Slide 1: 2021 Q3 Earnings Conference Call
2021 Q3 EARNINGS CONFERENCE CALL November 2, 2021
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: Company Overview
COMPANY OVERVIEW ELECTRIC PLATFORM MANUFACTURING PLATFORM MANUFACTURING SEGMENT PLASTICS SEGMENT Target earnings contributions Electric Platform Manufacturing Platform Manufacturing • Competitive low-cost operations 30% • Long-term growth potential • Constructive regulatory environment Electric • Ca
Slide 4: Q3 2021 Financial Summary and Highlights
Q3 2021 FINANCIAL SUMMARY AND HIGHLIGHTS • Based on our strong YTD results and outlook for the remainder of the year, we are raising our 2021 diluted Q3 2021 Q3 2020 earnings per share guidance range to $4.05-$4.20 from $3.50-$3.65 per diluted share. Mid-point of new range $0.55 higher than mid-poin
Slide 5: EPS Compared with Original EPS Guidance Ranges
EPS COMPARED WITH ORIGINAL EPS GUIDANCE RANGES $4.75 Initiated 2021 EPS Guidance range of $2.39-$2.54. Current guidance range increased on November 2, 2021 to $4.05- $4.13F $4.25 $4.20 primarily due to the continued strong performance at Plastics segment ’21 Midpoint $3.75 $3.25 Plastics Segment O
Slide 6: ESG Highlights
ESG HIGHLIGHTS Environmental Social Governance EEI Sustainability Templates These documents provide details of Otter Tail Corporation’s ESG practices. 6
Slide 7: Cleaner Energy Future
CLEANER ENERGY FUTURE Average Residential Rate per KWH OTP Energy Resource Mix 2005 2020 2023 15 13.0 13.0 13.3 13.2 13.1 12.8 Cents Per KWH 23% 27% 10.2 35% 39% 9.5 9.7 9.7 9.9 9.0 45% 10 9% 68% 4% 19% 1% 30% 5 2015 2016 2017 2018 2019 2020 OTP USA Source: Typical Bills and Average Rates Report, Ed
Slide 8: Cleaner Energy Future
CLEANER ENERGY FUTURE Otter Tail Power Company CO2 Trend (Owned Resources) 2005-2020 CO₂ CO2 Emissions (Million Short Tons) 43% Reduction in CO2 from 2005-2020 By 2023 our customers will Carbon emissions from our receive approximately 35% of owned generation resources are their energy from renewable
Slide 9: Electric Platform
ELECTRIC PLATFORM POWER COMPANY
Slide 10: Electric Operations
ELECTRIC OPERATIONS Net Revenue ($ in millions) $500 $459.1 $446.1 $461.5 $400 Highlights $300 • Rate base growth opportunities $200 $100 • Renewable generation $0 • Technology & infrastructure 2019 2020 9/30/21 LTM • Transmission assets Net Income ($ in millions) • MN rate case in November 2020. In
Slide 11: Hoot Lake Solar
HOOT LAKE SOLAR Project Description 49.9-MW self-build solar Schedule 2020-2023 OTP Cost ~$60 million • 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 retail sales). • MPUC approved 100% of cost
Slide 12: Ashtabula III Purchase
ASHTABULA III PURCHASE Project Description 62.4 MW Schedule Expected purchase first half of 2023 OTP Cost ~$50 million • Purchase Power Agreement (PPA) with NextEra Energy began in 2013. • PPA included option to buy starting in 2022. • Regulatory approvals expected in 2022. 12
Slide 13: MN Integrated Resource Plan
MN INTEGRATED RESOURCE PLAN • 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. • Preferred plan, requested authority to: • Add dual fuel (fuel oil back up) capabili
Slide 14: Minnesota Rate Case
MINNESOTA RATE CASE • Previous Minnesota rate case filed in 2016. • Request driven by new Astoria Station (MN IRP approved) and CIS system. Total initial request of $14.5 million, a 6.8% increase. • Incorporating approved lower depreciation rates and pension expense, amended rate case request on Apr
Slide 15: Minnesota Rate Case ALJ Recommendation
MINNESOTA RATE CASE ALJ RECOMMENDATION (in millions) OTP Rebuttal filing (April 30, 2021) $ 8.2 Recommendations in ALJ Report: • Enhanced ROE from current allowed ROE Administrative Law Judge (ALJ) Recommendations • Recovery that is supportive of Energy ROE (9.48% compared to 10.2% requested) (3.8)
Slide 16: 2021 Key Regulatory Matters
2021 KEY REGULATORY MATTERS Estimated Regulatory Matters MN ND SD Dates February North Dakota Advance Determination of Prudence for AMI Filing X 15, 2021 Minnesota Hoot Lake Solar Filing Rate Review Evidentiary Hearing & March 25, X Order 2021 April 21, Minnesota Depreciation Order X 2021 July
Slide 17: Rate Base Growth
RATE BASE GROWTH Capital spending of $978 million from 2022 to 2026 Rate Base In Billions $2.10 $1.98 $1.86 $1.75 $1.63 $1.57 $1.38 Amount Recovery Mechanism Percentage (in Millions) Depreciation $381 39% (Rate Base Replacement) 2020(A) 2021(F) 2022(F) 2023(F) 2024(F) 2025(F) 2026(F) Riders 460 47%
Slide 18: 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 In State Preference/ADP/ Non-renewable Phase
Slide 19: Rate Base Projects
