Good morning, and welcome to the Otter Tail Corporation's Q1 2021 Earnings Conference Call. Today's call is being recorded. I will now turn the call over to the company for their opening comments.

Good morning, everyone, and welcome to our call. My name is Loren Hanson, and I manage Otter Tail's Investor Relations area. Last night we announced our first quarter 2021 earnings results. Our complete earnings release and slides accompanying this call are available on our website at ottertail.com. A recording of the call will be available on our website later today. With me on the call today are Chuck MacFarlane, Otter Tail Corporation's President and CEO; and Kevin Moug, Otter Tail Corporation's Senior Vice President and Chief Financial Officer. Before we begin, I want to remind you that we will be making forward-looking statements during this call. As noted on Slide 2, these statements represent our current judgment or opinion of what the future holds. They are subject to risks and uncertainties that may cause actual results to differ materially. So please be advised about placing undue reliance on any of these statements. Our forward-looking statements are described in more detail in our filings with the Securities and Exchange Commission, which we encourage you to review. Otter Tail Corporation disclaims any duty to update or revise our forward-looking statements due to new information, future events, developments, or otherwise. For opening remarks, I will now turn the call over to Otter Tail Corporation's President and CEO, Mr. Chuck MacFarlane.

Thank you, Loren. Good morning, everyone. Welcome to our first quarter 2021 earnings call. Otter Tail Corporation continues to support all the locations we serve with collective efforts to mitigate the spread of COVID-19. Our business continuity plans put the health and safety of our employees and our communities at the forefront and are designed to help ensure continued electric reliability and operational excellence across our companies. We remain diligent in our precautionary health and safety efforts based on the recommendations from the CDC, regional health organizations, and state and local government orders. Currently, 10% of our employees continue to work remotely. We continue to monitor this dynamic event and how it is impacting the economy and our electric and manufacturing platforms. Please refer to Slide 4 as I begin my comments on Q1 results. We earned $0.73 per share for the quarter, a 22% increase over the $0.60 per share earned in Q1 of 2020. This increase was largely driven by outstanding results at our Plastics segment. Kevin will provide a more detailed discussion of our financial performance in his comments, but a brief overview of Q1 results are the electric segment earnings per share increased $0.02, which is primarily driven by recovery of now - the now operational Merricourt wind farm and approved interim rates going into effect January 1 in conjunction with Otter Tail Power's Minnesota general rate case filing. This was offset in part by negative weather and a decrease in C&I sales due to COVID. Our Manufacturing segment earnings per share increased $0.01. BTD continues to see a rebound in sales of most of their end markets as major OEMs rebuild depleted inventories created by the pandemic. Our Plastics segment had a record-breaking quarter with earnings per share increasing $0.08. This was driven by slightly higher pipe sales volumes and higher PVC pipe prices and improved operating margins. As shown on Slide 5, we are now on track to meet or exceed our original annual EPS guidance every year since 2016, with a projected 9.8% EPS compound annual growth rate over the 2016 to 2021 time frame. We continue to grow Otter Tail Power through capital investments in generation, transmission, and technology projects. On Slide 11, Merricourt Wind Energy Center concluded construction and began commercial operation at the end of 2020. The facility generates enough energy to power more than 65,000 homes. At a cost of $260 million, it's the largest capital project in company history. On Slide 12. After years of planning and 2 years of construction and testing, Astoria Station is now part of the Mid-continent independent system operator or MISO energy market, allowing MISO to economically dispatch the unit. The $152 million investment complements our wind generation by providing a reliable backstop when the wind is not blowing and it has flexible operating options and low emissions. Astoria Station provides 240 megawatts of dispatchable capacity compared to Hoot Lake plant's 140 megawatts with projected 85% less carbon emissions from historic Hoot Lake plant levels. We announced in September of 2020 the $60 million Hoot Lake Solar project, as shown on Slide 13. This is a 49 megawatt project we plan to build on previously owned and newly purchased land around Hoot Lake plant in Fergus Falls, Minnesota. Hoot Lake Solar will generate enough energy to power approximately 10,000 homes each year. This project offers us a unique opportunity to reuse our existing Hoot Lake transmission interconnection, along with substation and plant land after retiring the Hoot Lake coal plant in 2021. In March, the city of Fergus Falls accepted the Environmental Assessment Worksheet. The city also approved our annexation request for the project property we own in adjoining townships. We expect to submit our conditional use permit request during the second quarter. We have secured safe harbor equipment and currently anticipate the project to be completed in 2023. Additionally, the Minnesota Public Utilities Commission approved our request to authorize 100% of Hoot Lake Solar's output to be allocated for use by Minnesota customers, and 100% of our investment in the Hoot Lake Solar be eligible for future cost recovery from Minnesota customers through our renewable resource cost recovery rider. We filed our Minnesota general