MDU Resources (MDU) Q3 2025 Earnings Transcript

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DATE

Thursday, November 6, 2025 at 2 p.m. ET

CALL PARTICIPANTS

• President and Chief Executive Officer — Nicole A. Kivisto
• Vice President, Chief Financial Officer, and Treasurer — Jason L. Vollmer
• Operator

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TAKEAWAYS

• Income from Continuing Operations -- $18.4 million, or $0.09 per share, in Q3 2025, an increase of $2.8 million, or $0.01 per share, compared to the third quarter of 2024.
• Total Reported Earnings -- Earnings from continuing operations of $18.4 million, or $0.09 per share, in the third quarter of 2025, compared to $15.6 million, or $0.08 per share, in Q3 2024; excludes Everest spin-off impacts.
• Pipeline Segment Performance -- Record earnings of $16.8 million in Q3 2025, up from $15.1 million in Q3 2024; growth driven by increased transportation revenues from new projects and short-term contracts, partially offset by higher costs and taxes.
• Electric Utility Earnings -- $21.5 million in the third quarter, compared to $244.3 million in the same period of 2024; positive revenue impact outweighed by increased operation, maintenance, and depreciation expenses.
• Natural Gas Utility Loss -- Seasonal loss of $18.2 million in Q3 2025, compared to $17.5 million in Q3 2024; higher payroll and depreciation costs partially offset by retail sales rate relief.
• Data Center Load Agreements -- 580 megawatts of data center load under signed electric service agreements as of the third quarter of 2025; 180 megawatts of data center load are currently online, 100 megawatts expected to ramp up late in the year through 2026, 150 megawatts of data center load are expected to come online later in 2026, and 150 megawatts of data center load are expected to come online in 2027.
• Badger Wind Farm Approval -- 49% stake acquisition (122.5 megawatts) received North Dakota approval; expected to close upon commercial operation around year-end, included in the 2026 capital budget.
• Electric Rate Case Filings -- Montana: $14.1 million annual increase requested in the general rate case, with interim rates sought for January 1, 2026; North Dakota and South Dakota filings for Badger Wind cost recovery also submitted.
• Wildfire Mitigation Filings -- On schedule for North Dakota, Montana, and Wyoming before year-end.
• Natural Gas Rate Increases -- Wyoming: $2.1 million annual increase effective August 1, 2025; Montana: $7.3 million annual increase, effective November 1, 2025; Idaho: $13 million annual increase, pending effectiveness January 1, 2026; Oregon filing planned by year-end.
• Minot Expansion Project -- Commissioned in October, adding 7 million cubic feet per day of natural gas transport capacity in the fourth quarter of 2025.
• Line Section 32 Project -- Surveys progressing; FERC application planned for 2026, project completion targeted for late 2028.
• Bakken East Pipeline Project -- Selected by the North Dakota Industrial Commission for up to $50 million in annual firm pipeline capacity commitments for ten years; not included in current five-year capital plan.
• ATM Equity Program -- At-the-market equity program reestablished during the quarter to support forward capital requirements; no anticipated equity need for 2025.
• EPS Guidance Update -- Earnings per share guidance raised to $0.90–$0.95 from $0.88–$0.95 per share for 2025, reflecting third quarter performance; contingent on typical fourth quarter conditions.
• EPS and Dividend Outlook -- Management expects a 6%–8% long-term EPS growth rate and targets a 60%-70% dividend payout ratio.

SUMMARY

Management attributed the reported earnings gains to record results in the pipeline segment in the third quarter of 2025, which benefited from new project capacity and strong customer demand for transportation contracts. Strategic initiatives included finalizing regulatory asset recovery filings and advancing several capital projects, including the Badger Wind Farm investment and expansion of natural gas pipeline infrastructure. Rate relief through recent and pending settlements in multiple utility jurisdictions supported financial results and ongoing capital plans. An at-the-market equity program was reestablished to meet anticipated future capital needs, while 2025 maintains no planned equity issuance.

• Nicole A. Kivisto stated, "we are raising the bottom end of our earnings per share guidance to a new range of $0.90 to $0.95 per share for 2025, up from our previous range of $0.88 to $0.95 per share."
• The pipeline segment's performance was described as "driven by higher transportation revenue from growth projects placed in service in late 2024 and customer demand for short-term firm natural gas transportation contracts," according to Jason L. Vollmer.
• Significant data center load under contract is set to increase gradually through 2027, representing a material driver for future electric utility investment considerations.
• Rate cases and regulatory filings are advancing across Montana, North Dakota, South Dakota, Wyoming, and Idaho to recover recent infrastructure investments and mitigate higher operating expenses.
• Major pipeline growth projects, such as Bakken East and the Minot expansion, are positioned to address regional natural gas demand, though Bakken East is not currently reflected in the five-year capital plan and may require external financing partnerships.

