Good morning, and welcome to Otter Tail Corporation's third quarter 2025 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 this call over to the company for their opening comments.

Good morning, and welcome to our third quarter 2025 earnings conference call. My name is Beth Eichen, and I'm Otter Tail Corporation's Manager of Invest Relations. Last night, we announced our third 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 are Chuck McFarland, Otter Tail Corporation's President and CEO, and Todd Walland, 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 two, 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 McFarland.

Thank you, Beth. Good morning and welcome to our third quarter earnings call. Please refer to slide four as I begin my remarks with a summary of quarterly highlights. We are pleased with our Q3 financial results as they outpaced our expectations. Our team members continue to execute well on our growth plan despite dynamic market conditions. Otter Tail Power continues to deliver on its regulatory priorities. Our South Dakota rate case, previously filed in June of this year, continues to progress. And in late October, we filed a rate case with the Minnesota Public Utilities Commission. The second phase of Vinyl Tax expansion project is progressing well. We continue to target early next year for adding another 26 million pounds of capacity. Once complete, we will have increased our plastic segment total production capacity by 15% through our multi-year investment plan. We are also introducing our updated five-year capital spending plan today. Otter Tail Power's new capital investment plan totals $1.9 billion and is expected to produce a rate-based compounded annual growth rate of 10%. With our updated capital investment plan, we are increasing our targeted long-term earnings per share growth rate to 9% to 7% from 6% to 8% up a 2028 base year. This results in a targeted total shareholder return of 10% to 12%. Slide 5 provides a summary of our quarter-to-date and year-to-date earnings. We generated $1.86 of diluted earnings per share in the third quarter, a decrease of 8% from the same time last year. This expected decline in earnings was driven by the continued decline in plastic segment sales prices and earnings. Despite the year-over-year decrease, our results outpaced our expectations. We are increasing the midpoint of our 2025 earnings guidance to $6.47 from $6.26 per share. The increase in guidance is primarily due to better-than-expected plastic segment financial results in Q3 and our revised expectations for the remainder of the year. In a moment, Todd will provide a more detailed discussion of our quarterly financial results and our updated 2025 outlook. Transitioning now to an operational update for Otter Tail Power, as noted on slide 7, we filed a request with the Minnesota Public Utilities Commission for a net revenue increase of $44.8 million. This is based on a requested ROE of 10.65% and an equity layer of 53.5%. The increase is driven by investments in infrastructure and grid resilience, the impact of inflation since our last rate case filed five years ago, and accelerated recovery of the Minnesota portion of Coyote Station. We requested accelerated recovery of Coyote Station as the Minnesota Public Utilities Commission directed us to no longer serve our Minnesota customers with power from Coyote beyond 2031 as part of our integrated resource plan. Even with the proposed increase, Autotail Power is expected to continue to have some of the lowest electric rates in the region and country. Affordability remains a priority for us, and we are committed to selecting cost-effective investments to serve our customers with reliable energy while prudently managing our operating costs. Our updated five-year capital spending plan is expected to have limited impact on our customer rates due to lower fuel costs associated with renewable generation, as well as the favorable impact of renewable tax credits. Additionally, a significant portion of our capital spending plan relates to regional transmission projects. The cost of these projects will be allocated to either new generation interconnection customers or across the entire MISO footprint of which our customers comprise only a small portion. We continue to partner with our customers to identify ways to save, whether through energy efficiency programs or innovative pricing solutions. Turning to slide eight, our South Dakota rate case is progressing. The procedural schedule has been established, and we expect a decision in the first half of 2026, unless a settlement is reached in advance of that date. Interim rates, which amount to $5.7 million on an annual basis, will commence on December 1st of 2025. Turning to slide 9, Otter Tail Power updated its five-year rate-based CAGR to 10%. We continue to expect Otter Tail Power to convert its rate-based growth into earnings-per-share growth near a one-to-one ratio over the long term. This is made possible by identifying high-quality, customer-focused projects, effective project execution, efficient financing, and reducing regulatory lag. We currently expect approximately 90% of our updated five-year capital spending plan to be recovered through existing rates or riders, allowing