rate case on November 2, 2020, as shown on Slide 15. Our last Minnesota rate review was filed in 2016. Investment in cleaner energy generation is the primary driver for this request as we seek to get Astoria Station placed in base rates in Minnesota. This project was approved in our most recent IRP and has been earning AFUDC during the construction period. Additionally, our new customer information system, which focuses on enhancing the customer experience by allowing customers more access and options related to their energy use and services, was also a driver for this request. Recognizing the economic impact to customers of the ongoing pandemic and with input from commission staff, we agreed to reduce our interim rate request by approximately half to $6.9 million or 3.2%. This was done in conjunction with anticipated lower depreciation expense associated with extending our wind assets from 25- to 35-year lives. In December, the commission approved our interim request beginning in January 2021. On Friday, April 30, we filed a substantial reduction in our original request, incorporating these lower depreciation rates approved by the commission, lower borrowing rates, lower pension and benefit costs and other refinements identified during the discovery phase of the case. The new request is for $8.2 million, a 3.8% increase versus the original request of $14.5 million or 6.8% request. We anticipate a decision in late 2021 or early 2022. Even with this increase, Otter Tail Power residential customers will continue to have some of the lowest rates in the country. As shown on Slide 16, the utility's rate base is expected to grow by an annual rate of 5% between 2020 and 2025 in a constructive regulatory environment and will be a key driver for future earnings growth. We will be filing our next Minnesota integrated resource plan in September of 2021, as noted on Slide 19. This plan will identify the most cost-effective combination of resources to reliably meet customers' needs during the next 15 years. While the filing is required in Minnesota, we develop a strategy for our integrated system and also filed a plan with the North Dakota and South Dakota regulatory commissions. As required by the Minnesota PUC, the plan will speak to the North Dakota Regional Haze compliance. Our last integrated resource plan was filed in June of 2016 and approved in April 2017. We expect the updated IRP and MISO regional transmission plans under develop to favorably impact our long-term rate base growth forecast. In April, FERC issued a supplemental notice of proposed rulemaking, or NOPR, for transmission incentives. In its supplemental note, FERC focuses on the ROE adder for electric utilities that join transmission organizations. FERC's notice proposed to sunset the ROE adder after 3 years from when the utility transfers control of its transmission assets to the regional transmission organization. Right now, this incentive increases our base FERC ROE by 0.5%. We estimate a negative impact to ongoing EPS starting in 2022 of up to $0.02 if the RTO incentive is eliminated in FERC's final rule. The Biden Administration's infrastructure plan proposes approximately $2 trillion in investment this decade. The plan highlights infrastructure improvements, including electric grid resilience, the electric vehicle market and energy efficiency and reiterates the administration's call for net 0 carbon emissions from the electric sector by 2035. It also calls for a 10-year extension and phase-down of clean energy generation and storage, production tax credits and investment tax credits as well as the possibility of direct pay in lieu of the tax credit utilization. We continue to monitor both the FERC and infrastructure plan proposals. Turning to our Manufacturing segment. BTD, our contract metal fabricator, continues to experience increased demand and improved sales for most of their end markets as major OEMs rebuild depleted inventories. They are currently being challenged for securing staffing levels to keep up with the increased demand. Industry-wide demand for manufacturing talent has increased and lingering COVID-19 impacts have reduced the number of available applicants. Also, steel prices are exceeding historic levels, driven by strong demand and limited product availability as mills are slow to recover from capacity reductions in 2020 related to COVID. Even though BTD is able to pass the increased material costs on to customers, product availability could impact production for some OEM manufacturers. Our Plastics segment continues to deliver strong results as they benefit from a tight PVC pipe market due to PVC resin supply constraints that have significantly driven up PVC pipe prices. PVC resin constraints resulting from abnormally cold weather in February that impacted the Gulf Coast region, resulting in several resin suppliers invoking force majeure. Resin constraints remain due to high demand as PVC resin plants still do not have full operational capability. While we expect PVC resin supply constraints to extend into the second quarter, both of our PVC companies remain agile and reliable with on-time deliveries. Looking ahead, we continue to be innovative as we modernize our energy grid, enhance customer experiences and work toward a cleaner energy future. We project that by 2023, our customers will receive approximately 35% of their energy from renewable resources. And by 2025, we project that our carbon emissions will be 50% below 2005 levels, all while keeping residential rates among the lowest in the nation. With growing investor concern about companies generating more than 25% of revenues from thermal coal, it's reassuring to note that Otter Tail Corporation's percentage of revenue from coal assets is significantly below that threshold. The percentage of consolidated revenues from our coal assets was 12% in 2020. Now I'll turn it over to Kevin for the financial perspective.

