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What changed in MDU RESOURCES GROUP INC's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of MDU RESOURCES GROUP INC's 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+392 added−457 removedSource: 10-K (2025-02-20) vs 10-K (2024-02-22)

Top changes in MDU RESOURCES GROUP INC's 2024 10-K

392 paragraphs added · 457 removed · 276 edited across 6 sections

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

83 edited+39 added−46 removed57 unchanged
Biggest changeThese rules may also require the Company to report a cybersecurity incident before the Company has been able to fully assess its impact or remediate the underlying issue. Efforts to comply with such reporting requirements could divert management's attention from the Company's incident response and could potentially reveal system vulnerabilities to threat actors.
Biggest changeEfforts to comply with such reporting requirements could divert management's attention from the Company's incident response and could potentially reveal system vulnerabilities to threat actors. Failure to timely report incidents under these or other similar rules could also result in monetary fines, sanctions or subject the Company to other forms of liability.
In addition, pursuant to ERISA, as amended by MPPAA, the Company could incur a partial or complete withdrawal liability upon withdrawing from a plan, exiting a market in which it does business with a union workforce or upon termination of a plan.
In addition, pursuant to ERISA, as amended by MPPAA, the Company could incur a partial or complete withdrawal liability upon withdrawing from the plan, exiting a market in which it does business with a union workforce or upon termination of a plan.
Further, bad actors around the world use increasingly sophisticated methods, including the use of artificial intelligence, to engage in illegal activities involving the theft and misuse of personal information, confidential information, and intellectual property. Any of these outcomes could damage the Company’s reputation, result in the loss of valuable property and information and adversely impact its business.
Further, bad actors around the world use increasingly sophisticated methods, including artificial intelligence, to engage in illegal activities involving the theft and misuse of personal information, confidential information, and intellectual property. Any of these outcomes could damage the Company’s reputation, result in the loss of valuable property and information and adversely impact its business.
At times of low unemployment, it can be difficult for the Company to attract and retain qualified and affordable personnel. A shortage in the supply of skilled personnel creates competitive hiring markets, increased labor expenses, decreased productivity and potentially lost business opportunities to support the Company's operating and growth strategies.
At times of low unemployment, it can be difficult for the Company to attract and retain qualified and affordable personnel. A shortage in the supply of personnel creates competitive hiring markets, increased labor expenses, decreased productivity and potentially lost business opportunities to support the Company's operating and growth strategies.
These laws and regulations could require the Company to limit the use or output of certain facilities; restrict the use of certain fuels; prohibit or restrict new or existing services; replace certain fuels with renewable fuels; retire and replace certain facilities; install pollution controls; remediate environmental impacts; remove or reduce environmental hazards; or forego or limit the development of resources.
These laws and other regulations could require the Company to limit the use or output of certain facilities; restrict the use of certain fuels; prohibit or restrict new or existing services; replace certain fuels with renewable fuels; retire and replace certain facilities; install pollution controls; remediate environmental impacts; remove or reduce environmental hazards; or forego or limit the development of resources.
The issuance of a substantial amount of the Company's common stock, whether issued in connection with an acquisition or otherwise, or the perception that such an issuance could occur, could have a dilutive effect on stockholders and/or may adversely affect the market price of the Company's common stock.
The issuance of a substantial amount of the Company's common stock, whether issued in connection with an acquisition or otherwise, would have a dilutive effect on stockholders, and such an issuance, or perception that such an issuance may occur, could adversely affect the market price of the Company's common stock.
The Company's electric and natural gas transmission and distribution businesses are subject to comprehensive regulation by federal, state and local regulatory agencies with respect to, among other things, allowed rates of return and recovery of investments and costs; financing; rate structures; customer service; health care coverage and costs; taxes; franchises; recovery of fuel, purchased power and purchased natural gas costs; and construction and siting of generation and transmission facilities.
The Company's businesses are subject to comprehensive regulation by federal, state and local regulatory agencies with respect to, among other things, allowed rates of return and recovery of investments and costs; financing; rate structures; customer service; health care coverage and costs; taxes; franchises; recovery of fuel, purchased power and purchased natural gas costs; and construction and siting of generation and transmission facilities.
Further, any material decreases in customers' energy demand, for economic or other reasons, could have an adverse impact on the Company's earnings and results of operations. MDU Resources Group, Inc. Form 10-K 21 Index Part I The Company's operations involve risks that may result from catastrophic events.
Further, any material decreases in customers' energy demand, for economic or other reasons, could have an adverse impact on the Company's earnings and results of operations. 18 MDU Resources Group, Inc. Form 10-K Index Part I The Company's operations involve risks that may result from catastrophic events.
Form 10-K 23 Index Part I Operational Risks Significant portions of the Company’s natural gas pipelines and power generation and transmission facilities are aging. The aging infrastructure may require significant additional maintenance or replacement that could adversely affect the Company’s results of operations.
Form 10-K 21 Index Part I Operational Risks Significant portions of the Company’s natural gas pipelines and power generation and transmission facilities are aging. The aging infrastructure may require significant additional maintenance or replacement that could adversely affect the Company’s results of operations.
The Company may experience significant future costs associated with compliance of such legislative actions. The Company’s primary GHG emission is carbon dioxide from fossil fuels combustion at Montana-Dakota's electric generating facilities, particularly its coal-fired facilities.
The Company may experience significant future costs associated with compliance of such legislative actions. The Company’s primary GHG emission is carbon dioxide from fossil fuels combustion at Montana-Dakota's electric generating facilities, particularly its jointly owned coal-fired facilities.
Treaties, legislation or regulations to reduce GHG emissions in response to climate change may be adopted that affect the Company's utility and pipeline operations by requiring additional energy conservation efforts or renewable energy sources, limiting emissions, imposing carbon taxes or other compliance costs; as well as other mandates that could significantly increase capital expenditures and operating costs or reduce demand for the Company's utility services.
Treaties, legislation or regulations to reduce GHG emissions in response to climate change may be adopted and can affect the Company's operations by requiring additional energy conservation efforts or renewable energy sources, limiting emissions, imposing carbon taxes or other compliance costs; as well as other mandates that could significantly increase capital expenditures and operating costs or reduce demand for the Company's services.
Form 10-K 25 Index Part I The Company's operations are subject to environmental laws and regulations that may increase costs of operations, impact or limit business plans, or expose the Company to environmental liabilities.
Form 10-K 23 Index Part I The Company's operations are subject to environmental laws and regulations that may increase costs of operations, impact or limit business plans, or expose the Company to environmental liabilities.
The Company could experience increased operating expenses as a result of required contributions to MEPPs, which could have an adverse effect on the Company's results of operations, financial position or cash flows.
The Company could experience increased operating expenses as a result of required contributions to the MEPP, which could have an adverse effect on the Company's results of operations, financial position or cash flows.
Notwithstanding prior receipt of the IRS private letter ruling and opinion(s) of tax advisors, the IRS could determine that the completed distribution and/or certain related transactions should be treated as taxable transactions for U.S. federal income tax purposes if it determines that any of the representations, assumptions, or undertakings upon which the IRS private letter ruling or the opinion(s) of tax advisors were based are false or have been violated.
