Otter Tail Corporation Reports a 7.8 Percent Increase in 2020 Diluted Earnings per Share to $2.34, Increases Quarterly Dividend 5.4 Percent and…

FERGUS FALLS, Minn.--(BUSINESS WIRE)--Otter Tail Corporation (Nasdaq: OTTR) today announced financial results for the year ended December 31, 2020.

2020 SUMMARY

(in millions, except per share amounts)

4Q20

4Q19

2020

2019

Operating Revenues

$

226.8

$

215.7

$

890.1

$

919.5

Net Income

$

18.7

$

20.4

$

95.9

$

86.8

Diluted Earnings Per Share

$

0.45

$

0.51

$

2.34

$

2.17

2020 HIGHLIGHTS

CEO OVERVIEW

Otter Tail Corporation achieved outstanding financial results in 2020 despite the economic impacts from the global pandemic. These results are attributable to the collective efforts of employees across all of our operating companies, said President and CEO Chuck MacFarlane. Our Electric segment led the way with a $7.7 million increase in net income primarily driven by capital investments in energy generation and regional transmission projects. Our Plastics segment increased net income by $7.0 million driven by strong construction markets and favorable market conditions driven by supply constraints and rising prices. Manufacturing segment earnings were down $1.9 million primarily due to the impacts of COVID-19 on sales volumes. Our corporate costs increased $3.9 million mainly due to a $2.5 million committed contribution to the Otter Tail Corporation Foundation.

Employees across the organization performed admirably during the year despite the challenges presented by COVID-19.

Otter Tail Power Company executed on a record year in capital spending, driven by two significant projects that marked major milestones in our generation resources transition.

Our Merricourt Wind Energy Center, a $260 million 150-megawatt (MW) wind generation facility began commercial operation in December. The facility generates enough energy to power more than 65,000 homes.

We expect our Astoria Station, a $152.5 million 245-megawatt natural gas-fired combustion turbine generation facility, to be substantially complete in the first quarter of 2021. This facility complements our wind generation with more dispatchable capacity than our soon-to-be retired 140 MW Hoot Lake Plantwith projected carbon emissions 85% less than historic Hoot Lake Plant levels.

Otter Tail Power Company announced in September the $60 million Hoot Lake Solar project. This is a 49.9megawatt (MW) solar farm we plan to build on and near Hoot Lake Plant property in Fergus Falls, Minnesota. The project will include up to 150,000 solar panels and generate enough energy to power approximately 10,000 homes each year. The location of Hoot Lake Solar offers us a unique opportunity to re-use our existing Hoot Lake transmission rights, substation and land after retiring Hoot Lake Coal Plant in 2021.

Otter Tail Power Company continues to enhance its generation mix as it transitions to a cleaner energy future while maintaining low rates in the region for its customers. By 2023, up to 35 percent of our energy is projected to come from renewable resources.

Otter Tail Power Company filed a rate request with the Minnesota Public Utilities Commission (MPUC) in November. Investment in cleaner energy generation and smarter technologies primarily are driving this request along with rising costs for providing electric service. In December the MPUC approved our request to begin recovering $6.9 million or a 3.2 percent increase on an interim basis in January 2021 as it considers our overall request to increase revenue $14.5 million or 6.77 percent. Even with this increase Otter Tail Power Company will continue to have some of the lowest rates in the country.

Otter Tail Power Company continues to benefit from strong rate base growth investments. These investments represent over 85 percent of our total capital spending over the next five years and include regulated investments in renewable generation, technology and infrastructure, and transmission assets. We expect this to result in a projected compounded annual growth rate of approximately 5 percent in utility rate base from year-end 2020 through 2025 and to deliver value to customers and shareholders. We continue to make system investments to meet our customers expectations, reduce operating and maintenance costs, reduce emissions and improve reliability and safety.

Our Plastics segment had a record year, maintained production in a time when some competitors did not and continued to see strong market demand as new home and other construction continued through the pandemic.

BTD Manufacturing was significantly impacted by the COVID-19 pandemic primarily in the second quarter as many of their customers had temporary plant shutdowns. BTD did an excellent job of managing staffing and inventory during the year to help mitigate the negative impact on sales. The recreational vehicle and lawn and garden end markets did experience a rapid recovery during the third and fourth quarters last year as they began to rebuild depleted inventories.

Our long-term focus remains on executing our growth strategies, which are expected to increase shareholder value. For the utility, our strategy is to continue to invest in rate base growth opportunities and drive cost efficiency within our operating and maintenance expenses, which will lower our overall risk, create a more predictable earnings stream, maintain our credit quality and preserve our ability to pay dividends. Over time, we expect the electric utility business will provide approximately 75 percent of our overall earnings.

The utility is complemented by well-run, strategic manufacturing and plastic pipe businesses, which provide organic growth opportunities from new products and services, market expansion and increased efficiencies. We expect these companies will provide approximately 25 percent of our earnings over the long term.

Our strategic initiatives to grow our business and achieve operational, commercial and talent excellence continue to strengthen our position in the markets we serve. We remain confident in our ability to grow earnings per share in the range of 5 to 7 percent compounded annually from a base of $2.34 in 2020. And we are announcing our 2021 earnings per share guidance to be in the range of $2.39 to $2.54.

CASH FLOWS AND LIQUIDITY

Our consolidated cash provided by operating activities was $211.9 million in 2020 compared with $185.0 million in 2019.

Investing activities included capital expenditures of $371.6 million in 2020 compared with $207.4 million in 2019. The increase in capital expenditures was primarily for construction of Astoria Station and the Merricourt Wind Energy Center (Merricourt).

Financing activities in 2020 included the issuance of $75.0 million in long-term debt at Otter Tail Power Company, $75.0 million borrowed under the Otter Tail Corporation and Otter Tail Power Company Credit Agreements and net proceeds of $49.7 million raised from the issuance of common stock. Proceeds from the debt and equity issuances were used to fund a portion of Otter Tail Power Companys construction program expenditures in 2020. We also paid $60.3 million in common dividends in 2020. Financing activities in 2019 included net proceeds of $99.0 million from the issuance of long-term debt at Otter Tail Power Company and $17.0 million from the issuance of common stock. Proceeds from the debt and equity issuances were used to fund a portion of Otter Tail Power Companys construction program expenditures in 2019 and to repay $12.6 million in short-term debt. We paid $55.7 million in common dividends in 2019.

The following table presents the status of the corporations lines of credit at December 31, 2020 and 2019 :

2020

2019

(in thousands)

Line Limit

AmountOutstanding

Letters of Credit

AmountAvailable

AmountAvailable

Otter Tail Corporation Credit Agreement

$

170,000

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Otter Tail Corporation Reports a 7.8 Percent Increase in 2020 Diluted Earnings per Share to $2.34, Increases Quarterly Dividend 5.4 Percent and...