Good morning and welcome to the Otter Tail Corporation's 2021 Earnings Conference Call. Today's call is being recorded and we will hold a question-and-answer session after the prepared remarks. 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 Tyler Akerman, and I manage Otter Tail's Investor Relations area. Last night, we announced our Q4 and full-year 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 I 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 views and expectations of future events. They are subject to risks and uncertainties, which may cause actual results to differ from those presented today. 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. 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, Tyler. Good morning, everyone, and welcome to our 2021 year-end earnings call. Thanks to the efforts of our employees, Otter Tail Corporation achieved record financial results in 2021. Please refer to Slide 4 as I begin my comments on our results. We achieved earnings per share of $4.23, which is an increase of 80% over 2020. The increase was led by our plastic segment, which had an outstanding year driven by continued strong PVC pipe demand and PVC resin supply constraints. Kevin will provide more detailed discussion of our financial performance in his comments, but a brief overview of 2021 is as follows. Our electric segment increased earnings by 5.7 million or 8.5% over 2020. This was primarily driven by rate-based growth from our Merricourt Wind and Astoria station projects. Our manufacturing segment increased earnings by 6.1 million or 56% over 2020 with BTD’s earnings up 4.4 million and T.O. Plastics of 1.7. This was mostly due to strong end markets for both BTD and T.O. Plastics, as well as favorable scrap metal pricing at BTD. Our plastics segment had a record-breaking year with earnings of 97.8 million, which is approximately 250% higher than 2020. This was driven by higher pipe prices and improved operating results resulting from unique market conditions. These increased margins started with the unusual and frequent impact resulting from the extreme cold weather in February that caused resin suppliers to temporarily close petrochemical plants in the Gulf Coast region, and it was exacerbated in the third quarter from disruptions caused by Hurricane Ida. The first quarter of 2022 is expected to be strong as market conditions from the fourth quarter of 2021 continue into 2022. Now, I'll share some of the highlights from last year. Otter Tail Power filed its Integrated Resource Plan in September. The plan identifies key projects in the energy transition, which is underway at Otter Tail Power. The main request in the five-year action plan includes the addition of fuel oil backup capability at our Astoria Station natural gas plant, the addition of 150 megawatts of solar generation in the 2025 timeframe, and the commencement of the process to withdraw from our 35% ownership in Coyote Station by year-end 2028. After incorporating the request from the integrated resource plan, we now anticipate capital expenditures in our electric segment of nearly 1 billion over the next five years, which will result in a compounded annual growth rate in rate base of 5.9% from the end of 2020 to the end of 2026 as shown on Slide 17. Otter Tail Power's Hoot Lake solar project continues to move forward and is on schedule to be completed in 2023. The 49-megawatt solar project will be constructed on and near the retired Hoot Lake coal plant property. The location of Hoot Lake Solar offers us a unique opportunity to utilize our existing Hoot Lake transmission rights, substation, and land. Minnesota customers will be allocated 100% of the costs and benefits of the project. The project has received renewable rider eligibility approval in Minnesota. We continue to experience supply chain challenges in some inflationary costs associated with the project. We have contracts in place for thin-film panels, which will avoid the heightened supply chain risk related to alleged human rights abuses in China and the U.S. ban on goods from that region. Our investment in Hoot Lake Solar and those identified in our integrated resource plan and other capital expenditures will allow us to improve our customer's experience, reduce operating, and maintenance expenses, reduce emissions, and improve reliability. As shown on Slide 7, we are targeting a carbon reduction in emissions from our own generation resources approximately 50% lower than 2005 levels by 2025 and 97% by 2050. Otter Tail Power announced in the third quarter of 2021 the addition of a new loan with a business focused on the delivery of high performance, crypto mining, and related infrastructure solutions. This load started coming online during the first quarter of 2022 and plans to be fully operational in the second quarter of 2022. Demand from the customer's facility could approach 100 megawatts with a high load factor and the ability to be curtailed. Otter Tail Power received a written order on its rate case in February. Important takeaways from the written order are the improved return on equity of 9.48% on a 52.5% equity layer and a revenue decoupling mechanism as shown on Slide 14. Recognizing the economic impact on customers during the ongoing pandemic and with input from the 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 the approval of our annual depreciation filing, which extended our wind asset lives from 25 years to 35 years. We expect final rates to be implemented by mid-year 2022 with interim rates remaining in effect until then. Now, turning to our manufacturing segment. BTD, our contract metal fabricator was challenged by labor and recruitment costs as we focused on hiring to meet customer demand. During the year, we have made progress on hiring new employees after increasing starting wages, off-shift premiums, and hiring incentives. BTD’s year-end employee count was at its highest level of all time. We are focusing on training and increasing the productivity of these new employees. Steel prices peaked in the fourth quarter at historically high levels, and prices have begun to moderate and lead times have improved. Although steel prices have been high, BTD experienced increased customer demand driven by OEMs, improved sales, and the desire to rebuild depleted inventories. T.O. Plastics had solid performance driven by strong horticulture end market sales offset by lower sales to contract market customers. Horticulture sales backlog is at an all-time high. Our plastics segment continues to deliver extraordinary results, while managing through raw material supply challenges. Demand for PVC pipe remains strong, causing sales prices to continue to rise above raw material price increases, which has led to the record fourth quarter earnings. I'd like to thank all of the Otter Tail team members for their resiliency and continued commitment while navigating the economic swings and safety concerns presented with COVID. Now, I'll turn it over to Kevin to provide additional detail on our financial performance in 2021.

