Mdu Resources Group, Inc. · NYSE:MDU
Mdu Resources — Investor Presentation (March 2019)
53 slides from Mdu Resources's investor presentation, Mar 13, 2019
Slide 1: Investor Relations March 2019
MARCH 2019 INVESTOR RELATIONS
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
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
Slide 4: MDU Resources is Building a Strong America
MDU Resources is Building a Strong America® ior 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 Conducti
Slide 5: Results from Continuing Operations
RESULTS FROM CONTINUING OPERATIONS FOR YEAR ENDED DECEMBER 31, 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,
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
Slide 7: Earnings Contributions
EARNINGS CONTRIBUTIONS TRAILING TWELVE MONTH 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
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 $2,500 upgrades and replacements $435 ▪ Construction materials and services $2,000 − Equipment and plant $727 millions replacements an
Slide 9: Utility Electric & Natural Gas
INVESTOR RELATIONS MARCH 2019 UTILITY ELECTRIC & NATURAL GAS
Slide 10: Electric and Natural Gas
ELECTRIC AND NATURAL GAS WA 217,600 Customers MT ND 110,800 Customers 205,100 Customers MN OR 21,900 Customers 75,600 Customers ID SD 365,300 Customers 69,500 Customers WY 34,900 Customers ▪ 1,100,700 electric and natural gas customers in 459 communities Electric Natural Gas ▪ 143,000 customers ▪ 95
Slide 11: Strategy
STRATEGY ▪ Grow the business by investing in the safety and reliability of our existing system ▪ Focus on organic growth first while managing operating costs ▪ Look to expand into areas where similar operating and growth objectives exist ▪ Pillars to success –Integrity, safety, employees, customers
Slide 12: Rate Base Growth
RATE BASE GROWTH FOR YEAR ENDED DECEMBER 31, 2018 $2.5 $2.0 $1.5 Billions $1.0 $0.5 $0.0 2014 2015 2016 2017 2018 12
Slide 13: Customer Growth
CUSTOMER GROWTH FOR YEAR ENDED DECEMBER 31, 2018 1,150,000 1,100,000 1,050,000 1,000,000 Customer Growth CAGR 2014-2018 ▪ Montana-Dakota Utilities – 1.0% 950,000 ▪ Intermountain Gas – 2.3% 900,000 ▪ Cascade Natural Gas – 1.8% 850,000 800,000 750,000 700,000 2014 2015 2016 2017 2018 13
Slide 14: Transitioning Our Resources
TRANSITIONING OUR RESOURCES BASED ON NAME PLATE RATING 11% 27% 20% 46% 2013 2018 69% 27% Coal Gas Renewables 14
Slide 15: 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 natural gas combustion turbine in Mandan, ND; pla
Slide 16: 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 in February 2019 16
Slide 17: 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 59 turbines can power 50,000 homes. 17
Slide 18: 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 18
Slide 19: 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
Slide 20: 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
Slide 21: Pipeline & Midstream
INVESTOR RELATIONS MARCH 2019 PIPELINE & MIDSTREAM
Slide 22: WBI Energy Assets
WBI ENERGY ASSETS ▪ Regulated operations – Approx. 4,000 miles of pipe – Over 1.8 Bcf/d system capacity – 14 Interconnecting points – Largest storage field in N. America ▪ Non-regulated operations – Gas gathering – Cathodic protection – Energy management 22
Slide 23: Strategy Statement
STRATEGY STATEMENT Building upon our core strengths and expertise, WBI Energy will become a leader in the Mid-Continent and Rocky Mountain regions in meeting North America’s energy needs BUILDING A STRONG AMERICA® 23
Slide 24: 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 and operate capability BUILDING A STRONG AMERICA® 24
Slide 25: WBI in the Bakken
WBI Energy-Transmission Non-WBI Transmission Pipeline Gas storage field Pipeline Interconnect Non-WBI Gas Plants WBI in the Bakken ▪ Service to 23 of 30 natural gas plants ▪ 6 Bakken interconnects ▪ WBI moves over 50% of Bakken gas ▪ More takeaway capacity needed 25
Slide 26: Upcoming Growth Projects
WBI Energy-Transmission Non-WBI Transmission Pipeline Gas storage field Demicks Lake Projects Pipeline Interconnect Expansion Projects Upcoming Growth Projects In-Service Est. Project MMcf/d Date Cost* Demicks Lake 2019 175 $30M Billings (LS 22) 2019 22.5 $12M Demicks Lake 2020 175 $12M Expansion No
Slide 27: 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
Slide 28: Future Organic Growth