Well, thanks, Chuck, and good morning, everyone. We had an exceptionally strong first quarter with consolidated revenues up 11.5% and net earnings up 25%. This was driven primarily by the outstanding performance at our Plastics segment. We also experienced quarter-over-quarter earnings growth at our Electric and Manufacturing segments. Please refer to Slide 25, as I discuss our first quarter results. The Electric segment's net earnings increased $1.4 million. All the elements that impacted the Electric segment's quarter-over-quarter earnings are discussed in the release, but key items include a $2.3 million increase in new net retail revenues related to the interim rate increase in Minnesota that was effective January 1 of 2021, associated with the Minnesota rate case that was filed last November. Our increased conservation rider revenues related to the recovery of increased CIP program spending in Minnesota and South Dakota, increased rider revenues in North Dakota related to the recovery of Merricourt operating expenses and returns on increased investment in the project, as well as an increase in rider revenues in North Dakota and South Dakota for recovery of Astoria and transmission project costs. There's also increased transmission service revenues from the recovery of interconnected generators in MISO transmission tariffs. These items were offset by lower retail revenues from commercial and industrial customers due to the lingering impacts of COVID-19. COVID did not impact revenues in the first quarter of 2020. There was also lower retail revenues due to milder weather that was experienced quarter-over-quarter. Weather negatively impacted the quarter-over-quarter results by $0.02 a share. There were increased operating expenses due to the Merricourt wind farm being commercially operational at the start of the year, increased CIP expenditures, which are being recovered through rate riders in Minnesota and South Dakota. Higher depreciation and property tax expense due to recent capital additions, higher interest expense due to the new long-term debt issuances in 2020, and a reduction in other income due to the discontinuance of AFUDC on the Minnesota share of Astoria Station construction costs. This is due to the project now being recovered in Minnesota interim rates. These items were offset in part by decreased plant maintenance and operating expenses, a decrease in bad debt expense due to improved customer collections in the quarter. And income taxes were favorably impacted mainly due to PTC credits earned on Merricourt in the first quarter. Net earnings for the Manufacturing segment increased $500,000 and was driven by higher parts revenues at BTD due to increases in material costs, which were passed on to customers, and improved sales volumes and pricing, driven by increased sales to recreational vehicle, agricultural, lawn and garden, and construction end markets. Scrap revenues were mostly higher due to increases in scrap metal pricing as well as increases in scrap volumes. And cost of goods sold were higher due to increased sales volumes and higher material costs passed on to customers, along with increased labor-related costs and slightly higher operating expenses. At T.O. Plastics, net earnings increased modestly between the quarters. Our Plastics segment earnings increased $3.7 million due to higher pipe sales prices and slightly more sales volume. The pipe prices were driven in part by PVC resin supply constraints due to resin plant shutdowns, feedstock shortages related to the abnormally cold weather in the Gulf Coast region of the United States, continued significant global demand for PVC resin, and limited pipe inventory across the country. Our corporate costs net of tax decreased $500,000, mainly due to increased values on our corporate-owned life insurance and captive insurance investments that were realized during the quarter. We continue to generate strong cash flows and have the appropriate levels of liquidity under our credit facilities to support our business operations. Our current liquidity position under our two credit agreements is shown on Slide 24, and these facilities are in place until October 31 of 2024. Moving on to Slide 27. We are raising our 2021 overall diluted earnings per share guidance range to $2.47 to $2.62. The midpoint of the revised 2021 earnings per share guidance range of $2.55 a share reflects an approximate 9% growth rate off 2020 diluted earnings per share of $2.34. This is being driven in large part by expected performance in our Plastics segment. The key drivers of the downward revision to the Electric segment guidance from our original 2021 guidance are unfavorable weather experienced during the quarter, which negatively impacted first-quarter earnings by $0.04 compared to normal. We plan for normal weather the remainder of the year. Our commercial and industrial revenues are expected to be lower based on the continuing impacts from COVID-19. The level of self-funded interconnection projects is now expected to be lower, resulting in a lower level of earnings than originally expected due to FERC delays in the approval process and lower MISO revenues due to lower revenue requirements. Despite the decrease in the Electric segment guidance, we continue to expect Electric segment earnings in 2021 to exceed 2020 earnings driven by the Merricourt and Astoria projects