Mdu Resources Group, Inc. · NYSE:MDU
Mdu Resources — Investor Day (March 2024)
68 slides from Mdu Resources's investor day presentation, Mar 13, 2024
Slide 1: MDU Resources Group, Inc. Investor Day
== MDU RESOURCES GROUP, INC. INVESTOR DAY March 13, 2024 100: EST. 1924>
Slide 2: Welcome
Welcome
Slide 3: Forward-Looking Statement
Forward-Looking Statement During 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 results may diff
Slide 4: Agenda
Agenda Nicole Kivisto Welcome & Introductions President & CEO of MDU Resources Group, Inc. MDU Resources Group Nicole Kivisto Focusing on our CORE President & CEO of MDU Resources Group, Inc. Break MDU Construction Services Group Jeff Thiede Building America’s future President & CEO of MDU Construct
Slide 5: MDU Resources Group: Focusing on our CORE
MDU Resources Group Focusing on our CORE Nicole Kivisto President & CEO of MDU Resources Group, Inc.
Slide 6: Commitment to Shareholder Value
Commitment to Shareholder Value MDU Resources has a long history of evolving our company to create value 2023 Successful spinoff of Knife River and announced spinoff of MDU Construction 1924 1993 Service Group estimated for end of 2024 Began as a Expanded to Scaled both businesses to allow for effic
Slide 7: Why MDU?
Why MDU? Compelling Investment Thesis Regulated Energy Delivery Construction Services • Strong regulated business mix • One of the largest electrical construction service providers in the U.S. • Extensive operational diversification • Essential infrastructure service provider • Supportive regulatory
Slide 8: Path to Becoming Pure Play
Path to Becoming Pure Play Earnings EBITDA Capital Expenditures Regulated Utility 6% Regulated Pipeline 32% 22% 40% 45% Construction 54% 72% 14% 15% 21% 23% 28% Future state as a pure- play regulated energy delivery company 72% 77% 79% Note: Percentages are based on year-end 2023 results. MDU | Inve
Slide 9: Focusing on Our Core
FOCUSING ON OUR CORE
Slide 10: Focusing on our CORE
Focusing on our “CORE” MDU Resources becoming a pure-play regulated entity focuses the company on its original “CORE” energy delivery business Customers & Operational Returns Employee Communities Excellence Focused Driven Long history of providing regulated energy delivery service 2023 marked 75th y
Slide 11: Customers & Communities
Focusing on our “CORE” Customers & Communities • Sustain best-in-class customer satisfaction • Achieved Top 5 JD Power rankings in the midsize utilities of the West Region • Competitive rates • Maintain rates below the national average • Community focused • Support economic development of our commun
Slide 12: Operational Excellence
Focusing on our “CORE” Operational Excellence • Safety culture – driving employee and system safety • Proactive maintenance and active Safety Management Systems • Lower than industry average preventable injuries and vehicle accidents • Responsible approach to operating costs and capital investment •
Slide 13: Returns Focused
