Mdu Resources Group, Inc. · NYSE:MDU

Mdu Resources — Investor Presentation (March 2019)

52 slides from Mdu Resources's investor presentation, Mar 6, 2019

  1. Slide 1: Investor Relations March 2019

    MARCH 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: 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

  4. Slide 4: MDU Resources is Building a Strong America

    MDU Resources is Building a Strong America® io 24 40 & 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 Conducting

  5. Slide 5: Results from Continuing Operations

    RESULTS FROM CONTINUING OPERATIONS FOR THE YEAR ENDED DECEMBER 2018 EARNINGS EPS $320 $1.60 $284.2* $1.45* $269.4 $1.38 $270 $1.40 $1.20 $220 $1.00 millions $170 $0.80 $120 $0.60 $0.40 $70 $0.20 $20 $0.00 2017 2018 2017 2018 * Light gray area reflects a $39.5 million benefit, or 20 cents per share,

  6. Slide 6: Year in Review - 2018

    YEAR IN REVIEW - 2018  Consolidated EPS from continuing operations $1.38, compared to $1.45 in 2017 – 2017 results included a $0.20 one-time benefit from tax reform  Total construction materials and services earnings of $156.9 million – Construction services reported record revenues and earnings a

  7. Slide 7: Earnings Contributions

    EARNINGS CONTRIBUTIONS TRAILING TWELVE MONTHS ENDING DECEMBER 31, 2018 EARNINGS Regulated Energy 42% Construction 58% 1 EBITDA Regulated Construction Energy 49% 51% 1 - See Appendix for reconciliation of NON-GAAP financial measures 7

  8. Slide 8: 2019-23 Capital Program

    2019-23 CAPITAL Utility Construction Pipeline & Midstream PROGRAM $3,000 TOTAL CAPITAL FORECAST OF $2,642*  Electric and natural gas utility − System infrastructure upgrades and replacements $2,500 $435  Construction materials and services $2,000 − Equipment and plant $727 millions replacements an

  9. Slide 9: Utility Electric & Natural Gas

    INVESTOR RELATIONS MARCH 2019 UTILITY ELECTRIC & NATURAL GAS

  10. Slide 10: Electric and Natural Gas

    ELECTRIC AND NATURAL GAS  1,100,700 electric and natural gas customers in 459 communities Electric Natural Gas 143,000 customers  957,700 customers 800 MW of owned generation 10

  11. Slide 11: Strategy

    STRATEGY  Provide safe, reliable and economic service  Focus on organic growth through investments needed to provide these services  Look to expand into areas where similar operating and growth objectives exist  Be one of the top performing utilities in the nation – Measured by integrity, safety

  12. Slide 12: Customer Growth

    CUSTOMER GROWTH NATURAL GAS ELECTRIC 1,000,000 1.8% CAGR 144,000 1.2% CAGR 950,000 143,000 142,000 900,000 141,000 850,000 140,000 139,000 800,000 138,000 750,000 137,000 700,000 136,000 2014 2015 2016 2017 2018 2014 2015 2016 2017 2018 National Average - 0.7% CAGR National Average - 0.9% CAGR 12

  13. Slide 13: Transitioning Our Resources

    TRANSITIONING OUR RESOURCES BASED ON NAME PLATE RATING 11% 27% 20% 46% 2013 2018 69% 27% Coal Gas Renewables 13

  14. Slide 14: Generation Fleet Update

    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 combustion turbine in Mandan, ND; plan to file AD

  15. Slide 15: Big Stone South to Ellendale

    BIG STONE SOUTH TO ELLENDALE  MISO multivalue 345-kV transmission line; 160 miles from Big Stone City, SD, to Ellendale, ND  Recovery through MISO tariff  Energized February 2019 15

  16. Slide 16: Thunder Spirit Wind Expansion

    THUNDER SPIRIT WIND EXPANSION  Project purchase completed in October 2018  Acquisition costs of $84 million – Levelized cost of $26/megawatt  Qualifies for full PTCs  Added 16 turbines; 48 MW; brings project to 155 MW in total  In total, Thunder Spirit’s 69 turbines can power approximately 50,0

