Otter Tail Corporation · NASDAQ:OTTR
Otter Tail — Q1 2024 Earnings Presentation
37 slides from Otter Tail's earnings presentation, May 7, 2024
Slide 1: Q1 2024 Earnings Conference Call
Q1 2024 Earnings Conference Call May 7, 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, 34% 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 Q1 2024 Diluted EPS Up 19% Q1 2024 Q1 2023 • Strong Plastics segment performance (in millions, except per share data) Electric segment earnings Down 3% Operating Revenues $ 347.1 $ 339.1 • Impact of unfavorable weather and higher operating and maintenance expenses pa
Slide 5: Earnings Per Share Growth
Earnings Per Share Growth Decrease in earnings per share largely due to anticipated gradual decline in Plastics Segment earnings $7.00 $6.78 $6.38 24.1% Consolidated EPS (5YR CAGR) $4.23 Decrease in earnings per share driven by lower sales volumes within $2.17 $2.34 Manufacturing Segment 8.5% $2.53
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 distribution facilities $528.4 $517.9 • Serve more than 133,000 residential, commercial and industrial customers • Service area encompasses approximately 70,000 sq
Slide 8: Rate Base Growth
Rate Base Growth Rate Base $1.3B of Capital Spending from 2024 to 2028 $ in billions Renewables, 37% Depreciation*, 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% * Rate base replacement e C AG
Slide 9: Advanced Metering Infrastructure (AMI)
Advanced Metering Infrastructure (AMI) Project AMI Description Transition to advanced meters Est. Completion Date 2025 Otter Tail Power Cost ~ $60 million Recovery Mechanism Riders Project Summary • Upgrading more than 174,000 electric meters that enable two-way communication with our systems • AMI
Slide 10: Wind Repowering
Wind Repowering Project Wind Repowering Description Equipment upgrades at wind facilities Est. Completion Date 2024 and 2025 Otter Tail Power Cost ~ $230 million Recovery Mechanism Riders Project Summary • Upgrade and refurbishment of wind turbines at the Langdon, Ashtabula, Luverne, and Ashtabula I
Slide 11: 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 Cost ~ $420 million Recovery Mechanism MISO tariff Project Summary • MISO's approved Long Range Transmission Plan includes two 345 kV projects in
Slide 12: Affordability
Affordability Average Summer Residential Rate in Cents per kWh Otter Tail Power's 2023 rates: 15% below regional average 16.0 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 13: Key Regulatory Matters
Key Regulatory Matters Description MN ND SD Notes Original filing: Sep-21 Supplemental filing(s): Mar-23 and Dec-23 (MN only) Informational Integrated Resource Plan (IRP) X X Settlement agreement: Apr-24 (MN DOC and labor organizations) Only MN Hearing: May-24 Expect decision in MN during Q2 2024 ND
Slide 14: Integrated Resource Plan (IRP)
Integrated Resource Plan (IRP) Minnesota • In April 2024, Otter Tail Power, the MN Department of Commerce and three labor organizations entered into a settlement agreement for our IRP, recommending the MN Commission to resolve the plan and approve: ◦ Direct assignment of 200 to 300 MW of solar gener
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 • Last North Dakota rate case was filed 6 years ago • Proposed to increase net revenues from North Dakota rates by approximately $17 million, or 8.4%. Even with this request
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 $395.4 • Growth opportunities with existing customer base and expansion
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 has normalized to target levels, except for specific new premium and work models (ATVs, UTVs, etc.) • Inflation and interest rate environment impacting discretionary
Slide 21: Plastics Operations
Plastics Operations Operating Revenue (in millions) • Manufactures and sells polyvinyl chloride (PVC) pipe to $512.5 distributors. Pipe is used in municipal water, rural water, $443.8 $418.0 wastewater, and storm drainage systems • Plants located in Fargo, ND & Phoenix, AZ • Approximate production c
Slide 22: Historical Resin, Pipe Price and Spreads
Historical Resin, Pipe Price and Spreads Resin prices have declined and seemingly stabilized. Sales prices are gradually receding Resin shortages and strong demand for PVC pipe drives spread expansion Hurricane Harvey, followed by a series of resin disruptions, reset margins for several Downward sli
Slide 23: Annual U.S. Housing Starts
Annual U.S. Housing Starts in millions 2.5 2.0 1.50 1.5 1.45 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 Source: U.S. Census Bureau, U.S. Department of Commerce and Wells Fargo Economics 23
Slide 24: Financial Update
FINANCIAL UPDATE 24
Slide 25: 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 $306.0 $1,460.2 $294.2 $284.2 $1,349.2 $1,357.2 $390.4 $392.2 $377.9 $910.5 $222.3 $820.8 $839.3 $204.2 $209.8 $277.3 $2
Slide 26: Diluted EPS: Q1 2023 vs Q1 2024
Diluted EPS: Q1 2023 vs Q1 2024 Electric Manufacturing Plastics Corporate Total Q1 2023 DILUTED EARNINGS PER SHARE $ 0.55 $ 0.17 $ 0.80 $ (0.03) $ 1.49 Rider revenue 0.06 — — — 0.06 ND interim revenue 0.04 — — — 0.04 Sales volumes 0.03 — — — 0.03 Electric Impact of unfavorable weather (0.09) — — — (
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 25.6% 40.6% 38.6% 38.7% $79.4 Available 22.1% 22.1% $170.0 $170.0 $160.9 Available Available Available Available 59.4% 6
Slide 28: 2024 Earnings Guidance
2024 Earnings Guidance 2024 Guidance 2024 Guidance Actual February 12, 2024 May 6, 2024 Diluted EPS 2023 Low High Low High Electric $ 2.01 $ 2.13 $ 2.17 $ 2.13 $ 2.17 Manufacturing 0.51 0.51 0.55 0.45 0.49 Plastics 4.47 2.62 2.81 3.78 3.97 Corporate 0.01 (0.13) (0.10) (0.13) (0.10) Total $ 7.00 $ 5.
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 - No material external equity is
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