Focusing on our “CORE” Returns Focused • Attractive earnings and rate base growth • Achieve long-term EPS growth of 6-8% • Achieve long-term Utility rate base growth of 7% • ROE enhancement • Timely regulatory filings and incremental growth opportunities • Delivering strong total shareholder return
Slide 14: Employee Driven
Focusing on our “CORE” Employee Driven • Employee retention & recruitment • Maintain an employer of choice workplace culture • Provide a competitive total compensation package • Encourage employee engagement • Seek employee feedback on continuous improvement • Promote community volunteerism • Succes
Slide 15: Compelling Investment Thesis
Compelling Investment Thesis Strong, regulated • ~100% regulated cash flow contribution business mix • Stable, predictable cash flow driven by 72% utility and 28% regulated pipeline earnings Extensive operational • Utility operations in 8 states & 13 jurisdictions with 55% / 45% gas vs. electric rat
Slide 16: Regulated Utility Snapshot
Regulated Utility Snapshot ~1.2 million Total Customers Over 1 million Gas Over 145,000 Electric 648 MW Owned Generation 30,400 Miles of Electric and Gas Transmission and Distribution Lines 1,520 Skilled Employees WA OR ID MT WY ND SD MN 233k 84k 419k 114k 38k 210k 74k 22k Customers Customers Custom
Slide 17: Regulated Pipeline Snapshot
Regulated Pipeline Snapshot 3,800 Miles of Pipe ~2.6 Bcf/day System Capacity 14 Interconnecting Points ~320 Skilled Employees LARGEST Storage Field in North America ~82% of Montana-Dakota’s natural gas transported by the Pipeline MDU | Investor Day | March 13, 2024 17
Slide 18: 2023 Combined Regulated Rate Base
2023 Combined Regulated Rate Base Total Rate Base Rate Base Diversity 14 Jurisdictions 20% 25% 8 States $4.0B $4.0B Balanced Growth 80% 75% Strong organic growth in both State and FERC jurisdictions Utility Pipeline State FERC MDU | Investor Day | March 13, 2024 18
Slide 19: History of Growth: Rate Base
History of Growth Rate Base Dollars in billions $4.5 $4.0 $4.0 1.6% customer growth $3.5 $0.8 Higher than the national average $0.7 $0.7 $3.0 $2.7 $0.5 ~2.6 Bcf/day $2.5 $0.4 $0.5 Pipeline capacity $2.0 8% CAGR $1.5 $2.8 $3.0 $3.2 Combined rate base growth $2.6 $2.3 $2.5 $1.0 $0.5 $0.0 2018 2019 202
Slide 20: History of Growth: Earnings
History of Growth Earnings Dollars in millions 8% CAGR $180 $167.0 Combined earnings growth $160 $140 $46.9 1.6% customer growth $120 $113.2 $37.0 $40.9 $35.3 Higher than the national average $29.6 $100 $28.5 Data center $80 Welcomed a new high-volume $60 $120.1 customer in 2023 $103.5 $102.3 $94.3
Slide 21: FERC Regulatory Highlights
FERC Regulatory Highlights Rate Base Split Dollars in Billions, includes CWIP (2023) Pipeline Utilities Total FERC 6% FERC 25% $0.8B $3.2B $4.0B State State FERC Regulated Regulated 100% 94% 75% Pipeline Electric Transmission Formula Rate 10.52% 60% MISO Construct Authorized equity layer System oper
Slide 22: Electric Rate Base Summary
Electric Rate Base Summary Current Landscape as of December 2023 Electric Rate Base Dollars in Millions Current Allowed Jurisdiction ROE% Rate Case Filing $269 ND 9.75% 2022 MT 9.65% 2022 $836 $1,439 $178 FERC 10.52% 2023 WY 9.45% 2025¹ $88 $68 SD * 2023 *Global Settlement - no publicly stated ROE.