  17. Slide 17: 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 17

  18. Slide 18: 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

  19. Slide 19: Outlook

    OUTLOOK  Safely meet customer demand by upgrading and expanding infrastructure and facilities  Historic and future organic growth opportunities – Capital expenditures: $1.5 billion over next five years  Expects to grow rate base by 5% compounded annually over the next five years  Customer growth

  20. Slide 20: Pipeline & Midstream

    INVESTOR RELATIONS MARCH 2019 PIPELINE & MIDSTREAM

  21. Slide 21: Pipeline & Midstream

    PIPELINE & MIDSTREAM  Regulated operations – Approx. 4,000 miles of pipe – 1.8 Bcf/d system capacity – 14 Interconnecting points – Largest storage field in N. America  Non-regulated operations – Gas gathering – Cathodic protection – Energy management 21

  22. Slide 22: Strategy Statement

    STRATEGY STATEMENT We will maximize the value of our integrated system of assets by targeting growth projects that utilize our competitive advantages: the existing location of our asset base; our talented team; our competitiveness in deal origination, design, engineering and construction; and operat

  23. Slide 23: 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, operate capability 23

  24. Slide 24: WBI Energy

    WBI Energy  FERC regulated  Over 4,000 miles of pipeline  Over 1.8 billion cubic feet/day capacity  13 interconnecting points  Largest storage field in N. America 24

  25. Slide 25: Growth Projects

    Demicks Lake LS 27 Valley Expansion LS 22 Expansion GROWTH PROJECTS Demand Related Project Bakken Related Project 25

  26. Slide 26: 2019 Organic Growth

    2019 ORGANIC GROWTH  Demicks Lake – 14 miles of 20-inch pipeline in McKenzie County, North Dakota – Will increase capacity by 175 million cubic feet per day – Estimated construction costs of $30 million – Targeted in-service date in the fall of 2019  Line Section 22 – Replacing 10-inch pipe with l

  27. Slide 27: 2019 Organic Growth

    2019 ORGANIC GROWTH  North Bakken Expansion – 67 miles of new 20-inch pipeline and two associated compressor facilities – As designed, will increase capacity 200 million cubic feet per day – Construction expected to begin in early 2021 and be completed late that year – Estimated cost of $220 millio

  28. Slide 28: Outlook

    OUTLOOK  Begin construction on Demicks Lake and Line Section 22 projects in 2019  Begin construction on North Bakken Expansion project in 2021  Profitably grow the core business – Be the pipeline of choice for increasing Bakken takeaway and demand customers – $435 million CAPEX investment for 201

  29. Slide 29: Construction Services

    INVESTOR RELATIONS MARCH 2019 CONSTRUCTION SERVICES

  30. Slide 30: 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 30

  31. Slide 31: 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 31

  32. Slide 32: Outside Companies

    OUTSIDE COMPANIES  Capital Electric Line Builders  International Line Builders  Lone Mountain Excavation  Loy Clark Construction  Rocky Mountain Contractors  Wagner-Smith Equipment 32

  33. Slide 33: Inside Companies

    INSIDE COMPANIES  Bell Electrical  ESI Electrical Contractors Contractors  Bombard  Lone Mountain Electric Excavation  Bombard  OEG, Inc Mechanical  USI Industrial  Capital Electric Construction  Desert Fire Protection  Duro Electric 33

  34. Slide 34: Customer Satisfaction: Backlog

    CUSTOMER SATISFACTION: BACKLOG AS OF DECEMBER 31, 2018 $1,000 $900 $939 $800 $700 $708 $600 millions $500 $493 $475 $400 $459 $300 $325 $308 $305 $200 $100 $0 2011 2012 2013 2014 2015 2016 2017 2018 34

  35. Slide 35: Outlook

    OUTLOOK  $939 million of backlog, up 33% from 2017  2019 revenue guidance $1.35 billion to $1.50 billion – Margins expected to be comparable to 2018  Strong demand for utility construction equipment it manufactures as well as electrical transmission, distribution and substation work  High demand

  36. Slide 36: Construction Materials

    INVESTOR RELATIONS MARCH 2019 CONSTRUCTION MATERIALS

  37. Slide 37: Who We Are

    WHO WE ARE About Us  1.0 billion tons of aggregate reserves  Top 10 aggregate producer – 6th sand and gravel – 1.0B tons of reserves  Operations in 15 states  Over 5,100 employees at peak season 37