Notwithstanding prior receipt of IRS private letter rulings and opinion(s) of tax advisors, the IRS could determine that the completed distributions and/or certain related transactions should be treated as taxable transactions for U.S. federal income tax purposes if it determines that any of the representations, assumptions, or undertakings upon which the IRS private letter rulings or the opinion(s) of tax advisors were based are false or have been violated.
Accordingly, notwithstanding receipt by the Company of the IRS private letter ruling and the opinion(s) of tax advisors, there can be no assurance that the IRS will not assert that the distribution and/or certain related transactions do not qualify for tax-free treatment for U.S. federal income tax purposes or that a court would not sustain such a challenge.
Accordingly, notwithstanding receipt by the Company of the IRS private letter rulings and the opinion(s) of tax advisors, there can be no assurance that the IRS will not assert that the distributions and/or certain related transactions do not qualify for tax-free treatment for U.S. federal income tax purposes or that a court would not sustain such a challenge.
The Company's credit ratings may also change as a result of the differing methodologies or changes in the methodologies used by the rating agencies. Increasing costs associated with health care plans may adversely affect the Company's results of operations. The Company's self-insured costs of health care benefits for eligible employees continues to increase.
The Company's credit ratings may also change as a result of the differing methodologies or changes in the methodologies used by the rating agencies. Increasing costs associated with health care plans and changes in employment laws or regulations may adversely affect the Company's results of operations. The Company's self-insured costs of health care benefits for eligible employees continues to increase.
The Company operates in or provides services to capital intensive industries in which federal trade policies could significantly impact the availability and cost of materials. Imposed and proposed tariffs could significantly increase the prices and delivery lead times on raw materials and finished products that are critical to the Company and its customers, such as aluminum and steel.
The Company operates in or provides services to capital intensive industries in which federal trade policies could significantly impact the availability and cost of materials. Imposed and proposed tariffs could significantly increase the prices and delivery lead times on raw materials and finished products that are critical to the Company and its customers.
In addition, the increasing focus on climate change and stricter regulatory requirements may result in the Company facing adverse reputational risks associated with certain of its operations producing GHG emissions.
In addition, any increased focus on climate change and stricter regulatory requirements may result in the Company facing adverse reputational risks associated with certain of its operations producing GHG emissions.
These hazards and operating risks have occurred and may reoccur in the future, which could result in loss of human life; personal injury; property damage; environmental impacts; impairment of operations; and substantial financial losses. The Company maintains insurance against some, but not all, of these risks and losses.
These hazards and operating risks may occur in the future, which could result in loss of human life; personal injury; property damage; environmental impacts; impairment of operations; and substantial financial losses. The Company maintains insurance against some, but not all, of these risks and losses.
Regulatory, contractual and legal limitations, as well as their capital requirements, affect the ability of the subsidiaries to pay dividends to the Company and thereby could restrict or influence the Company's ability or decision to pay dividends on its common stock, which could adversely affect the Company's stock price.
Regulatory, contractual and legal limitations, as well as their capital requirements, affect the ability of the subsidiaries to pay dividends to the Company and thereby could restrict or influence the Company's ability or decision to pay dividends on its common stock, which could adversely affect the Company's stock price. MDU Resources Group, Inc.
The Company's financial performance is tied to the health of the regional economies served. The Company provides natural gas and electric utility service, as well as construction services, for some states and communities that are economically affected by the agriculture industry.
The Company's financial performance is tied to the health of the regional economies served. The Company provides natural gas and electric utility service for some states and communities that are economically affected by the agriculture industry.
The degree to which pandemics impact the Company depends on, among other things, federal and state mandates, actions taken by governmental authorities, availability, timing and effectiveness of vaccines being administered, and the pace and extent to which the economy recovers and operates under normal market conditions. MDU Resources Group, Inc.
The degree to which pandemics impact the Company depends on, among other things, federal, state and local mandates, actions taken by governmental authorities, availability, timing and effectiveness of vaccines being administered, and the pace and extent to which the economy recovers and operates under normal market conditions.
The Company will continue to monitor GHG regulations and their potential impact on operations. Due to the uncertain availability of technologies to control GHG emissions and the unknown obligations that potential GHG emission legislation or regulations may create, the Company cannot determine the potential financial impact on its operations.
Due to the uncertain availability of technologies to control GHG emissions and the unknown obligations that potential GHG emission legislation or regulations may create, the Company cannot determine the potential financial impact on its operations.
Delays in the collection of utility fuel cost recoveries, as compared to expenditures for fuel purchases, could also negatively impact the Company's cash flows. Increased labor costs, due to labor shortages, competition from other industries, or other factors, could negatively affect the Company's results of operations.
Delays in the collection of utility fuel cost recoveries, as compared to expenditures for fuel purchases, could also negatively impact the Company's cash flows. Increased labor costs, due to labor shortages, competition from other industries, or other factors, could negatively affect the Company's results of operations. 20 MDU Resources Group, Inc.
Decreased energy use due to weather may result in decreased revenues. Extreme weather conditions, such as uncommonly long periods of high or low ambient temperature in general require more system backup, adding to costs, and can contribute to increased system stress, including service interruptions. Weather conditions outside of the Company's service territory could also have an impact on revenues.
Extreme weather conditions, such as uncommonly long periods of high or low ambient temperature in general require more system backup, adding to costs, and can contribute to increased system stress, including service interruptions. Weather conditions outside of the Company's service territory could also have an impact on revenues.
Third-party service providers that perform critical business functions for the Company or have access to sensitive information within the Company also may be vulnerable to security breaches and information technology risks that could adversely affect the Company.
Third-party service providers that perform critical business functions for the Company or have access to sensitive information within the Company also may be vulnerable to security breaches and information technology risks that could adversely affect the Company. 26 MDU Resources Group, Inc.
The Company's operations are exposed to fluctuations in prices for labor, oil, raw materials and utilities. Prices are generally subject to change in response to fluctuations in supply and demand and other general economic and market conditions beyond the Company's control.
The Company's operations are exposed to fluctuations in prices for labor, petroleum products, raw materials and services. Prices are generally subject to change in response to fluctuations in supply and demand and other general economic and market conditions beyond the Company's control.
In addition, neither the IRS private letter ruling nor opinion(s) of tax advisors will address all of the issues that are relevant to determining whether the distribution, together with certain related transactions, qualifies as a transaction that is generally tax-free for U.S. federal income tax purposes.
In addition, neither the IRS private letter rulings nor opinion(s) of tax advisors will address all of the issues that are relevant to determining whether the distributions, together with certain related transactions, qualifies as transactions that are generally tax-free for U.S. federal income tax purposes.
Prolonged depressed prices for oil and natural gas could negatively affect the growth, results of operations, cash flows and asset values of the Company's electric, natural gas and pipeline businesses. 22 MDU Resources Group, Inc.
Prolonged depressed prices for oil and natural gas could negatively affect the growth, results of operations, cash flows and asset values of the Company's electric, natural gas and pipeline businesses.
Where weather normalization mechanisms are in place, there is no assurance the Company will continue to receive such regulatory protection from adverse weather in future rates.
Where weather normalization mechanisms are in place, there is no assurance the Company will continue to receive such regulatory protection from adverse weather in future rates. 24 MDU Resources Group, Inc.
Form 10-K Index Part I If oil and natural gas prices increase significantly, which has occurred and may reoccur, customer demand could decline for utility, pipeline and construction services, which could impact the Company's results of operations and cash flows.