being commercially operational and our $405 million total investment in these projects being fully reflected in rate base. Both projects have recovery mechanisms in all three of our jurisdictions, partially offset by increased O&M, depreciation, and property tax expense associated with these investments and increased expense due to debt issuances in 2020. Also, the impact of the Minnesota rate case filed in November of 2020, the Minnesota Public Utilities Commission has approved an interim rate increase of 3.2% or $6.9 million. These items are partially offset by increased nonlabor O&M expenses related to planned outages at Big Stone plant and increased post-retirement expense related to a decrease in the discount rate and the long-term rate of return on plant assets. We are maintaining our original 2021 earnings guidance for our Manufacturing segment and continue to expect net income to be higher than 2020. This is based on an expected increase in sales at BTD, driven mostly by improving end markets as our customers continue to rebuild inventories to fill the shortages created by the pandemic. Scrap revenues are also expected to improve based on higher scrap metal prices. Decreased steel mill capacity due to COVID has created product availability issues. Mills are struggling to keep up with demand, which has created concerns over our ability to get the steel needed to meet customer demands and continues to keep steel prices elevated above historic levels. We continue to work on increasing staffing levels to keep up with demand and being impacted by lower productivity and increasing expedited freight costs. We expect higher earnings at T.O. Plastics mainly due to increased sales to horticultural and life science end markets. The backlog for the Manufacturing segment is approximately $201 million for 2021 compared with $127 million a year ago. We are raising the 2021 guidance for our Plastics segment from the original guidance and now expect net earnings to be higher than 2020. Sales prices of PVC pipe in the first quarter were stronger than expected, and we expect prices to remain high for the rest of the year. Resin suppliers continue to increase raw material prices in response to market conditions such as availability, constraints related to feedstock supplies for resin, and a strong export market, which has higher resin prices than the domestic market. Pounds of pipes sold in 2021 are still expected to be lower than what was sold in 2020. And our corporate costs, net of tax, are expected to be in line with 2020. This is driven by higher employee benefit costs and likely contributions to Otter Tail Corporation's foundation. We are extremely pleased with our strong first-quarter results. Those results, along with our updated view for the remainder of the year, position us to achieve our updated earnings per share guidance range of $2.47 to $2.62 a share. The key drivers in achieving this 2021 guidance for the utility include our capital spend on Merricourt and Astoria Capital projects being fully reflected in rate base and a successful outcome of our Minnesota rate case. For BTD, key drivers will be continued recovery in their end markets from the pandemic as our customers look to have full plant capacity to rebuild low inventory levels, also maintaining appropriate staffing levels to position them to fully utilize existing capacity and operational and productivity improvements across all locations to further improve our return on sales margins and invested capital. We continue to monitor the risk related to decreased mill capacity that has created product availability issues and how that will impact operations for the remainder of the year. As for our Plastics segment, PVC resin plants still are not fully operational from the impacts of February winter storms. We continue to expect supply constraints through the end of the second quarter. And while these constraints have favorably impacted our first-quarter results, we need to be mindful of the negative impacts this could have on our production capabilities and on operating margins during the second half of 2021. Despite these challenges, this segment is well-positioned to provide another excellent year in earnings, returns on invested capital, and cash flows. Over time, the electric utility will deliver reliable performance along with rate base investment opportunities over the next five years to allow for growing revenues, earnings, and cash flows. The Electric business is expected to contribute approximately 75% of our overall earnings. The Manufacturing and Plastics segments will also provide organic growth over the long term. These two segments are expected to provide around 25% of our earnings over time. We expect to deliver total shareholder return of 8% to 10% over the long term, consisting of our expected 5% to 7% compounded annual growth rate in earnings per share and our current dividend yield. Looking forward, we would expect to grow the dividend along with earnings per share growth and maintain a dividend payout ratio between 60% to 70%. Our diversified business model continues to serve us well, and we remain positioned to fund our rate base growth opportunities at the utility with our strong balance sheet, ample liquidity to support our businesses, and strong investment-grade corporate credit ratings. We're now ready to take your questions.

