MDU Resources Reports Robust Growth in 2023; Initiates Guidance for 2024

BISMARCK, N.D., Feb. 8, 2024

• Record electric retail sales volumes.
• Record pipeline earnings and natural gas transportation volumes.
• Record construction services revenues, earnings and EBITDA.
• 2024 guidance: Regulated energy delivery earnings in the range of $170 million to $180 million; construction services revenues of $2.9 billion to $3.1 billion with EBITDA of $220 million to $240 million.
• Investor Day scheduled for March 13 at NYSE.

MDU Resources Group, Inc. (NYSE: MDU) today reported strong 2023 results from its utility, pipeline and construction services businesses. It also completed in the fourth quarter of 2023 the tax-free exchange of its retained shares in Knife River Corporation, the construction materials business that it spun off on May 31, 2023.

"Through the hard work and dedication of our employees, 2023 was truly an outstanding year for MDU Resources as we continue to transform our company," said Nicole A. Kivisto, president and CEO of MDU Resources. "In addition to successfully completing the spinoff of Knife River Corporation as we work toward becoming a pure-play regulated energy delivery company, we had record results across our remaining businesses. Our pipeline business had record earnings with continued system expansion and strong demand for storage services, and our utility business benefited from rate relief in certain jurisdictions as well as customer and demand growth. Our construction services business also had a fantastic year, with record revenue, earnings and EBITDA."

The following table summarizes the company's results:

	Twelve months ended Dec. 31,
	2023 ARIVA.DE Börsen-Geflüster Kurse MDU Resources Group 23,00 € 0,00%	2022
	(in millions, except per share amounts)
Net income	$                         414.7	$                         367.5
Earnings per share, diluted	$                           2.03	$                           1.81
Income from continuing operations1	$                         480.4	$                         250.8
Earnings per share from continuing operations, diluted1	$                           2.36	$                           1.23
Adjusted income from continuing operations2,3	$                         305.1	$                         254.5
Adjusted earnings per share from continuing operations, diluted2,3	$                           1.50	$                           1.25
Regulated energy delivery earnings	$                         167.0	$                         137.6
Construction services
Revenue	$                      2,854.4	$                      2,699.2
Earnings	$                         137.2	$                         124.8
EBITDA3	$                         222.7	$                         193.4

"We expect this strong momentum to continue into 2024 as we invest in transmission and distribution upgrades across our utility footprint and additional expansion projects at our natural gas pipeline business. Our construction services business also continues its growth trajectory, with strong backlog and margins, as we work toward the planned spinoff of this business in late 2024," Kivisto said. "We look forward to providing more detail about our expectations for the future at our investor day on March 13 at the New York Stock Exchange."

In the fourth quarter of 2023, the company on a GAAP basis earned $170.7 million, or 84 cents per share, compared to fourth quarter 2022 GAAP earnings of $117.1 million, or 57 cents per share. Fourth quarter 2023 income from continuing operations was $170.7 million, or 84 cents per share, compared to fourth quarter 2022 income from continuing operations of $103.9 million, or 51 cents per share. Adjusted income from continuing operations for fourth quarter 2023 was $98.8 million, or 48 cents per share, compared to adjusted income from continuing operations for fourth quarter 2022 of $107.6 million, or 53 cents per share. Additional information about the fourth quarter results is available following each business segment's financial table.

Results at each of MDU Resources' continuing businesses were positively impacted in 2023 on a non-cash basis by higher investment returns on nonqualified benefit plans. Collectively, the positive earnings variance was approximately $17.7 million, or 9 cents per share, compared to 2022. In the fourth quarter of 2023, the positive earnings variance was approximately $1.8 million, or 1 cent per share, compared to fourth quarter 2022. The company attributes this change in investment returns to fluctuations in the financial markets.

Regulated Energy Delivery Highlights
Electric and Natural Gas Utility
The electric and natural gas utility earned $120.1 million in 2023, compared to $102.3 million in 2022. Results were driven by:

• Approved rate relief in certain electric and natural gas jurisdictions.
• Electric retail sales volumes increasing 25.5% compared to 2022, to an all-time record high for the company. The increase was primarily from electricity usage at a data center that began operating in the company's service territory in mid-2023.
• Natural gas retail sales volumes decreasing 6.6% compared to 2022, largely related to warmer weather across the company's service territory.
• Several non-recurring items with a net benefit of $3 million in 2023.

The utility, which serves 1.2 million customers, saw customer growth of 1.3% in 2023. It expects customer growth to continue at a rate of 1%-2% annually and rate base to grow approximately 7% on a compounded annual basis over the next five years.

