Mdu Resources Group, Inc. · NYSE:MDU
Mdu Resources — Investor Presentation (October 2019)
44 slides from Mdu Resources's investor presentation, October 2019
Slide 1: October 2019 Investor Relations
OCTOBER 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: MDU Resources is Building a Strong America
MDU Resources is Building a Strong America® ion FR 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
Slide 4: 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 5: Year-to-Date Results
YEAR-TO-DATE RESULTS* AS OF JUNE 30, 2019 EARNINGS EPS $120 $0.60 $102.7 $0.52 $100 $0.50 $86.2 $0.44 $80 $0.40 millions $60 $0.30 $40 $0.20 $20 $0.10 $0 $0.00 2018 2019 2018 2019 * Includes both continuing and discontinued operations 5
Slide 6: Earnings Contributions
EARNINGS CONTRIBUTIONS TRAILING TWELVE MONTH ENDED JUNE 30, 2019 EARNINGS Regulated Energy 42% Construction 58% EBITDA1 Regulated Energy Construction 50% 50% 1 - See Appendix for reconciliation of NON-GAAP financial measures 6
Slide 7: 2019-23 Capital Program
2019-23 CAPITAL Utility Construction Pipeline & Midstream PROGRAM $3,000 TOTAL CAPITAL FORECAST OF $2,740* ▪ Electric and natural gas utility − System infrastructure upgrades and $2,500 $473 replacements − Natural gas combustion turbine ▪ Pipeline and midstream $2,000 − Demicks Lake project $787 mil
Slide 8: Sound Financial Position
SOUND FINANCIAL POSITION FOR QUARTER ENDED JUNE 30 52% Equity / 48% Debt $6,000 $5,000 $4,000 millions $3,000 $2,000 $1,000 $0 2015 2016 2017 2018 2019 Equity Debt 8
Slide 9: Annualized Dividend Rate
DIVIDEND $0.85 GROWTH $0.81 ▪ 81 consecutive years of $0.80 quarterly dividend payments ▪ Dividend increased Annualized Dividend Rate November 2018, making 28 $0.75 consecutive years of increases $0.73 ▪ 2018 annualized dividend $0.81 per share $0.70 ▪ Member of S&P High-Yield Dividend Aristocrats i
Slide 10: Utility Electric & Natural Gas
INVESTOR RELATIONS OCTOBER 2019 UTILITY ELECTRIC & NATURAL GAS
Slide 11: Electric and Natural Gas
ELECTRIC AND NATURAL GAS WA 217,600 Customers MT ND 110,800 Customers 205,000 Customers MN OR 21,500 Customers 75,800 Customers ID SD 368,300 Customers 69,500 Customers WY 35,100 Customers ▪ 1,103,600 electric and natural gas customers in 459 communities Electric Natural Gas ▪ 143,400 customers ▪ 96
Slide 12: 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 13: Transitioning Our Electric Resources
TRANSITIONING OUR ELECTRIC RESOURCES BASED ON NAME PLATE RATING 11% 27% 28% 31% 20% Forecasted 2013 2018 46% 2023 69% 27% 41% Coal Gas Renewables 13
Slide 14: Electric Generation
ELECTRIC GENERATION ▪ Announced in February plans to retire aging coal-fired units – Lewis & Clark Station around the end of March 2021 – Heskett Station Units 1 & 2 around the end of March 2022 ▪ Construct simple cycle natural gas combustion turbine – 88 megawatts; located adjacent to similar turbi
Slide 15: 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 15
Slide 16: 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 17: Utility Electric & Natural Gas Outlook
UTILITY ELECTRIC & NATURAL GAS OUTLOOK ▪ Safely meet customer demand by upgrading and expanding infrastructure and facilities ▪ Customer base expected to continue growing by 1-2% annually ▪ Expects to grow rate base by 5% compounded annually over the next five years ▪ Focused on timely regulatory re
Slide 18: Pipeline & Midstream
INVESTOR RELATIONS OCTOBER 2019 PIPELINE & MIDSTREAM
Slide 19: WBI Energy Assets and Operations
WBI ENERGY ASSETS AND OPERATIONS ▪ Regulated (Approx. 90%) – Approx. 4,000 miles of pipe – Over 1.8 Bcf/d system capacity – 13 Interconnecting points – Largest storage field in N. America ▪ Non-regulated (Approx. 10%) – Gas gathering – Cathodic protection – Energy management 19
Slide 20: 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® 20
Slide 21: 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® 21
Slide 22: 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 22
Slide 23: 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 Project MMcf/d Date Demicks Lake 2019 175 Billings (LS 22) 2019 22.5 Demicks Lake 2020 175 Expansion North Bakken 2021 300 Expans
Slide 24: Pipeline & Midstream Outlook
PIPELINE & MIDSTREAM OUTLOOK ▪ Demicks Lake project – Will increase capacity, as designed, by 175 million cubic feet per day – Expected to be in service in fall 2019 ▪ Line Section 22 Expansion project – Will increase capacity, as designed, by 22.5 million cubic feet per day – Expected to be in serv
Slide 25: Construction Services
INVESTOR RELATIONS OCTOBER 2019 CONSTRUCTION SERVICES
Slide 26: 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 ▪ Currentl
Slide 27: 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 27
Slide 28: Outside Companies
OUTSIDE COMPANIES ▪ Capital Electric Line Builders ▪ International Line Builders ▪ Lone Mountain Excavation ▪ Loy Clark Construction ▪ Rocky Mountain Contractors ▪ Wagner-Smith Equipment 28
Slide 29: 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 29
Slide 30: Revenue Growth
YEAR-TO-DATE ENDING JUNE 30 REVENUE GROWTH $1,000.0 $900.0 $885.7 ▪ Year-To-Date revenues $800.0 of $885.7 million as of June 30 $700.0 $657.6 ▪ Record year-to-date $600.0 $635.9 earnings of $42.9 million millions $500.0 $542.0 ▪ 2019 revenue guidance $400.0 $462.1 $1.6 billion to $1.8 billion $300.