And your first question comes from Chris Ellinghaus with Siebert Williams.

Can you talk a little bit about the FERC delays that you mentioned in the Electric segment discussion on the MISO projects?

Sure. Chris, this is Chuck. We have been doing a number of the self-fund, and these are the projects where effectively a generator, generally a wind generator, could be a neighboring utility or an IPP request interconnection. We do upgrades on our transmission system to allow them to interconnect. And then we recover that over 20 years from that interconnection customer. We've done about $50 million of upgrades, and there's a series of projects, which are referred to as interim projects. There were a number of different FERC orders on these, and these interim projects tend to be about 5 years old. They're already built and in service. And they're reviewing those for movement into this sort of category where we're going to get recovery of those over 20 years versus when they were completed, we were paid by the interconnection customer the full amount. So those rulings on those have been delayed, and we don't anticipate that we'll get those here in 2021. But they refer to projects about $9 million worth of projects that are in service where interconnection customer has paid us the full amount, we would refund that, and then we would set up a 20-year schedule. Those are the four or five projects that are - are not - haven't been heard or we don't expect an order from FERC this year.

Chuck, you were talking about the Biden infrastructure plan. What elements do you see there? I think the one about PTCs is kind of interesting. But elements in that plan sort of intrigue you for your own opportunities?

I think you touched on the extension of PTCs or ITCs. As we are doing our current integrated resource plan runs for a September '21 filing, if PTCs are extended on wind or solar, new solar or new wind for 10 years, that will impact, I believe, the amount of renewables that become cost-effective in that plant. I think that's the biggest rollout. We do have plans on EV infrastructure that's been reviewed and approved by the Minnesota Commission. It's effectively like 11 large or tier 3 chargers and approximately the same tier 2 spread out in our service territory in Minnesota. But I think the biggest ones would be the tax credit and any requirement on carbon reduction.

Would the alternative schemes in the Biden plan be helpful to you in terms of your tax appetite?

The - I mean the direct pay-in in lieu of the tax credit? Yes.

Okay. As far as PVC goes, this is really kind of a confusing time. We've got enormous demand for construction materials, and yet you still have resin supply constraints. How do we think about that back-end of the year? And how do we think about the supply-demand dynamics, particularly with - presumably, the rest of the world is seeing some similar construction demand. So as those plants come back to full capacity, will some of that be utilized for the export market? So there could still remain some supply-demand imbalances in the U.S. How do we think about this in the grand scheme? And if there were supply constraints for a good piece of 2021, does that leave a backlog of demand for 2022 that suggests a strong 2022 pipe market as well?

A long question, Chris.

Lot of pieces there.

We will address your question and respond to what we missed later. Regarding whether a significant portion will still be exported as the plants are operational again, the answer is yes. The export market is expected to remain strong, continuing to create challenges for domestic PVC capacity. Currently, we expect the plants to be fully operational by the end of the quarter, and we anticipate our resin shipments to the plants will return to normal levels. However, we are concerned that the supply constraint has lasted longer than we initially anticipated. If the plants do not achieve normal capacity, it could pressure the latter half of the year. To your question about whether limited resin supplies this year will impact project timelines in 2022, I believe it will. If we cannot return to normal levels, it may delay projects into 2022 due to insufficient resin supply for manufacturing PVC pipe. Right now, we have announced resin price increases of $0.04 for May and $0.03 for June, bringing our expectations to $0.74 a pound for resin by the end of the second quarter. We have not seen any announced resin price changes for Q3, but that could occur later in the quarter. I hope this addresses your questions, Chris, but feel free to ask if it doesn't.

