OTTR

Electric (Otter Tail Power) Operations

• Secured route permits for two 345kV MISO Tranche 1 regional transmission projects (totaling nearly 200 miles), reaching a key milestone for these reliability-focused capital investments.
• Filed a 15-year integrated resource plan (IRP) with the Minnesota Public Utilities Commission, outlining a preferred plan to add 50MW of natural gas generation (2031/2032) and 100MW of total wind capacity (50MW in 2035, 50MW in 2040), while completing all previously approved in-progress projects. A final order on the IRP is expected in Q2 2027.
• Requested and received approval for an extended procedural schedule for the Minnesota rate case, and amended the requested net revenue increase to $42.3 million from $44.8 million to reflect updated test year data. The company is currently finalizing annual cost of service analysis to evaluate future rate case filings in other jurisdictions.
• Two solar projects are under construction: Solway Solar is expected online in H1 2027, and Abercrombie Solar in 2028. A battery storage project remains in development targeting a 2028 online date.
• The large load development pipeline grew 350MW to 1,400MW total, 35% from data centers and the remainder from clean fuel and thermal storage. The company filed large load tariffs in Minnesota, North Dakota, and South Dakota that allocate all new costs to new customers and provide rate credits to existing customers by spreading fixed costs across a larger base.
• The company reaffirms a 10% compounded annual growth rate (CAGR) for rate-based growth over the next five years, and projects customer bills will grow at a 3-4% CAGR over the same period, with rates remaining well below national and regional averages.

Manufacturing Segment Operations

• End market conditions are improving broadly: recreational vehicle and lawn and garden markets have stabilized, horticulture remains stable, construction end market demand is rising, and industrial demand remains strong (supported by growing energy demand). Agriculture market conditions remain challenging due to a weak farm economy, elevated costs, lower commodity prices, and ongoing trade disruption.
• The segment successfully leveraged new capacity added at its Georgia facility to meet rising demand, with remaining capacity available for future growth.

Plastic Segment Operations

• Average PVC pipe sales prices declined 14% year-over-year in Q2, with a slower rate of decline than in prior quarters. Sales volumes rose 15% year-over-year, hitting an all-time quarterly high, as customers pulled forward orders ahead of announced PVC resin price increases.
• The company entered into settlement agreements to resolve all class claims in the U.S. PVC pipe antitrust litigation, with a total settlement value of $103.5 million. The court granted preliminary approval, and final approval is expected in Q4 2026. Full payment into an escrow account was completed in late July 2026. The settlement eliminates litigation uncertainty and allows the segment to focus on core operations, with no admission of wrongdoing.

Financial Position

• The company maintained a strong balance sheet at quarter-end: equity represented 60% of total capital, with over $600 million in available liquidity including $278 million in cash and cash equivalents. The company can fund its full five-year growth plan without needing external equity financing.

• The company revised 2026 adjusted diluted earnings per share guidance upward to a range of $5.68 to $6.08, up from the prior range of $5.22 to $5.62. This guidance excludes the after-tax impact of the PVC pipe litigation settlement.
• Electric segment 2026 earnings guidance is maintained, with expected 14% year-over-year growth driven by robust rate-based growth and higher approved electric rates.
• Manufacturing segment 2026 guidance was increased: higher-than-expected end market demand has led to upward revisions for sales volumes, margins, and price realization, with greater fixed cost leveraging expected in the second half of the year. The segment is currently tracking to its historical 5-7% net profit margin target, with upside from further volume growth and operational efficiencies.
• Plastic segment 2026 guidance was increased: stronger-than-expected Q2 performance and moderating price declines led to an upward revision. Full-year 2026 average PVC pipe prices are now expected to decline ~15% year-over-year, with full-year annual sales volumes largely unchanged from prior forecasts, as strong Q2 demand is expected to be offset by softer second-half volumes.
• Full-year corporate costs are now expected to be higher than originally projected, driven by lower investment income and a reduced tax benefit related to the litigation settlement.
• The company reaffirmed its $1.9 billion five-year capital investment plan for Otter Tail Power, which remains the primary driver of long-term growth. The financing plan is unchanged, with no need for equity market financing. The parent company plans to retire $80 million in maturing debt in Q4 2026 without replacement, leaving only Otter Tail Power with outstanding debt.
• The long-term expected PVC segment earnings profile is reaffirmed: segment earnings are expected to continue declining through the end of 2027, with 2028 earnings projected between $45 million and $50 million.
• Long-term corporate targets are maintained: 7-9% long-term earnings per share CAGR, with 10-12% total shareholder return, expected to be achieved once plastic segment earnings normalize in 2028.

