Slide 1: 2023 Earnings Conference Call
2023 Earnings Conference Call February 13, 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,” “could,” “estimate,” “expect,” “f
Slide 3: Company Overview
Company Overview MANUFACTURING PLATFORM ELECTRIC PLATFORM MANUFACTURING SEGMENT PLASTICS SEGMENT Electric Platform 2023 Earnings Mix Long-Term Earnings Mix Manufacturing Platform • Customer rates below • Organic growth regional and national opportunities averages • Diversified end • Constructive reg
Slide 4: 2023 Financial Summary and Highlights
2023 Financial Summary and Highlights Financial Results Record Financial Results Up 4% • We produced record breaking earnings in 2023, driven by strong financial results across our ($ in millions, except per share data) 2023 2022 segments, as well as corporate cost savings Operating Revenues $ 1,349
Slide 5: Earnings Per Share Growth
Earnings Per Share Growth $6.78 $7.00 27.7% Consolidated EPS Plastics segment earnings decline (CAGR) offset by strong performance within the other segments, including corporate cost savings $4.23 $2.34 11.6% $2.06 $2.17 Consolidated EPS $2.53 w/o Plastics* $2.12 (CAGR) $1.89 $1.66 $1.67 $1.46 2018
Slide 6: 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 7: 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 8: Electric Platform
Electric Platform OrEnian POWER COMPANY
Slide 9: Electric Operations
Electric Operations Operating Revenue (in millions) • Vertically integrated, regulated utility with generation, transmission and $549.7 distribution facilities $528.4 $480.3 • Serve more than 133,000 residential, commercial and industrial customers • Service area encompasses approximately 70,000 squ
Slide 10: 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 11: 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 Rider until next rate case Project Summary • Upgrading more than 174,000 electric meters that enable two-way communication wit
Slide 12: 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 MN & ND - Rider until next rate case Recovery Mechanism SD - Rate case Project Summary • Upgrade and refurbishment of wind turbines at the
Slide 13: 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 14: 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 15: Key Regulatory Matters
Key Regulatory Matters Description MN ND SD Notes Original filing: Sep-21 Informational Integrated Resource Plan X X Supplemental filing(s): Mar-23 and Dec-23 (MN only) Only Expect increased clarity in 2024 ND: Rate case filed in Nov-23 General Rate Case TBD X TBD MN and SD: Dependent on results of
Slide 16: Integrated Resource Plan (IRP)
Integrated Resource Plan (IRP) • Supplemental IRP filed March 2023, jointly in MN, ND & SD • Additional supplemental IRP filed December 2023 in MN requesting to separate Otter Tail Power's resource planning by jurisdiction ◦ Separate resource plans by jurisdiction may result in new generation resour
Slide 17: 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 18: 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 19: Manufacturing Platform
Manufacturing Platform we @®) VINYLTECH TO. PLASTICS Vill BT D northern pipe PVCePIPE products 19
Slide 20: 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 21: 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 21
Slide 22: End Market Outlook - Manufacturing Segment
End Market Outlook - Manufacturing Segment End Market 2024 Outlook Comments BTD Manufacturing Recreational Vehicles • Dealer inventory at healthy levels, except for premium models (still low inventory for these models) (ATVs, UTVs, etc.) • Inflation and interest rate environment impacting discretion
Slide 23: 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, $418.0 wastewater, and storm drainage systems $380.2 • Plants located in Fargo, ND & Phoenix, AZ • Approximate production c
Slide 24: Historical Resin, Pipe Price and Spreads
Historical Resin, Pipe Price and Spreads Resin prices have declined and seemingly leveled off. 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 sl
Slide 25: Annual U.S. Housing Starts
Annual U.S. Housing Starts in millions 2.5 2.0 1.47 1.5 1.42 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 25
Slide 26: Financial Update
FINANCIAL UPDATE 26
Slide 27: 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 $1,460.2 $294.2 $284.2 $1,349.2 $390.4 $377.9 $1,196.8 $910.5 $820.8 $249.7 $176.8 $209.8 $277.3 $204.2 $716.5 $271.4 $1
Slide 28: Diluted EPS: Q4 2022 vs Q4 2023
Diluted EPS: Q4 2022 vs Q4 2023 Electric Manufacturing Plastics Corporate Total Q4 2022 DILUTED EARNINGS PER SHARE $ 0.41 $ 0.07 $ 0.59 $ (0.07) $ 1.00 Sales volumes 0.07 — — — 0.07 Pension plan costs 0.06 — — — 0.06 Rider revenues 0.04 — — — 0.04 Electric Impact of unfavorable weather (0.08) — — —
Slide 29: Diluted EPS: 2022 vs 2023
Diluted EPS: 2022 vs 2023 Electric Manufacturing Plastics Corporate Total 2022 DILUTED EARNINGS PER SHARE $ 1.91 $ 0.50 $ 4.66 $ (0.29) $ 6.78 Commercial & industrial sales volumes 0.19 — — — 0.19 Pension plan costs 0.17 — — — 0.17 Rider revenue 0.17 — — — 0.17 O&M expense (0.17) — — — (0.17) Electr
Slide 30: 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 25.6% in millions 40.6% 38.6% 46.3% $79.4 Available 22.1% $152.2 $170.0 $170.0 Available Available Available 59.4% 61.4% 53.7% $90.6
Slide 31: 2024 Earnings Guidance
2024 Earnings Guidance Actual 2024 Guidance Diluted EPS 2022 2023 Low High Electric $ 1.91 $ 2.01 $ 2.13 $ 2.17 Manufacturing 0.50 0.51 0.51 0.55 Plastics 4.66 4.47 2.62 2.81 Corporate (0.29) 0.01 (0.13) (0.10) Total $ 6.78 $ 7.00 $ 5.13 $ 5.43 Return on Equity 25.6 % 22.1 % 14.3 % 15.1 % 31
Slide 32: 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 33: Five Year Financing Plan
Five Year Financing Plan Long-Term Financing 2023 2024-2028 $ in millions (Actual) (Planned) LONG-TERM DEBT Otter Tail Power Issuances $ — $ 540 Retirements — (42) Otter Tail Corporation (Parent) Issuances — — Retirements — (80) Net Debt Increase $ — $ 418 EQUITY - No material external equity issuan
Slide 34: Bond Maturity Schedule
Bond Maturity Schedule $150 in millions Balanced and manageable maturity schedule 7% 6.47% Weighted average interest 6.37% rate of 4.23% $125 6% 5.47% $100 5% Debt Maturity Interest Rate 4.45% $75 4.07% 3.92% 3.82% 3.77% 4% 3.62% 3.69% 3.55% 3.52% $50 3.22% 2.74% 3% $25 $0 // // // // // 2% 26 27 29
Slide 35: 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 36: OTTR Investment Targets
OTTR Investment Targets Total Shareholder Return Balanced Growth and Income Strategy 8-10% Dividend Growth • Attractive rate base growth at our electric utility with a proven track Rate record of converting rate base growth 5-7% into earnings growth Long-Term EPS • Manufacturing businesses provide D
Slide 37: www.ottertail.com
S OTIERTAIL W CORPORATION www.ottertail.com