for timely recovery of our capital investments. Slide 10 and 11 provide an overview of ongoing future capital projects. Our wind repowering project is nearly complete. We finished upgrading the wind towers at our Laverne Wind Energy Center in Q3 and expect to complete the remaining two repower sites later this year. Once finished, we expect the increased energy production from these facilities to total approximately 40 megawatts of new generation, which equates to over a 20% output increase. Our two solar development projects also continue to progress. During the quarter, we transitioned Solway Solar from a project development to start of construction and look forward to adding additional cost-effective solar generation to our portfolio. Development work continues on our MISO Tranche 1 and 2.1 portfolio projects, as well as our JTIQ project. We are working through landowner and local government resistance associated with siting and certain permits for one of the tranche 1 projects. Additionally, in July, a complaint was filed at FERC against MISO's tranche 2.1 projects, citing a concern with benefit calculations. North Dakota, one of the jurisdictions in which we operate, joined the complaint. We are closely monitoring developments around the FERC complaint docket, and at this time, continue to expect these projects to move forward due to their reliability-related benefits, but some delays are possible. Turning to slide 12, Otter Tail Power remains well-positioned to attract and support large load. Our team continues to engage with companies looking to add new large loads to our system. In the coming weeks, we look forward to bringing online the 155-megawatt load secured earlier this year. The 155-megawatt load is comprised of 3 megawatts of firm load and approximately 152 megawatts of non-firm load. We expect this load to positively contribute to earnings starting next year. We have and will continue to be thoughtful in our negotiations to ensure we are appropriately mitigating potential adverse implications of adding new large loads to our existing customer base. Adding new loads, if appropriately managed, would not only benefit us but also our current customers as it enables us to spread out existing fixed costs. In what is a challenging economic environment for many, affordability has become increasingly important. As shown on slide 13, Otter Tail Power's electric rates have remained well below the national and regional average for many years, and we expect Otter Tail Power rates to remain among the lowest in the nation. However, we know that our customers still feel the impact of rate increases. We are deeply focused on identifying cost-effective investment projects and are committed to prudently managing costs. We aim to partner with our customers to continue to identify ways for them to save. Transitioning to our manufacturing platform, slide 15, provides an overview of industry conditions impacting our manufacturing segment. BTD continues to face end-market demand-related headwinds. Sales volumes remain below historic levels after sharply declining in the third quarter of last year. The lawn and garden and agricultural end markets continue to be most heavily impacted. Recreational vehicle and construction have shown signs of improvement, and the industrial end market remains strong as our products are ultimately used to support the growing data center energy demand. While the down cycle impacting BTD's volume continues, we saw some month-over-month stabilization in volumes during the third quarter. This could indicate reaching the bottom of the business cycle. At this time, we expect our current low-demand environment to continue through most of 2026, and we'll give a fulsome update regarding 2026 expectations during our Q4 call. We have seen some improvement at Teo Plastics Horticulture End Market, but low-cost import competition remains a challenge for our team. We continue to monitor the tariff environment to determine what impact, if any, it will have. However, in the meantime, we remain focused on aligning costs with current demand across our manufacturing segment. I want to take a moment to recognize and thank our manufacturing team members for their commitment and efforts during challenging market conditions. Slide 16 provides an overview of our plastic segment's pricing and volume trends. Our sales prices of PVC pipe continue to steadily decline, decreasing 17% from the same time last year. Sales volumes increased 4%, due in part to capacity added to Vinyl Tech late last year. We also continue to benefit from lower material input costs, including resin. The cost of PVC resin has decreased from the same time last year due to global supply and demand dynamics, resulting in elevated domestic supply. Turning to slide 17, our manufacturing platform remains well positioned for future growth opportunities. Our BTD Georgia facility is ready to support our customers in the southeast once market conditions improve. Phase two of our vinyl tech expansion is progressing well. Once complete, we will have increased our total production capacity for the plastic segment by approximately 50 million pounds over the past two years. I'll now turn it over to Todd to provide his financial update.