Well, there's still 1 million questions that would go into this sort of equation of what the PVC pipe price market might look like. So even though there might be price increases for PVC resin, the demand for construction materials seems such that they're being able to absorb cost increases with prices. So what would your thought process be for pipe prices and margins sort of in this very strong demand market for the second half of the year and for 2022? It seems like the environment that you're in might suggest that resin prices might support sustainable high margins.

I think that's right, Chris. I mean we're seeing today, obviously in the first quarter we saw higher PVC sales pipe prices driven by this supply constraint concern. Resin prices, like I said, are expected to be around $0.74 by the end of the second quarter. And we continue to see strong sales prices here in the second quarter. Despite some of the constraints that are there, the projects still need to be done and completed. And the - typically the cost of the PVC pipe for these projects are not a significant portion of the overall construction cost of these projects. And so sales prices have been rising much more than what resin prices have been. I think that as we continue to go through the rest of the year, to the extent that there's still that shortage that is out there because the plants aren't full capacity, we would certainly expect that sales prices would still continue to be strong through the rest of the year. Of course, we're going to be heading into the third quarter that always introduces the elements of hurricanes and the impacts that hurricanes could have on this dynamic as well. And that - of course, we're not going to know the result of that until we get to the third quarter and see what type of weather conditions we have. The thing we're watching and guarding against as we've been in this business long enough to know that things can turn quickly. And to the extent that resin supply does get back to normal levels, and there is plenty of it available, that could cause margin erosion for us in the last half of the year as - if that availability of the raw material is there, there could be downward pressure than on the sales prices, and we look to see some margin erosion as we head into the last half of the year.

So in other words, you're saying it's a complicated scenario?

Yes. And I think that we're going to - I mean, as we're looking at this, we're going to have - expect to have a whole lot better visibility at the end of the second quarter once we see what happens with the - if these - the petrochemical plants are fully back online as they're expecting.

Okay. Last thing, you mentioned the foundation in corporate and other segments. Can we assume that that $0.04 change to the guidance is for - dedicated for that piece alone?

It's in part dedicated to that, Chris. But given the uplift in the guidance because of the strong performance, we're also seeing that part of it is being driven by incentive costs in our incentive plans as well.

And your next question comes from Brian Russo with Sidoti.

Just to quickly follow up on the Plastics segment and the significant performance to say the least in the first quarter and your increased guidance. In the first quarter, is it safe to say that PVC prices were rising at a faster rate than your resin prices to supply constraints, which cause operating margins to expand significantly more than what, say, the historical kind of run rate is in the low teens?

Yes. That's a fair statement.

And when we look at - I think this is the second year in a row, right, where you've had tailwinds I guess in the Plastics segment. And I guess things can go the other way. But are we in, say, a new PVC environment where not only can you retain margins, but you can expand your margins on a sustainable basis over the next, say, 2 years despite supply constraints or running out of resin inventory? So your cost of goods sold will increase as you maybe suggested in the second half of the year?

Yes. Are we in a new situation? I think we've been stating for the past couple of years that normal earnings in this business are around $20 million to $25 million. We're now increasing our guidance significantly from our initial projections, driven by a market factor that we can anticipate. The unseasonably cold winter weather and plant shutdowns were unexpected. Your earlier point about sales prices rising faster than the announced resin price increases is accurate. There's a demand for the pipe, and customers are willing to pay higher prices to secure the product for their projects. Regarding the current margins, we don't anticipate maintaining these levels over the next couple of years. We expect market forces to realign, and once the resin plants are fully operational and supplying adequately, we should return to more typical sales price spreads compared to resin prices.

Got it. That makes sense. Then just to switch gears to Manufacturing and specifically BTD, you maintained the February guidance. And I'm just curious, since February, we've seen a couple of your larger end market customers increasing their sales outlook and earnings outlook while also acknowledging supply constraints on that side of the business and rising steel prices, which you pass through. So I'm just wondering, are there any more assumptions? What's your - any assumption on sales growth at BTD embedded in the new guidance, which is unchanged?