Thanks, Chuck, and good morning, everyone. Our 2021 operating revenues were 1.196 billion compared with 890 million in 2020. This revenue growth occurred across all of our reporting segments. Our 2021 earnings per share of $4.23 increased from our 2020 earnings per share of $2.34. These results were primarily driven by the unique market conditions we experienced in our plastics segment during 2021. However, it is important to note that all of our operating segments contributed to our year-over-year earnings increase. Our 2021 return on equity was 19.2% on an equity ratio of 53.7%. Slide 27 provides an overview of our three-year financial performance. These results are reflective of our strategy of having electric, manufacturing, and plastic segments. Our electric segment is a well-run, fully integrated electric utility with a growing rate base; this is expected to provide continued earnings growth, with support of regulatory environments and a demonstrated ability to successfully execute on large-scale capital projects. Our manufacturing and plastics segments provide additional earnings growth and are well-positioned for the future. The additional earnings and cash flows generated by the plastics segment in 2021 provide additional strength to our already strong credit metrics, liquidity, and capital structure. 2021 resulted in a record year of cash flows generated from operating activities. The 231 million of operating cash flows was generated in large part by increases in year-over-year net income and depreciation expense. As a part of this, our accounts receivable increased $61 million and our inventories increased $54 million, and we fully expect these working capital items will be converted to cash in 2022 contributing to another strong year of operating cash flows. These operating cash flows and liquidity available under our credit facilities allow us to look at additional organic investment opportunities. Specifically, we will be making a discretionary contribution of $20 million to our pension plan in February of 2022. And as previously mentioned, we have acquired land in Phoenix, adjacent to our Vinyltech property that will allow us to execute on a potential facility expansion to improve plant operations, logistics, and increase plant capacity. The capital for this project is included in our five-year capital expenditure plans. Our five-year financing plans call for issuance of long-term debt to primarily support the electric segment's rate base growth, and there is no need for any external equity in the financing plan. The Board of Directors increased our 2022 indicated annual dividend rate by 5.8% to $0.65 a share. This increase reflects our strong 2021 financial performance and our 2022 outlook, the company's strong balance sheet, liquidity, cash generation profile, and our commitment to enhancing shareholder returns. We expect future dividend increases to be in line with our long-term earnings growth goal of 5% to 7% of our 2020 earnings per share of $2.34. In 2022, will be the 84th year we have paid dividends on our common stock. Please refer to Slides 28 and 29 as I provide an overview of 2021 earnings by segment. The electric segment net earnings increased $5.7 million or 8.5% over 2020. The increase in earnings is primarily driven by rate-based growth resulting from the completion of the Merricourt wind farm and Astoria Station, increased retail revenues from the interim rates related to our Minnesota rate case, net of production tax credits, and increases in transmission service revenues. These items were offset by higher O&M costs related to increased operating costs from placing Merricourt and Astoria Station in service in 2021. Increase in Big Stone Plant maintenance cost is a result of our planned facility outage. Increases in other O&M costs such as transmission tariff costs, insurance costs, and higher vegetative maintenance costs. Depreciation and amortization expenses also increased due to recent capital additions. Interest costs were higher due to higher levels of long-term debt compared with the previous year, and income taxes were favorably impacted mainly due to the production tax credits earned on Merricourt in 2021. Net earnings for the manufacturing segment increased $6.1 million over 2020. This growth in earnings resulted from increased sales volumes of 6.8% at BTD from improved end market demand across most markets served. We also experienced an increase in operating revenues related to the rise in material costs during 2021. These costs are passed through to our customers. There were higher scrap metal prices that continued throughout 2021, which contributed to a growth in operating revenues of $7.3 million. This increase in operating revenues at BTD was largely offset by lower gross profit margins. This was a result of more labor related to the time required for new employees to be trained. This in turn caused lower productivity levels during the year. Operating expenses expanded in 2021 to support our higher business volumes. T.O. Plastics also contributed to the growth in segment operating revenues in net income. This was primarily due to improved product pricing and sales volumes. These items also contributed to an increase in gross profit margins in T.O. Plastics. Plastic revenues and net earnings increased driven by higher sales prices due to a combination of PVC resin supply constraints, which led to limited PVC pipe inventory and strong demand for PVC pipe products. Resin supply in 2021 was negatively impacted during the year by production disruptions caused by the extreme weather events in the first and third quarters in the Gulf Coast region. Pounds of pipe sold in 2021 increased 1.7% from 2020 as resin supply constraints limited our production. Our corporate costs grew by 1.1 million, primarily due to increased labor and benefits costs, including higher health insurance costs related to our self-funded health insurance plan, as well as a $0.5 million year-over-year increase