Slide 23: Natural Gas Rate Base Summary
Natural Gas Rate Base Summary Current Landscape as of December 2023 Natural Gas Distribution Rate Base Dollars in Millions Current Allowed Jurisdiction ROE% Rate Case Filing $475 WA 9.40% 2024¹ $229 ID 9.50% 2022 ND 9.30% 2023 $1,791 $175 OR 9.40% 2024¹ MT * 2024¹ $124 SD * 2023 $647 MN 9.53% 2025¹
Slide 24: Supportive Utility Jurisdictions: Electric
Supportive Utility Jurisdictions and Favorable Recovery Mechanisms Electric Jurisdictions Percentage of jurisdiction with… Jurisdiction Montana North Dakota South Dakota Wyoming Forward Year/ 2023A Rate Base ($mm) $269 $836 $68 $88 Forecasted Test Period Allowed ROE 9.65% 9.75% ¹ 9.45% Last Rate Cas
Slide 25: Supportive Utility Jurisdictions: Gas
Supportive Utility Jurisdictions and Favorable Recovery Mechanisms Gas Jurisdictions North South Percentage of jurisdiction with… Jurisdiction Minnesota Montana Wyoming Idaho Washington Oregon Dakota Dakota Forward Year/ 2023A Rate Base ($mm) $45 $124 $229 $69 $26 $475 $647 $175 Forecasted Test Peri
Slide 26: Utility Regulatory Activity
Utility Regulatory Activity Regulatory filings to recover capital investment and costs Targeted 2022 2023 2024 • North Dakota – electric • North Dakota – natural gas • Washington – natural gas • Idaho – natural gas • South Dakota – electric • Montana – natural gas • Montana – electric • South Dakota
Slide 27: Business Evolution: Increasing Stability
Business Evolution: Increasing Stability Fundamentally enhanced business mix since 2009 WBI Energy Revenue • Exited all gathering & Dollars in millions processing services as $180 of December 2020, as $160 $156 8% part of strategic review $140 34% 29% 9% $120 • Continue to increase $100 7% 11% FERC-
Slide 28: Business Evolution: Increasing Stability
Business Evolution: Increasing Stability • In 2009, fixed vs. variable revenue was approximately 50/50 • In 2023, nearly 80% of revenue was fixed and driven largely by long-term natural gas transportation contracts • Anticipate fixed revenue to continue to increase as growth projects supported by lo
Slide 29: Pipeline Growth
Pipeline Growth • Earnings are largely driven by growth projects • Growth projects are driven by demand from a diverse mix of customers • Supported by long-term contracts (generally 10 years or longer) • Majority of capital expenditures occur in the year project goes into service • Limited regulator
Slide 30: Positive Bakken Outlook
Positive Bakken Outlook • Natural gas production continues to outpace oil through the forecast period • Bakken gas-to-oil ratios (GOR) are projected to continue to increase • Shallower natural gas decline • Increased GOR on new wells • Forecasted natural gas growth outpaces current takeaway capacity
Slide 31: Pipeline Regulatory Activity
Pipeline Regulatory Activity • Successfully settled rate cases in 2014, 2019 and 2023 • Collaborative process with FERC and shippers • Just and reasonable outcomes • Favorable capital structure: 60% equity and 40% debt • 2023 settlement includes 2-year moratorium and 5-year required comeback MDU | I
Slide 32: Our Commitment
Our Commitment Legacy and Longevity: • We have proudly served our communities for 100 years, demonstrating a strategy of sustainability • We believe sustainability is balancing social, environmental and financial impacts Environment: • We are committed to providing safe, reliable and cost-effective
Slide 33: Emission Reduction Goals
Emission Reduction Goals Focused on operating our business with a decreasing environmental footprint GHG Emission Reduction Targets Sustainable Operations • Target to reduce electric utility GHG emissions by 45% by 2030 30% Utility Methane Emissions Reduction Target Compared to 2022 levels reduction
Slide 34: Renewable Natural Gas Projects
Renewable Natural Gas Projects • Legacy landfill operations in Billings, MT • Significant activity in the Pacific Northwest • Five interconnection agreements as well as construction and ownership of Deschutes County landfill • Able to procure renewable gas from these facilities • Five interconnectio
Slide 35: Social Responsibility
Social Responsibility Committed to operating with integrity and being a good corporate citizen Employees Community • Focus on safety and training drives the recruitment and • Safety and reliability are key to maintaining trust, as well as retention of top talent winning repeat business • Survey empl
Slide 36: Experienced Management Team
Experienced Management Team Nicole Rob Anne Kivisto Johnson Jones President and Chief President of WBI Vice President and Chief Executive Officer of Energy, Inc. Human Resources Officer MDU Resource (41 years of service) of MDU Resources (29 years of service) (42 years of service) Peggy Paul Garret
Slide 37: Corporate Governance
Corporate Governance MDU Resources is committed to strong corporate governance aligned with shareholder interests. Below highlights a few of our governance practices and policies: • Annual election of all directors • Standing committees consist • Majority voting for directors entirely of independent
Slide 38: Highly Qualified Board of Directors
Highly Qualified Board of Directors Dennis Johnson, Chair Nicole Kivisto Darrel Anderson Expertise: Business President and Chief Expertise: Finance, public management, specialty Executive Officer of MDU utilities, human resources contracting, finance and Resources management, public strategic planni
Slide 39: MDU Resources Group, Inc.
