Otter Tail Q4 Earnings Call Highlights

Core Insights - Otter Tail Corporation reported a diluted earnings per share (EPS) of $6.55 for 2025, a decline of 9% from 2024, primarily due to a decrease in the plastics segment performance [4][5][8] - The company announced a 10% increase in its dividend to $2.31 per share, marking the 88th consecutive year of uninterrupted dividend payments [3][8] - Management provided guidance for 2026 with an expected EPS range of $5.22 to $5.62, forecasting a 14% growth in electric earnings but a significant decline of approximately 36% in plastics earnings [6][16][19] Rate Cases and Regulatory Updates - In South Dakota, interim rate revenues of $5.7 million became effective on December 1, 2025, and are subject to refund, with a settlement in principle reached with the South Dakota Public Utilities Commission [1] - The Minnesota Public Utilities Commission approved $28.6 million in interim rate revenues effective January 1, 2026, with final rates expected to be implemented by mid-2027 [2][7] Capital Expenditure and Growth Plans - Otter Tail refreshed its five-year capital expenditure plan totaling $1.9 billion, focusing on renewable energy projects and a battery storage facility with a capacity of 75 MW [7][10][18] - The company is advancing key regulatory and capital initiatives, including a wind repowering project expected to increase output by 20% and extend renewable energy tax credits [9][10] Segment Performance and Future Guidance - For 2026, electric segment earnings are expected to increase by over 7%, driven by rate base recovery and higher volumes, while manufacturing earnings are projected to rise by 7% due to improved sales outlook [16][17] - The plastics segment is anticipated to see a 36% decline in earnings as PVC prices are expected to be about 20% lower than in 2025, with normalization not expected until around 2028 [6][19] Financial Health and Balance Sheet - Otter Tail ended 2025 with $386 million in cash and produced a 16% return on equity, indicating a strong balance sheet capable of funding growth plans without external equity through at least 2030 [15] - The company plans to retire $80 million of parent-level debt maturing in 2026 without replacement, leaving no outstanding parent-level debt [18]