Good morning, and welcome to the Otter Tail Corporation's Second Quarter 2024 Earnings Conference Call. Today's call is being recorded. 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 second quarter 2024 earnings conference call. My name is Beth Eiken, and I'm Otter Tail Corporation's Manager of Investor Relations. Last night, we announced our second quarter financial results. Our complete earnings release and slides accompanying this call are available on our website at ottertail.com. A recording of this 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 Todd Wahlund, Otter Tail Corporation's Vice President and CFO. Before we begin, I want to remind you that we will be making forward-looking statements during the course of 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 here. So please be advised against 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. I will now turn the call over to Otter Tail Corporation's President and CEO, Mr. Chuck MacFarlane.

Thank you, Beth, and good morning, and welcome to our second quarter 2024 earnings call. Please refer to Slide 4 as I begin my comments on our quarterly performance. We are pleased with our second quarter financial results. Diluted earnings per share increased 6% to $2.07 per share, compared to the same time last year, driven by strong financial performance within our Plastics and Manufacturing segments. Plastics segment earnings increased 9% from the second quarter of 2023 due to higher sales volumes driven by customer sales volume growth and distributor and end market demand. This was partially offset by lower pipe prices. Manufacturing segment earnings increased 15%, primarily driven by higher margins at BTD. Electric segment earnings increased 6% from the same time last year or decreased 6% from the same time last year, primarily due to the impact of unfavorable weather. We are increasing our 2024 earnings guidance to the range of $6.77 to $7.07, from our previous range of $6.23 to $6.53, primarily due to the strength of our Plastics segment. In a moment, Todd will provide a more detailed discussion of our second quarter financial results and our updated earnings expectations for 2024. Slide 5 shows our expected five-year compounded annual growth rate and earnings per share with and without the impact of our Plastics segment, through the end of 2024 based on the midpoint of our updated earnings guidance. Even without the impact of extraordinary results generated by our Plastics segment over the last few years, we expect to produce a compounded annual growth rate in earnings per share from 2019 through 2024 of 8.3%. Turning to our electric segment. Slide 7 provides an overview of our electric operations. Our regulated electric utility announced a sizable five-year capital spending plan earlier this year, with significant amounts being allocated to renewable resources, transmission investment and technology. In addition to Otter Tail Power's rate base growth, we continue to explore opportunities for new large loans. This potential load growth is primarily driven by data centers, crypto mining and clean fuel related opportunities. We have not made any adjustments to our load forecast for these opportunities currently, but continue to engage with companies showing an interest in entering our service territory. When engaging with these various companies, we typically take a prudent approach, ensuring adequate financial security and protection from the loss of the large load, or a slowdown in demand, or energy cost changes that could impact our other customers. We are certainly interested in bringing large loads online in our service territory and feel well positioned to do so as we have several sites available that could support these large loads with minimal delivery infrastructure investment needed, but we'll continue to balance this with the needs of our other customers. Slide 8 summarizes Otter Tail Power's five-year capital spending plan. The plan includes $1.3 billion of capital investment over the next five-year period and is expected to produce rate base growth of 7.7%. Otter Tail Power has a strong track record of translating rate base growth into earnings growth. In the previous five-year period, we converted average rate base growth into earnings growth at a 1:1 ratio, a sign of a high-performing regulated utility. Over the long-term, we expect to continue to convert our rate base growth into earnings growth near a 1:1 ratio, given our constructive regulatory environments and available riders. I will now provide a few details on several projects within the existing five-year planning period and beyond. Slide 9 summarizes Otter Tail Power's Advanced Metering Infrastructure project with a total investment of approximately $60 million. Advanced Metering Infrastructure, or AMI, will allow us to better understand peak energy use so that we can offer energy and cost-saving options to our customers and improve our customers' experience. We are targeting to upgrade more than 174,000 meters across our service territory and are about halfway through at this point. We anticipate completing the project in 2025 and expect this project will reduce operating expense through lower meter reading costs and technology-enabled savings. Turning to Slide 10. We have commenced repowering our four legacy wind farms with an investment of approximately $230 million. Once complete, this project is expected to be equivalent to adding 40 megawatts of new wind generation with a 50% capacity factor. In March, we received approval for rider recovery of the project cost from the North Dakota Commission