MDU Resources Group, Inc. A predictable, sustainable long-term investment based on a history of performance Customers and Operational Returns Employee Community Excellence Focused Driven • Best-in-class • Safety culture • Attractive earnings • Employee retention customer satisfaction and rate base g
Slide 40: Break
Break
Slide 41: Everus Construction Services Group
Jeff Thiede | President & CEO CG)MBU CONSTRUCTION SERVICES GROUP
Slide 42: Everus Construction Group
a EVERUS CONSTRUCTION GROUP www.EVERUS.com
Slide 43: Who We Are
Who We Are 9,100+ employees at peak Operating across the U.S. More than 40,000 projects completed in 2023 No. 4 EC&M* 2023 Top 50 Electrical Contractors No. 10 ENR* 2023 Top 600 Specialty Contractors *Electrical Construction & Maintenance magazine and Engineering News-Record ©2024 EVERUS 43
Slide 44: Electrical and Mechanical
Electrical and Mechanical Construction and maintenance of electrical and communication wiring and infrastructure, fire suppression systems, and mechanical piping and services ©2024 EVERUS 44
Slide 45: Transmission and Distribution
Transmission and Distribution Construction and maintenance of overhead and underground electrical, gas and communication infrastructure, as well as manufacturing and distribution of transmission line construction equipment and tools ©2024 EVERUS 45
Slide 46: Significant Historical Growth
Significant EBITDA Historical Growth 2024 forecast: EBITDA of $220 million to $240 million Backlog remains strong at $2.01 billion as of Dec. 31, 2023 Organic growth and growth through acquisitions $222.7 $193.4 $173.1 $168.6 $145.3 $103.6 2018 2019 2020 2021 2022 2023 ©2024 EVERUS 46
Slide 47: Low Capital Investment
Low Capital CAPEX AS % OF REVENUE Investment $3.5 $3.0 Not a capital-intensive business $2.5 Will allow cash to be reinvested in business for organic and acquisition $2.0 growth Billions Historical disciplined acquisition $1.5 growth has helped drive growth $1.0 $0.5 1.5% 0.5% 1.3% 1.2% 1.7% $- 2019
Slide 48: Building America's Future
Building America’s future.™ 48
Slide 49: Employees Value Execution Relationships
Employees Value Execution Relationships Our greatest asset We create value for We work safely, We build is our people. We our shareholders, efficiently and with connections with are committed to our team members integrity to deliver key stakeholders to engaging, training, and our other what we say w
Slide 50: Growth Opportunities
Growth Opportunities We Build Strong Cash Flow Distinct Investment Infrastructure Supports Growth Opportunity Essential services provider Reinvesting to organically One of the largest service IIJA, IRA, CHIPS projects grow market share providers in the U.S. Grid hardening Greater opportunities for H
Slide 51: Building America's Future
Building America’s future.™ 51
Slide 52: We Look Forward to Seeing You
We look forward to seeing you at Everus’ investor day event
Slide 53: Financial Outlook & Guidance
Financial Outlook & Guidance Jason Vollmer Vice President, CFO & Treasurer of MDU Resources Group, Inc.