If oil and natural gas prices increase significantly, which has occurred and may reoccur, customer demand could decline for utility and pipeline services, which could impact the Company's results of operations and cash flows.
The Company’s information systems experience ongoing and often sophisticated cyberattacks by a variety of sources with the apparent aim to breach the Company's cyber-defenses. The Company may face increased cyber risk due to the increased use of employee-owned devices, work from home arrangements, and the separation of Knife River.
Form 10-K Index Part I The Company’s information systems experience ongoing and often sophisticated cyberattacks by a variety of sources with the apparent aim to breach the Company's cyber-defenses. The Company may face increased cyber risk due to the increased use of employee-owned devices, work from home arrangements, and the separation of Everus.
For residential customers, heating and cooling represent the largest energy use. To the extent weather conditions are affected by climate change, customers’ energy use could increase or decrease. Increased energy use by its utility customers due to weather may require the Company to invest in additional generating assets, transmission and other infrastructure to serve increased load.
To the extent weather conditions are affected by climate change, customers’ energy use could increase or decrease. Increased energy use by its utility customers due to weather may require the Company to invest in additional generating assets, transmission and other infrastructure to serve increased load. Decreased energy use due to weather may result in decreased revenues.
To the extent pandemics adversely impact the Company's businesses, operations, revenues, liquidity or cash flows, they could also have a heightened effect on other risks described in this section.
To the extent pandemics adversely impact the Company's businesses, operations, revenues, liquidity or cash flows, they could also have a heightened effect of other risks.
The Company's operations, particularly those related to electric and natural gas transmission and distribution, include a variety of inherent hazards and operating risks, such as product leaks; explosions; mechanical failures; vandalism; fires; pandemics; social or civil unrest; protests and riots; natural disasters; cyberattacks; acts of terrorism; and acts of war.
The Company's operations include a variety of inherent hazards and operating risks, such as product leaks; explosions; mechanical failures; vandalism; fires; wildfires; pandemics; social or civil unrest; protests and riots; natural disasters; cyberattacks; acts of terrorism; and acts of war.
Although the Company has not experienced difficulties in these areas, if the Company is unable to satisfy the increasing climate-related expectations of certain stakeholders, the Company may suffer reputational harm, which may cause its stock price to decrease or difficulty in accessing the capital or insurance markets.
If the Company is unable to satisfy the climate-related expectations of certain stakeholders, the Company may suffer reputational harm, which may cause its stock price to decrease or difficulty in accessing the capital or insurance markets.
This may include interruption of electric generation, transmission and distribution facilities, natural gas storage and pipeline facilities, any of which could adversely affect the Company's reputation, business, cash flows and results of operations or subject the Company to legal or regulatory liabilities and increased costs.
This may include interruption of electric generation, transmission and distribution facilities, natural gas storage and pipeline facilities, any of which could adversely affect the Company's reputation, business, cash flows and results of operations or subject the Company to legal or regulatory liabilities and increased costs. Litigation expenses and damages for such an event can be significant.
In 2023, 2022 and 2021, the Company experienced elevated commodity and supply chain costs including the costs of labor, raw materials, energy-related products and other inputs used in the production and distribution of its products and services.
Form 10-K Index Part I In 2024, 2023 and 2022, the Company experienced elevated commodity and supply chain costs including the costs of labor, raw materials, energy-related products and other inputs used in the production and distribution of its products and services.
The Company completed the separation of Knife River on May 31, 2023. In connection with the completed separation of Knife River, the Company received a private letter ruling from the IRS and opinion(s) of outside counsel regarding the qualification of certain elements of the separation and distribution under Section 355(a) of the Code.
The Company completed the separations of Knife River and Everus on May 31, 2023, and October 31, 2024, respectively. In connection with the completed separations, the Company received private letter rulings from the IRS and opinion(s) of outside counsel regarding the qualification of certain elements of the separations and distributions under Section 355(a) of the Code.
If either the completed separation of Knife River or the proposed separation of MDU Construction Services, together with certain related transactions, were to fail to qualify as a transaction that is generally tax-free for U.S. federal income tax purposes, the Company and its stockholders could be subject to significant tax liabilities.
Separation Risks If the completed separations of Knife River or Everus, together with certain related transactions, were to fail to qualify as transactions that are generally tax-free for U.S. federal income tax purposes, the Company and its stockholders could be subject to significant tax liabilities.
Due to the changing workforce demographics and a lack of younger employees who are qualified to replace employees as they retire and remote work opportunities, among other things, competition for these employees is high. In some cases competition for these employees is on a regional or national basis.
Due to the changing workforce dynamics and an insufficient number of qualified applicants to replace skilled employees as they retire and remote work opportunities, among other things, competition for these employees is high. In some cases competition for these employees is on a regional or national basis.
Construction services' competition is based primarily on price and reputation for quality, safety and reliability. The electric utility and natural gas businesses also experience competitive pressures as a result of consumer demands, technological advances and other factors. The pipeline business competes with several pipelines for access to natural gas supplies and for transportation and storage business.
The electric utility and natural gas businesses also experience competitive pressures as a result of consumer demands, technological advances and other factors. The pipeline business competes with several pipelines for access to natural gas supplies and for transportation and storage business.
The Company relies on third-party vendors and manufacturers to supply many of the materials necessary for its operations. Global logistic disruptions have impacted the flow of materials and restricted global trade flows. Manufacturers are competing for a limited supply of key commodities and logistical capacity which has impacted lead times, pricing, supply and demand.
Global logistic disruptions have impacted the flow of materials and restricted global trade flows. Manufacturers are competing for a limited supply of key commodities and logistical capacity which has impacted lead times, pricing, supply and demand.
Stakeholder actions and increased regulatory activity related to environmental, social and governance matters, particularly climate change and reducing GHG emissions, could adversely impact the Company's operations, costs of or access to capital and impact or limit business plans.
Stakeholder actions and increased regulatory activity related to ESG matters, particularly climate change and reducing GHG emissions, could adversely impact the Company's operations, costs of or access to capital and impact or limit business plans. The Company has faced and may continue to face stakeholder scrutiny related to ESG matters.
These laws and regulations can increase capital, operating and other costs; cause delays as a result of litigation and administrative proceedings; and create compliance, remediation, containment, monitoring and reporting obligations, particularly relating to electric generation, and natural gas transmission and storage operations.
These laws and regulations can increase capital, operating and other costs; cause delays as a result of litigation and administrative proceedings; and create compliance, remediation, containment, monitoring and reporting obligations.
Adverse weather conditions, which have occurred and may reoccur, such as heavy or sustained rainfall or snowfall, droughts, storms, wind and colder weather may affect the demand for products and the ability to perform services at the construction business and affect ongoing operation and maintenance and construction activities for the electric and natural gas transmission and distribution businesses.
Form 10-K Index Part I Adverse weather conditions, which have occurred and may reoccur, such as heavy or sustained rainfall or snowfall, droughts, storms, wind and colder weather may affect ongoing operation and maintenance and construction activities for the electric and natural gas transmission and distribution businesses.
Increasing quantities of large individual health care claims and an overall increase in total health care claims could have an adverse impact on operating results, financial position and liquidity. Legislation related to health care could also change the Company's benefit program and costs.
