MDU Resources Group, Inc. Q4 FY2025 earnings call

Management Statement and Operational Highlights

• 2025 earnings were $190.4 million ($0.93 per share), mid-range of guidance. Deployed $792 million in capital, including acquiring the 49% ownership in Badger Wind Farm (placed in service Dec 31, 2025).
• Utility rate base grew 16% YOY. Retail customer growth for utility was 1.5%, within targeted 1%-2% annual rate.
• Regulatory progress: Filed for recovery of Badger Wind Farm in ND, SD, MT; electric rate case in MT; gas rate case settlements in ID, WA, OR; wildfire mitigation plans filed in ND, MT, WY.
• Data center: 580 MW of data center load under signed agreements; 180 MW online since 2023, 100 MW ramping, 150 MW expected later 2026, 150 MW in 2027.
• Pipeline segment: Progress on Line Section 32 expansion, agreement for industrial pipeline project, prefiling for Bakken East pipeline with open season Feb 2 - Mar 13, 2026.

Segment Performance

• Electric Utility: Reported earnings of $64.9 million in 2025, down from $74.8 million in 2024. Higher retail sales revenue and volumes were offset by higher operation and maintenance expense (e.g., payroll, contract services, software, insurance).
• Natural Gas Utility: Earnings of $56.1 million in 2025, up from $46.9 million in 2024. Driven by higher retail sales revenue from rate relief in multiple jurisdictions (Washington, Montana, South Dakota, Wyoming), partially offset by higher O&M expense (e.g., insurance, payroll).
• Pipeline Business: Posted record earnings of $68.2 million in 2025, slightly up from $68 million in 2024. Driven by expansion projects and customer demand, offset by higher O&M expense (e.g., payroll) and other factors (absence of 2024 proceeds and tax benefit).

Guidance

• 2026 EPS guidance range $0.93 to $1 per share.
• Long-term EPS growth rate targeted at 6% to 8%, with a 60%-70% annual dividend payout ratio.
• Revised 2026-2030 capital investment plan to $3.1 billion due to early acquisition of Badger Wind Farm.

Risks

• Regulatory Uncertainty: Outcomes of rate cases and other regulatory proceedings could impact earnings.
• Project Execution: Delays or issues in pipeline projects (e.g., Line Section 32, Bakken East) could affect capital investment and earnings.
• Market Conditions: Fluctuations in customer growth, energy prices, or demand could impact revenue and profitability.

Q: On the '26 guidance, what are the year-over-year headwinds embedded?

A: Jason Vollmer notes rate case impacts, equity issuance for growth projects, and some offset from the Badger Wind Farm benefit but expects growth with the midpoint of the range over the year.

Q: Elaborate on the continued contract negotiations for the Bakken East pipeline?

A: Nicole Kivisto states the binding open season for Bakken East pipeline runs through Mar 13, 2026; ongoing discussions with customers; timeline includes finalizing project design, executing customer agreements, and aiming for final investment decision with FERC 7C filing in Q3 2026.