Slide 1: Sidoti Fall 2022 Virtual Conference
Sidoti Fall 2022 Virtual Conference September 21-22, 2022
Slide 2: Forward-Looking Statement
FORWARD-LOOKING STATEMENT Except for historical information contained here, the statements in this presentation 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
Slide 3: Agenda
AGENDA • Business Overview • ESG Highlights • Electric Platform • Manufacturing Platform • Financial Update 3
Slide 4: Company Overview
COMPANY OVERVIEW MANUFACTURING PLATFORM ELECTRIC PLATFORM MANUFACTURING SEGMENT PLASTICS SEGMENT Electric Platform Expected 2022 Earnings Mix Long-term Earnings Mix Manufacturing Platform • Competitive low-cost • Long-term growth operations potential • Constructive • Capacity utilization regulatory
Slide 5: Strategic Outlook
STRATEGIC OUTLOOK • High performing electric utility ◦ Strong pipeline of rate base growth for at least 5 years ◦ Supportive regulatory treatment ◦ History of excellence • Disciplined and focused set of manufacturing companies ◦ Incremental organic growth ◦ Diversified earnings complement electric u
Slide 6: Q2 2022 Financial Summary and Highlights
Q2 2022 FINANCIAL SUMMARY AND HIGHLIGHTS • Q2 2022 diluted earnings per share of $2.05, up 104% from 2021 • Increased the 2022 diluted earnings per share guidance range to $6.83-$7.13 which reflects a 61%-69% increase from the Q2 2022 Q2 2021 2021 reported annual diluted earnings per share of $4.23.
Slide 7: Earnings Per Share Growth
Earnings Per Share Growth 31.0% CAGR 8.8% CAGR *Consolidated EPS w/o Plastics is a non-GAAP financial measure management uses to assess the financial results of the business exclusive of the impact of the earnings generated by our Plastics segment in 2021 and anticipated in 2022 which are impacted b
Slide 8: Cleaner Energy Future
CLEANER ENERGY FUTURE OTP Asset Profile 2018 2023 Footnotes: 1) Consolidated revenues include estimated returns on coal generation facility rate base investment, fuel expenses, O&M's, depreciation, property taxes, and coal conversion costs. 2) By 2022, the combination of the Hoot Lake Plant retireme
Slide 9: ESG Highlights
ESG HIGHLIGHTS By 2025, We are Targeting: 50% 50% Our owned and contracted Our carbon emissions from energy generation will be owned generation resources more than 50% renewable will be 50% below 2005 (Does not include MISO levels. market purchases). Carbon emission reductions targeted to be 97% bel
Slide 10: ESG Highlights
ESG HIGHLIGHTS Safety - Safety is one of our core values. We focus on the safety of our employees and have implemented safety programs and management practices to promote a culture of safety. Safety is also a metric used and evaluated in determining annual incentive compensation. Human Capital We ar
Slide 11: Electric Platform
ELECTRIC PLATFORM OrzEnian POWER COMPANY 11
Slide 12: Electric Operations
ELECTRIC OPERATIONS Highlights • Rate base growth opportunities: • Renewable generation - Hoot Lake Solar and Ashtabula Wind III purchase • Technology & infrastructure - Advanced Metering Infrastructure • Transmission assets - MISO Long Range Transmission Planning (LRTP) • Constructive regulatory en
Slide 13: Rate Base Growth
RATE BASE GROWTH Rate Base $978M of Capital Spending from 2022 to 2026 in billions 2022-2026 Total Recovery Mechanism $ (millions) % Depreciation (rate base replacement) $ 381 39 % Riders 460 47 Rate Case 137 14 Includes MN IRP Projects through 2026 Total $ 978 100 % 13
Slide 14: Regulatory Framework