Increasing quantities of large individual health care claims and an overall increase in total health care claims could have an adverse impact on operating results, financial position and liquidity.
These changes could impact the assumptions and negatively affect the value of assets held in the Company's pension and other postretirement benefit plans and may increase the amount and accelerate the timing of required funding contributions for those plans. Significant changes in prices for commodities, labor or other production and delivery inputs could negatively affect the Company's businesses.
These changes could impact the assumptions and negatively affect the value of assets held in the Company's pension and other postretirement benefit plans and may increase the amount and accelerate the timing of required funding contributions for those plans. MDU Resources Group, Inc.
Such disruptions could include: • A significant economic downturn. • The financial distress of unrelated industry leaders in the same line of business. • Deterioration in capital market conditions. • Turmoil in the financial services industry. • Volatility in commodity prices. • Pandemics. • War. • Terrorist attacks. • Cyberattacks.
Such disruptions could include items such as a significant economic downturn, the financial distress of unrelated industry leaders in the same line of business, the deterioration of capital market conditions, turmoil in the financial services industry, volatility in commodity prices, increased trade tariffs and trade disputes with other countries, supply chain weaknesses, pandemics, natural disasters, war, terrorist attacks and cyberattacks.
Such an event could result in negative publicity and reputational harm, remediation costs, legal claims and fines that could have an adverse effect on the Company's financial results.
A breach of the Company's systems could compromise sensitive data and could go unnoticed for some time. Such an event could result in negative publicity and reputational harm, remediation costs, legal claims and fines that could have an adverse effect on the Company's financial results.
As a result, the Company's ability to maintain productivity, relationships with customers, competitive costs, and quality services is limited by the ability to employ, retain and train the necessary skilled personnel and could negatively affect the Company's results of operations, financial position and cash flows. The Company's construction services business may be exposed to warranty claims.
As a result, the Company's ability to maintain productivity, relationships with customers, competitive costs, and quality services is limited by the ability to employ, retain and train the necessary personnel and could negatively affect the Company's results of operations, financial position and cash flows. The Company is a holding company and relies on cash from its subsidiaries to pay dividends.
Economic conditions and population growth affect the electric and natural gas distribution businesses' growth in service territory, customer base and usage demand.
Economic volatility affects the Company's operations, as well as the demand for its products and services. Economic conditions and population growth affect the electric and natural gas distribution businesses' growth in service territory, customer base and usage demand.
Even if properly maintained, reliability may ultimately deteriorate and negatively affect the Company’s ability to serve its customers, which could result in increased costs associated with regulatory oversight. The costs associated with maintaining the aging infrastructure and capital expenditures for new or replacement infrastructure could cause rate volatility and/or regulatory lag in some jurisdictions.
Even if properly maintained, reliability may ultimately deteriorate and negatively affect the Company’s ability to serve its customers, which could result in increased costs associated with regulatory oversight.
The Company is subject to capital market and interest rate risks. The Company's operations, particularly its electric and natural gas transmission and distribution businesses, require significant capital investment. Consequently, the Company relies on financing sources and capital markets as sources of liquidity for capital requirements not satisfied by cash flows from operations.
The Company's operations require significant capital investment. Consequently, the Company relies on financing sources and capital markets as sources of liquidity for capital requirements not satisfied by cash flows from operations.
Significant reductions in demand for the Company's utility and pipeline services as a result of increased costs or emissions limitations could also adversely impact the results of operations and cash flows. The Company monitors, analyzes and reports GHG emissions from its other operations as required by applicable laws and regulations.
Significant reductions in demand for the Company's services as a result of increased costs or emissions limitations could also adversely impact the results of operations and cash flows.
Disruptions or delays in receiving materials; price increases from suppliers or manufacturers; or inability to source needed materials, which has occurred and could reoccur, could adversely affect the Company’s results of operations, financial condition and cash flows. Environmental and Regulatory Risks The Company's operations could be adversely impacted by climate change.
Disruptions or delays in receiving materials; price increases from suppliers or manufacturers; or inability to source needed materials, which have occurred and could reoccur, could adversely affect the Company’s capital expenditure programs, results of operations, financial condition and cash flows. 22 MDU Resources Group, Inc.
The cost of providing service could increase if the frequency of severe weather events increases because of climate change or otherwise. The Company may not recover all costs related to mitigating these physical risks.
The cost of providing service could increase if the frequency of severe weather events increases because of climate change or otherwise. The Company may not recover all costs related to mitigating these physical risks. Utility customers’ energy needs vary with weather conditions, primarily temperature and humidity. For residential customers, heating and cooling represent the largest energy use.
The Company’s vendors and third-party partners may incorporate artificial intelligence tools into their offerings with or without disclosing this use to us.
The Company has, and may again in the future, adopt and integrate certain artificial intelligence tools into its systems for specific use cases. The Company’s vendors and third-party partners may incorporate artificial intelligence tools into their offerings with or without disclosing this use to the Company.
Costs related to obligations under MEPPs could have a material negative effect on the Company's results of operations and cash flows. Various operating subsidiaries of the Company participate in MEPPs for employees represented by certain unions.
Form 10-K 25 Index Part I Costs related to obligations under a MEPP could have a material negative effect on the Company's results of operations and cash flows. An operating subsidiary of the Company participates in a MEPP for employees represented by a union.
There can be no assurance that applicable regulatory commissions will determine that the Company's electric and natural gas transmission and distribution businesses' costs have been prudent, which could result in the disallowance of costs in setting rates for customers.
Changes in regulations or the imposition of additional regulations could have an adverse impact on the Company's results of operations and cash flows. There can be no assurance that applicable regulatory commissions will determine that the Company's costs have been prudent, which could result in the disallowance of costs in setting rates for customers.
While the Company has policies, procedures and processes in place designed to strengthen and protect these systems, they may be vulnerable to physical and cybersecurity failures or unauthorized access, due to: • hacking, • human error, • theft, • sabotage, • malicious software, • ransomware, • third-party compromise, • acts of terrorism, • acts of war, • acts of nature or • other causes.
These systems may be vulnerable to physical and cybersecurity failures or unauthorized access, due to hacking, human error, theft, sabotage, malicious software, ransomware, third-party compromise, acts of terrorism, acts of war, acts of nature or other causes. Should a compromise or system failure occur, interdependencies to technology may disrupt the Company's ability to fulfill critical business functions.
Form 10-K Index Part I Other Risks The Company's various businesses are seasonal and subject to weather conditions that could adversely affect the Company's operations, revenues and cash flows. The Company's results of operations could be affected by changes in the weather. Weather conditions influence the demand for electricity and natural gas and affect the price of energy commodities.
The Company's results of operations could be affected by changes in the weather. Weather conditions influence the demand for electricity and natural gas and affect the price of energy commodities.
Such efforts, if successfully directed at the Company, could increase the costs of or access to capital or insurance and interfere with business operations and ability to make capital expenditures. 26 MDU Resources Group, Inc.
Such efforts, if successfully directed at the Company, could increase the costs of or access to capital or insurance and interfere with business operations and ability to make capital expenditures. Other Risks The Company's businesses are seasonal and subject to weather conditions that could adversely affect the Company's operations, revenues and cash flows.
