/General Rate Case Astoria Station Rider/General Rate Case - ND & SD $152.5 2020-2021 95% 245-MW natural gas simple-cycle combustion turbine General
Slide 24: MN Integrated Resource Plan
MN INTEGRATED RESOURCE PLAN • Filing September 2021. • Filed last plan in June 2016 (MPUC approved April 2017). • Required in Minnesota, though Otter Tail Power Company develops strategy for integrated system and files plan with the North Dakota and South Dakota regulatory commissions. • Will includ
Slide 25: Manufacturing Platform
MANUFACTURING PLATFORM 7 @®) VINYLTECH T.O. PLASTICS Vin BT D northern pipe PVCePIPE products
Slide 26: Manufacturing
MANUFACTURING • Contract metal fabrication – stamping, machining, tube bending, tool & die making, welding, painting, assembly. Net Revenues ($ in millions) (One stop shop for customer needs) $300 $277.2 $238.8 $246.1 • Growth opportunities with existing customer base and $250 expansion with new cus
Slide 27: Manufacturing Locations
MANUFACTURING LOCATIONS je- 27
Slide 28: Manufacturing Sales by End Markets
MANUFACTURING SALES BY END MARKETS 2019 BTD 2020 BTD Energy, Energy, 4% 2% AGR, 12% AGR, 14% RV, 41% RV, 37% L&G, 15% L&G, 14% Const, 14% Const, 19% Industrial, Industrial, 14% 14% 2019 T.O. Plastics 2020 T.O. Plastics Medical, 18% Medical, 22% Industrial, 8% Industrial, 9% Extrusion/Food, 1% Hortic
Slide 29: Plastics
PLASTICS • Manufactures and sells PVC (polyvinyl chloride) pipe to Net Revenue ($ in millions) distributors. Pipe is used in municipal water, rural $250 $221.0 water, wastewater, and storm drainage systems. $205.2 $200 $183.3 • Plants located Fargo ND & Phoenix AZ. $150 • Approximate production capa
Slide 30: Plastics Locations
PLASTICS LOCATIONS NPP 17 States Served: East Idaho, Montana, © Wyoming, Colorado, North & South Dakota, Nebraska, Kansas, Oklahoma, Minnesota, lowa, Missouri, East Texas, Wisconsin, Illinois, Michigan & Indiana. 3 Canadian Provinces Served: Alberta, Saskatchewan, Manitoba
Slide 31: Financial Update
FINANCIAL UPDATE 31
Slide 32: Financial Overview ($ in millions)
FINANCIAL OVERVIEW ($ IN MILLIONS) Revenue Sources Operating Income Net Income $180 $120 $1,000 $147.9 $152.8 $919.5 $890.1 $917.1 $101.9 $900 $160 $95.9 $134.9 $100 $800 $140 $86.8 40.8 46.0 33.7 $700 460.4 467.2 $120 $80 29.1 446.1 36.5 27.8 $600 $100 $500 $60 $80 $400 $300 $60 $40 107.1 106.8 66.
Slide 33: Liquidity, Cap Structure & Credit Ratings
LIQUIDITY, CAP STRUCTURE & CREDIT RATINGS Consolidated Capital Structure OTP OTC 100% 11.6% 11.6% 12.0% 11.5% Line of Credit Facilities $ 170,000,000 $ 170,000,000 80% 11.5% 45.5% 49.0% 47.1% 11.0% Equity/Debt 60% Outstanding ROE 10.5% Borrowings 15,830,771 65,166,054 40% 10.0% Letters of Credit 14,
Slide 34: 2021 Earnings Guidance
2021 EARNINGS GUIDANCE 2020 EPS 2021 EPS 2021 EPS by February 15, 2021 May 3, 2021 Segment Low High Low High Electric $ 1.63 $ 1.80 $ 1.83 $ 1.71 $ 1.74 Manufacturing 0.27 0.28 0.32 0.28 0.32 Plastics 0.67 0.52 0.56 0.73 0.77 Corporate (0.23) (0.21) (0.17) (0.25) (0.21) Total $2.34 $2.39 $2.54 $2.47
Slide 35: 2021-2025 Financing Plans
2021-2025 FINANCING PLANS 35
Slide 36: Bond Maturity Schedule
BOND MATURITY SCHEDULE $160,000 7.00% 6.47% 6.37% 6.15% $140,000 6.00% 5.47% $120,000 4.68% 5.00% 4.63% $100,000 4.07% 3.92% 3.52% 3.62% 4.00% 3.55% 2019 Senior Unsecured Notes $80,000 3.82% $10M at 3.07% 3.07% 3.22% 3.00% $60,000 2013 Senior Unsecured Notes $60M at 4.68% 2.00% $40,000 $20,000 1.00%
Slide 37: Capital Expenditures
CAPITAL EXPENDITURES (in millions) 2020 2021 2022 2023 2024 2025 Total Electric Segment: Renewables and Natural Gas Generation $ 31 $ 104 $ 3 $ 1 $ 1 $ 140 Technology and Infrastructure 6 25 32 28 18 109 Distribution Plant Replacements 24 27 30 30 27 138 Utility spend Transmission (includes replacem
Slide 38: History of Dividend Growth
HISTORY OF DIVIDEND GROWTH Dividend Growth • Consecutive annual dividends without $1.56 interruption paid since 1938. $1.34 $1.40 $1.48 $1.25 $1.28 $1.19 $1.21 $1.23 • Indicated 5.4 % increase of $.08/share. • Strong balance sheet, liquidity, cash 79% 78% 78% 78% 65% 65% 65% 63% 61% generation profi
Slide 39: OTTR Investment Theme
OTTR INVESTMENT THEME Total Shareholder Return 8%-10%* EPS growth rate 5-7% Dividend Yield ~ 3% Dividend Payout Ratio 60-70% Dividend growth rate Align with earnings Balanced Growth and Income Strategy Stable and Growing Utility Base Strong and stable regulated electric operations provide cash flow
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