Otter Tail Corporation

Good morning and welcome to Otter Tail Corporation's Q3 2022 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 Ackerman. I'm the manager of investor relations at Otter Tail. Last night, we announced our third quarter 2022 financial 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 McFarland, Otter Tail Corporation's President and CEO, and Kevin Moog, 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 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 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 Security 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 McFarland.

Thank you, Tyler. Good morning, and welcome to our third quarter 2022 earnings call. Otter Tail Corporation achieved record financial results for the third quarter, led primarily by another outstanding quarter in our plastic segment. Please refer to slide four as I begin my comments on our third quarter results. We achieved diluted earnings per share of $2.01, which is an increase of 60% over the third quarter of 2021. All segments produced double-digit year-over-year earnings increases, for the quarter, Kevin will provide more detailed discussion of our third quarter financial performance. Slide 5 reflects the earnings profile of our businesses with and without the impact of the plastics segment. Through dependable earnings and steady growth at OTP, BTD, and TO Plastics and changes in the Corporate Cost Center, We have experienced a historic 9.8% earnings per share kegger, excluding the plastics companies, Northern Pipe and Vinyl Tech. The additional earnings and cash flow generated by the plastic segment in 2021 and 2022 provide additional strength to our already strong credit metrics, liquidity, and capital structure, and provide for capital investment in our operating companies. Otter Tail Power continues to work toward a cleaner energy future. As shown on slide 7, assuming forecasted dispatch occurs, we are targeting to reduce carbon emissions from our owned generation resources approximately 50% from 2005 levels by 2025 and 97% by 2050. Additionally, our owned and contracted energy generation will be more than 50% renewable by 2025. Progress continues on Otter Tail Power's 49 megawatt Hoot Lake solar project. Project construction began in May of 2022 and is expected to be completed in 2023. All costs and benefits of the project are assigned to Minnesota customers. Recovery for the $60 million investment has been approved through the Renewable Rider. As we have shared on previous calls, we have contracted contracts in place for thin film panels which reduce supply chain risks related to the United States restriction on goods from the Xinyang region of China and the US Department of Commerce circumvent investigation Passage of the Inflation Reduction Act has increased the ITC on this project from 26 to 40 percent and Otter Tail Power exercised its option to purchase the Ashtabula III wind farm. We anticipate closing on the transaction in January of 2023. Since 2013, we've had a purchase power agreement in place to purchase the offtake of this facility. The agreement granted us the option to purchase the wind farm after 10 years. Most regulatory approvals have been received for the transaction. Slide 13 provides information on MISO's long-range transmission planning projects, which Otter Tail Power will be a participant in. The Tranche 1 portfolio includes 18 projects and represents approximately $10.3 billion of new transmission development in the MISO Midwest subregion. This is based on MISO estimates. The Jamestown-Ellendale and Big Stone South Alexandria transmission projects are located in Otter Tail Power Service Territory, and Otter Tail owns two of the endpoint substations. Otter Tail's total capital investment for the projects are estimated at $330 million, with 40% of the capital investment expected to occur in the next five years. On October 14th, a supplemental filing was made to the Minnesota PUC, which included a request to amend the procedural schedule for Otter Tail Power's integrated resource plan, which was filed in September of 2021. We determined it was appropriate to request an extended procedural schedule based on the changes to the MISO seasonal capacity construct, increased reserve margin requirements, recent load additions, and the passage of the Inflation Reduction Act. These items could have an impact on the initial preferred five-year plan, which requested authority to add dual fuel capability to Astoria Station, to add 150 megawatts of solar at a yet to be determined site, and to commence the process of withdrawing from our 35% ownership interest in the coal-fired Coyote Generating Station by 2028. If granted permission, We plan to file an updated resource plan in March of 2023. Our supplemental filing requested maintaining the original procedural schedule for adding dual fuel capability at Astoria Station. We are now projecting 6.4% of compound annual rate based growth with our updated five year capital spending plan of 1.1 billion with 2022 as the base year. This compares with the 21 to 26, 5.9% compounded annual rate-based growth provided last quarter. Our manufacturing segment continues to experience volatile steel markets. Steel prices rapidly decreased during the third quarter. The lower steel prices have impacted our cost of material and scrap revenues. We continue to monitor the impact of unpredictable customer supply chains may have on our shipping volumes. Teal Plastics has increased sales prices and decreased freight costs, which led to increased gross profit margins despite higher material costs in the third quarter. Our plastic segment again delivered extraordinary results as sales prices remained strong while resin prices decreased. Demand for PVC pipe began to soften during the third quarter as distributors and contractors started to use up high-priced inventory instead of buying additional PVC pipe. Sales volume for the quarter decreased 15% due to softening demand. The PVC price and volume reductions in the third quarter are the main factor for the revised 2022 earnings guidance Kevin will expand on. I'll now turn it over to Kevin to provide an overview of our third quarter results and our updated business outlook for 2022. Well, thank you, John.