Otter Tail Corporation · NASDAQ:OTTR
Otter Tail — Q3 2024 Earnings Presentation
37 slides from Otter Tail's earnings presentation, Nov 5, 2024
Slide 1: Q3 2024 Earnings Conference Call
Q3 2024 Earnings Conference Call November 5, 2024
Slide 2: Forward-Looking Statement
Forward-Looking Statement Except for historical information contained here, the statements in this release are forward-looking and made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The words “anticipate,” “believe,” “can,” “could,” “estimate,” “expe
Slide 3: Company Overview
Company Overview MANUFACTURING PLATFORM ELECTRIC PLATFORM MANUFACTURING SEGMENT PLASTICS SEGMENT Expected 2024 Earnings Mix Long Term Earnings Mix Target Electric, 30% Electric, 65% Electric Platform Highlights Manufacturing Platform Highlights • Attractive rate base growth • Enhanced consolidated R
Slide 4: Financial Summary and Highlights
Financial Summary and Highlights Q3 2024 Diluted EPS Down 7% Q3 2024 Q3 2023 • Strong Electric segment performance, offset by lower Plastics and Manufacturing segment earnings (in millions, except per share data) Operating Revenues $ 338.0 $ 358.1 Electric segment earnings Up 16% • Impact of interim
Slide 5: Earnings Per Share Growth
Earnings Per Share Growth $7.00 $7.07 $6.78 26.6% Consolidated EPS (5YR CAGR) $4.23 $2.17 $2.34 7.7% $2.53 $2.41 Consolidated EPS $2.12 w/o Plastics* $1.89 $1.66 $1.67 (5YR CAGR) 2019 2020 2021 2022 2023 2024 Guidance Midpoint *Consolidated EPS w/o Plastics is a non-GAAP financial measure management
Slide 6: Electric Platform
Electric Platform OrEnian POWER COMPANY
Slide 7: Electric Operations
Electric Operations Operating Revenue (in millions)* • Vertically integrated, regulated utility with generation, transmission and $549.7 $528.4 distribution facilities $517.1 • Serve more than 133,000 residential, commercial and industrial customers • Service area encompasses approximately 70,000 sq
Slide 8: Multiple Opportunities to Drive Load Growth
Multiple Opportunities to Drive Load Growth Otter Tail Power is Well Positioned to Address Incremental Opportunity Through: Locations have been identified with high Operating in attractive service territory Long-standing, approved tariffs for large reliability and minimal delivery costs to which has
Slide 9: Rate Base Growth
Rate Base Growth Rate Base $1.3B of Capital Spending from 2024 to 2028 $ in billions Renewables, 37% Existing Rates, 33% Rate Case, 9% $2.52 $2.35 Capital Recovery $2.20 Spending Mechanism Other, 14% $2.08 $1.89 $1.74 Transmission, 34% Distribution, 15% Riders, 58% 7.7% e C AGR of Bas 2018 to 2023 R
Slide 10: Advanced Metering Infrastructure (AMI)
Advanced Metering Infrastructure (AMI) Project AMI Description Transition to advanced meters Est. Completion Date 2025 Otter Tail Power Investment ~ $60 million Recovery Mechanism Approved riders Project Summary • Upgrading more than 170,000 electric meters that enables automated meter reading; ~ 90
Slide 11: Wind Repowering
Wind Repowering Project Wind Repowering Description Equipment upgrades at wind facilities Est. Completion Date 2024 and 2025 Otter Tail Power Investment ~ $230 million Recovery Mechanism Approved riders Project Summary • Develop and perform equipment upgrades at the Langdon, Ashtabula, Luverne and A
Slide 12: MISO Long Range Transmission Planning (LRTP)
MISO Long Range Transmission Planning (LRTP) Project MISO LRTP Description LRTP Tranche 1 Transmission Projects Est. Completion Date 2032 Otter Tail Power Investment ~ $420 million Recovery Mechanism MISO Tariff Project Summary • MISO's approved Long Range Transmission Plan includes two 345 kV proje