Slide 54: 2023: Recap of a Record Year
2023: Recap of a Record Year for the Group MDU Resources Group Utility Group Pipeline Everus • Achieved record results • 25% electric retail sales • Record earnings and • Record revenues, across all businesses volume growth (all-time annual natural gas earnings and EBITDA record) transportation volu
Slide 55: Guidance 2024
Guidance 2024 Regulated Energy Delivery Everus • Earnings in the range of $170 million • Revenues expected to be in the to $180 million range of $2.9 billion to $3.1 billion, with margins comparable to 2023 • EBITDA in the range of $220 million to $240 million Guidance as of March 13, 2024 MDU | Inv
Slide 56: Regulatory Update
Regulatory Update Annual Revenue Increase Annual Revenue Increase (in Business Jurisdiction Filing Date Status (%) millions) Settled cases with implemented rates North Dakota Approved June 6, 2023 Electric Utility May 16, 2022 7.4% $15.3M Electric New rates effective July 1, 2023 Natural Gas Approve
Slide 57: Capital Allocation Philosophy
Capital Allocation Philosophy • Prioritize investments that enhance safety, reliability and security of our system • Projects that support customer growth and expansion • Projects with minimal regulatory lag • Additional growth projects • Prioritize those with best return profile • Dividend payout r
Slide 58: Capital Investment Driving Rate Base Growth
Capital Investment Driving Rate Base Growth $2.8 billion Investment examples: Capital Investment 2024-2028 700 ($ in millions) • System safety and integrity $657 600 $609 projects $532 $529 500 $434 • Electric transmission 400 and distribution projects 300 • Expansion projects 200 100 • Replacements
Slide 59: Strong Balance Sheet
Strong Balance Sheet 45% debt-to-total capitalization ratio at December 31, 2023 No 60% equity layer for FERC regulated pipeline near-term Equity layer ~50% for utility jurisdictions equity needs Manageable debt maturities and issuances through current forecast No equity issuance planned until 2027
Slide 60: Electric & Natural Gas Outlook
Electric & Natural Gas Outlook • Expect to grow rate base by 7% compounded annually over the next five years • Safely meet customer demand by upgrading and expanding infrastructure and facilities • Customer base expected to continue growing by 1-2% annually • Focused on timely regulatory recovery •
Slide 61: Pipeline Outlook
Pipeline Outlook • Will continue to benefit from new transportation and storage service rates, as approved by the FERC, which were effective Aug. 1, 2023 • Will continue to benefit from expansion projects placed in service in Nov. 2023 • Current transportation capacity of approximately 2.6 billion c
Slide 62: Construction Services Outlook
Construction Services Outlook • Previously announced tax-free spinoff expected to be complete in late 2024 • Backlog of $2.01 billion, down slightly compared to record year-end backlog of $2.13 billion in 2022 • The Infrastructure Investment and Jobs Act and Inflation Reduction Act propose billions
Slide 63: Strong Long-Term Regulated Financial Guidance
Strong Long-Term Regulated Financial Guidance $2.7 Billion 7% 1-2% Regulated Capital Investment Utility Rate Base Growth Customer Growth 6-8% 60-70% No near-term Annual Dividend Payout EPS Growth Rate Ratio Target equity needs MDU | Investor Day | March 13, 2024 63
Slide 64: Closing Remarks
Closing Remarks Nicole Kivisto President & CEO of MDU Resources Group, Inc.
Slide 65: Key Takeaways
Key Takeaways Compelling Investment Opportunity • Focusing on our “CORE” • One of the largest electrical construction service providers in the U.S. • Strong regulated business mix • Essential infrastructure service provider • Extensive operational diversification • Competitive positioning and indust
Slide 66: Questions
Questions
Slide 67: Appendix
Appendix
Slide 68: Reconciliation of EBITDA
Reconciliation of EBITDA ($ in millions) For the year ended December 31 2018 2019 2020 2021 2022 2023 Income from Continuing $64.3 $93.0 $109.7 $109.4 $124.8 $142.4 Ops. Adjustments: Interest Expense $3.6 $5.3 $4.1 $3.5 $6.3 $10.1 Income Taxes $20.0 $30.0 $35.8 $35.4 $40.8 $47.0 Depreciation, $15.7