in a contribution commitment to Otter Tail Corporation’s charitable foundation. Moving on to our business outlook on Slide 31. This reflects an earnings per share range of $3.78 to $4.08 for 2022. This guidance equates to a return on equity range of 15.3% to 16.3%. The guidance is reflective of an electric utility with a 5.9% compounded annual growth rate and rate base off of 2021 over the next five years in support of regulatory jurisdictions, and strong levels of earnings in 2022 from our manufacturing and plastics segments. The earnings contribution expected in 2022 is different from our anticipated 70% electric, 30% manufacturing plastics long-term earnings mix. We are expecting another strong financial performance here in our plastics segment. This performance is expected to result in our manufacturing and plastics segment contributing 53% of 2022 earnings, and a 47% contribution from the electric segment. We are planning on capital expenditures of 182 million in 2022, compared to 172 million in 2021 in our electric segment, which accounts for 82% of our planned 2022 expenditures. Our strategic objectives to grow our business and achieve operational excellence continue to position us to achieve a 5% to 7% compounded annual growth rate in earnings per share using 2020’s $2.34 a share. We expect our electric segment net income to increase 7% over 2021 based on the following items: year-over-year increase in rate base along with increased load growth from new and existing commercial and industrial customers. Our ending rate base in 2021 grew by 13.7% to $1.6 billion. Lower expected plant outage costs in 2022 as the Big Stone Plant outage in 2021 had higher costs than what is expected related to the planned Coyote Plant outage in 2022. The discount rate for our pension plan for 2022 is 3.03%, compared with 2.78% in 2021. For each 25 basis point increase in the discount rate, pension expense decreases approximately $1.3 million. The assumed long-term rate of return for 2022 is 6.3%, compared with 6.51% in 2021. Each 25 basis point decrease in this rate equates to approximately $900,000 in increased pension expense. There are lower expected contributions to the Otter Tail Power Company Foundation in 2022. Lower interest expense as the $140 million notes issued in November 2021 have a lower interest rate compared to the $140 million that was refinanced. These items are partially offset by: higher depreciation and property tax expense driven by increasing rate base. Labor costs are expected to be higher in 2022 as open positions were filled in the last half of 2021 and are expected to be employed for all of 2022. And continued increases in insurance costs related to increased insurable values and an increase in insurance rates due to competitive market conditions. We expect net income from our Manufacturing segment to increase 7.6% compared with 2021. This is based on an increase in sales at BTD driven by end market demand as our customers continue to build inventory to fill shortages created by supply chain challenges. And while we have been generally able to meet our customers’ on-time delivery requirements, our customers have other supply chain challenges that impact their ability to consistently take our product in line with their production timelines. Steel lead times have improved back to pre-pandemic timeframes. Steel costs remain elevated as mill prices and supply chain costs are expected to remain historical during 2022. These costs could put additional pressure on our profitability if we are unable to pass cost increases on to our customers on a timely basis. Scrap metal revenues are expected to be lower in 2022, given currently declining market prices for scrap metal. We continue to work on improving labor efficiencies in order to enhance our gross margins. An increase in earnings from T.O. Plastics is driven in large part by a full-year of increases in product prices that occurred throughout 2021 and improved manufacturing productivity. Our backlog for the manufacturing segment is approximately $391 million for 2022, compared with $204 million one year ago. We expect 2022 net income from our Plastics segments to decline from the record earnings year in 2021. Even with the expected decline in earnings, 2022 is expected to generate significant earnings and cash flows in this segment. The first quarter of 2022 is expected to be strong as market conditions from the fourth quarter of 2021 continue into 2022. We then expect to see a return to more normal business conditions as raw material supply improves, causing sales prices, resin prices, and related spreads to decline. Specific reasons for the expected year-over-year decline in net income: lower volume of pounds of pipe sold in 2022, driven by extremely low levels of finished goods inventories to start the year. PVC resin production is forecasted to be strong beginning in the first quarter, which is expected to put downward pressure on prices. PVC demand has decreased globally causing PVC supply to increase, which is also expected to result in declining PVC resin prices. And increases in freight costs due to the inflationary nature of the logistics environment across the country. We expect our Corporate costs will be in line with 2021. We are not planning for a contribution to our Foundation in 2022. This savings is largely offset by lower budgeted gains on our investments in 2022 than what was recognized in 2021 and anticipated costs related to further expected safety measures related to COVID-19 to be incurred in 2022. We expect to deliver a 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 using 2020 as the base year along with our current dividend yield. Looking forward, we would expect to grow the dividend consistent with our long-term earnings per share growth rate of 5% to 7%. Our business model continues to serve us well, and we remain positioned to fund our rate base growth opportunities of 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.

