Slide 1: 2021 Q2 Earnings Conference Call
2021 Q2 EARNINGS CONFERENCE CALL August 3, 2021
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 ELECTRIC PLATFORM MANUFACTURING PLATFORM MANUFACTURING SEGMENT PLASTICS SEGMENT Target earnings contributions Electric Platform Manufacturing Platform Electric Manufacturing • Competitive low-cost operations 70-75% 25-30% • Long-term growth potential • Constructive regulatory enviro
Slide 4: Q2 2021 Financial Summary and Highlights
Q2 2021 FINANCIAL SUMMARY AND HIGHLIGHTS • Based on our strong YTD results and outlook for the Q2 2021 Q2 2020 remainder of the year, we are raising our 2021 diluted earnings per share guidance range to $3.50-$3.65 from $2.47-$2.62 per diluted share. Mid-point of new range Operating Revenues $285.6
Slide 5: EPS Compared with Original EPS Guidance Ranges
EPS COMPARED WITH ORIGINAL EPS GUIDANCE RANGES $3.70 $3.58E $3.60 ’21 Midpoint $3.50 Initiated 2021 EPS Guidance range $3.40 of $2.39-$2.54. Current guidance $3.30 range increased on August 3, 2021 $3.20 to $3.50-3.65 primarily due to the $3.10 strong performance at Plastics $3.00 Plastics Segment
Slide 6: ESG Highlights
ESG HIGHLIGHTS Environmental Social Governance EEI Sustainability Templates These documents provide details of Otter Tail Corporation’s ESG practices. 6
Slide 7: Cleaner Energy Future
CLEANER ENERGY FUTURE Average Residential Rate per KWH OTP Energy Resource Mix 2005 2020 2023 15 13.0 13.0 13.3 13.2 13.1 12.8 Cents Per KWH 23% 27% 10.2 35% 39% 9.5 9.7 9.7 9.9 9.0 45% 10 9% 68% 4% 19% 1% 30% 5 2015 2016 2017 2018 2019 2020 OTP USA Source: Typical Bills and Average Rates Report, Ed
Slide 8: Cleaner Energy Future
CLEANER ENERGY FUTURE Otter Tail Power Company CO2 Trend (Owned Resources) 2005-2020 CO₂ CO2 Emissions (Million Short Tons) 43% Reduction in CO2 from 2005-2020 By 2023 our customers will Carbon emissions from our receive approximately 35% of owned generation resources are their energy from renewable
Slide 9: Electric Platform
ELECTRIC PLATFORM POWER COMPANY
Slide 10: Electric Operations
ELECTRIC OPERATIONS Net Revenue ($ in millions) $500 $459.1 $446.1 $458.0 $400 Highlights $300 $200 • Rate base growth opportunities. $100 • Renewable generation. $0 2019 2020 6/30/21 • Technology & infrastructure. LTM Net Income ($ in millions) • Transmission assets. $80 • MN rate case in November
Slide 11: Hoot Lake Plant | Retired May 27, 2021
HOOT LAKE PLANT | RETIRED MAY 27,2021 Highlights • 140 MW Facility in Fergus Falls, MN • Played vital role in our company’s history of generating reliable and affordable energy 11
Slide 12: Astoria Station Natural Gas Plant | Complete
ASTORIA STATION NATURAL GAS PLANT | COMPLETE 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
Slide 13: 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 14: Ashtabula III Purchase
ASHTABULA III PURCHASE Project Description 62.4 MW Schedule Expected purchase early 2023 • Purchase Power Agreement (PPA) with NextEra Energy began in 2013. • PPA included option to buy starting in 2022. • Regulatory approvals expected in 2022. 14
Slide 15: MN Integrated Resource Plan
MN INTEGRATED RESOURCE PLAN • Filing September 2021. • Filed last plan in June 2016 (MPUC approved April 2017). • Required in Minnesota and North Dakota due to new legislation, though Otter Tail Power Company develops strategy for integrated system and will also file plan with the South Dakota regul
Slide 16: 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 17: 2021 Key Regulatory Matters
2021 KEY REGULATORY MATTERS Estimated Regulatory Matters MN ND SD Dates February North Dakota Advance Determination of Prudence for AMI Filing X 15, 2021 Minnesota Hoot Lake Solar Filing Rate Review Evidentiary Hearing & March 25, X Order 2021 April 21, Minnesota Depreciation Order X 2021 July
Slide 18: 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 19: 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 20: 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 245-MW natural gas simple-cycle combustion $152.5 2021 99% General Rate Case - M