Severe weather events, such as tornadoes, hurricanes, rain, drought, ice and snowstorms, and high and low temperature extremes, occur in regions in which the Company operates and maintains infrastructure. Climate change could change the frequency and severity of these weather events, which may create physical and financial risks to the Company.
Environmental and Regulatory Risks The Company's operations could be adversely impacted by severe weather. Severe weather events, such as tornadoes, fires, rain, drought, ice and snowstorms, and high and low temperature extremes, occur in regions in which the Company operates and maintains infrastructure.
Such risks could have an adverse effect on the Company's financial condition, results of operations and cash flows. To date, the Company has not experienced any material impacts to its financial condition, results of operations or cash flows due to the physical effects of climate change.
Climate change could change the frequency and severity of these weather events, which may create physical and financial risks to the Company. Such risks could have an adverse effect on the Company's financial condition, results of operations and cash flows.
Additionally, if the Company is unable to hire employees with the requisite skills, the Company may be forced to incur significant training expenses.
The Company is subject to risks associated with labor disputes or prolonged negotiation processes, which could disrupt operations and increase costs. Additionally, if the Company is unable to hire employees with the requisite skills, the Company may be forced to incur significant training expenses.
Prolonged lead times on the delivery of raw materials and further tariff increases on raw materials and finished products could adversely affect the Company's business, financial condition and results of operations. Pandemics may have a negative impact on the Company's business operations, revenues, results of operations, liquidity and cash flows. Pandemics have disrupted national, state and local economies.
Pandemics may have a negative impact on the Company's business operations, revenues, results of operations, liquidity and cash flows. Pandemics have disrupted national, state and local economies in the past and may again in the future.
The Company could also have indirect credit risk from participating in energy markets such as MISO in which credit losses are socialized to all participants. Changes in tax law may negatively affect the Company's business. Changes to federal, state and local tax laws have the ability to benefit or adversely affect the Company's earnings and customer costs.
Changes in tax law and other regulations may negatively affect the Company's business. Changes to federal, state and local tax laws have the ability to benefit or adversely affect the Company's earnings and customer costs.
The amount and timing of any increase in the Company's required contributions to MEPPs may depend upon one or more factors, including the outcome of collective bargaining; actions taken by trustees who manage the plans; actions taken by the plans' other participating employers; the industry for which contributions are made; future determinations that additional plans reach endangered, seriously endangered or critical status; newly-enacted government laws or regulations and the actual return on assets held in the plans; among others.
The amount and timing of any increase in the Company's required contributions may depend upon one or more factors, including the outcome of collective bargaining; actions taken by the trustee; actions taken by the plan's other participating employers; the industry; future determinations of plan status; and laws and regulations.
The following are the most material risk factors applicable to the Company and are not necessarily listed in order of importance or probability of occurrence.
The following are the most material risk factors applicable to the Company and are not necessarily listed in order of importance or probability of occurrence. Economic Risks The Company is subject to government regulations that may have a negative impact on its business and its results of operations and cash flows.
Although the incidents the Company has experienced to date have not had a material effect on its business, financial condition or results of operations, such incidents could have a material adverse effect in the future as cyberattacks continue to increase in frequency and sophistication. The Company is continuously reevaluating the need to upgrade and/or replace systems and network infrastructure.
Such incidents could have a material adverse effect in the future as cyberattacks continue to increase in frequency and sophistication. The Company is continuously reevaluating the need to upgrade and/or replace systems and network infrastructure. These upgrades and/or replacements could adversely impact operations by imposing substantial capital expenditures, creating delays or outages, or experiencing difficulties transitioning to new systems.
These upgrades and/or replacements could adversely impact operations by imposing substantial capital expenditures, creating delays or outages, or experiencing difficulties transitioning to new systems. System disruptions, if not anticipated and appropriately mitigated, could adversely affect the Company. Artificial intelligence presents challenges that can impact our business by posing security risks to confidential or proprietary information and personal data.
System disruptions, if not anticipated and appropriately mitigated, could adversely affect the Company. Artificial intelligence presents challenges that can impact the Company's business by posing security risks to confidential or proprietary information and personal data The use of artificial intelligence, combined with an uncertain regulatory environment, may result in reputational harm, liability, or other adverse consequences to business operations.
The Company is required to make contributions to these plans in amounts established under numerous collective bargaining agreements between the operating subsidiaries and those unions. The Company may be obligated to increase its contributions to underfunded plans that are classified as being in endangered, seriously endangered or critical status as defined by the Pension Protection Act of 2006.
The Company may be obligated to increase its contribution to the plan if it becomes underfunded and is classified as being in endangered, seriously endangered or critical status as defined by the Pension Protection Act of 2006, or if other participating employers withdraw from the plan and are unable to contribute sufficient amounts.
Concern that GHG emissions contribute to global climate change has led to international, federal, state and local legislative and regulatory proposals to reduce or mitigate the effects of GHG emissions. For example, the SEC has published proposed rules that would require significantly increased disclosures associated with climate change and other issues.
Certain stakeholders of the Company, such as investors, customers, employees and lenders, have increased their scrutiny of the impacts and social cost associated with ESG matters, including climate change. Concern that GHG emissions contribute to global climate change has led to international, federal, state and local legislative and regulatory proposals to reduce or mitigate the effects of GHG emissions.
Significant changes to corporate tax rates could result in the impairment of deferred tax assets that are established based on existing law at the time of deferral. Changes to the value of various tax credits could change the economics of resources and the resource selection for the electric generation business.
Significant changes to corporate tax rates could result in the impairment of deferred tax assets that are established based on existing law at the time of deferral. The U.S. administration has introduced uncertainty regarding the continuation of the IRA and a potential shift in federal energy policies regarding clean energy projects.
The regulatory approval, permitting, construction, startup and/or operation of pipelines, power generation and transmission facilities may involve unanticipated events, delays and unrecoverable costs.
Additionally, failure to meet stockholder expectations, particularly with respect to financials, cost-cutting programs, operating margins, and earnings per share, could result in volatility in the market value of the Company’s stock. The regulatory approval, permitting, construction, startup and/or operation of pipelines, power generation and transmission facilities may involve unanticipated events, delays and unrecoverable costs.
The SEC has adopted new rules that require the Company to provide greater disclosures around cybersecurity risk management, strategy, and governance, as well as disclose the occurrence of material cybersecurity incidents. The Company cannot predict or estimate the amount of additional costs it will incur in order to comply with these rules or the timing of such costs.
The SEC has adopted rules that require the Company to provide disclosures around cybersecurity risk management, strategy, and governance, as well as disclose the occurrence of material cybersecurity incidents. These rules may also require the Company to report a cybersecurity incident before the Company has been able to fully assess its impact or remediate the underlying issue.
Nonpayment and/or nonperformance by the Company's customers and counterparties, particularly customers and counterparties of the Company’s pipeline and construction services businesses for large construction projects, could have a negative impact on the Company's results of operations and cash flows.
Nonpayment and/or nonperformance by the Company's customers and counterparties, particularly customers and counterparties of the Company’s pipeline business, could have a negative impact on the Company's results of operations and cash flows. The Company could also have indirect credit risk from participating in energy markets such as MISO in which credit losses are socialized to all participants.