  38. Slide 38: Knife River Strategy

    KNIFE RIVER STRATEGY  Take advantage of vertical integration  Grow operations through M&A and greenfield  Success through People, Safety, Quality, Environmental  Focus on recruiting and retention 38

  39. Slide 39: Vertical Integration

    VERTICAL INTEGRATION  Aggregates-based  Asphalt, concrete, liquid asphalt, cement, construction  Advantage over competition  Adds margin 39

  40. Slide 40: Services

    SERVICES  General Contractor  Subcontractor  Aggregate Laydown  Asphalt Paving  Concrete Construction  Site Development  Underground Utilities  Railroad Work  Bridges  Marine Construction 40

  41. Slide 41: Construction Backlog

    CONSTRUCTION BACKLOG AS OF DECEMBER 31, 2018 $800.0 $700.0 $706 $600.0 $500.0 $538 $490 $486 millions $400.0 $438 $300.0 $200.0 $100.0 $0.0 2014 2015 2016 2017 2018 41

  42. Slide 42: Growing Our Operations - 2018

    GROWING OUR OPERATIONS - 2018 Honey Creek Aggregates 42

  43. Slide 43: Outlook

    OUTLOOK  Backlog of $706 million as of December 31, 2018, up 45 percent from year-end 2017  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 43

  44. Slide 44: Financial Update

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

  45. Slide 45: Electric & Natural Gas Utility

    ELECTRIC YEAR-END 2018 & NATURAL GAS UTILITY Earnings  Reported combined earnings of $84.7 million $100 – Higher electrical retail sales volumes $95 to all major customer classes – Higher natural gas distribution retail $90 sales margins $85 – Earnings offset by higher $84.7 millions depreciation,

  46. Slide 46: Pipeline & Midstream

    PIPELINE & MIDSTREAM YEAR-END 2018  Reported earnings of $28.5 million Earnings $30 $28.5** – Increased transportation revenues and volumes from organic growth projects $25 – Increase in earnings was driven by a $20.5* tax benefit of $4.2 million in the third $20 quarter related to a final accounti

  47. Slide 47: Construction Services

    CONSTRUCTION SERVICES YEAR-END 2018  Reported record earnings of Earnings $64.3 million $70 – Higher outside specialty contracting $64.3 workloads, largely from higher $60 equipment sales and rentals and increased power line recovery work $53.3* related to natural disasters $50 – Lower income taxes

  48. Slide 48: Construction Materials

    CONSTRUCTION MATERIALS YEAR-END 2018  Reported earnings of $92.6 million Earnings $130 – Higher aggregate and asphalt $123.4* product workloads and margins and $120 lower income taxes due to the $110 enactment of the TCJA $100 $92.6 – Earnings offset by higher selling, general and administration ex

  49. Slide 49: Dividend Growth

    DIVIDEND $0.85 GROWTH $0.81  81 consecutive years of $0.80 quarterly dividend payments ANNUALIZED DIVIDEND RATE  Dividend increased $0.75 November 2018, making 28 consecutive years of increases $0.70 $0.69  2018 annualized dividend $0.81 per share $0.65  Member of S&P High- Yield Dividend Aristo

  50. Slide 50: 2019 Earnings Guidance

    2019 EARNINGS GUIDANCE $1.35 - $1.55 Consolidated EPS Guidance Note: As of February 5, 2019 5 - 8% Long-Term Compound Annual Growth Rate Target 50

  51. Slide 51: Questions

    INVESTOR RELATIONS QUESTIONS

  52. Slide 52: Appendix: Reconciliation of Non-GAAP Financial Measures: EBITDA

    APPENDIX RECONCILIATION OF NON-GAAP FINANCIAL MEASURES: EBITDA Trailing Twelve Month Ended December 31, 2018 (dollars in millions) Construction Construction Electric Natural Gas Pipeline Services Materials Earnings $47.0 $37.7 $28.5 $64.3 $92.6 Adjustments: Interest Expense 25.9 30.7 5.9 3.6 17.3 In

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