MDU Resources Group, Inc. Q1 FY2025 earnings call

• Overall Performance: Strong start in 2025 with income from continuing operations of $82.5 million ($0.40 per share), up 10.4% YOY. Pipeline and Natural Gas Distribution segments grew earnings by 13.9% and 11.5% respectively. - Utility Growth: Utility experienced 1.4% combined retail customer growth (in line with 1%-2% annual projected growth). Need to invest in infrastructure to meet growing customer base. - Electric Segment: Acquired 49% ownership in Badger Wind Farm (122.5 MW of 258 MW), pending regulatory approvals. Anticipate general rate cases in Montana and Wyoming. Wildfire prevention/liability limitation bills passed in 3 states, providing certainty and liability limits. Data center opportunities: 580 MW under signed ESAs, 180 MW online, 100 MW expected online late 2025, balance ongoing. - Natural Gas Distribution: Rate relief contributed to Q1 results. Final order in Washington for multi-year rate case, interim rates approved in Montana, settlement in principle in Wyoming, anticipate general rate case in Idaho Q2. - Pipeline Segment: Record first quarter earnings, driven by strategic expansion and increased demand. Completed non-binding open season for Bakken East pipeline project (375 miles), targeting in-service late 2029 (phase 1) and late 2030 (phase 2). Announced binding open season for Baker Storage Field Enhancement project (add 72 MMcf/d deliverability), open season runs through May 20, 2025.

Electric Utility: First quarter earnings were $15 million, down from $17.9 million in Q1 2024. Retail sales revenue increased due to higher residential volumes (colder weather) and data center volumes, but was offset by higher O&M expenses (outage-related contract services, software, insurance, payroll) and lower returns on non-qualified benefit plan investments. Natural Gas Utilities: Earnings were $44.7 million in Q1 2025, up 11.5% from $40.1 million in Q1 2024. Growth due to rate relief in Washington, Montana, and South Dakota, and increased volumes (colder weather), but partially offset by higher O&M expenses and lower non-qualified plan investment returns. Pipeline: Record first quarter earnings of $17.2 million, up from $15.1 million in Q1 2024. Driven by growth projects in service, customer demand for short-term firm capacity, and higher storage-related revenue, but offset by higher O&M expenses (payroll) and depreciation from growth projects, and lower non-qualified plan investment returns. Revenue contributions: Pipeline 13.9% growth, Natural Gas Distribution 11.5% growth, Electric Utility earnings down.

• Affirmed earnings per share guidance range of $0.88 to $0.98 per share for 2025. - Anticipate $3.1 billion capital investment over next five years, 7%-8% compound annual utility rate base growth, 1%-2% annual customer growth, long-term EPS growth rate 6%-8%, and 60%-70% annual dividend payout ratio. - Plan to reestablish an ATM program in the near term to meet future equity capital needs.

• Potential disruption to the economy, particularly affecting the Bakken region and oil prices, which could impact pipeline and related segments. - Economic sensitivity in service areas, though utility customer growth has historically stayed within 1%-2% range. - Regulatory approvals and compliance requirements for projects like the Badger Wind Farm and pipeline expansions. - Impact of wildfire legislation and potential liabilities, though legislation provides some certainty and de-risking.

Q: Large customer load strategy and capital light model. Are rates from large customers accretive?

A: Nicole Kivisto explains the data center opportunity in Ellendale was capital light and accretive, but they continue to evaluate incremental generation opportunities for other customers, ensuring financial, regulatory, and retail customer base alignment.

Q: Economic disruption impact on Bakken and oil prices.

A: Nicole Kivisto and Jason Vollmer state the Bakken is a long-term play, gas-to-oil ratio increasing, and gas provides long-term benefits for pipeline and utility customers.

Q: Electric segment earnings down despite retail volumes up. Unpack drivers.

A: Jason Vollmer notes lack of regulatory rate relief in Q1, higher O&M expenses (outages, payroll), and non-qualified plan investment returns impact. Data center volume increase helped, but outages and investment performance affected results.

Q: Bakken East pipeline project progress and tariffs.

A: Jason Vollmer says conversations continue with customers, tariffs may impact costs but not derail project. Nicole Kivisto mentions ongoing feedback from customers and strategic position in pipelines.

Q: Wildfire legislation impact on mitigation plans.

A: Nicole Kivisto states legislation helps formalize prevention plans, providing certainty and liability limits, but company was already proactive in prevention efforts.

Q: ATM program size and EPS growth starting point.

A: Jason Vollmer says ATM size not determined yet, EPS growth starting point is based on adjusted 2024 numbers, aligning with 2025 guidance range.