There's some sales growth embedded in there, Brian. But what we're seeing is this - the steel availability issues that are there. And then, of course, we're having labor issues because we laid off a number of people in the second quarter last year, and now we're having difficulty getting people back. So we need - we're - our productivity is being impacted by not having the right level of staffing. And then with this product availability issue on the steel side, we've seen our expedited freight costs go up. So that's been eroding into our margin as well. And so despite - we were able to - obviously we passed through the steel price, but we've seen some price increases. We've seen that offset by the labor productivity and then this expedited freight. And that as we look at the guidance and keeping it where it is, despite the good first quarter performance, we're being cautious because of the impact that the labor and the expedited freight costs are having on the business right now.

Okay. Got it. Then just switching gears to the electric utility, I think it's roughly a 9% or 10% downward revision to the EPS guidance range. And I think you attributed $0.04 to weather. Can you break down the other $0.06, which is C&I versus those delayed MISO projects?

Sure. So I think the C&I is about $0.02. The delays in FERC approval is $0.01 to $0.02. And then the lower MISO revenues would kind of be the rest.

Okay. And then just one last question. Thanks for the sensitivity on the FERC NOPR. Can you give us a sense of what percent of your overall rate base is under FERC jurisdiction?

This is Chuck, Brian. The total amount under FERC - the vast majority of our transmission is under state regulation. I would guess it is in.

About 10%.

Which is why the sensitivity, I guess, seems manageable on a 50 basis point change? Yes. Okay. Great.

Brian, the revenue from FERC is 10%.

And your next question comes from Chris Ellinghaus with Siebert Williams.

Sorry, did it again, I left the mute on. But I want to beat this horse a little bit more because it's really important. The first quarter, can you differentiate, if possible, how much of sort of the good margin dynamic is the supply constraint for the resin versus we've seen quite an extraordinary spike in construction demand. So my thought is some of these other markets, the prices have skyrocketed for construction materials and prices, and margins have been good there as well. So would you have seen a really strong PVC pipe market and prices even in the absence of the resin issues?

I think we would have seen a strong quarter. It wouldn't have been as strong had it not been for the constraint issues, Chris, because our volumes quarter-over-quarter are basically flat.

Well, you also had constraints too. So how much - can you differentiate how much of the flat volumes was a function of the resin constraint? How much more could you have produced if there were no constraints?

Not much in the first quarter.

Not much in the first quarter.

Okay. I guess there's a question here about whether there's maybe been somewhat of a demand shift. Over the last few years, has the first quarter dynamics given you any thoughts about that $20 million to $25 million that you've kind of been expecting a normal trend to develop at some point? Has that number, that range been adjusted in your mind at all with the totality of what you've seen over the last, say, 5 years?

I would say, answer that, Chris, that we're looking at it again.

I would like to ask Chuck if he has questions about the company's ability to forecast that range. I will check in with him at the end of the year to see if the chief forecaster of PVC dynamics needs to make any adjustments.

We'll look into that, Chris. I mean I think we're in an unusual market. You can't look at any construction material now that's following a normal pattern. So - and I think there's a number of people that would have loved to been long, lumber or something in that area. We'll look at it. I do think we've got to look at this total global resin supply. There's more export pressure, and Kevin mentioned that, and there has been historically too just the ability for the U.S. to produce resin using natural gas versus other feedstocks in other parts of the world has continued to put pressure on the export market for this resin, U.S.-produced resin.

Right. So will you now, like Kevin said, you'll know more at the end of the second quarter when supply returns to normal somewhat, but it seems like the same dynamics in many other countries are similar to what we're seeing on the construction materials side. So will you have a sense of how much more of the resin supply is being siphoned off for international markets at that point?

We'll have updates to it. Yes, Chris.

Okay. It’s a very interesting set of equations for the PVC market.

And there are no further questions. I will now turn the call back over to Chuck for closing remarks.

Thank you for your questions and interest in Otter Tail Corporation. With continued execution on our rate base growth and efficiency improvement opportunities at the utility and emphasis on operational and commercial performance and our manufacturing platform, we remain confident in our ability to deliver long-term shareholder value. Based on our strong first quarter performance and our updated view of the remainder of the year, we are raising our 2021 diluted earnings per share to $2.47 to $2.62 from our previous guidance of $2.39 to $2.54. Thank you for joining our call. We appreciate your interest in Otter Tail Corporation, and we look forward to speaking with you next quarter.

This concludes today's conference call. You may now disconnect.