MDU Resources Group, Inc. Q3 2026 Earnings Conference Call - MDU RESOURCES GROUP INC

Explicit Guidance:

• Reaffirmed 2026 earnings per share (EPS) guidance range of $0.93 to $1.00, assuming normal weather, economic conditions, customer growth, capital plan execution, and constructive regulatory outcomes.
• Maintained long-term earnings per share growth objective of 6% to 8% annually.
• Anticipates filing approximately three to five rate cases annually over the long term.
• No specific FY2027 revenue, margin, or EPS guidance provided at this time; guidance is typically released in Q4 (February timeframe).

Business-Segment Outlook:

• Electric Segment: Anticipates continued growth from data center loads and broader infrastructure demand; currently has >1 GW of signed data center loads with ~280 MW online and additional volumes expected to ramp in the "next few years."
• Natural Gas Distribution: Adjusted strategy to focus on investments providing strongest long-term value following the discontinuation of the not-landfill renewable natural gas project in Oregon.
• Pipeline Segment: The Bakken East project will transport 1.4 billion cubic feet per day (Bcf/d) of natural gas.
• Data Centers: Currently over 1 GW of loads signed under ESAs; expects significant ramp-up in additional volumes over the coming years.

Market and Competitive Outlook:

• Demand Trends: Sees "encouraging development activity" across service territories, specifically driven by data center opportunities and large load customers.
• Pricing/Regulatory: Interim electric rates ($26.3M in ND, $10.4M in MT) and natural gas revenue increases ($12.2M in OR) are effective or pending; expects rate cases to continue providing benefit in 2027, though no specific growth acceleration guidance was offered for next year.
• Structural Changes: Commitment to "cost causation" principles where large load customers (e.g., data centers) bear the cost of infrastructure, protecting existing customer bills while enabling growth.
• Competition: Open to potential utility-owned generation investments for data centers but will evaluate case-by-case to ensure "right cost causation" and shareholder value, distinct from past practices.

Macro / Industry Outlook:

• Rates: Operating under assumptions of "normal weather, economic and operating conditions" for current guidance.
• Regulation: Anticipates continued constructive regulatory outcomes as a key driver for growth.
• Regional Economy: Belief that the Bakken East project will support economic development in North Dakota and the broader region.

Strategic Initiatives:

• Bakken East Pipeline (FID Confirmed):
  • Capital Investment: Estimated range narrowed to $2.8–$3.1 billion.
  • Timeline: Constructed in two phases with in-service dates of late 2029 and late 2030.
  • Design: 350-mile route with 42-inch, 36-inch, and 30-inch diameter pipes; four new compressor stations plus additional compression at two existing facilities.
  • Financing/Ownership: FERC 7C filing expected in Q4; actively evaluating financing options (financial/strategic investors) while maintaining majority ownership and operational control for WBI Energy.
  • CapEx Timing: Increased CapEx in current quarter reflects post-FID spending; new 5-year capital plan forecast expected later this month (post-EEI conference).
• Oregon RNG Project: Discontinued development due to increased costs and regulatory changes shifting timing/reducing volume needs.
• Rate Case Filings: Filed Minnesota rate case (Oct 30) requesting $4.5M annual increase and $3.9M interim increase effective January 1, 2027; pending settlement in Washington multi-year case.

Risks and Headwinds to Outlook:

• Regulatory/Project: FERC 7C filing and financing negotiations for Bakken East remain pending; outcomes of rate case hearings (ND, MT, OR, WA, MN, FERC) could affect results.
• Execution: Success of guidance depends on "successful execution of capital investment plans."
• Weather/Economics: 2026 guidance assumes "normal weather" and "economic conditions"; deviations could impact results.
• Cost Overruns: Discontinuation of Oregon project highlighted risks in cost escalation and regulatory shifts impacting project viability.
• Investment Returns: Lower returns on non-qualified benefit plan investments previously impacted earnings.

Management Tone on the Future:

• Confidence: Expresses "confidence in the strategic importance" of Bakken East and "belief in long-term economic opportunities."
• Discipline: Emphasizes "disciplined capital allocation" and focus on investments providing "strongest long-term value."
• Caution: Avoids speculating on 2027 guidance or specific Bakken East financing partners until the Q4 call (February), maintaining a "wait-and-see" approach on external equity structures.

Miscellaneous:

• Financial Position: Maintains "strong balance sheet and ample access to working capital" to finance operations and the Bakken East project.
• Tax Rate: Adjusting annualized effective tax rate due to claims experience and other adjustments.