MDU Resources Group, Inc. Q2 FY2026 earnings call

Strategic Infrastructure Project Advancement

• Bakken East Pipeline Project: All required precedent agreements with customers from the binding open season have been signed, totaling nearly 1.2 billion cubic feet per day (BCF/d) of contracted transportation capacity. A negotiated option allows for additional volume increases that would bring total contracted volumes nearly equal to the full original open season interest. The project is still designed for a total capacity of 1.4 BCF/d. Final project design is ongoing to confirm volumes and delivery routes ahead of a final investment decision (FID), which will occur before the FERC 7C filing. The FERC filing is now scheduled for Q4 2026, with in-service dates unchanged: phase 1 in late 2029, phase 2 in late 2030. Total projected project capital cost is $2.7 billion to $3.2 billion, and management is evaluating financing, partnership, and commercial options, with the project remaining incremental to the current capital program.
• Other Pipeline Growth: The Lines Section 32 expansion project remains on schedule after its March 2026 FERC Section 7 filing, targeting a late 2028 in-service date pending regulatory approval. Development of a potential mine and industrial project continues under agreements extended through late 2026. The pipeline segment filed a FERC rate case in May 2026 requesting a $31 million annual revenue increase, with proposed rates set to take effect December 1, 2026, subject to refund pending final settlement or regulatory outcome.

Data Center Business Development

• Management follows a capital-light framework that requires data center customers to cover all grid connection, infrastructure, and energy-related costs, while additional revenue from these customers spreads fixed system costs across a larger customer base, reducing fixed cost burdens for existing retail customers, creating mutual benefit.
• MDU has signed an electric service agreement (ESA) with Applied Digital to serve the 430-megawatt Polaris Forge 3 AI factory near Center, North Dakota, with regulatory approval from the North Dakota Public Service Commission still pending.
• Total signed ESAs for data center load exceed 1 gigawatt, with approximately 240 megawatts currently operational, and additional capacity coming online over the next few years as new facilities are completed.

Regulatory Updates

• Electric: A North Dakota general rate case was filed June 30, 2026, requesting a $34.5 million annual revenue increase, with $26.3 million in interim rates requested to take effect September 1, 2026, to reflect investments in electric infrastructure, depreciation, reliability improvements, system safety, and higher operating expenses. A $10 million settlement agreement for a Montana electric rate case is pending approval, with $10.4 million in interim rates already in effect. A Wyoming electric general rate case settlement was approved, with new rates effective April 1, 2026, adding $5.8 million in annual revenue. The North Dakota Public Service Commission approved the route permit for the Jamestown to Ellendale transmission project, which will improve grid reliability, resiliency, reduce congestion, and enable access to lower-cost regional energy.
• Natural Gas Distribution: A multi-year rate case was filed in Washington, requesting $25.1 million in annual revenue increase for year one and $18.1 million for year two. A $12.2 million annual revenue increase multi-party settlement for an Oregon general rate case was filed July 31, 2026, and remains pending. A Minnesota general rate case is expected to be filed later in 2026.

Financial Position

• MDU maintains a strong balance sheet with ample access to working capital to fund operations through peak demand periods. The total 2026-2030 capital program is approximately $3.1 billion, with planned investments of $1.1 billion for the electric business, $1.4 billion for natural gas distribution, and $643 million for the pipeline segment.