REGULATORY FRAMEWORK Minnesota North Dakota South Dakota Renewable Riders Rider recovery / Rate case Rider recovery / Rate case Phase-in rider / Rate case Transmission Riders Rider recovery / Rate case Rider recovery / Rate case Rider recovery / Rate case A constructive regulatory environment In sta
Slide 15: Rate Base Projects
RATE BASE PROJECTS Our Investment Project (millions) In Service % Complete Recovery Mechanisms Hoot Lake Solar ~ $60 2023 ~ 30% Rider/General Rate Case - MN Advanced Metering Infrastructure and Grid Rider/General Rate Case - MN ~ $145 2019 - 2024 ~ 25% Modernization (Innovation 2030) General Rate Ca
Slide 16: Hoot Lake Solar
HOOT LAKE SOLAR Project Hoot Lake Solar Description 49-MW self-build solar Schedule 2020-2023 Otter Tail Power Cost ~ $60 million Project Summary • Qualifies for investment tax credit of 26%; safe harbor equipment secured • Eligible to meet utility scale portion of MN Solar Energy Standard (1.5% of
Slide 17: Ashtabula Wind III Purchase
ASHTABULA WIND III PURCHASE Project Ashtabula Wind III Description 62.4-MW wind farm Schedule Expected closing in early 2023 Otter Tail Power Cost ~ $50 million Project Summary • Purchase power agreement (PPA) with NextEra Energy began in 2013 • Exercised option to purchase operational assets of AWI
Slide 18: MISO Long Range Transmission Planning (LRTP)
MISO Long Range Transmission Planning (LRTP) OTP investment opportunity up to 50% Source: MISO, Reliability Imperative: Long Range Transmission Planning, July 25, 2022 18
Slide 19: MN Integrated Resource Plan/ND Regional Haze Plan
MN INTEGRATED RESOURCE PLAN/ND REGIONAL HAZE PLAN Project Summary • Filed September 2021, jointly in MN, ND, & SD • Required filing in Minnesota. North Dakota recently passed legislation requiring an IRP filing, but specific rulemaking is not complete. Delays anticipated with filing. • Preferred 5-y
Slide 20: Minnesota Rate Case
Minnesota Rate Case • Previous Minnesota rate case filed in 2016. • Compliance filing approved by the PUC on May 12, 2022. Final rates were implemented July 1, 2022. • Effective increase requested after intervenor testimony was 3.83%. Cost changes such as additional Production Tax Credits resulted i
Slide 21: 2022 Key Regulatory Matters
2022 KEY REGULATORY MATTERS Estimated Regulatory Matter MN ND SD Date Minnesota Electric Utility Infrastructure Costs (EUIC) Rider for Advanced Metering X Q3 2022 Infrastructure & Outage Management System Minnesota Rate Review Finalized/Final Rate Implemented X Q3 2022 Minnesota Integrated Resource
Slide 22: Electric Rates
Electric Rates Otter Tail Power has maintained rates lower than the national average in recent years while major projects have been constructed and put in service. Continuous improvement efforts have provided Otter Tail Power the ability to maintain competitive rates while executing on the capital i
Slide 23: Manufacturing Platform
MANUFACTURING PLATFORM BTD T.O. PLASTICS p northern pipe products VINYLTECH Vil PVCePIPE 23
Slide 24: Manufacturing Operations
MANUFACTURING OPERATIONS • Contract metal fabrication – stamping, machining, tube bending, tool & die, laser cutting, welding, painting, assembly. A one stop shop for customer needs. • Growth opportunities with existing customer base and expansion with new customers. • Ability to pass through commod
Slide 25: Manufacturing Locations
MANUFACTURING LOCATIONS 25
Slide 26: Manufacturing Sales by End Markets
MANUFACTURING SALES BY END MARKETS 2020 2021 2020 2021 26
Slide 27: Plastics Operations