Higher interest rates on borrowings have impacted and could further impact the Company's future operating results, as evidenced by the Company's increased interest expense in 2023 as discussed in Item 7 - MD&A. Financial market changes could impact the Company’s pension and postretirement benefit plans and obligations.
Higher interest rates on borrowings have impacted and could further impact the Company's future operating results.
If these costs are not fully recoverable from customers, they could have an adverse effect on the Company’s results of operations and cash flows. The backlog at the Company's construction services business may not accurately represent future revenue. Backlog consists of the uncompleted portion of services to be performed under job-specific contracts.
If these costs are not fully recoverable from customers, they could have an adverse effect on the Company’s results of operations and cash flows. Supply chain disruptions may adversely affect Company operations. The Company relies on third-party vendors and manufacturers to supply many of the materials necessary for its operations.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeManagement's Role Managing Risk The CIO plays a large role in informing the audit committee on cybersecurity risks. The audit committee receives presentations and reports from the CIO on cybersecurity related issues which include information security, technology risks and risk mitigation programs regularly at the quarterly board meetings.
Biggest changeThe audit committee of the board of directors receives presentations and reports from the CIO on cybersecurity related issues which include information security, technology risks and risk mitigation programs regularly at the quarterly board meetings. In addition to scheduled meetings, the CIO and audit committee of the board of directors maintain an ongoing dialogue regarding emerging or potential cybersecurity risks.
Monitor, Manage, and Safeguard Against Cybersecurity Incidents and Risks The Company's CIO, along with the director of cybersecurity and a designated security team of professionals, are responsible for assessing and managing risks as well as developing and implementing policies, procedures, and practices based on the range of threats faced by the Company.
Monitor, Manage, and Safeguard Against Cybersecurity Incidents and Risks The Company's CIO, along with its director of cybersecurity and a designated security team of professionals, are responsible for assessing and managing risks as well as developing and implementing policies, procedures, and practices based on the range of threats faced by the Company.
Other Risk Factors See also “Item 1A – Risk Factors – Other Risks – Technology disruptions or cyberattacks could adversely impact the Company's operations.” Governance Board of Directors Oversight The board, as a whole and through its committees, has responsibility for oversight of risk management.
See “Item 1A – Risk Factors – Other Risks – Technology disruptions or cyberattacks could adversely impact the Company's operations.” Governance Board of Directors Oversight The Company's board of directors, as a whole and through its committees, has responsibility for oversight of risk management.
Item 1C. Cybersecurity Risk Management and Strategy Overall Risk Management The Company has implemented a cyber risk management program to help ensure that the Company's electronic information and information systems are protected from various threats. The cyber risk management program is maintained as part of the Company's overall governance, enterprise risk management program and compliance program.
Item 1C. Cybersecurity Risk Management and Strategy Overall Risk Management The Company has implemented a cyber risk management program to help ensure that the Company's electronic information and information systems are protected from various threats. The cyber risk management program is maintained as part of the Company's overall governance, ERM program and compliance program.
The other members of information technology director level leadership also responsible for managing cybersecurity risks have a combined 95 years of experience and have degrees including Bachelor of Computer Information Systems, information systems management, electronics, electrical engineering, business administration, and accounting, along with certified information systems auditor certification and a cybersecurity fundamentals certificate.
The other members of information technology director level leadership also responsible for managing cybersecurity risks have degrees including Bachelor of Computer Information Systems, information systems management, electronics, electrical engineering, business administration, and accounting, along with certified information systems auditor certification and a cybersecurity fundamentals certificate.
In its risk oversight role, the board of directors has the responsibility to satisfy itself that the risk management processes designed and implemented by management are adequate for identifying, assessing, and managing risk. The audit committee of the board of directors of the Company is responsible for oversight of risks from cybersecurity threats.
In its risk oversight role, the board of directors has the responsibility to satisfy itself that the risk management processes designed and implemented by management are adequate for identifying, assessing, and managing risk. The audit committee of the board of directors of the Company is responsible for oversight of risks from cybersecurity threats. 28 MDU Resources Group, Inc.
Cyber Risk Oversight Committee Additionally, in 2014 the board of directors established CyROC to provide executive management and the audit committee with analyses, appraisals, recommendations and pertinent information concerning cyber defense of the Company's electronic information, information technology and operation technology systems. The CyROC is responsible for guiding the Company's comprehensive cybersecurity policies.
Cyber Risk Oversight Committee Additionally, in 2014 the board of directors established CyROC to provide executive management and the audit committee of the board of directors with analyses, appraisals, recommendations and pertinent information concerning cyber defense of the Company's electronic information, information technology and operation technology systems.
The Company's information systems experience ongoing and often sophisticated cyberattacks by a variety of sources with the apparent aim to breach the Company's cyber-defenses. The Company may face increased cyber risk due to the increased use of employee-owned devices and work from home arrangements. The Company is continuously reevaluating the need to upgrade and/or replace systems and network infrastructure.
The Company's information systems experience ongoing and often sophisticated cyberattacks by a variety of sources with the apparent aim to breach the Company's cyber-defenses. The Company has and may continue to face increased cyber risk due to the increased use of employee-owned devices and work from home arrangements.
There are processes around access management, data security, encryption, asset management, secure system development, security operations, network and device security to provide safeguards from a cybersecurity incident along with continual monitoring of various threat intelligence feeds. 30 MDU Resources Group, Inc. Form 10-K Index Part I Cyber Risk Management Personnel The Company's director of cybersecurity reports to the CIO.
There are processes around access management, data security, encryption, asset management, secure system development, security operations, network and device security to provide safeguards from a cybersecurity incident along with continual monitoring of various threat intelligence feeds. Cyber Risk Management Personnel The Company's director of cybersecurity reports to the CIO and the CIO reports directly to the Company's chief executive officer.
The director of cybersecurity has a bachelor’s degree in computer information systems, 25 years of information security experience, and holds certified information systems security professional and certified risk and information systems control certifications. The members of the designated cybersecurity team that report to the director of cybersecurity have a combined 57 years of experience.
The director of cybersecurity has a bachelor’s degree in computer information systems, over 25 years of information security experience, and holds certified information systems security professional and certified risk and information systems control certifications.
The CyROC is chaired by the Company's CIO and is comprised of members such as the chief financial officer, information technology leaders, internal auditors, and other leaders from the Company's business segments.
The CyROC is responsible for guiding the Company's comprehensive cybersecurity policies and oversight of cybersecurity risks. The CyROC is chaired by the Company's CIO and is comprised of members such as the chief financial officer, information technology leaders, internal auditors, and other leaders from across the Company.
Form 10-K 29 Index Part I Risks from Cybersecurity Threats Any risks from previous cybersecurity threats, including as a result of any previous cybersecurity incidents, have not materially affected or are reasonably likely to materially affect the Company's business, financial condition, or results of operations.
The Company continually assesses risks from cybersecurity threats and adapts and enhances its controls accordingly. Risks from Cybersecurity Threats Any risks from previous cybersecurity threats, including as a result of any previous cybersecurity incidents, have not materially affected or are reasonably likely to materially affect the Company's business, financial condition, or results of operations.
These upgrades and/or replacements could adversely impact operations by imposing substantial capital expenditures, creating delays or outages, or experiencing difficulties transitioning to new systems. System disruptions, if not anticipated and appropriately mitigated, could adversely affect the Company. The Company continually assesses risks from cybersecurity threats and adapts and enhances its controls accordingly. MDU Resources Group, Inc.
