Otter Tail Corporation · NASDAQ:OTTR
Otter Tail — MUI Virtual Investor Meeting 2020
29 slides from Otter Tail's conference presentation, Oct 7, 2020
Slide 1: MUI Virtual Investor Meeting
MUI Virtual Investor Meeting October 7, 2020
Slide 2: Forward-Looking Statement
FORWARD-LOOKING STATEMENT This presentation contains statements that may be considered forward-looking statements. Such statements contain the word “expect,” “anticipates” or words of similar meaning, or speak to management’s expectations regarding the EPS growth goals, sales, total shareholder retu
Slide 3: Agenda
AGENDA • Business Overview • Electric Platform • ESG Highlights • Manufacturing Platform • COVID-19 Impacts & Mitigation Efforts • 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 • Long-term growth potential 75% 25% • 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: Electric Utility
ELECTRIC UTILITY OrEnian POWER COMPANY
Slide 8: Electric Operations
ELECTRIC OPERATIONS Energy by Source - 2019 Service Area* Wind, 15.0% Coal, 46.0% Purchased, 37.0% Gas, Hydro, 1.0% 1.0% Revenues by State - 2019 Revenues by Customer - 2019 Other, Residential, ND, 2.3% 32.3% 37.7% Industrial, 30.0% MN, 52.3% Commercial, SD, 10.0% 35.4% 8
Slide 9: Merricourt Wind Energy Center
MERRICOURT WIND ENERGY CENTER Project Merricourt Wind Energy Center 150 megawatts Description Capacity factor ~ 50% to 55% 2017 – 2020 Schedule Construction started Q3 2019 OTP cost $260 million
Slide 10: Astoria Station
ASTORIA STATION Project Astoria Station Natural Gas Plant Description 245-megawatt simple cycle unit 2020 – 2021 Schedule Construction started Q2 2019 OTP cost $154 million
Slide 11: Self-Fund Transmission Projects
SELF-FUND TRANSMISSION PROJECTS Project Self-Fund Transmission Projects Description OTP to fund transmission upgrades associated with new generator interconnections. Schedule 2019 - 2021 OTP cost ~$50 million 11
Slide 12: Advancing Economic Recovery
ADVANCING ECONOMIC RECOVERY Minnesota Relief and Recovery Proposal – Potential Projects. • 12 projects submitted with estimated total cost of $153-173 million Renewable Generation ~$60 million Infrastructure and Reliability Improvements ~$18 million Technology Advancement ~$71 million Electric Vehic
Slide 13: Hoot Lake Solar Project
HOOT LAKE SOLAR PROJECT • Nearly 50 MW solar farm on soon-to-be retired Hoot Lake Plant. • Will include around 170,000 solar panels, generating enough energy to power approximately 10,000 homes each year
Slide 14: Rate Base Growth
RATE BASE GROWTH $1.59 $1.67 $1.73 $1.77 $1.42 $1.10 2018(A) 2019(A) 2020(F) 2021(F) 2022(F) 2023(F) 2024(F) @ Rate Base (amounts in billions) 14
Slide 15: ESG Highlights
ESG HIGHLIGHTS Environmental Social Governance https://www.ottertail.com/annual-report-and- proxy-statement/Index?KeyGenPage=1073752420 https://www.ottertail.com/custompage/Index?KeyGenPage=351348 These 3 documents provide details of Otter Tail Corporation’s ESG practices 15
Slide 16: ESG Highlights
ESG HIGHLIGHTS ESG Highlights 2022 Projections By 2022 we 30% 30% 30% expect our carbon dioxide emissions RENEWABLE CARBON LOWER from owned RESOURCES REDUCTION RATES resources to that we own or secure from 2005 levels compared to the through power beresidential national 33% lower purchase agreements
Slide 17: Manufacturing Platform
MANUFACTURING PLATFORM northern pipe products VINYLTECH Sone Vil TO. PLASTICS PVCePIPE
Slide 18: Custom Metal Fabricator
CUSTOM METAL FABRICATOR
Slide 19: Custom Plastic Parts Manufacturer
CUSTOM PLASTIC PARTS MANUFACTURER
Slide 20: Plastics Segment
PLASTICS SEGMENT @ northern pipe products VINYLTECH Vid PVCePIPE
Slide 21: COVID-19 Overview
COVID-19 OVERVIEW 21
Slide 22: Key COVID-19 Financial Risks
KEY COVID-19 FINANCIAL RISKS Potential Impacts Mitigation Factors • Lower commercial and industrial sales • Higher margin residential usage volumes • O&M expense reductions • Increased bad debt expense and waived late • Rigorous COVID-19 safety programs and fees project management Electric Segment •
Slide 23: Financial Update
FINANCIAL UPDATE 23
Slide 24: 2020 Earnings Guidance
2020 EARNINGS GUIDANCE 2019 EPS by 2020 Guidance Segment February 17, 2020 Guidance 2020 Guidance 2020 May 5, 2020 August 3, 2020 Diluted Earnings Per Share Low High Low High Low High Total $2.17 $2.22 $2.37 $2.00 $2.25 $2.10 $2.30 Return on Equity 11.6% 11.0% 11.7% 9.9% 11.1% 10.4% 11.4% 24
Slide 25: COVID-19 Strong Liquidity Position
COVID-19 STRONG LIQUIDITY POSITION December 31, 2019 July 31, 2020 OTC OTP OTC OTP Total Credit Capacity $170.0 $170.0 $170.0 $170.0 Outstanding Borrowings (6.0) (45.9) Letters of Credit (15.5) (7.7) Unused $164.0 $154.5 $124.1 $162.3 Expiration Date October 31, 2024 October 31, 2024 25
Slide 26: Credit Ratings
CREDIT RATINGS Otter Tail Corporation Moody’s Fitch S&P Otter Tail Power Company Moody’s Fitch S&P Corporate Credit/Long-term Baa2 BBB- BBB Corporate Credit/Long-term Issuer A3 BBB BBB+ Issuer Default Rating Default Rating Senior Unsecured Debt N.A. BBB- N.A. Senior Unsecured Debt N.A. BBB+ BBB+ Out
Slide 27: History of Dividend Growth
HISTORY OF DIVIDEND GROWTH Dividend Growth • Consecutive annual dividends $1.23 $1.25 $1.34 $1.40 $1.48 without interruption paid since $1.19 $1.21 $1.28 1938. • Indicated increase of $.08/share 79% 78% 79% 78% 71% 65% 65% 67% (5.7%). • Strong balance sheet, liquidity, cash generation profile, and c
Slide 28: Investment Highlights
INVESTMENT HIGHLIGHTS Total Shareholder Dividend yield ~ 3% 5-7% EPS growth- based off from 2019 EPS Return Dividend growth in line with EPS growth while maintaining a ~ 8-10% Payout ratio of 60-70% Strong and stable regulated electric operations provide cash flow to Competitive, low cost integrated
Slide 29: Thank You
THANK YOU