and recently received approval from the Minnesota Commission as well. We requested rider recovery in South Dakota and anticipate a decision in Q3. This wind repowering project qualifies for production tax credits under the Inflation Reduction Act. These tax credits, along with the incremental energy produced at these repowered wind farms are anticipated to lower customer bills, demonstrating our continued focus and commitment to customer affordability. Slide 11 summarizes Otter Tail Power's investments under Tranche 1 of MISO's long-range transmission plan. Otter Tail Power will co-own two Tranche 1 projects, the Jamestown-Ellendale, and the Big Stone South-Alexandria, Big Oaks 345 kV transmission projects. Both projects have FERC approval for construction work in progress, ensuring the timely recovery of our capital investment. In total, we estimate our capital investment in these projects to be approximately $420 million. These investments are expected to have very little impact on our retail customer rates as they are allocated across the entire MISO North footprint. In March of 2024, MISO released their initial draft proposal for Tranche 2 portfolio projects and recognized additional transmission investment would be required to meet the needs Tranche 2 was intended to resolve. In June, MISO revised the proposal for Tranche 2 and released their near-final Tranche 2 portfolio projects, which included additional transmission investment for Otter Tail Power. We expect the MISO Board of Directors to approve the portfolio later this year. In addition to transmission investment opportunities available through MISO's long-range plan, MISO in the Southwest Power Pool or SPP, partnered to develop the Joint Targeted Interconnection Queue or JTIQ portfolio projects focused on improving the interconnection queue backlog along the MISO SPP. MISO and SPP are currently planning to file their cost allocation tariff with FERC in Q3. While the recovery method of these projects is still in process, we are optimistic about the potential investment opportunity, which we estimate to range from approximately $350 million to $400 million. Both Tranche 2 and JTIQ represent incremental transmission investment opportunities for us, but most of the spend is likely to fall outside of our current five-year planning period. Turning to Slide 12. While we continue to focus on identifying opportunities for capital investment to support safe, reliable and increasingly clean electric service to our customers, affordability remains one of our top priorities. Otter Tail Power's electric rates have consistently remained well below the national and regional averages. Slide 13 summarizes Otter Tail Power's key regulatory matters in 2024. As we complete our internal cost of service studies this year, we will determine whether a Minnesota general rate case will be filed in late 2024. In addition to Otter Tail Power's specific key regulatory matters, we continue to monitor developments at FERC relating to ROE and self-fund dockets. I will now give a more detailed update on our Integrated Resource Plan and North Dakota rate case. Turning to Slide 14. In May, Otter Tail Power received approval from the Minnesota Public Utilities Commission on its integrated resource plan. The decision authorizes adding 200 megawatts to 300 megawatts of solar generation by 2027, 150 megawatts to 200 megawatts of wind generation and 20 megawatts to 75 megawatts of battery storage by 2029, designating the Minnesota portion of Coyote Station as an emergency-only resource starting as early as 2026, and commencing activities to no longer serve Minnesota customers with capacity or energy from Coyote Station as soon as feasible, but no later than December of 2031 and adding on-site fuel storage at Astoria Station by 2027. We view the outcome of our integrated resource plan docket in Minnesota as favorable overall and one that helps to preserve reliability as we continue to transition to cleaner energy. Despite the approval of adding on-site fuel storage at a storage station from the Minnesota Commission, the North Dakota Public Service Commission denied our advanced determination of prudence relating to this project. As such, there's uncertainty about the future prospects of this project. Turning to Slide 15. We filed a general rate case with the North Dakota Public Service Commission in November of 2023. In July, Otter Tail Power amended its rate case filing for certain items identified through the regulatory review process to a modified request to increase net revenues by approximately $23 million or 10.9%, based on a requested ROE of 10.6% and an equity layer of 53.5%. We anticipate the final outcome of the case will occur in late 2024. Separately, in July, the EPA published its proposed rule for North Dakota's Regional Haze State Implementation Plan, which the EPA proposed to disapprove of the state's conclusion that no emissions control additions are necessary at Coyote Station to achieve the objectives of the Regional Haze Rule. We cannot predict the certainty of the final resolution and timing of the Regional Haze compliance in North Dakota and specifically the impact of Coyote Station and its operations, if any. However, significant emission control investments could be required and recovery of such costs from customers would require regulatory approval. Alternatively, investments in emission control equipment may prove to be uneconomic and could result in the early retirement or sale of our interest in Coyote Station, which would also be subject to regulatory approval. Turning to our Manufacturing