MDU Resources Group reported Q2 2026 total net earnings of $21.3 million, or $0.10 per diluted share, compared to $13.7 million ($0.07 per share) in Q2 2025. Year-to-date (first half 2026) total net earnings were $102.1 million ($0.49 per share), compared to $95.7 million ($0.47 per share) in the first half of 2025. By segment:

1. Electric Utility: Q2 2026 earnings of $14.7 million, up from $10.4 million in Q2 2025. No revenue contribution percentage was explicitly provided for this segment. Improved results were driven by higher retail sales volumes, earnings recovery from the Badger Wind Farm ($3.3 million in Q2), interim rate approval in Montana, and new approved rates in Wyoming.
2. Natural Gas Distribution: Reported a Q2 2026 net loss of $3.9 million, a year-over-year improvement from a $7.4 million loss in Q2 2025. No revenue contribution percentage was provided. The improvement came from new approved rates across Idaho, Washington, Montana, and Wyoming, 6.7% higher year-over-year retail sales volumes, and 1.6% customer growth, partially offset by higher interest expense.
3. Pipeline: Q2 2026 earnings of $14.4 million, down from $15.4 million in Q2 2025. No revenue contribution percentage was provided. The decrease stemmed from lower other income and higher depreciation and amortization from recently completed growth projects, partially offset by strong customer demand for short-term transportation and interruptible storage services, and contributions from existing growth projects including a contracted volume increase.
4. Other/Corporate: Reported a Q2 2026 net loss of $3.9 million, an improvement from a $4.7 million net loss in Q2 2025. The improvement was driven by a $1.5 million tax benefit from discontinued operations related to strategic initiative costs.

• Management reaffirms its 2026 full-year earnings per share guidance range of 93 cents to $1.00, with guidance based on assumptions of normal weather, normal economic and operating conditions, continued customer growth, successful execution of approved capital programs, and constructive regulatory outcomes.
• The company's long-term earnings per share growth target is maintained at 6% to 8%.

• Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from projections, as disclosed in the company's SEC filings. This includes regulatory risk: rate case outcomes remain uncertain for multiple pending regulatory filings, with new rates subject to refund and final approval, which could impact realized revenue.
• All major infrastructure projects remain subject to regulatory approval and permitting timelines, which could delay in-service dates or change project scope.
• Final approval of the Polaris Forge 3 ESA and data center projects is pending, so no revenue or earnings from these projects are included in current guidance, and approval is not guaranteed.
• The Bakken East project's final investment decision is pending, and there is uncertainty around final project scope, capital costs, financing terms, and customer option execution for additional volumes.

Q: Analyst asks what favorable financing markets MDU is seeing for the large Bakken East project, and confirms whether financing will be part of the FID and if FID is still on schedule for Q3 or moved to Q4 with the 7C filing. / A: Management says it has completed the milestone of signing all required precedent agreements, and is evaluating all possible financing options for the project. Market appetite for infrastructure assets of this type is currently strong, and management is confident in its ability to secure financing. Precedent agreement negotiations took longer than initially planned, pushing the 7C filing to Q4 2026, and FID will occur before that filing. Management did not give a specific fixed date for FID, and will continue updating the board before making a final decision.

Q: Analyst asks for details on the negotiated volume option for Bakken East, the strategic rationale, whether the state remains an off-taker in the executed agreements, and asks about the margin impact of the Polaris Forge 3 ESA and its impact on future rate case timing. / A: The volume option gives one customer the ability to add additional contracted volume at pre-negotiated terms to align with their own customer timing; the project will still be designed for 1.4 BCF/d total capacity. The state remains a party to the executed precedent agreements. The 430 MW Polaris Forge 3 ESA uses MDU's capital-light model, which delivers incremental margin to MDU while shifting transmission costs to the data center, reducing cost allocations to retail customers. Regulatory approval for the ESA is still pending, so the project is not included in current guidance or long-term growth projections.

Q: Analyst asks if expansion beyond 1.4 BCF/d for Bakken East is possible, and when the capital plan will be updated to reflect the project after FID. / A: Management notes the project is still being designed with expandability in mind, and will balance expansion options with the project's required financial return hurdles for the board and shareholders during the FID process. The company's normal annual capital plan update cycle occurs in late November, and the Bakken East cost range of $2.7 billion to $3.2 billion will be refined as FID approaches. If the board approves the project, the capital plan will be updated with a more precise estimate in conjunction with the normal November update cycle.