Thank you Chuck and good morning everyone. Turning to slide 19, our quarterly financial results exceeded expectations. We generated a dollar and 86 cents of diluted earnings per share compared to two dollars and three cents during the same time last year. Please Please follow along on slides 20 and 21 as I provide an overview of quarterly financial segment results by segment. Electric segment earnings decreased 3 cents per share in the third quarter. The decrease in earnings was primarily driven by unfavorable weather and the impact of seasonal rate differences between interim and final rates in North Dakota. This timing effect does not impact our revenue on an annual basis. These drivers were partially offset by higher quarterly sales volumes, excluding the impact of weather, as well as lower operating and maintenance expenses. Manufacturing segment earnings increased $0.04 per share. The increase in earnings was primarily driven by a lower cost structure following our efforts over the last year to align the costs in our business with the current demand environment. We also benefited from enhanced production efficiencies with a smaller but more skilled workforce. The timing of pass-through steel cost fluctuations and the selling of lower cost inventory also contributed to improved profit margins. These drivers were partially offset by the impact of lower sales volumes and higher SG&A expense. Turning to slide 21, plastic segment earnings decreased 26 cents per share compared to the same time last year. Plastic segment earnings exceeded our expectation for the third quarter even as we continue to progress towards a more normalized earnings level. The decrease in earnings was driven by lower average sales prices partially offset by lower input material costs and higher sales volumes. The average sales price of PVC pipe declined 17% compared to the third quarter of 2024. This continues the downward trend experienced in the sales prices of our PVC pipe since it reached its peak in mid-2022. Partially offsetting the decline in pricing, our lower material input costs, which decreased 16% from the same time last year. Our plastic segment earnings also benefited from a 4% increase in sales volumes, largely driven by the incremental volume from the capacity added at Vinyl Tech. Finally, our corporate costs improved 8 cents per share in the third quarter from the same time last year. This improvement was driven by an increase in income tax benefits, lower workers' compensation expenses, and lower employee health insurance claims. During the slide 22, our balance sheet remains very strong, and we are positioned well to fund the utility's updated customer-focused growth plan without the need for external equity through at least 2030. We have $325 million of cash on hand and continue to produce a utility sector leading return on equity of 16% on an equity layer of nearly 64%. On slide 23, we are increasing and narrowing our 2025 diluted earnings per share guidance to a range of $6.32 cents to $6.62. We are increasing our 2025 earnings guidance primarily due to a better than expected plastic segment financial results in the third quarter, as well as our revised margin expectations for the remainder of the year. We are increasing our margin expectations as we expect raw material costs to be lower than previously projected for the remainder of the year. We are also increasing the midpoint of our electric segment earnings guidance and narrowed the range. Our updated guidance is primarily based on better-than-expected financial results in the third quarter of 2025 which was largely driven by higher than anticipated sales volumes. We are maintaining the midpoint of our 2025 earnings guidance for a manufacturing segment, but are narrowing the range. We are also narrowing the guidance range for our corporate cost center. With the increase to our 2025 earnings guidance, we are forecasting our consolidated five-year compounded annual growth rate to be approximately 23%. As shown on slide 24, we have a proven track record of delivering outstanding earnings per share growth with and without the impact of plastic segment earnings. Our updated capital investment plan for 2026 through 2030 is included on slide 25. Our electric segment's revised five-year capital spending plan increased by approximately 35 percent and now totals $1.9 billion. The increase is primarily driven by moving into the construction phase of our previously discussed regional transmission projects. It is important to highlight that our updated capital plan does not include any investment to serve new large loads. Additionally, we project approximately $350 million of potential incremental utility capital investments to our base plan. The incremental opportunity includes the wind generation and battery storage projects previously approved in our Minnesota Integrated Resource Plan, as well as delivery-related investments for any new large loads added to our system. We estimate that for every $100 million of incremental capital investment, our rate-based compounded annual growth rate would increase by approximately 65 basis points. Slide 26 summarizes our updated five-year financing plan. plan. Even with our updated utility capital spending plan, we expect to finance our growth without any equity issuances. We plan to issue debt at Otter Tail Power on an annual basis to help fund the investment plan and maintain the authorized capital structure. We have $80 million in parent-level debt that matures in late 2026 and expect to retire this debt. debt. We will have no outstanding parent level debt upon retirement. As included on slide 27, our long-term expectations of normalized plastic segment earnings remains unchanged. We believe plastic segment earnings will continue to decline through the end of 2027 such that 2028 is our first full year of normalized earnings. This assumption is based on the average sales price of our PVC pipe falling at a rate similar to what we have experienced since late 2022. Increased sales volumes due to our expansion projects at Vinyl Tech and cost changes generally in line with the rate of inflation. Due to seasonality and other factors, the rate of margin compression could vary from period to period. Additionally, it continues to be difficult to predict with certainty long-term plastic segment earnings and the timing or level of earnings could vary materially from this projection. However, the plastic segment remains an important component to our overall strategy due to the enhanced returns and earnings it generates. Even as earnings normalize over the coming years, we expect the segment to produce an accretive return and incremental cash to help fund our electric utilities rate-based growth plan. Slide 28 summarizes our uplifted investment targets. We increased our long-term earnings per share growth rate to 7-9% and also increased our targeted total shareholder return to 10-12%. We anticipate delivering on these targets once plastic segment earnings normalize in 2028. Our long-term earnings mix target has also been updated. We now expect 70% of our earnings to be driven by our electric platform and 30% from our manufacturing platform. We anticipate reaching this earnings mix in 2028 as electric segment earnings continue to grow in line with its rate-based growth rate of 10%. Plastic segment earnings have normalized and the manufacturing segment has rebounded from the current down cycle. As we continue to execute on our customer focused growth plan, we are well positioned to deliver on our revised investment targets over the long term. Otter Tail Power continues to be a high-performing electric utility converting its rate-based growth into earnings per share growth at an approximate one-to-one ratio. Our manufacturing and plastic pipe businesses consistently produce accretive returns and incremental cash which will be used to help fund our rate-based growth plan without any equity needs. It is this combination of companies and performance that has and we project continuing to provide excellent benefits for our customers and our investors we look forward to what the future holds and are grateful for your interest and investment in Otter Tail Corporation we are now ready to take your questions thank you to ask a question please press star one one on your telephone and wait for your name to be announced to withdraw your question please press star one one again first call comes from