The Company is continuously reevaluating the need to upgrade and/or replace systems and network infrastructure. These upgrades and/or replacements could adversely impact operations by imposing substantial capital expenditures, creating delays or outages, or experiencing difficulties transitioning to new systems. System disruptions, if not anticipated and appropriately mitigated, could adversely affect the Company.
In addition to scheduled meetings, the CIO and audit committee maintain an ongoing dialogue regarding emerging or potential cybersecurity risks. Cybersecurity Incident Response The Company has an incident response plan to identify, protect, detect, respond to, and recover from cybersecurity threats and incidents that is also tested on an annual basis.
Cybersecurity Incident Response The Company has an incident response plan to identify, protect, detect, respond to, and recover from cybersecurity threats and incidents that is also tested on an annual basis. The incident response plan is updated based on results of the test or as new cyber related developments occur.
The CIO, who reports to the chief executive officer, holds a degree in Business Administration and oversees the information technology and cybersecurity portfolios for the Company with over 25 years of information technology experience and 19 years working directly in the energy and utilities business.
A new CIO from within the Company was named to succeed the retiring CIO and holds both a bachelor's and master's degree in business administration with over 25 years of information technology experience in the energy and utilities business.
Security protocols for the Company's operational technology follow applicable NERC, FERC and TSA regulations and security directives.
Security protocols for the Company's operational technology follow applicable NERC, FERC and TSA regulations and security directives. Other Risk Factors Notwithstanding the breadth of the Company's information security program, the Company may be unsuccessful in preventing or mitigating a cybersecurity event that could have a material adverse impact.
Removed
The incident response plan is updated based on results of the test or as new cyber related developments occur.
Added
Form 10-K Index Part I Management's Role Managing Risk The Company's CIO plays a large role in informing the audit committee of the board of directors on cybersecurity risks.
Added
The Company's CIO who served as the first CIO of the Company since 2016, oversaw the information technology and cybersecurity portfolios until her retirement on January 10, 2025.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changePursuant to SEC regulations, the Company has adopted a threshold of $1.0 million for purposes of determining whether disclosure of any such proceedings is required. For information regarding legal proceedings required by this item, see Item 8 - Note 22, which is incorporated herein by reference.
Biggest changePursuant to SEC regulations, the Company has adopted a threshold of $1.0 million for purposes of determining whether disclosure of any such proceedings is required. For information regarding legal proceedings required by this item, see Item 8 - Note 21, which is incorporated herein by reference. MDU Resources Group, Inc. Form 10-K 29 Index Part II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThe Company has an 86-year history of uninterrupted dividend payments to stockholders and remains committed to paying a competitive dividend as the Company transitions to being a pure-play regulated energy delivery company.
Biggest changeBased on the Company becoming a pure-play regulated energy delivery business, the Company's board of directors established a long-term dividend payout ratio target of 60 percent to 70 percent of regulated energy delivery earnings. The Company has an 87-year history of uninterrupted dividend payments to stockholders and remains committed to paying a competitive dividend.
The following table includes information with respect to the Company's purchase of equity securities: ISSUER PURCHASES OF EQUITY SECURITIES Period Total Number of Shares (or Units) Purchased (1) Average Price Paid per Share (or Unit) Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs (2) Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs (2) October 1 through October 31, 2023 — — — — November 1 through November 30, 2023 50,717 $18.73 — — December 1 through December 31, 2023 — — — — Total 50,717 $18.73 — — (1) Represents MDU original issue shares of common stock in connection with annual stock grants made to the Company's non-employee directors.
The following table includes information with respect to the Company's purchase of equity securities: ISSUER PURCHASES OF EQUITY SECURITIES Period Total Number of Shares (or Units) Purchased (1) Average Price Paid per Share (or Unit) Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs (2) Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs (2) October 1 through October 31, 2024 — — — — November 1 through November 30, 2024 46,341 $18.34 — — December 1 through December 31, 2024 — — — — Total 46,341 $18.34 — — (1) Represents MDU original issue shares of common stock in connection with annual stock grants made to the Company's non-employee directors.
Item 5. Market for the Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The Company's common stock is listed on the New York Stock Exchange under the symbol "MDU." As of December 31, 2023, the Company's common stock was held by approximately 9,200 stockholders of record.
Item 5. Market for the Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The Company's common stock is listed on the NYSE under the symbol "MDU." As of February 13, 2025, the Company's common stock was held by approximately 8,700 stockholders of record.
The declaration and payment of dividends is at the sole discretion of the board of directors, subject to limitations imposed by agreements governing the Company's indebtedness, federal and state laws, and applicable regulatory limitations. For more information on factors that may limit the Company's ability to pay dividends, see Item 8 - Note 13.
The Company depends on earnings and dividends from its subsidiaries to pay dividends on common stock. The declaration and payment of dividends is at the sole discretion of the board of directors, subject to limitations imposed by agreements governing the Company's indebtedness, federal and state laws, and applicable regulatory limitations.
Removed
Based on this anticipated future state as a pure-play regulated energy delivery business, the board of directors established a long-term dividend payout ratio target of 60 percent to 70 percent of regulated earnings. The Company depends on earnings and dividends from its subsidiaries to pay dividends on common stock.
Added
For more information on factors that may limit the Company's ability to pay dividends, see Item 8 - Note 12.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeForm 10-K Index Part II • Depreciation and amortization decreased $3.6 million. ◦ Primarily due to decreased amortization of plant retirement and closure costs of $5.3 million resulting from an extension to the recovery period for these costs, which are recovered in operating revenues, as discussed in Note 12. ◦ Partially offset by increased depreciation of $1.2 million associated with higher property, plant and equipment balances, the result of transmission projects placed in service to improve reliability and update aging infrastructure. • Taxes, other than income were comparable to the same period in the prior year. • Other income increased $5.3 million, primarily resulting from higher returns on the Company's nonqualified benefit plan investments of $4.7 million, as discussed in Note 9, and higher interest income of $1.3 million, largely related to contributions in aid of construction, offset in part by lower AFUDC equity due to higher average debt balance. • Interest expense decreased $500,000, as a result of higher AFUDC debt, largely due to higher rates, partially offset by higher average interest rates. • Income tax benefit decreased $4.4 million. ◦ Largely due to: ▪ Higher income taxes of $4.7 million related to higher taxable income. ▪ Decreased excess deferred income tax amortization. ◦ Partially offset by lower permanent tax adjustments. 2022 compared to 2021 Electric earnings increased $5.2 million as a result of: • Revenue increased $27.5 million. ◦ Largely attributable to: ▪ Higher fuel and purchased power costs of $17.9 million recovered in customer rates and offset in expense, as described below. ▪ Interim rate relief in North Dakota of $5.0 million. ▪ Higher net transmission revenues of $3.9 million, largely from increased investment, and higher transmission interconnect upgrades of $800,000. ▪ Higher retail sales volumes of 2.2 percent, primarily to residential customers, largely due to colder weather in the first and fourth quarters of the year. ◦ Partially offset by: ▪ Lower renewable tracker revenues associated with higher production tax credits offset in expense, as described below. ▪ Lower per unit average rates of $1.0 million related to block rates in certain jurisdictions. • Electric fuel and purchased power increased $17.9 million . ◦ Primarily the result of $17.4 million higher commodity price, including higher recovery of fuel clause adjustments, and increased retail sales volumes. • Operation and maintenance expense decreased $4.2 million. ◦ Primarily due to: ▪ Decreased payroll-related costs, largely $2.8 million related to the Heskett Station and Lewis & Clark Station plant closures and lower incentive accruals of $1.9 million. ▪ Reduced materials costs and contract services from the Heskett Station and Lewis & Clark Station plant closures. ▪ Reduced costs due to the absence of the Big Stone Station outage in 2021. ◦ Partially offset by increased contract services associated with a planned outage at Coyote Station of $2.6 million. • Depreciation and amortization increased $1.0 million, largely resulting from increased property, plant and equipment balances placed in service, mostly related to growth and replacement projects. • Taxes, other than income decreased $600,000, largely as a result of lower coal conversion taxes in certain jurisdictions. • Other income decreased $4.1 million, primarily due to lower returns on the Company's nonqualified benefit plan investments of $4.6 million, as discussed in Note 9, partially offset by higher AFUDC equity largely due to higher rates. • Interest expense increased $1.8 million, largely resulting from $3.2 million due to higher long-term debt balances, partially offset by higher AFUDC debt largely due to higher rates. • Income tax benefit decreased $2.3 million. ◦ Largely due to: ▪ Higher income taxes of $1.8 million related to higher taxable income. ▪ Higher permanent tax adjustments and decreased excess deferred amortization. ◦ Partially offset by higher production tax credits of $1.4 million driven by higher wind production.