Slide 21: Manufacturing Platform
MANUFACTURING PLATFORM 7 @®) VINYLTECH T.O. PLASTICS Vil BTD northern pipe PVCePIPE products
Slide 22: Manufacturing
MANUFACTURING • Contract metal fabrication – stamping, machining, tube bending, tool & die making, welding, painting, assembly. Net Revenues ($ in millions) $284.5 (One stop shop for customer needs) $300 $277.2 $238.8 • Growth opportunities with existing customer base and $250 expansion with new cus
Slide 23: Manufacturing Sales by End Markets
MANUFACTURING SALES BY END MARKETS 2019 BTD 2020 BTD Energy, Energy, 4% 2% AGR, 12% AGR, 14% RV, 41% RV, 37% L&G, 15% L&G, 14% Const, 14% Const, 19% Industrial, Industrial, 14% 14% 2019 T.O. Plastics 2020 T.O. Plastics Medical, 18% Medical, 22% Industrial, 8% Industrial, 9% Extrusion/Food, 1% Hortic
Slide 24: Plastics
PLASTICS • Manufactures and sells PVC (polyvinyl chloride) pipe to Net Revenue ($ in millions) distributors. Pipe is used in municipal water, rural $300 $267.5 water, wastewater, and storm drainage systems. $250 $205.2 • Plants located Fargo ND & Phoenix AZ. $200 $183.3 • Approximate production capa
Slide 25: Historical Resin, Pipe Price and Spreads
HISTORICAL RESIN, PIPE PRICE AND SPREADS Resin shortages driven by a hurricane, Covid and a polar vortex Hurricane Harvey, followed by have driven margins to a series of resin disruptions, record levels have reset margins for the A downward slide in Resin prices led past several years to lower margi
Slide 26: Financial Update
FINANCIAL UPDATE 26
Slide 27: Q2 EPS 2020 vs. Q2 EPS 2021
Q2 EPS 2020 VS. Q2 EPS 2021 Q2 Diluted EPS: 2020 vs. 2021 Electric Manufacturing Plastics Corporate Consolidated Q2 2020 Diluted Earnings per Share $ 0.33 $ 0.01 $ 0.12 $ (0.04) $ 0.42 Increase in retail revenue from interim rate increase, net of PTC credits 0.03 0.03 Increase in retail revenue from
Slide 28: YTD EPS 2020 vs. YTD EPS 2021
YTD EPS 2020 VS. YTD EPS 2021 YTD Diluted EPS: June 2020 vs. June 2021 Electric Manufacturing Plastics Corporate Consolidated YTD June 2020 Diluted Earnings per Share $ 0.73 $ 0.13 $ 0.26 $ (0.10) $ 1.02 Increase in retail revenue from interim rate increase, net of PTC credits 0.06 0.06 Decrease in
Slide 29: Financial Overview ($ in millions)
FINANCIAL OVERVIEW ($ IN MILLIONS) Revenue Sources Operating Income Net Income $200 $140 $1,200 $184.7 $127.0 $180 $1,010 $120 $1,000 $160 $919.5 $890.1 $147.9 $95.9 $134.9 76.8 $100 56.7 $140 $86.8 $800 40.8 552.0 $120 36.5 $80 29.1 460.4 444.0 27.8 $600 $100 $60 $80 $400 $60 $40 107.1 107.9 70.3 9
Slide 30: 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 68,711,606 59,245,383 40% 10.0% Letters of Credit 12,
Slide 31: 2021 Earnings Guidance
2021 EARNINGS GUIDANCE 2020 EPS 2021 EPS 2021 EPS 2021 EPS by February 15, 2021 May 3, 2021 August 2, 2021 Segment Low High Low High Low High Electric $ 1.63 $ 1.80 $ 1.83 $ 1.71 $ 1.74 $ 1.71 $ 1.74 Manufacturing 0.27 0.28 0.32 0.28 0.32 0.43 0.47 Plastics 0.67 0.52 0.56 0.73 0.77 1.64 1.68 Corpora
Slide 32: 2021-2025 Financing Plans
2021-2025 FINANCING PLANS $230M LT Debt transaction completed June 2021. Delayed Draws of $140M in November 2021 and $90M in May 2022 32
Slide 33: Bond Maturity Schedule
BOND MATURITY SCHEDULE 2019 Senior Unsecured Notes $10M at 3.07% 2013 Senior Unsecured Notes $60M at 4.68% 2021 Senior Unsecured Notes $230M (Transaction priced in June ‘21 subject to final closing on delayed funding of $140M in Nov ’21 and $90M in May ’22) 33
Slide 34: 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 represents over Transmission (i
Slide 35: 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 Lower pay-out ratio • Indicated 5.4 % increase of $.08/share. projected for 2021 due to strong performance in Plastics segment • Stron
Slide 36: OTTR Investment Theme
OTTR INVESTMENT THEME Total Shareholder Return 8%-10%* Long-term EPS Growth Rate 5-7% ** Dividend Yield ~ 3% Long-term Targeted 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 electr