PLASTICS OPERATIONS • Manufactures and sells PVC (polyvinyl chloride) pipe to distributors. Pipe is used in municipal water, rural water, wastewater, and storm drainage systems. • Plants located Fargo ND & Phoenix AZ. • Approximate production capacity of 350 mm lbs. of PVC. Highlights • Unique marke
Slide 28: Historical Resin, Pipe Price and Spreads
Continued strong domestic demand and HISTORICAL RESIN, PIPE PRICE AND SPREADS increased export market demand drive further margin expansion. Resin shortages, driven by Hurricane Ida, COVID and a polar vortex, drives margins to record levels. Hurricane Harvey, followed by a series of resin disruption
Slide 29: Plastics Locations
PLASTICS LOCATIONS 29
Slide 30: Financial Update
FINANCIAL UPDATE 30
Slide 31: Financial Overview
FINANCIAL OVERVIEW Operating Revenues Operating Income Net Income in millions in millions in millions 2021 and 2022 earnings mix are impacted by strong Plastic segment performance. (incl. unallocated corporate costs) 31
Slide 32: Liquidity, Cap Structure & Credit Ratings
LIQUIDITY, CAP STRUCTURE & CREDIT RATINGS Liquidity: Line of Credit Availability Consolidated Capital Structure & ROE Otter Tail Corporation Otter Tail Power Company ROE is TTM at 6/30/22 Borrowing Capacity of $170M in millions Available Available Available Available $7.8 Outstanding1 Outstanding Ou
Slide 33: 2022 Earnings Guidance
2022 EARNINGS GUIDANCE 2022 Guidance 2022 Guidance 2022 Guidance Actual February 14, 2022 May 2, 2022 August 1, 2022 Diluted EPS 2020 2021 Low High Low High Low High Electric $ 1.63 $ 1.73 $ 1.81 $ 1.85 $ 1.81 $ 1.85 $ 1.84 $ 1.88 Manufacturing 0.27 0.41 0.42 0.46 0.42 0.46 0.42 0.46 Plastics 0.67 2
Slide 34: Pension Assumptions and Recovery
Pension Assumptions and Recovery Actuarial EPS Projected Allocation Assumptions Sensitivity Contributions ($mm) Funding Risk Return Discount Discount Status Management Enhancement Other Rate RoR Rate RoR 2022 2023 2024 93% 50% 47% 3% 3.03% 6.3% $0.03/25bps $0.02/25bps $20 NA NA Consideration Minneso
Slide 35: Five Year Financing Plan
FIVE YEAR FINANCING PLAN Long-Term Financing 2021 2022-2026 in millions (Actual) (Planned) LONG-TERM DEBT Otter Tail Power Issuances $ 140.0 $ 380.0 Retirements — (30.0) Otter Tail Corporation (Parent) Issuances $ — $ 80.0 Retirements (0.2) (80.0) Net Debt Increase $ 139.8 $ 350.0 EQUITY - No materi
Slide 36: Bond Maturity Schedule
BOND MATURITY SCHEDULE in millions Balanced and manageable maturity schedule Weighted average interest rate of 4.29% // // // // // // 36
Slide 37: Capital Expenditures
CAPITAL EXPENDITURES Total in millions 2021 2022 2023 2024 2025 2026 2022-2026 Electric Segment Renewables & Natural Gas Generation $ 30 $ 80 $ 92 $ 92 $ 160 $ 454 Technology & Infrastructure 26 30 18 — — 74 Distribution Plant Replacements 37 35 35 35 33 175 Transmission (incl. replacements) 26 28 2
Slide 38: History of Dividend Growth
HISTORY OF DIVIDEND GROWTH Our Dividend Story Dividend Growth & Payout Ratio CAGR = 5.2% • Paid annual dividend without interruption since 1938 • 5.8% increase, or $0.09/share, indicated for 2022 • Strong balance sheet, ample liquidity, history of cash generation and commitment to enhancing sharehol
Slide 39: OTTR Investment Theme
OTTR INVESTMENT THEME Financial Performance Targets Current New Total Shareholder Return1 8-10% 8-10% Long-Term EPS Growth Rate2 5-7% 5-7% Dividend Yield ~ 3% ~ 3% Long-Term Targeted Dividend Payout Ratio 60-70% 55-65% Dividend Growth Rate 5-7% 5-7% Equity Layer 51-54% 55-60% 1Defined as EPS growth
Slide 40: www.ottertail.com
S OTTERTAIL W CORPORATION www.ottertail.com