MDU Resources Group, Inc.

Hello, everyone. Thank you for joining us, and welcome to the MDU Resources Group Inc. Q1 2026 Earnings Conference Call. After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please press star 1 to raise your hand. To withdraw your question, press star 1 again. I will now hand the conference over to Brent Miller, Treasurer.

Brent, please go ahead. Thank you, Warren, and welcome everyone to the MDU Resources Group First Quarter 2026 Earnings Conference Call. Our earnings release and supporting materials for this call are available on our website at mdu.com under the Investors section. Leading today's call are Nicole Cavisto, President and Chief Executive Officer, and Jason Vollmer, Chief Financial Officer of MDU Resources Group. During today's call, we will make certain forward-looking statements within the meaning of the federal securities laws. Please refer to our SEC filings for a discussion of risks and uncertainties that could cause actual results to differ. I will now turn the call over to Nicole for her prepared remarks. Nicole?

Thank you, Brent, and good afternoon, everyone. We appreciate you joining us today and for your continued interest in MD resources. This morning, we reported first quarter 2026 earnings of 80.8 million, or $0.39 per share. Results reflected strong operational performance across our businesses, offset by mild winter weather impacts, which reduced earnings by approximately $0.03 per share. At the same time, rate relief and recent investments, such as Badger Wind Farm and other pipeline expansions, contributed positive results. And we continue to see encouraging demand trends, including interest tied to data center development. During the quarter, we concluded our binding open season for the proposed Bacanese pipeline project with continued strong interest received. As a reminder, we have not yet reached a final investment decision on this potential project, but we are certainly encouraged with the approximate 1.4 billion cubic feet per day of submitted interest received in the open season. Of that total approximately 40% has been signed under precedent agreements with additional precedent agreements in active negotiation. Included in the signed precedent agreements is a firm capacity commitment of 50 million annually for 10 years from the state of North Dakota. With these results, we are now expecting the design of the potential project to include approximately 353 miles of 42 inch, 36 inch and 30 inch diameter mainline pipe. Approximately 21 miles of 30 inch, 24 inch and 20 inch diameter lateral pipelines. additional compression at three existing compressor stations and the construction of three new compressor stations based on these assumptions we are projecting total capital investment for the potential project in the range of 2.7 billion to 3.2 billion which would be incremental to our current 3.1 billion dollar capital investment forecast We are encouraged by the level of interest and ongoing commercial discussions that demonstrate continued demand for additional takeaway capacity from the Bakken region, which the Bakken East project could provide. This potential project would also provide natural gas transportation service to meet growing customer demand from industrial, power generation, and local distribution companies in the region. As we look to finance a project of this size and scope, we will evaluate all options, including using our balance sheet to finance the project, pursuing potential partnerships, and various other options. Also during the quarter, we saw a continued ramp of our data center load. We currently have 580 megawatts under signed electric service agreements, of which 180 megawatts has been online since mid-year 2023. 50 megawatts from the second data center is currently online with an additional 50 megawatts currently ramping online. An additional 150 megawatts is expected online later this year with another 100 megawatts expected online in 2027 and the remaining 50 megawatts expected online in 2028. Our current approach to serve these large load customer opportunities is with a capital light business model, which not only benefits our earnings and returns, but also provides cost savings to our other retail customers. Currently, our average retail customer receives an approximate $70 per year credit on their bill from this approach. And we anticipate this credit to increase to potentially over $200 per year when all volumes are fully online. We do continue to pursue additional discussions with potential data center customers and will provide further updates when we reach executed electric service agreements. Depending on the structure of future agreements, we would consider investing capital into new generation, substation and transmission assets to serve the increased load. Aside from data center load, we also continue to evaluate other potential capital projects related to safely and reliably meeting existing customer demand, as well as grid resiliency. On the regulatory front, we are continuing to execute on our plan of filing three to five rate cases annually in working to achieve constructive outcomes in all jurisdictions. At our electric segment, our Wyoming rate case was approved with rates effective April 1st, 2026. In our Montana case, interim rates were approved for an annual increase of 10.4 million with rates also effective April 1st, subject to refund. We also anticipate filing a general rate case in North Dakota yet this year. On a slightly separate but related note during the quarter, the South Dakota legislature approved legislation enabling utilities to reduce wildfire risk through the submission of wildfire mitigation plans and providing associated liability protection. With this action, all four states in which we provide electric service now have wildfire mitigation and liability relief frameworks in place. Moving on to our natural gas regulatory update, new rates from our Idaho case were effective January 1st, reflecting an annual increase of 13 million. In Washington, year two rates under our approved multi-year rate plan, representing an annual increase of 10.8 million, were effective March 1st of 2026. In April, we did file a revision to decrease revenue by 20%. 2.1 million annually due to forecasted capital investments, excuse me, that were not placed in service as of December 31st, 2025. Our Oregon rate case is still pending before the commission where we requested an annual increase of 16.4 million. As we look ahead, we anticipate filing another multi-year rate case in Washington this year and also plan to file a general rate case in Minnesota later in 2026. Moving on to our pipeline segment, we filed our FERC Section 7 application in March for our Line Section 32 expansion project, marking an important regulatory milestone in this project's development. This expansion will provide natural gas transportation service to an electric generating facility being constructed in Northwest North Dakota. The project is dependent on regulatory approvals with construction targeted to be complete in late 2028 with the total capital investment of approximately 70 million, which is included in our $3.1 billion capital plan. We also extended the signed agreement to support the early stage development of the potential Minot Industrial Pipeline project through late 2026. This project would be approximately a 90 mile pipeline from Tiowa, North Dakota to Minot, North Dakota, and would provide incremental natural gas transportation capacity for anticipated industrial demand should we decide to proceed. This project is included in our already years of the $3.1 billion capital plan, and we will continue to provide updates as the project progresses. Looking ahead, continued strong customer demand at our pipeline segment and progress in our utility regulatory schedule should provide opportunities to meet our long-term EPS growth rate target as we move forward. In addition, our utility experienced combined retail customer growth of 1.4% when compared to this time last year, which is within our targeted annual growth rate of 1-2%. This demand and growth provide investment opportunity for customer-driven growth projects at our pipeline and in our utility infrastructure. I am proud of our employees whose dedication to our core strategy continues to drive our business to deliver exceptional performance and positions MDU resources with compelling long-term growth prospects. Despite the mild weather headwinds experienced in the first quarter, we are affirming our 2026 earnings per share guidance range of 93 cents to a dollar per share. We remain confident in our ability to execute our long-term growth strategy and believe our operational focus and financial discipline continue to position us well for delivering safe and reliable energy, customer value, and strong stockholder returns. We also continue to anticipate a long-term EPS growth rate of 6% to 8% while targeting a 60% to 70% annual dividend payout ratio. As always, MDA Resources is committed to operating with integrity and with a focus on safety. We remain dedicated to delivering value as a leading energy provider and employer of choice. I will now turn the call over to Jason for a financial update. Jason.