Regulatory update:

• On Aug. 15, 2023, the utility filed with the South Dakota Public Utilities Commission an electric rate case requesting a revenue increase of $3 million, or 17.3%, and a natural gas rate case requesting a revenue increase of $7.4 million, or 11.2%. The requests are pending decisions by the commission. On Jan. 26, 2024, the utility requested an interim electric rate revenue increase of $2.7 million, or 15.4%, and an interim natural gas rate increase of $7.4 million, or 11.2%, to be effective March 1, 2024. The interim rates are subject to refund based on the commission's decisions in the cases.
• On Oct. 2, 2023, the utility filed with the North Dakota Public Service Commission an electric service agreement request to serve an additional data center that is expected to be online in mid-2024 in its service territory. The request is pending a decision by the commission.
• On Nov. 1, 2023, the utility filed with the North Dakota Public Service Commission a natural gas rate case requesting a revenue increase of $11.6 million, or 7.5%. The utility implemented interim natural gas rates effective Jan. 1, 2024, that will increase revenue $10.1 million, or 6.5%. The interim rates are subject to refund based on the commission's decision in the case.
• In 2024, the utility expects to file a multiyear natural gas rate case in Washington and natural gas rate cases in Montana, Oregon and Wyoming.

The company's new Heskett Unit IV, an 88-megawatt natural gas-fired electric generating facility near Mandan, North Dakota, was expected to be online in 2023. Initial testing identified certain performance concerns. Modifications are being made and, barring any setbacks, the facility is now expected to be fully operational in the second quarter of 2024.

Pipeline
The pipeline business had record earnings of $46.9 million in 2023, up 33% compared to $35.3 million in 2022. Results were driven by:

• Record annual transportation volumes, which increased 17% compared to 2022. The volume increases were largely from higher contracted volume commitments on the North Bakken Expansion project and other expansion projects placed in service in 2022 and 2023. The company now has capacity to transport approximately 2.6 billion cubic feet of natural gas per day.
• Higher revenue from new transportation and storage rates, as approved by the Federal Energy Regulatory Commission, that were effective Aug. 1.
• Higher natural gas storage service usage.

The pipeline business has a number of additional growth projects underway:

• The 2023 Line Section 27 expansion project in northwestern North Dakota is expected to be in service in the first quarter of 2024. It will add 175 million cubic feet of natural gas transportation capacity per day.
• Construction is expected to begin in the second quarter on the Wahpeton expansion project, which will add approximately 20 million cubic feet of natural gas transportation capacity per day in eastern North Dakota. The project is expected to cost approximately $75 million and be in service in late 2024.
• The Line Section 28 expansion will serve a natural gas-fired power plant in northwestern North Dakota, which is supported by a long-term negotiated customer agreement. Construction is anticipated to begin in the second quarter and the project is expected to be in service in the third quarter of 2024. It will add 137 million cubic feet of natural gas transportation capacity per day.

Construction Services Highlights
The construction services business had record revenues of $2.85 billion and record earnings of $137.2 million in 2023, compared to revenues of $2.7 billion and earnings of $124.8 million in 2022. It also had record EBITDA of $222.7 million, compared to EBITDA of $193.4 million in 2022.

Results were driven by:

• Strong demand for commercial and institutional services work, particularly for hospitality, high-tech, data center and health care clients.
• Strong demand for utility-related transmission, distribution and underground work.
• Margin improvement from efficiency gains on projects and the overall combination of the type of work performed.
• Higher interest expense and labor costs.

Backlog for construction services remained strong at $2.01 billion as of Dec. 31, compared to $2.13 billion at Dec. 31, 2022.

As previously announced, MDU Resources is working toward a tax-free spinoff of its construction services business into a separate, publicly traded company. The spinoff is expected to be complete in late 2024.

Discontinued Operations and Adjusted Earnings
On May 31, 2023, MDU Resources completed a spinoff of approximately 90% of the outstanding shares of its construction materials subsidiary, Knife River, which became an independent, publicly traded company. MDU Resources completed a tax-free exchange of its retained shares of Knife River in the fourth quarter of 2023, and the gain is reported as part of MDU Resources' Other segment. MDU Resources has reported Knife River's results and the transaction costs and certain interest expenses associated with the spinoff as discontinued operations, and MDU Resources' prior period results have been restated to reflect the spinoff.