Our first question comes from Brian Russo with Sidoti. Your line is open.

Yes, hi, good morning.

Hey Brian.

Hey, just to start with utility fee, the 100-megawatt cryptocurrency customer, I believe it's under a specific tariff or rate, any detail you can provide for us on that? How does that compare versus some of your other, maybe your average C&I type rate?

Hey Brian. This is Chuck. We filed a rate approximately five years ago in North Dakota. We have a large general service rate and we came up with a new rate for customers that are over 25 megawatts called the super large general service rate. I don’t know; we spend a lot of time on the naming, but that rate is, each individual customer has to have the rate approved by the commission, which we have done in this case, and it tends to be because this customer is interruptible or curtailment and is really only an energy-using customer, its rates are fairly attractive from that standpoint.

Okay. So, the rate is fairly attractive to the customer?

Yes. It's not a large margin rate for us because there's very little demand component on it.

Understood, but I guess you know, you have quite a bit of CapEx. So, you were just able to spread costs over a larger megawatt customer base?

It does reduce fixed costs across all customers because its load is covering the fixed costs on that energy component.

Okay. And then just on the plastics, it looks like your operating margins in the fourth quarter of 2021 were approximately 44%, that compares to 35% for the full year of 2021. I'm wondering just based on your comments earlier, are other margins that you captured in the fourth quarter; can we extrapolate that into the first quarter of 2022 to kind of figure out what a, kind of quarterly dispersion? And then do you think by the fourth quarter of 2022 you'll be back to historical margins?