Michael Patel from Keyblock Capital Markets. Your line is now open.

Hey, good morning. Congrats on the updates this morning.

Thanks, Michael. Good morning.

I'm just curious on the updated EPS long-term growth right there, just on the shaping of it and kind of expect that to grow linearly or any movement on a year-to-year basis.

Yeah, over the long term, we do expect our utility earnings to grow in line with our rate-based. There will be year-to-year fluctuations depending upon timing of recovery, but over the long term we do expect our earnings for the utility to be in line with the rate-based growth plan, and we do provide the rate-based projections by year. And certainly, you know, as we're going through the manufacturing, you know, on the plastic side, we're seeing that normalize. And then on the manufacturing segment, we're in a down cycle right now. So we will have some fluctuations year to year, but beyond 2028, when we reach that normal level of plastics earnings and are through the manufacturing down cycle, we expect to achieve the 7% to 9% long term.

And just a quick modeling question, but what are you currently assuming for your 2025 tax rate and how are you tracking towards that and has there been any change in your assumption uh since your initial guidance this year uh just to make sure i understood that michael our tax rate is that what you're asking about um i don't know that i have that specific information in front of me okay and then uh just on the antitrust case and just curious if you could provide any update there um and then how does the department of justice's involvement affect the

proceedings or timeline Michael this is Chuck during the quarter the there were amended complaints filed in the in the class action lawsuits in the US in as you mentioned in October the DOJ intervened to stay the such the discovery in the civil litigation which which is not uncommon when there's a parallel investigation going on there's also a class action complaint filed in British Columbia Canada with with similar allegations to the civil complaint in the United States and then finally last week defendants filed a motion to dismiss in the civil litigation case we argue that the complaints should be dismissed in their entirety. There's no deadline for the court to make a decision but we anticipate that in calendar year 26.

Got it. Thanks for your time and look hard to see you in Florida in a few days.

Thank you.

Our next call comes from Tim Winter of Gabelli Funds. Your line is now open.

Good morning gentlemen and congrats on the quarter. Thanks for taking my question. I know you guys talked a little bit about 64% equity ratio and the $8 of cash on the balance sheet with, you know, some near-term need to take out that $80 million in debt. But I was just wondering if you could talk a little more how you're thinking about using that cash, you know, long-term.

I know you have plenty to use the utility over the long-term, but over the near-term just just wondering if there's if that's the best way to maximize the cash or what your thinking is regarding that good morning Tim yeah so in terms of our capital allocation priorities you know certainly our our priority is investing in our businesses and with the significant rate-based growth we have without our tail power we do expect that cash balance will decline over the five-year period as we invest and provide equity for that you know we don't have any external equity needs, we'll be able to fund that with our cash that we have on hand. Beyond that, certainly looking at the dividend payout ratio, we did increase our dividend payout ratio or our dividend by 12% earlier this year. Beyond that, we would look at are there opportunistic M&A opportunities or opportunistic returns to shareholders. But But our primary focus is on the first two with funding the utility growth plan as well as providing capital back to our shareholders through the dividend.

Okay, great. And on the M&A opportunities, what sorts of things are priorities of yours as you look at the environment out there?

You know, we would look on the utility side, you know, some potential assets from M&A. We've not put a specific, a lot of focus on that right now due to our internal growth opportunities available at the utility. in the manufacturing or plastic segments, we would review bolt-on opportunities, but we are not currently looking to add in any additional platforms or new companies that way. They would be smaller add-ons like we have done with BTD over time.

I'd just add, Jim, that we're positioned very well to execute on our growth plan without M&A for scale. We're positioned well to attract large loads. We've got the cash to fund our growth plan. That's very significant.

Okay, and if I could just ask one more, could you talk just a little bit about the large load customer and maybe how the electric service agreement is structured, that 155 megawatt customer?

Yeah, it's Chuck. You know, it's a customer that is an interruptible type load, and so we have very minimal capacity needs, and the site location, the customer had limited interconnection costs, primarily distribution at that point. So a customer that will use low-cost energy in a storage function, we don't see a large capacity need or a large investment need right at this point. So it's not driving significant earnings in the 2026 timeframe, but it is reducing fixed costs across a big amount with that type of load.

All right. Thank you, guys, and we'll see you in sunny Florida.

Thanks, Kevin.

Good to talk to you.

As there are no remaining questions in the queue, I will turn the call back over to Chuck for his closing remarks.

Thank you for joining our call and your interest in Auto-Till Corporation. If you have any questions, please reach out to our investor relations team, and we look forward to speaking with you next quarter.

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.