MDU Resources (MDU) - 2025 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported income from continuing operations of $82.5 million or $0.40 per share for Q1 2025, a 10.4% increase compared to the same period last year [4][13] - First quarter earnings were $82 million compared to $100.9 million for Q1 2024, indicating a decrease in overall earnings [13] - The natural gas utility segment reported earnings of $44.7 million, an 11.5% increase year over year [14] Business Line Data and Key Metrics Changes - The electric utility segment reported earnings of $15 million, down from $17.9 million in Q1 2024, despite a 25% increase in retail electric volumes [13][14] - The pipeline segment achieved record first quarter earnings of $17.2 million, up from $15.1 million in the previous year, driven by growth projects and increased demand [9][15] - The natural gas distribution segment's rate relief contributed significantly to its quarterly results, with new rates effective in Washington and Montana [7][8] Market Data and Key Metrics Changes - The utility experienced a 1.4% combined retail customer growth compared to a year ago, aligning with the projected annual growth rate of 1% to 2% [5] - The company signed a purchase agreement to acquire a 49% interest in the Badger Wind Farm, contingent on regulatory approvals [5] Company Strategy and Development Direction - The company is focused on a core strategy emphasizing customer and community engagement, operational excellence, and employee-driven initiatives [12] - A capital investment of $3.1 billion is anticipated over the next five years, with a target of 7% to 8% compound annual utility rate base growth [12] - The company is committed to maintaining a 60% to 70% annual dividend payout ratio while targeting long-term EPS growth of 6% to 8% [12] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the long-term growth prospects of the Bakken region, despite potential short-term disruptions due to oil prices [24][25] - The company remains proactive in wildfire prevention and has seen legislative support that limits liability, enhancing operational certainty [6][60] Other Important Information - The company plans to reestablish an ATM program to meet future equity needs as part of its capital investment strategy [16] - The anticipated filing of a general rate case in Idaho is expected in the second quarter of 2025 [9] Q&A Session Summary Question: Are the tariffs from large customers not accretive for new resources? - Management indicated that the capital-light strategy for data centers is beneficial, as it allows for shared costs with large customers, providing benefits to the retail customer base [18][19] Question: Thoughts on potential disruptions to the Bakken region? - Management believes in the long-term viability of the Bakken play, citing increasing gas production and industrial demand as positive indicators [24][25] Question: Impact of housing starts on service areas? - Management noted that customer growth has remained stable within the 1% to 2% range, with Boise being a particularly strong growth area [30][32] Question: Clarification on accounting restatements? - Management explained that the restated numbers primarily reflect the separation of discontinued operations and some ongoing costs related to previous separations [33][34] Question: Confidence in the Bakken East project development? - Management expressed optimism based on ongoing customer conversations and feedback, while noting that the project is not currently in the five-year capital forecast [48][49] Question: Role of recent tariffs in the Bakken East project's attractiveness? - Management stated that while tariffs could impact costs, they do not foresee them derailing the project [55][57] Question: Impact of wildfire legislation on mitigation plans? - Management highlighted that existing proactive measures will be formalized through new legislation, which will help limit liability [58][60] Question: Size of the anticipated ATM program? - Management has not yet determined the size of the ATM program but indicated it would be sized to meet future needs starting in 2026 [61][62] Question: Clarification on long-term growth rate starting point? - Management clarified that the long-term growth rate is based on adjusted 2024 numbers or the 2025 range provided earlier [63][64]