Hey, Brian, this is Kevin. Thanks for the question. That's – your comment is what we are seeing happen is that the results in the fourth quarter were stronger than what we expected when we were with you at the third-quarter earnings call. And so what happened is as demand continued to outpace supply, we continue to see upward movement in sales prices that then caused higher operating margins in the fourth quarter than what occurred throughout the year as you noted. And what we're seeing as those conditions have continued into the first quarter. And so to say, can we extrapolate that? I think that's a fair assumption based on what we're currently seeing as these conditions, like you said, transitioned into the first quarter of 2022. And then as we go throughout the year, of course, things can change, but as we sit here today based on the reasons I talked about in my comments and are included in the press release, we are expecting through the rest in the year than are returned back to these more normal-like conditions and what are those more normal-like conditions. If we look on Slide 25 of the earnings call presentation, we have that graphic that shows what's happened to the relationship of spreads and pricing. We expect here over time that we're going to return back to those, call it those conditions in the 2018 to early 2021 timeframe.

Okay. So, have you seen PVC prices already moderating for the back half of the year or are companies like yourself still raising prices?

In the first quarter, we're still seeing our first quarter in the first month and half of the first quarter. We have seen a rise in sales prices. We've seen competitors take sales prices up and we are seeing expected – there's a little bit of conflicting information, we've seen some announcements that say resin prices are going to come down. And we've also seen some announcements where resin prices could stay where they're at or potentially increase. So, we continue to monitor that. I think the general view based on the – as PVC resin supply has improved that prices will certainly remain flat to start to decline through the rest of the year, which would then we expect to see sales prices decline and ultimately those return to more normal-like margins. One of the things that happened in the late fourth quarter was there was a supply constraint with a stabilizer that’s used in the making of PVC pipe that caused a number of competitors or pipe converters, I should say, to not take as much PVC resin because they were constrained with stabilizer issues. So that helped increase PVC resin supply towards the end of the year. A lot of the stabilizer issues look to have corrected themselves here as there was alternate products that converters were able to go back to help with, kind of ramping back up their production, but we start the year with low inventory levels and expect PVC resin production to improve as we go through the year and that will be a key driver on where spreads will shake out as we go through the rest of the year.

Okay. Thank you. That's helpful. And then just real quickly on BTD, it looked like you saw some margin compression to the low single digits versus a full year of mid to high single digits on an operating margin perspective. Is the driver of that the reasons you cited supply chain issues from the OEMs and where do we see normalized operating margins as we move through 2022 as these OEMs look to replenish their dealer inventories?

Yes. As we move forward into 2022, Brian, I mean, the answer to the margin compression is certainly the supply chain challenges that we're talking about. The fact that our productivity wasn't where we wanted it to be because of the ramp up in new employees that we brought on and needed to continue to get them trained. We've continued to see some of them – through the fourth quarter those productivity challenges we continue to work improve those into Q4. I'm sorry into 2022. And as we look forward, we certainly are expecting to see some strengthening in margins that will be somewhat offset by the fact that we'll see lower scrap metal revenues in 2022; 2021 had high scrap metal prices; we’re assuming a pullback in scrap metal revenues, which is based on current scrap metal prices as they're currently declining. And we’re looking to offset some of that with improved productivity, but I think the other challenge that's there is, while we are certainly able to meet our delivery requirements to our customers, we're being pushed off by them because of their other supply chain challenges. And so, we're building to their forecast in terms of what they're telling us, but then they are taking the product as quickly as planned, and so that has potentially of pressure on us in 2022 as well.

Okay, got it. And then just real quickly, the backlog that you cited in manufacturing, I understand sometimes it's not an apples-to-apples comparison because you’ve got a lot of steel prices that might be higher versus a year ago that is basically margin neutral for you, right, because you pass it through. So, I was just curious, what's embedded in that like 300 million plus of backlog, you know that's really not incremental order related margins, but it's just inflationary pressure on the steel side?

Yes. I mean, I think our backlog in BTD is mostly around that. It has steel prices around that $1,800 a ton. Okay.

I'm not showing any additional questions at this time. I’d like to turn the call back over to Chuck for any closing remarks.

Thank you for your questions and your interest in Otter Tail Corporation. Our outstanding 2021 results reflect the resiliency and hard work from the employees of Otter Tail Corporation and unique market conditions. With our utility growth strategy and predictable earnings stream complemented by our strategic manufacturing platform companies, we are well-positioned to deliver 2022 earnings per share in the range of $3.78 to $4.08. 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 the program. You may now disconnect. Everyone, have a great day.