1. Electric Segment: Earnings decreased slightly year-over-year. Results benefited from higher recent rate case-approved electric rates, timely recovery of rate-based investments (net of incremental depreciation and financing costs), and increased commercial and industrial sales volumes. These gains were offset by higher operating and maintenance (O&M) costs from a planned coal facility outage, timing of vegetation management work, and elevated 2026 labor costs. No absolute earnings figure or revenue contribution percentage was disclosed.
2. Manufacturing Segment: Adjusted earnings increased 3 cents per share (38% year-over-year). Growth was driven by higher margins from favorable product mix, as well as increased sales volumes in the construction, recreational vehicle, and horticulture end markets. Higher operating costs, including performance-based compensation, partially offset these gains. No absolute earnings figure or revenue contribution percentage was disclosed.
3. Plastic Segment: Adjusted earnings decreased 14 cents per share (11% year-over-year). The decline stemmed from continued falling PVC pipe average sales prices, which was partially offset by a 15% year-over-year increase in sales volumes that outperformed company expectations. No absolute earnings figure or revenue contribution percentage was disclosed.
4. Corporate: Corporate costs increased 7 cents per share year-over-year, driven by interim tax expense internal allocation and higher employee compensation costs.

• All forward-looking statements, including projections for IRP approval, earnings growth, and project timelines, are subject to risks and uncertainties that could cause actual results to differ materially from expectations.
• Development and construction risk for Otter Tail Power's capital projects, including potential delays to timelines and cost overruns, could impact projected growth.
• Long-term PVC segment earnings are difficult to predict with certainty, and the timing and level of actual earnings could vary materially from current projections.
• Supply chain challenges for large generation projects, including natural gas facilities, could delay project execution and investment timelines.
• Large load development depends on regulatory and local government approval, which may not be obtained as expected.

Q: The analyst asks about the manufacturing segment's historical 5-7% net profit margin range, whether that still holds going forward given recent economic strength, and how much capacity is available for future growth at current facilities. / A: Management confirms the segment is currently tracking near the 5% end of the 5-7% range, with upside potential as higher volumes enable greater fixed cost leveraging and operational and productivity improvements. Management adds that there is remaining available capacity for growth, particularly at the recently expanded Georgia facility which was purpose-built to support growing demand from existing customers in the region. (239 words)

Q: The analyst asks if the PVC antitrust litigation settlement changes pricing dynamics with distributors, and whether customer relationship considerations factored into the decision to settle. He also asks if the settlement amount should be viewed as an adjustment to historical PVC pricing. / A: Management confirms the settlement will not change any pricing or customer relationships, and that it is not possible to draw a direct connection between the settlement amount and a retrospective adjustment to historical PVC pricing. Management also clarifies the full $103.5 million settlement amount was paid into a restricted escrow account by the end of July 2026, with funds held there until final court approval. (221 words)

Q: The analyst asks what is driving the recent growth in Otter Tail Power's large load development pipeline, and whether interconnection constraints and moratoriums in other regions are driving more opportunities to the company's service territory. / A: Management notes continued strong activity driven by a diverse pipeline of opportunities (data centers, clean fuel, thermal storage), and highlights that the company's large geographic footprint provides many viable locations for large new loads, while the team works proactively with state and local stakeholders to facilitate new development. (151 words)

Q: The analyst asks if the natural gas generation project outlined in the new IRP is incremental to the existing $750 million capital opportunity pipeline, and when investment in this project would begin. / A: Management confirms the project is incremental to existing identified capital opportunities. Final approval is expected by the end of Q2 2027, and if approved, development activity would begin after that, with potential initial investment starting in the later years of the current five-year planning period, though supply chain delays for natural gas generation may impact timelines. (144 words)