Slide 31: Earnings
EARNINGS $50.0 YTD as of June 30 $40.0 $42.9 $30.0 millions $29.2 $20.0 $19.8 $10.0 $13.0 $11.8 $0.0 2015 2016 2017 2018 2019
Slide 32: Customer Satisfaction: Backlog
CUSTOMER SATISFACTION: BACKLOG FOR QUARTER ENDED JUNE 30 $1,400 $1,200 $1,148 $1,000 $800 $888 millions $600 $596 $508 $400 $429 $200 $0 2015 2016 2017 2018 2019 32
Slide 33: Growing Our Operations
GROWING OUR OPERATIONS ▪ Pride Electric, Inc. acquisition completed September 2019 ▪ Purchase expands and strengthens the services portfolio in the Seattle, WA market ▪ Founded in 1993, Pride Electric provides high-end commercial, industrial and tenant improvement electrical construction, along with
Slide 34: Outlook
OUTLOOK ▪ $1.15 billion of backlog, up 30% from 2018 – Record second quarter backlog ▪ 2019 revenue guidance $1.6 billion to $1.8 billion – Margins expected to be comparable to 2018 ▪ Currently staffing at record levels with over 6,500 employees ▪ High demand for specialty contracting work in the fo
Slide 35: Construction Materials
INVESTOR RELATIONS OCTOBER 2019 CONSTRUCTION MATERIALS
Slide 36: 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 ▪ 5,700 employees in peak season ▪ $2.0B - $2.2B in revenue projected for 2019 36
Slide 37: 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 37
Slide 38: Vertical Integration
VERTICAL INTEGRATION ▪ Aggregates-based ▪ Asphalt, concrete, liquid asphalt, cement, construction ▪ Advantage over competition ▪ Adds margin 38
Slide 39: Services
SERVICES ▪ General Contractor ▪ Subcontractor ▪ Aggregate Laydown ▪ Asphalt Paving ▪ Concrete Construction ▪ Site Development ▪ Underground Utilities ▪ Railroad Work ▪ Bridges ▪ Marine Construction 39
Slide 40: Construction Backlog
CONSTRUCTION BACKLOG FOR QUARTER ENDED JUNE 30 $1,200.0 $1,000.0 $1,042 $800.0 $833 $805 $766 $731 millions $600.0 $400.0 $200.0 $0.0 2015 2016 2017 2018 2019 40
Slide 41: Growing Our Operations
GROWING OUR OPERATIONS 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 ▪ Seasi
Slide 42: Outlook
OUTLOOK ▪ Backlog of $1.04 billion as of June 30, 2019, up 42% from second quarter 2018 − All-time record backlog ▪ 2019 revenue guidance range of $2.0 billion to $2.2 billion − Margins expected to be comparable to or slightly higher than 2018 ▪ Actively pursuing acquisition opportunities 42
Slide 43: Questions
INVESTOR RELATIONS QUESTIONS
Slide 44: Appendix: Reconciliation of Non-GAAP Financial Measures: EBITDA
APPENDIX RECONCILIATION OF NON-GAAP FINANCIAL MEASURES: EBITDA Trailing Twelve Month Ended June 30, 2019 (dollars in millions) Construction Construction Electric Natural Gas Pipeline Services Materials Earnings $47.8 $42.2 $31.4 $78.0 $86.5 Adjustments: Interest Expense 25.4 33.0 7.1 4.2 21.3 Income
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