FUTURE ORGANIC GROWTH ▪ Demicks Lake Expansion –Will increase capacity by 175 million cubic feet per day – Estimated construction cost of $12 million – Targeted in-service date in early 2020 ▪ North Bakken Expansion – 67 miles of new 20-inch pipeline and two associated compressor facilities – As des
Slide 29: Outlook
OUTLOOK ▪ Begin construction on Demicks Lake and Line Section 22 projects in 2019 ▪ Begin construction on Demicks Lake Expansion in 2020 ▪ Begin construction on North Bakken Expansion in 2021 ▪ Profitably grow the core business – $435 million CAPEX investment for 2019-23 ▪ Focus on organic growth op
Slide 30: Construction Services
INVESTOR RELATIONS MARCH 2019 CONSTRUCTION SERVICES
Slide 31: 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 31
Slide 32: 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 32
Slide 33: Outside Companies
OUTSIDE COMPANIES ▪ Capital Electric Line Builders ▪ International Line Builders ▪ Lone Mountain Excavation ▪ Loy Clark Construction ▪ Rocky Mountain Contractors ▪ Wagner-Smith Equipment 33
Slide 34: Inside Companies
INSIDE COMPANIES ▪ Bell Electrical ▪ ESI Electrical Contractors Contractors ▪ Bombard ▪ Lone Mountain Electric Excavation ▪ Bombard ▪ OEG, Inc Mechanical ▪ USI Industrial ▪ Capital Electric ▪ Wagner Construction Industrial Electric ▪ Desert Fire Protection ▪ Duro Electric 34
Slide 35: Customer Satisfaction: Backlog
CUSTOMER SATISFACTION: BACKLOG FOR YEAR ENDED 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 35
Slide 36: Outlook
OUTLOOK ▪ $939 million of backlog, up 33% from 2017 – All-time record backlog ▪ 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 sub
Slide 37: Construction Materials
INVESTOR RELATIONS MARCH 2019 CONSTRUCTION MATERIALS
Slide 38: Who We Are
WHO WE ARE ▪ Top 10 U.S. aggregate producer – 6th sand and gravel – 1.0B tons of reserves ▪ Operations in 15 states ▪ 5,400 employees in peak season ▪ $2.00B - $2.15B in revenue projected for 2019 38
Slide 39: Knife River Strategy
KNIFE RIVER STRATEGY ▪ Create value by treating our people well and leading our markets in quality, service and safety ▪ Enhance shareholder value by generating cash and continued meaningful growth ▪ Grow through M&A and greenfield ▪ Take advantage of our vertical integration 39
Slide 40: Vertical Integration
VERTICAL INTEGRATION ▪ Aggregates-based ▪ Asphalt, concrete, liquid asphalt, cement, construction ▪ Advantage over competition ▪ Adds margin 40
Slide 41: Services
SERVICES ▪ General Contractor ▪ Subcontractor ▪ Aggregate Laydown ▪ Asphalt Paving ▪ Concrete Construction ▪ Site Development ▪ Underground Utilities ▪ Railroad Work ▪ Bridges ▪ Marine Construction 41
Slide 42: Construction Backlog
CONSTRUCTION BACKLOG FOR YEAR ENDED 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 42
Slide 43: Growing Our Operations - 2018
GROWING OUR OPERATIONS - 2018 Honey Creek Deposits 43
Slide 44: Acquisition Activity
ACQUISITION ACTIVITY Viesko Redi-Mix Molalla Redi-Mix ▪ March 2019 ▪ July 2018 ▪ Salem, OR ▪ Molalla, OR Honey Creek Deposits Tri-City Paving ▪ February 2019 ▪ June 2018 ▪ Marble Falls, TX ▪ Little Falls, MN Sweetman Const. Co. Teevin & Fischer ▪ October 2018 ▪ April 2018 ▪ Sioux Falls, SD ▪ Seaside
Slide 45: Outlook
OUTLOOK ▪ Backlog of $706 million as of December 31, 2018, up 45 percent from year-end 2017 − Record year-end backlog ▪ 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 45
Slide 46: Financial Update
MARCH 2019 FINANCIAL UPDATE | A I LISTED =MDU RESOURCES | Building a Strong America: INW74= GROUP. INC
Slide 47: Electric & Natural Gas Utility
ELECTRIC & NATURAL FOR YEAR ENDED DECEMBER 31, 2018 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 mill
Slide 48: Pipeline & Midstream
PIPELINE & MIDSTREAM FOR YEAR ENDED DECEMBER 31, 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
Slide 49: Construction Services
CONSTRUCTION SERVICES FOR YEAR ENDED DECEMBER 31, 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 –
Slide 50: Construction Materials
CONSTRUCTION MATERIALS FOR YEAR ENDED DECEMBER 31, 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 an
Slide 51: Annualized Dividend Rate
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
Slide 52: Questions
INVESTOR RELATIONS QUESTIONS
Slide 53: 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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