OTTER TAIL CORPORATION Q1 2024 Investor Meetings
Forward-Looking Statement
Except for historical information contained here, the statements in this release are forward-looking and made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The words "anticipate," "believe," "could," "estimate," "expect," "future," "goal," "intend," "likely," "may," "outlook," "plan," "possible," "potential," "predict," "probable," "projected," "should," "target," "will," "would" and similar words and expressions are intended to identify forward-looking statements. Such statements are based upon the current beliefs and expectations of management. Forward-looking statements made herein, which may include statements regarding 2024 earnings and earnings per share, long-term earnings, earnings per share growth and earnings mix, anticipated levels of energy generation from renewable resources, anticipated reductions in carbon dioxide emissions, future investments and capital expenditures, rate base levels and rate base growth, future raw materials costs, future raw materials availability and supply constraints, future operating revenues and operating results, and expectations regarding regulatory proceedings, as well as other assumptions and statements, involve known and unknown risks and uncertainties that may cause our actual results in current or future periods to differ materially from the forecasted assumptions and expected results.
The Company's risks and uncertainties include, among other things, uncertainty of future investments and capital expenditures, rate base levels and rate base growth, risks associated with energy markets, the availability and pricing of resource materials, inflationary cost pressures, attracting and maintaining a qualified and stable workforce, changing macroeconomic and industry conditions, long-term investment risk, seasonal weather patterns and extreme weather events, counterparty credit risk, future business volumes with key customers, reductions in our credit ratings, our ability to access capital markets on favorable terms, assumptions and costs relating to funding our employee benefit plans, our subsidiaries' ability to make dividend payments, cybersecurity threats or data breaches, the impact of government legislation and regulation including foreign trade policy and environmental, health and safety laws and regulations, changes in tax laws and regulations, the impact of climate change including compliance with legislative and regulatory changes to address climate change, expectations regarding regulatory proceedings, and operational and economic risks associated with our electric generating and manufacturing facilities. These and other risks are more fully described in our filings with the Securities and Exchange Commission, including our most recently filed Annual Report on Form
10-K, as updated in subsequently filed Quarterly Reports on Form 10-Q, as applicable. Forward-looking statements speak only as of the date they are made, and we expressly disclaim any obligation to update any forward-looking information.
Company Overview
ELECTRIC | MANUFACTURING PLATFORM | ||||||||||
PLATFORM | |||||||||||
PLASTICS SEGMENT | |||||||||||
MANUFACTURING SEGMENT | |||||||||||
PLATFORM HIGHLIGHTS | |||
Electric Platform | Manufacturing Platform | ||
• Attractive rate base growth | • | Enhanced consolidated ROE | |
• | Constructive regulatory environments | • | Organic growth opportunities |
• | Affordable customer rates | • | Diversified end markets |
3
2023 Financial Summary and Highlights
Financial Results
($ in millions, except per share data) | 2023 | 2022 | |||
Operating Revenues | $ | 1,349.2 | $ | 1,460.2 | |
Net Income | $ | 294.2 | $ | 284.2 | |
Diluted EPS | $ | 7.00 | $ | 6.78 | |
Return on Equity | 22.1 % | 25.6 % | |||
Cash From Operating Activities | $ | 404.5 | $ | 389.3 | |
Record Financial Results | Up 4% |
- We produced record breaking earnings in 2023, driven by strong financial results across our segments, as well as corporate cost savings
85th Consecutive Year of Dividend Payments
- 2023 dividends paid to common shareholders was $1.75 per share, a 6% increase from 2022. The indicated annual dividend for 2024 is $1.87 per share, a 7% increase
Electric segment earnings | Up 6% |
- Increased commercial and industrial sales, lower pension costs and recovery of rate base investments
Diluted EPS By Segment
2023 | 2022 | ||||
Electric | $ | 2.01 | $ | 1.91 | |
Manufacturing | 0.51 | 0.50 | |||
Plastics | 4.47 | 4.66 | |||
Corporate | 0.01 | (0.29) | |||
Total | $ | 7.00 | $ | 6.78 | |
Manufacturing segment earnings | Up 2% |
- Favorable product mix and higher sales volumes at BTD Manufacturing, partially offset by lower sales volumes at T.O. Plastics
Plastics segment earnings | Down 4% |
- Decrease in sales volumes partially offset by an increase in gross profit margins
Corporate cost center earnings