segment on Slide 18. Despite strong quarterly financial results, BTD and T.O. Plastics continue to face end market demand-related headwinds. We anticipate conditions to soften further in the second half of 2024. In response, we have and will continue to take actions to manage costs and mitigate the impact of lower sales volumes. Turning to our end market outlook on Slide 20. Many of the end markets that BTD serves are softening. We continue to see customers in-sourcing work to put their excess capacity to use. While the outlook for T.O. Plastics' primary end market horticulture remains relatively stable, distributors continue to reduce and more tightly manage their inventory levels as lead times have shortened and interest rates have increased. We remain optimistic about demand improving in the second half of 2024, but expect sales volumes to be down significantly from 2023 levels. Slide 21 provides an overview of our Plastics segment. Sales volumes increased in the second quarter of 2024 compared to the same time last year, due to sales volume growth with existing customers, and improved distributor and end market demand. It’s important to note that while sales volumes were higher quarter-over-quarter, sales volumes during Q2 of 2023 were below normal levels as distributors were largely focused on destocking efforts. Slide 22 highlights historical sales prices of PVC pipe and the cost of resin. Sales prices continue to decline but at a slower rate than we anticipated. Improved demand has provided support for product pricing and moderated the rate of pricing declines. We continue to see variability in the rate of price decline across product categories and geographies. Our vinyl tech site improvement and expansion project continues to progress well. We look forward to bringing large diameter pipe production capabilities to vinyl tech later this year, so that we can better serve our customers located in the South and Southwest.

Thank you, Chuck, and good morning, everyone. We delivered record second quarter earnings generating diluted earnings per share of $2.07, a 6% increase over the same time last year. Our Plastics segment continues to perform very well, capitalizing on customer sales volume growth and distributor and end market demand, while sales prices continue to remain elevated relative to historical levels. Due to the continued strength within our Plastics segment, we have increased the midpoint of our 2024 earnings guidance by 8%. Please follow along on Slide 26, as I begin with an overview of our second quarter financial results by segment. Electric segment earnings decreased 6% from the second quarter of 2023, driven by the impact of unfavorable weather and lower transmission revenue, partially offset by the interim rate increase in North Dakota stemming from our general rate case filing, lower operating and maintenance expenses, and higher commercial and industrial sales. Manufacturing segment earnings increased 15% compared to the second quarter of 2023, primarily due to higher margins at BTD Manufacturing, driven by the positive impact from the timing of pass-through steel cost fluctuations, and the selling of lower-cost inventory, as well as a favorable product mix compared to the same time last year. This was partially offset by lower sales volumes at both of our manufacturing businesses, lower profit margins at T.O. Plastics, and lower scrap sales at BTD. Like Chuck mentioned, despite the strong quarterly financial performance, our manufacturing segment continues to face end market demand-related headwinds, and we anticipate conditions to soften further as the year progresses. Sales volumes decreased at BTD in the second quarter of 2024 compared to the same time last year, primarily in the lawn and garden and agriculture end markets. The outlook for the end markets BTD serves is softening, and select customers have reduced their remaining 2024 orders due to weakening end market demand, negatively impacting our forecast of sales volumes for the remainder of the year. T.O. Plastics also experienced lower sales volumes in Q2 2024, primarily attributable to decreased sales of horticulture products as distributors and growers continue to work through existing inventory. Plastics segment earnings increased 9% from the second quarter of 2023 due to higher sales volumes, partially offset by a decrease in sales prices. Sales volumes increased 26% compared to the same period last year due to customer sales volume growth and distributor and improved end market demand. However, it's important to remember, sales volumes in the second quarter of 2023 were below average as distributors, our primary customers, were tightly managing their inventory levels amid uncertain market conditions. Gross profit margins declined in the second quarter of 2024 compared to the same time last year, primarily due to the impact of lower PVC sales pipe prices. The 26% increase in sales volumes drove a $0.37 increase in quarter-over-quarter earnings per share and this was partially offset by a $0.24 earnings per share decrease from lower profit margins. This was driven primarily by a 13% quarter-over-quarter sales price decrease. We continue to have a very strong balance sheet with a higher level of earnings and cash generated from our diversified business model. Turning to Slide 28. Our cash and cash equivalents position was over $230 million, and our consolidated equity layer as of June 30, 2024, was 62.1%. Based on the strong financial performance, our return on equity over the last 12 months was 21.5% on this high level of equity. We continue to be in an enviable