Slide 13: Affordability
Affordability Average Summer Residential Rate in Cents per kWh Otter Tail Power's 2023 rates: 16.0 15% below regional average USA 30% below national average 14.6 13.6 13.2 13.2 13.1 We expect to continue to keep customer bills Regional 13.1 low through: 12.7 12.4 • Inflation Reduction Act tax credit
Slide 14: Key Regulatory Matters
Key Regulatory Matters Description MN ND SD Notes ND rate case filed: Nov-23 ND amended application filed: Jul-24 General Rate Case X Evidentiary hearing before the ND Commission: Dec-24 Expect final outcome of ND rate case in early 2025 Informal hearing with ND Commission: Oct-24 Integrated Resourc
Slide 15: North Dakota Rate Case
North Dakota Rate Case North Dakota Rate Case • Filed with the North Dakota Public Service Commission (NDPSC) in November 2023 • Amended rate case filing in July 2024 with the NDPSC, proposing to increase net revenues by approximately $23 million, or 10.9% • Requested the following: ◦ 10.6% return o
Slide 16: Regulatory Framework
Regulatory Framework Minnesota North Dakota South Dakota Renewable Generation Rider Recovery Rider Recovery Phase-In Rider Transmission Projects Rider Recovery Rider Recovery Rider Recovery Non-Renewable Generation Rate case Rider or Rate Case Phase-In Rider Customer and Distribution Technology Ride
Slide 17: Manufacturing Platform
Manufacturing Platform we @®) VINYLTECH TO. PLASTICS Vill BT D northern pipe PVCePIPE products 17
Slide 18: Manufacturing Operations
Manufacturing Operations Operating Revenue (in millions) • Contract metal fabrication – stamping, machining, tube bending, tool & die, laser cutting, welding, painting, assembly. A one stop shop for customer needs $398.0 $402.8 • Growth opportunities with existing customer base and expansion with ne
Slide 19: Manufacturing Sales by End Market
Manufacturing Sales by End Market 1% 2% 1% 6% 10% 18% 18% Energy 14% 16% 14% Agriculture Other 19% Lawn & Garden Industrial 18% 22% Construction Medical 10% 11% 80% 73% Industrial Horticulture 34% 33% Rec. Vehicle 2022 2023 2022 2023 19
Slide 20: End Market Outlook - Manufacturing Segment
End Market Outlook - Manufacturing Segment End Market 2024 Outlook Comments BTD Manufacturing Recreational Vehicles • Dealer inventory is up, negatively impacting production (ATVs, UTVs, etc.) • Decreased discretionary spending due to inflation and higher interest rates • Residential demand has soft
Slide 21: Plastics Operations
Plastics Operations Operating Revenue (in millions) $512.5 • Manufactures and sells polyvinyl chloride (PVC) pipe to $455.9 distributors. Pipe is used in municipal water, rural water, $418.0 wastewater and storm drainage systems • Companies located in Fargo, ND & Phoenix, AZ • Approximate combined p
Slide 22: Annual U.S. Housing Starts
Annual U.S. Housing Starts in millions 2.5 2.0 1.48 1.5 1.42 1.36 50-Year Average 1.0 0.5 0.0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024E 2025E 2026E Source: U.S. Census Bureau, U.S. Department of Commerce and Wells Fargo E
Slide 23: Financial Update
FINANCIAL UPDATE 23
Slide 24: Financial Overview
Financial Overview Elevated Plastics segment earnings impacting Operating Income & Net Income in all periods presented $ in millions Operating Revenues Operating Income Net Income $304.6 $1,460.2 $294.2 $284.2 $1,349.2 $1,341.8 $390.4 $383.5 $377.9 $910.5 $218.1 $820.8 $824.7 $204.2 $209.8 $277.3 $2
Slide 25: Diluted EPS: Q3 2023 vs Q3 2024