RATE BASE PROJECTS Our Investment Percent Project In Service Recovery Mechanisms (Millions) Complete Merricourt Wind Energy Center $260 2020 100% Rider/General Rate Case Astoria Station 245-MW natural gas simple-cycle Rider/General Rate Case - ND & SD $152.5 2021 100% combustion turbine General Rate
Slide 20: Manufacturing Platform
MANUFACTURING PLATFORM 7 @®) VINYLTECH T.O. PLASTICS Vil BTD northern pipe PVCePIPE products
Slide 21: Manufacturing
MANUFACTURING • Contract metal fabrication – stamping, machining, tube bending, tool & die making, welding, painting, assembly. Net Revenues ($ in millions) (One stop shop for customer needs) $350 $314.6 • Growth opportunities with existing customer base and $300 $277.2 $238.8 $250 expansion with ne
Slide 22: Manufacturing Sales by End Markets
MANUFACTURING SALES BY END MARKETS 2019 BTD 2020 BTD Energy, Energy, 4% 2% AGR, 12% AGR, 14% RV, 41% RV, 37% L&G, 15% L&G, 14% Const, 14% Const, 19% Industrial, Industrial, 14% 14% 2019 T.O. Plastics 2020 T.O. Plastics Medical, 18% Medical, 22% Industrial, 8% Industrial, 9% Extrusion/Food, 1% Hortic
Slide 23: Plastics
PLASTICS • Manufactures and sells PVC (polyvinyl chloride) pipe to Net Revenue ($ in millions) distributors. Pipe is used in municipal water, rural $350 $314.4 water, wastewater, and storm drainage systems. $300 • Plants located Fargo ND & Phoenix AZ. $250 $205.2 $183.3 $200 • Approximate production
Slide 24: Historical Resin, Pipe Price and Spreads
HISTORICAL RESIN, PIPE PRICE AND SPREADS Resin shortages driven by Hurricane Ida, COVID, and a polar vortex have driven margins to record levels Hurricane Harvey, followed by a A downward slide in Resin prices led series of resin disruptions, have to lower margins as pipe producers reset margins for
Slide 25: Financial Update
FINANCIAL UPDATE 25
Slide 26: Q3 EPS 2020 vs. Q3 EPS 2021
Q3 EPS 2020 VS. Q3 EPS 2021 Q3 Diluted EPS: 2020 vs. 2021 Electric Manufacturing _Plastios Corporate Consolidated Pasa outeseanogspasiae TS ass tas ds cop saa Impactin 2020 on MN TCR rider revenue from favorable MN judicial decsion (004) (004) Favorable weather 092 0.92 Increase i ransmission servic
Slide 27: YTD EPS 2020 vs. YTD EPS 2021
YTD EPS 2020 VS. YTD EPS 2021 27
Slide 28: Financial Overview ($ in millions)
FINANCIAL OVERVIEW ($ IN MILLIONS) Revenue Sources Operating Income Net Income Earnings mix in 2021 differs from expected 70% electric/30% $180 $160 $184.7 manufacturing due to unique $1,200 $143.8 market conditions in our Plastics $1,090.5 $160 $140 $147.9 segment which are not expected to $1,000 $
Slide 29: Liquidity, Cap Structure & Credit Ratings
LIQUIDITY, CAP STRUCTURE & CREDIT RATINGS Consolidated Capital Structure (in thousands) 100% 17.0% 16.1% 16.0% 80% 47.1% 49.0% 47.5% 15.0% Equity/Debt 60% 14.0% ROE 13.0% 40% 11.6% 11.6% 12.0% 52.9% 51.0% 52.5% 11.0% 20% 10.0% 0% 9.0% 2019 2020 2021 Common Equity Debt ROE Otter Tail Corporation Mood
Slide 30: 2021 Earnings Guidance
2021 EARNINGS GUIDANCE 2021 EPS 2021 EPS 2020 EPS February 15, 2021 EPS 2021 EPS November 2, by 2021 May 3, 2021 August 2, 2021 2021 Segment Low High Low High Low High Low High Electric $ 1.63 $ 1.80 $ 1.83 $ 1.71 $ 1.74 $ 1.71 $ 1.74 $ 1.71 $ 1.74 Manufacturing 0.27 0.28 0.32 0.28 0.32 0.43 0.47 0.
Slide 31: 2021-2025 Financing Plans
2021-2025 FINANCING PLANS $230M LT Debt transaction completed June 2021. Delayed Draws of $140M in November 2021 and $90M in May 2022 31
Slide 32: Bond Maturity Schedule
BOND MATURITY SCHEDULE 2019 Senior Unsecured Notes $10M at 3.07% 2013 Senior Unsecured Notes $60M at 4.68% 2021 Senior Unsecured Notes $230M (Transaction priced in June ‘21 subject to final closing on delayed funding of $140M in Nov ’21 and $90M in May ’22) 32
Slide 33: Capital Expenditures
CAPITAL EXPENDITURES Total 2022 - (in millions) 2020 2021 2022 2023 2024 2025 2026 2026 Electric Segment: Renewables and Natural Gas $ 23 $ 30 $ 80 $ 92 $ 92 $ 160 $ 454 Generation Technology and Infrastructure 2 26 30 18 74 Distribution Plant Replacements 31 37 35 35 35 33 175 Transmission (include
Slide 34: History of Dividend Growth
HISTORY OF DIVIDEND GROWTH Dividend Growth • Consecutive annual dividends without $1.56 interruption paid since 1938. $1.34 $1.40 $1.48 $1.25 $1.28 $1.19 $1.21 $1.23 • Indicated 5.4 % increase of $.08/share. Lower pay-out ratio projected for 2021 due to strong performance in Plastics segment • Stron
Slide 35: OTTR Investment Theme
OTTR INVESTMENT THEME Total Shareholder Return 8%-10%* Long-term EPS Growth Rate (2020 base year) 5-7% Dividend Yield ~ 3% Long-term Targeted Dividend Payout Ratio 60-70% Dividend Growth Rate 5-7% Balanced Growth and Income Strategy Stable and Growing Utility Base Strong and stable regulated electri