position with a strong balance sheet and ample liquidity to fund growth opportunities without having to issue additional equity for at least the next five years, based on our current projected capital spend and financial performance. Turning to Slide 29. Due to the continued strength within our Plastics segment, we are increasing our 2024 diluted earnings per share guidance to a range of $6.77 to $7.07, from our previous guidance range of $6.23 to $6.53. This increases the midpoint of our guidance to $6.92, which is an 8% increase over the previous guidance midpoint. We are maintaining our electric segment guidance for 2024 despite the $0.17 year-to-date impact of unfavorable weather. Our Electric segment is positioned well to overcome these headwinds through prudent cost management, the impact of our sales decoupling mechanism in Minnesota, rate case revenue increases in North Dakota, and timely returns on our capital spending. We are decreasing the 2024 earnings guidance for our Manufacturing segment due to anticipated lower sales volumes as end market demand softens further. We expect the recreational vehicle, agriculture, construction, and horticulture end markets to be impacted the most. Additionally, we anticipate operating margins to be lower in the second half of 2024, as lower production and sales volumes negatively impact the leverage of our fixed manufacturing costs. We have and continue to take action to tightly manage costs and mitigate the impact of lower forecasted sales volumes on 2024 earnings while balancing that with being positioned to respond quickly when the markets improve. We are increasing our Plastics segment earnings guidance due to the better-than-expected financial results in the second quarter of 2024, as well as our updated PVC pipe pricing expectations, which are for a slower decline than what we previously expected over the remainder of the year. We are also reducing our corporate cost estimate primarily due to an increase in forecasted investment income, which is driven by a higher projected yield and a higher investment balance. With the changes made to our earnings guidance for the year, we anticipate our earnings mix for 2024 to be 31% electric and 69% non-electric, net of corporate costs. While this anticipated mix deviates from our long-term expected earnings mix of approximately 65% electric and 35% non-electric, the incremental earnings and cash flow increase shareholder value as we continue to execute on our solid growth strategies without the dilution of equity issuances. We expect to reach our targeted long-term earnings mix of 65% electric and 35% non-electric, as Plastics segment earnings normalized to a range of $45 million to $50 million on an annual basis, while our Electric segment earnings continue to grow at a rate in line with our projected rate base growth compound annual growth rate. Our five-year capital spending plan, which is a key driver of earnings growth for our Electric segment is included in more detail on Slide 30. No changes have been made to this plan since it was first announced earlier this year during our year-end earnings call. However, with the approval of our integrated resource plan in Minnesota in May, we anticipate there being incremental opportunities to our five-year spending plan. We are currently gathering and evaluating information on potential projects to determine the best ones for our customers, whether ownership or contracting the energy, and anticipate providing an updated capital spending plan during our year-end earnings call. In order to finance our rate base growth at Otter Tail Power, we project issuing debt on an annual basis for the next four years. Slide 31 provides a summary of our financing plan for 2025 through 2028. We continue to expect retiring and not replacing our only outstanding parent-level debt when the $80 million note matures in 2026. Additionally, with the significant amount of cash and earnings generated over the past few years, we have no external equity needs for at least the next five-year period. This will enhance the value to our shareholders and differentiate us from many of our utility sector peers that will need to access the equity markets to fund their rate base growth. We are positioned well to deliver upon our increased 2024 earnings guidance as well as meet our long-term investment targets as summarized on Slide 34. Our diversified business model continues to produce above-average returns and long-term value for our shareholders. We have many organic growth opportunities across our segments and are positioned to grow with our customers. We are in an excellent position to support this growth with our strong balance sheet, ample access to liquidity, and investment-grade credit ratings. We are now ready to take your questions.

Our diversified business model continues to produce above-average returns and long-term value for our shareholders. We have many organic growth opportunities across our segments and are positioned to grow with our customers. We are in an excellent position to support this growth with our strong balance sheet, ample access to liquidity, and investment-grade credit ratings. We are now ready to take your questions. As there are no questions in the queue, I'll turn the call back to Chuck for closing remarks.

Thank you for joining our call and your interest in Otter Tail Corporation. If you have any questions, please reach out to our Investor Relations team. We look forward to speaking with you next quarter.

This concludes today's conference call. Thank you for your participation. You may now disconnect.