INDUSTRY GLOSSARY

• ATM Program (At-the-Market Equity Program): A capital-raising mechanism allowing a company to sell shares directly into the open market over time, rather than through a single offering.
• FERC (Federal Energy Regulatory Commission): The U.S. agency responsible for regulating interstate transmission of electricity, natural gas, and oil.
• Interim Rates: Temporarily approved utility rates that are charged while a regulatory commission reviews a permanent rate case application.
• Open Season: A designated period allowing shippers to bid for pipeline capacity, determining commercial commitment for new projects.
• Wildfire Mitigation Plan: A set of utility policies and infrastructure investments designed to reduce the risk and impact of utility-related wildfires.

Full Conference Call Transcript

Nicole A. Kivisto: All right. Thank you, Jason, and thank you, everyone, for joining us today and for your continued interest in MDU Resources Group, Inc. This morning, we reported income from continuing operations of $18.4 million or $0.09 per share for 2025. An increase of $2.8 million or $0.01 per share over 2024. Strong performance at our pipeline segment drove results for the quarter. Typically, this is a less impactful quarter from an earnings perspective at the utility as we approach the beginning of the heating season. Increased operating costs across our business segments did impact our third quarter results. Continued strong customer demand at our pipeline segment and progress in our utility regulatory schedule should provide opportunity as we move forward.

In addition, our utility experienced combined retail customer growth of 1.5% when compared to this time last year, which is within our targeted annual growth rate of 1% to 2%. This demand and growth provide investment opportunity for customer-driven growth projects at our pipeline and in our utility infrastructure to meet the demands of our growing customer base. I'm extremely proud of our employees whose dedication to our core strategy continues to drive our business and to deliver exceptional performance while positioning MDU Resources Group, Inc. with compelling long-term growth prospects.

At our Electric segment, the North Dakota Public Service Commission approved the advanced determination of prudence filing for the proposed acquisition of a 49% ownership interest in the Badger Wind Farm, which equates to 122.5 megawatts of the project's total 250 megawatts of generation capacity. As a result, we will complete the acquisition of this investment upon commercial operation, which we expect to be around year-end. This investment is currently in our 2026 capital budget. We also filed a general rate case in Montana during the quarter requesting an increase of $14.1 million annually that includes recovery of Montana's share of our investment in the Badger Wind Farm.

This filing included a request for a systems management cost adjustment mechanism for cost recovery of transmission and wildfire-related costs. Interim rates were requested to be effective January 1, 2026, and the Montana PSC has up to nine months to issue its decision. Recently, we also filed for recovery of our investment in Badger Wind in North Dakota through our annual update filing to our renewable resource cost adjustment. And in South Dakota through our annual update filing to our infrastructure rider. On our wildfire mitigation plans, those remain on track with filings in North Dakota, Montana, and Wyoming before year-end. At our electric utility, we currently have 580 megawatts of data center load under signed electric service agreements.

Of that total, 180 megawatts is currently online with an additional 100 megawatts expected to start ramping online late this year and continue into 2026. An additional 150 megawatts is expected online later in 2026 with the remaining 150 megawatts expected online in 2027. Our current approach is to serve these large customer opportunities with a capital-light business model, which not only benefits our earnings and returns but also provides cost savings to our other retail customers. We do continue to pursue additional discussions with potential data center customers and should these discussions progress to signed agreements, we would consider investing capital into new generation and transmission assets to serve the increased load.

Aside from data center load, we also continue to evaluate other potential capital projects related to safely and reliably meeting existing customer demand as well as grid resiliency. An example of this would be we recently signed a non-binding memorandum of understanding for a potential investment in the North Plains Connector project. At our Natural Gas segment, a settlement agreement was approved in our Wyoming general rate case for an annual increase of $2.1 million with rates effective August 1, 2025. Additionally, in Wyoming, we filed for a mechanism to recover pipeline replacement costs during the quarter.

A settlement in our general rate case in Montana was also approved on October 7, finalizing a $7.3 million annual increase with final rates effective November 1, 2025. Moving to Idaho, a general rate case settlement agreement was filed on October 20, for an annual increase of $13 million. The hearing on this case is scheduled for November, with rates expected to be effective January 1, 2026. Looking ahead, we also plan to file a general rate case in Oregon before the end of this year. Moving on to our pipeline segment, our Minot expansion project was placed in service earlier this month and added approximately 7 million cubic feet of natural gas transportation capacity per day.

We also continue to make progress on required surveys for our Line Section 32 expansion project, which will provide natural gas transportation service to an electric generation facility being constructed in Northwest North Dakota. We anticipate filing our FERC application in 2026 for this project and are targeting construction to be complete in late 2028. In regard to our proposed Bakken East Pipeline project that could run approximately 350 miles, from Western North Dakota to the eastern part of the state plus additional pipeline laterals, the project was selected by the North Dakota Industrial Commission for firm pipeline capacity commitments of up to $50 million annually for ten years.

