Otter Tail Corp Q4 FY2024 earnings call

• 2024 was successful with record earnings and diluted EPS of $7.17. Updated five-year capital spending plan for Otter Tail Power is $1.4 billion, a 9% increase, with 9% rate-based compounded annual growth rate expected. Long-term earnings per share growth rate updated to 6%-8% from 5%-7%. • Electric platform: Otter Tail Power performed well, converted rate base growth to earnings growth at 1:1 ratio. Obtained approval for North Dakota general rate case with net annual revenue requirement increase of $13.1 million. Wind repowering project progressing, solar generation plans announced, MISO projects approved with capital investment opportunities. • Manufacturing platform: Manufacturing segment faced market challenges in 2024, but fundamentals remain strong. Plastics segment sales prices declined 12% in 2024, volumes increased, long-term earnings projection adjusted to 2028 for $45M-$50M annual earnings. Completed first phase of Vinyltech expansion and BTD Georgia expansion project.

Electric segment earnings grew nearly 8% year over year with an increase of $0.15 per share in 2024, driven by the interim rate increase in the North Dakota rate case, higher rider revenues from rate-based investments, and increased commercial and industrial sales volumes, partially offset by unfavorable weather and higher depreciation/interest expense from rate-based investments. Manufacturing segment earnings decreased $0.18 per share primarily due to lower sales volumes, higher production costs, and less scrap revenue, partially offset by lower general and administrative expenses and favorable product pricing/mix. Plastics segment generated record earnings per share of $4.77 in 2024, increasing $0.30 per share from 2023, primarily due to higher sales volumes partially offset by lower sales prices. Sales volumes increased 27% in 2024, and electric segment contributed about 65% to long-term earnings mix while plastics contributed 35% currently.

• 2025 diluted earnings per share guidance range: $5.68 to $6.08, expected return on equity near 14%. Electric segment earnings growth ~7%, plastics segment earnings decline, manufacturing segment earnings lower. • Updated long-term earnings per share growth rate to 6%-8%, targeted total shareholder return to 9%-11%. Plastics segment expected to reach normalized earnings of $45M-$50M in 2028 instead of 2026. Consolidated five-year compounded annual growth rate in earnings per share midpoint of 2025 guidance range over 20%, excluding plastics ~8%.

• Market dynamics could materially impact plastics segment results, causing variation from projections. • Political environment changes such as IRA-related changes, DOE grant funding for JTIQ projects, and potential tariffs pose risks. • Continued challenging market conditions in manufacturing segment could affect results.

Q: Regarding phases to secure larger loads, Chuck, did you say earlier that you have agreed to large load agreements with one or two customers or potentially will, and then is that reflected in the current CapEx guidance?

A: Tate, thanks for the question. Yeah. If you are looking at that slide, we have what we consider an electric service agreement would be the point at which we have a signed agreement with the new large loads, and we do not have any of those. We have term sheets out to a group that have 150 megawatts worth, and then we are working with others, but just at an entry level of letter of intent discussion. So we have no signed items, but we hope to do that in the next one to three years. And just to add to that, those are not in our capital spending plan.

Q: Turning to manufacturing, categorize across different end markets, is it higher interest rates? Is it just cyclical related to higher demand during COVID?

A: Just a few things Tate, you know, some of it is cyclical. Some of it is in the recreational vehicle. We think there is a large used inventory and dealer inventory channel inventory corrections on agriculture. We do think that is also reflective of commodity prices that have come down and and farmer income. Construction, you know, is down, but not as much as the others. And lawn and garden has been sort of weak That was the first sector to go lower after COVID.

Q: Is the expansion of BTT Georgia related to specific end markets?

A: We would say that the current area of BTD Georgia, you know, we have more construction in that segment than others, but they are all represented at BTD in Georgia.

Q: Is most of the work in the manufacturing, not the plastics part of manufacturing, metal fabrication work versus plastic thermoforming?

A: No. The mix is still heavily toward metal fabrication.