Diluted EPS: Q3 2023 vs Q3 2024 Electric Manufacturing Plastics Corporate Total Q3 2023 DILUTED EARNINGS PER SHARE $ 0.58 $ 0.18 $ 1.41 $ 0.02 $ 2.19 ND interim revenue 0.08 — — — 0.08 Transmission revenue 0.03 — — — 0.03 Rider revenue 0.02 — — — 0.02 Electric Impact of favorable weather 0.02 — — —
Slide 26: Diluted EPS: YTD 2023 vs YTD 2024
Diluted EPS: YTD 2023 vs YTD 2024 Electric Manufacturing Plastics Corporate Total YTD 2023 DILUTED EARNINGS PER SHARE $ 1.60 $ 0.48 $ 3.53 $ 0.02 $ 5.63 ND interim revenue 0.20 — — — 0.20 Sales volume 0.05 — — — 0.05 Rider revenue 0.04 — — — 0.04 O&M expense 0.03 — — — 0.03 Electric AFUDC equity 0.0
Slide 27: Liquidity, Cap Structure and Credit Ratings
Liquidity, Cap Structure and Credit Ratings Liquidity: Line of Credit Availability Consolidated Capital Structure & ROE Otter Tail Corporation Otter Tail Power Company in millions 40.6% 38.6% 38.2% $79.4 $93.8 Available Available 22.1% 25.6% 20.2% $170.0 $170.0 Available Available Available 61.4% 61
Slide 28: 2024 Earnings Guidance
2024 Earnings Guidance 2024 Guidance 2024 Guidance Actual August 5, 2024 November 4, 2024 Diluted EPS 2023 Low High Low High Electric $ 2.01 $ 2.13 $ 2.17 $ 2.13 $ 2.17 Manufacturing 0.51 0.36 0.40 0.30 0.34 Plastics 4.47 4.35 4.54 4.61 4.70 Corporate 0.01 (0.07) (0.04) (0.07) (0.04) Total $ 7.00 $
Slide 29: Capital Expenditures
Capital Expenditures Total in millions 2023 2024 2025 2026 2027 2028 2024-2028 Electric Segment Renewables $ 118 $ 93 $ 33 $ 113 $ 129 $ 486 Transmission 51 85 111 98 100 445 Distribution 38 39 36 38 39 190 Other 67 37 30 27 25 186 Electric Segment Total $ 241 $ 274 $ 254 $ 210 $ 276 $ 293 $ 1,307 M
Slide 30: Five Year Financing Plan
Five Year Financing Plan Long-Term Financing 2024 2025-2028 $ in millions (Actual) (Planned) LONG-TERM DEBT Otter Tail Power Issuances $ 120 $ 420 Retirements — (42) Otter Tail Corporation (Parent) Issuances — — Retirements — (80) Net Debt Increase $ 120 $ 298 EQUITY $ — $ — 30
Slide 31: Bond Maturity Schedule
Bond Maturity Schedule $150 in millions Balanced and manageable maturity schedule 10% Weighted average interest rate of 4.40% $125 8% 6.37% 6.47% $100 5.77% 5.48% 5.47% 6% Debt Maturity Interest Rate $75 4.45% 4.07% 3.82% 3.92% 3.62% 3.69% 3.77% 3.55% 3.52% 4% 3.22% $50 2.74% 2% $25 $0 // // // // /
Slide 32: History of Dividend Growth
History of Dividend Growth Our Dividend Story Dividend Growth & Payout Ratio 5 YEAR CAGR = 6.0% • Paid annual dividend without interruption since 1938 $1.87 $1.75 $1.65 $1.56 • 6.9% increase, or $0.12 per share, indicated $1.40 $1.48 $1.34 for 2024 $1.23 $1.25 $1.28 • Strong balance sheet, ample liq
Slide 33: OTTR Investment Targets
OTTR Investment Targets Balanced Growth and Income Total Shareholder Return Strategy 8-10% Dividend Growth • Attractive rate base growth at our electric utility with a proven track Rate record of converting rate base growth into earnings growth 5-7% • Manufacturing and Plastics Long-Term EPS Dividen
Slide 34: Appendix
Appendix 34
Slide 35: Cleaner Energy Future
Cleaner Energy Future By 2030, We are Targeting: Otter Tail Power Scope 1 CO2 Emissions (in million short tons) 55% 50% 4.3 3.9 3.7 Our owned and contracted Our carbon emissions from 2.9 energy generation will be owned generation 2.6 2.1 55% renewable resources will be 50% (Does not include MISO mar
Slide 36: Values in Action
Values in Action Safety - We provide safe workplaces and require safe work practices • Published an Occupational Health and Safety Policy, committing to: ◦ Safety as our top priority; ◦ Development of and training on safe work methods; and ◦ Implementation of a safety program • Our 2023 Total Record
Slide 37: www.ottertail.com
S OTIERTAIL W CORPORATION www.ottertail.com