We continue to actively market this project and engage with all interested parties to further define the project scope, timelines, and commercial terms. This project would provide natural gas transportation service for additional industrial, power generation, and local distribution companies' growing demand and also provide much-needed takeaway capacity to meet forecasted natural gas production growth in the Bakken region. This project is currently not in our five-year capital forecast and would be incremental should we determine to proceed. The final route, timeline, and cost of this project will be determined later as we finalize discussions with potential shippers, including delivery points and contracted volume commitments.

As we look to finance a project of this size and scope, we will evaluate all options, including using our balance sheet to finance the project, pursuing potential partners, and various other options. We currently plan to conduct a binding open season during 2026 and will continue to provide updates on this potential project as we learn more. We also signed an agreement to support the early-stage development of a potential Minot industrial pipeline project, which would be an approximate 90-mile pipeline from Tioga, North Dakota, to Minot, North Dakota. The project would provide incremental natural gas transportation capacity for anticipated industrial demand. We will provide updates as the project progresses to final investment decision.

With the performance we have experienced during the third quarter and our view for the remainder of the year, we are raising the bottom end of our earnings per share guidance to a new range of $0.90 to $0.95 per share from our previous range of $0.88 to $0.95 per share. This, of course, remains dependent on normal weather and operating conditions in the fourth quarter. We remain confident in our ability to execute on our long-term growth strategy and believe our operational focus and financial discipline continue to position us well for delivering safe, reliable energy, customer value, and strong stockholder returns.

We also continue to anticipate a long-term EPS growth rate of 6% to 8% while targeting a 60% to 70% annual dividend payout ratio. As always, MDU Resources Group, Inc. is committed to operating with integrity and with a focus on safety. We remain dedicated to delivering value as a leading energy provider and employer of choice. I will now turn the call back over to Jason for the financial update. Jason?

Jason L. Vollmer: Thanks, Nicole. This morning we announced third quarter earnings of $18.4 million or $0.09 per share compared to third quarter 2024 earnings of $64.6 million or $0.32 per share. Third quarter income from continuing operations was $18.4 million or $0.09 per share compared to $15.6 million or $0.08 per share in the prior year. Income from continuing operations excludes the impacts of Everest, which was separated in a spin-off transaction on October 31, 2024. Turning to our individual businesses, our electric utility reported third quarter earnings of $21.5 million compared to $244.3 million for the same period in 2024.

Higher retail sales revenues positively impacted results for the quarter but were more than offset by higher operation and maintenance expense, primarily from higher payroll-related costs and higher contract services related to electric generation station outages this year. Higher depreciation expense associated with capital projects placed in service further impacted the results. Our natural gas utility reported a seasonal loss of $18.2 million in the third quarter compared to a loss of $17.5 million in 2024. Increased operational maintenance expense, primarily again higher payroll-related costs as well as higher depreciation expense related to capital projects placed in service, drove the loss in the quarter.

Higher retail sales revenue due to rate relief in Washington, Montana, and Wyoming partially offset the seasonal loss. The pipeline posted record third quarter earnings of $16.8 million compared to third quarter earnings of $15.1 million last year. The increase in earnings was driven by higher transportation revenue from growth projects placed in service in late 2024 and customer demand for short-term firm natural gas transportation contracts. Higher operation and maintenance expense along with increased property taxes and depreciation partially offset the earnings increase. And finally, MDU Resources Group, Inc. continues to maintain a strong balance sheet with ample access to working capital to finance our operations.

While we have no equity needs in 2025 based on our current capital plan, our capital investment program moving forward will require access to the equity capital markets. As such, we reestablished an ATM program during the quarter to meet those needs. We will update our forward-looking capital investment plan later this month and will provide further details around the size and timing of the near-term equity needs at that same time. That summarizes our financial highlights for the third quarter. We appreciate your interest in and commitment to MDU Resources Group, Inc. and ask that we now open the line for any questions. Operator?

Operator: We will now begin the question and answer session. If you would like to ask a question, please raise your hand now. If you have dialed into today's call, please press 9 to raise your hand and 6 to unmute. Once again, if you would like to ask a question, please raise your hand now. If you have dialed into today's call, please press 9 to raise your hand and 6 to unmute. There are no questions at this time. I will now turn the call back to Nicole A. Kivisto for closing remarks.

Nicole A. Kivisto: Thank you, everyone, for joining us today. We certainly appreciate your continued interest and support of MDU Resources Group, Inc. and look forward to connecting with you as we finish out the year. And with that, I'll turn the call back over to the operator.

Operator: This concludes today's call. Thank you for attending. You may now disconnect.

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