MDU Resources is reporting adjusted income from continuing operations that excludes the gain on the tax-free exchange of the retained shares of Knife River as well as costs associated with MDU Resources' strategic initiatives. Adjusted income from continuing operations is a non-GAAP measure. The "Non-GAAP Financial Measures" section of this news release explains the earnings adjustments. More information about MDU Resources' strategic initiatives can be found on the company's website at www.mdu.com. 

Guidance
Because of MDU Resources' ongoing strategic initiatives, the company is providing guidance for 2024 results by business. Guidance does not include transaction costs associated with the strategic initiatives or costs associated with standing up the construction services business as a public company. For 2024, MDU Resources expects:

• Earnings from its regulated energy delivery businesses in the range of $170 million to $180 million.
• Construction services revenues in the range of $2.9 billion to $3.1 billion, with margins comparable to 2023, and EBITDA of $220 million to $240 million.

The expected 2024 results are based on these assumptions:

• Normal weather for the year, including precipitation and temperatures, across all company markets.
• Normal economic and operating conditions.
• Continued availability of necessary equipment and materials.
• Electric and natural gas customer growth continuing at a rate of 1%-2% annually.
• No planned equity issuances.

Conference Call
MDU Resources' management will discuss on a webcast at 2 p.m. EST today the company's 2023 results. The webcast can be accessed at www.mdu.com under the "Investor Relations" heading. Select "Events & Presentations," and click on "Year-End 2023 Earnings Conference Call." A replay of the webcast will be available at the same location.

On March 13, MDU Resources will host an investor day at the New York Stock Exchange. The event also will be webcast. During the event, executive management will provide updates on operational strategy and financial plans as well as the expected tax-free spinoff of MDU Construction Services Group. Additional details about the investor day and webcast will be available on MDU Resources' website at www.mdu.com. 

About MDU Resources
MDU Resources Group, Inc., a member of the S&P MidCap 400 index, provides essential products and services through its regulated energy delivery and construction services businesses. For more information about MDU Resources, visit www.mdu.com or contact the Investor Relations Department at investor@mduresources.com. 

Media Contact: Laura Lueder, manager of communications and public relations, 701-530-1095
Financial Contact: Brent Miller, assistant treasurer, 701-530-1730

Forward-Looking Statements

The information in this news release highlights the key growth strategies, projections and certain assumptions for the company and its subsidiaries and other matters for each of the company's businesses. Many of these highlighted statements and other statements not historical in nature are "forward-looking statements" within the meaning of Section 21E of the Securities Exchange Act of 1934. Although the company believes that its expectations are based on reasonable assumptions, there is no assurance the company's projections, including estimates for growth, shareholder value creation and financial guidance or other proposed strategies such as the pursuit of a tax-advantaged separation of its construction services business and proposed future structure of a pure-play regulated energy delivery company, will be achieved. Please refer to assumptions contained in this news release, as well as the various important factors listed in Part I, Item 1A - Risk Factors in the company's most recent Form 10-K and subsequent filings with the Securities and Exchange Commission, including the company's Form 10-Q for the period ended Sept. 30, 2023.

Changes in such assumptions and factors could cause actual future results to differ materially from growth and financial guidance. All forward-looking statements in this news release are expressly qualified by such cautionary statements and by reference to the underlying assumptions. Undue reliance should not be placed on forward-looking statements, which speak only as of the date they are made. Except as required by law, the company does not undertake to update forward-looking statements, whether as a result of new information, future events or otherwise.

Throughout this news release, the company presents financial information prepared in accordance with GAAP, as well as EBITDA by operating segment, EBITDA from continuing operations, adjusted EBITDA from continuing operations, 2024 EBITDA guidance, adjusted income from continuing operations, and adjusted earnings per share from continuing operations, which are considered non-GAAP financial measures. The use of these non-GAAP financial measures should not be construed as alternatives to earnings, earnings per share, operating income or operating cash flows. The company believes the use of these non-GAAP financial measures are beneficial in evaluating the company's financial performance due to its diverse operations, its impacts related to the Knife River separation, and non-recurring costs associated with other strategic initiatives. Please refer to the "Non-GAAP Financial Measures" section contained in this document for additional information.

Consolidated Statements of Income
	Three Months Ended		Twelve Months Ended
	December 31,		December 31,
	2023	2022	2023	2022
	(In millions, except per share amounts)
Operating revenues:	(Unaudited)
Electric, natural gas distribution and regulated pipeline	$        495.7	$        595.4	$    1,789.6	$    1,736.4
Non-regulated pipeline, construction services and other	639.6	727.1	2,867.7	2,705.4
Total operating revenues	1,135.3	1,322.5	4,657.3	4,441.8
Operating expenses:
Operation and maintenance:
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