- Driven by returns earned on our short-term investments funded by the significant cash flows generated by our businesses over the last three years
4
Earnings Per Share Growth
$6.78 | $7.00 | 27.7% | |
Plastics segment earnings decline | Consolidated EPS | ||
(CAGR) |
offset by strong performance within the other segments, including corporate cost savings
$4.23
11.6% | ||||||
$2.17 | $2.34 | |||||
$2.06 | Consolidated EPS | |||||
$2.53 | ||||||
w/o Plastics* | ||||||
$1.89 | $2.12 | (CAGR) | ||||
$1.66 | $1.67 | |||||
$1.46 | ||||||
2018 | 2019 | 2020 | 2021 | 2022 | 2023 |
*Consolidated EPS w/o Plastics is a non-GAAP financial measure management uses to assess the financial results of the business exclusive of the impact of the earnings generated by our Plastics segment which have benefited from favorable industry conditions
5
Cleaner Energy Future
By 2030, We are Targeting:
Otter Tail Power Scope 1 CO2 Emissions
(in million short tons)
55%
Our owned and contracted energy generation will be 55% renewable
(Does not include MISO market purchases)
50%
Our carbon emissions from
owned generation
resources will be 50%
below 2005 levels
4.3 | 3.7 | 3.9 | |
2.9 | 2.6 | ||
2.1 | |||
0.13 |
Carbon emission targeted to be 97% below 2005 levels by 2050 on our owned generation
Otter Tail Power Energy Resource Mix
Coal | Renewable | Purchased | Natural Gas | |||||
7% | 3% | 8% | ||||||
23% | 18% | |||||||
35% | ||||||||
9% | 43% | |||||||
68% | 23% | 42% | 74% | |||||
27% | 20% | |||||||
2005 | 2023 | 2030 Target | 2050 Target |
2005 | 2009 | 2013 | 2017 | 2023 | 2030 | 2050 |
Target | Target |
2023 Consolidated Revenues from Coal Assets
7.1%
92.9%
Revenue from Coal Assets | Revenue from Non-Coal Assets |
Note: Consolidated revenues include estimated returns on coal generation facility rate base investment, fuel expenses, O&M's, depreciation, property taxes, and coal conversion costs
6
Values in Action
Safety - We provide safe workplaces and require safe work practices
- Published an Occupational Health and Safety Policy, committing to:
- Safety as our top priority;
- Development of and training on safe work methods; and
- Implementation of a safety program
- Our 2023 Total Recordable Incident Rate was 1.67 (peer benchmark 2.32)
People - We build respectful relationships and create inclusive environments, where all people can thrive
- Published a Human Rights Policy, honoring and protecting the rights of our employees while working with our suppliers to encourage healthy, safe and respectful workplaces
- Diversity, Equity and Inclusion
- Diverse and experienced board - 90% independent; 40% female; 10% racially and ethnically diverse; balanced tenure profile (30% 0-5 years; 20% 6-10 years; 50% > 10 years)
- Total workforce diversity - 18% female; 18% diverse
Community - We improve the communities where we work and live
- In 2023, our two foundations gave nearly $1.2 million to strengthen our companies' communities
- We focused our support on the following areas of emphasis: community, civic and cultural development, education, environment and health and human services
7
Electric Platform
8
Electric Operations
- Vertically integrated, regulated utility with generation, transmission and distribution facilities
- Serve more than 133,000 residential, commercial and industrial customers
- Service area encompasses approximately 70,000 square miles of western Minnesota, eastern North Dakota and northeastern South Dakota
Highlights
- Significant rate base growth opportunities in the 5-year planning period and beyond, including:
- Renewable generation
- Wind repowering
- Resource plan proposed renewable additions of 350 MW
- Transmission investment
- MISO Long Range Transmission Planning (LRTP)
- Joint Targeted Interconnection Queue (JTIQ)
- Technology and infrastructure
- Advanced metering infrastructure
- Constructive regulatory environments
- Electric rates significantly below national and regional averages
Operating Revenue (in millions)
$549.7$528.4
$480.3
202120222023
Net Income (in millions) | |
$80.0 | $84.4 |
$72.5 |
2021 | 2022 | 2023 |
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Rate Base Growth
Rate Base | $1.3B of Capital Spending from 2024 to 2028 |
$ in billions
Renewables, 37% | Depreciation*, 33% | ||||||||
$2.52 | Rate Case, 9% | ||||||||
$2.35 | Capital | Recovery | |||||||
$2.20 | Spending | Mechanism | |||||||
$2.08 | Other, 14% | ||||||||
$1.89 | |||||||||
$1.74 | Distribution, 15% | Transmission, 34% | |||||||
Riders, 58% | |||||||||
* Rate base replacement | |||||||||
2018 to 2023 | |||||||||
9% | 9% | ||||||||
Rate Base | Earnings | ||||||||
Growth | Translated To | Growth | |||||||
(CAGR) | (CAGR) | ||||||||
2023(A) | 2024(F) | 2025(F) | 2026(F) | 2027(F) | 2028(F) |
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Disclaimer
Otter Tail Corporation published this content on 13 March 2024 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 13 March 2024 11:43:24 UTC.