Biggest changeAlthough residential volumes were lower, there was a 25.5 percent increase in volumes overall, which was largely driven by the data center as previously discussed and further discussed in the outlook section. • Electric fuel and purchased power increased $15.4 million, largely due to higher retail sales volumes, partially offset by lower commodity prices. • Operation and maintenance expense decreased $600,000. ◦ Largely the result of: ◦ Decreased Coyote Station costs of $1.7 million due to the absence of the planned outage in 2022. ◦ Lower materials expense of $500,000, partially due to the closure of Units 1 and 2 at Heskett Station. ◦ Partially offset by increased payroll-related costs, which include higher employee incentive accruals. • Depreciation and amortization decreased $3.6 million. ◦ Primarily due to decreased amortization of plant retirement and closure costs of $5.3 million resulting from an extension to the recovery period for these costs, which are recovered in operating revenues, as discussed in Note 12. ◦ Partially offset by increased depreciation of $1.2 million associated with higher property, plant and equipment balances, the result of transmission projects placed in service to improve reliability and update aging infrastructure. • Taxes, other than income were comparable to the same period in the prior year. • Other income increased $5.3 million. ◦ Largely due to: ▪ Higher returns on the Company's nonqualified benefit plan investments of $4.7 million, as discussed in Note 9. ▪ Higher interest income of $1.3 million, largely related to contributions in aid of construction. ◦ Offset in part by lower AFUDC equity due to higher average debt balance. • Interest expense decreased $500,000, as a result of higher AFUDC debt, largely due to higher rates, partially offset by higher average interest rates. • Income tax benefit decreased $4.4 million. ◦ Largely due to: ▪ Higher income taxes of $4.7 million related to higher taxable income. ▪ Decreased excess deferred income tax amortization. ◦ Partially offset by lower permanent tax adjustments.
Generally, contract modifications are for goods or services that are not distinct from the existing contract due to the significant integration of services provided in the context of the contract and are accounted for as if they were part of that existing contract.
Generally, contract modifications were for goods or services that are not distinct from the existing contract due to the significant integration of services provided in the context of the contract and were accounted for as if they were part of that existing contract.
The Company retained approximately 10 percent or 5.7 million shares of Knife River common stock immediately following the separation, which was disposed of in a tax-free exchange in November 2023. The separation of Knife River was a tax-free spinoff transaction to the Company's stockholders for U.S. federal income tax purposes.
The Company retained approximately 10 percent or 5.7 million shares of Knife River common stock immediately following the separation, which were disposed of in a tax-free exchange in November 2023. The separation of Knife River was a tax-free spinoff transaction to the Company's stockholders for U.S. federal income tax purposes.
The agreement contains customary covenants and provisions, including a covenant of Intermountain not to permit, at any time, the ratio of debt to total capitalization to be greater than 65 percent. Other covenants include restrictions on the sale of certain assets, limitations on indebtedness and the making of certain investments.
The credit agreement contains customary covenants and provisions, including a covenant of Intermountain not to permit, at any time, the ratio of total debt to total capitalization to be greater than 65 percent. Other covenants include restrictions on the sale of certain assets, limitations on indebtedness and the making of certain investments.
While the amount of commercial paper outstanding does not reduce available capacity under the revolving credit agreement, Montana-Dakota does not issue commercial paper in an aggregate amount exceeding the available capacity under their credit agreement.
While the amount of commercial paper outstanding does not reduce available capacity under the revolving credit agreement, Montana-Dakota does not issue commercial paper in an aggregate amount exceeding the available capacity under the credit agreement.
The segment reviews and secures existing permits and easements, as well as new permits and easements as necessary, to meet current demand and future growth opportunities on an ongoing basis. The Company continues to actively manage the national supply chain challenges being faced by working with its manufacturers and suppliers to help mitigate some of these risks on its business.
The segment reviews and secures existing permits and easements, as well as new permits and easements as necessary, to meet current demand and future growth opportunities on an ongoing basis. The Company continues to actively manage the national supply chain challenges by working with its manufacturers and suppliers to help mitigate some of these risks on its business.
Differences between actuarial assumptions and actual plan results are deferred and amortized into expense when the accumulated differences exceed 10 percent of the greater of the projected benefit obligation or the market-related value of plan assets. Therefore, this change in asset values will be reflected in future expenses of the plans beginning in 2024.
Differences between actuarial assumptions and actual plan results are deferred and amortized into expense when the accumulated differences exceed 10 percent of the greater of the projected benefit obligation or the market-related value of plan assets. Therefore, this change in asset values will be reflected in future expenses of the plans beginning in 2025.
For more information on the Company's tracking mechanisms and recent rate cases, see Items 1 and 2 - Business Properties and Item 8 - Note 21. These segments are also subject to extensive regulation related to certain operational and environmental compliance, cybersecurity, permit terms and system integrity.
For more information on the Company's tracking mechanisms and recent rate cases, see Items 1 and 2 - Business Properties and Item 8 - Note 20. These segments are also subject to extensive regulation related to certain operational and environmental compliance, cybersecurity, permit terms and system integrity.
Market Trends The Company continues to manage the inflationary pressures experienced throughout the United States, including the impact that inflation, rising interest rates, commodity price volatility and supply chain disruptions may have on its business and customers and proactively looks for ways to lessen the impact to its business.
Market Trends The Company continues to manage the inflationary pressures experienced throughout the United States, including the impact that inflation, higher interest rates, commodity price volatility and supply chain disruptions may have on its business and customers and proactively looks for ways to lessen the impact to its business.
Within the past year, there have been cyber and physical attacks within the energy industry on infrastructure, such as substations, and the Company continues to evaluate the safeguards implemented to protect its electric and natural gas utility systems. Implementation of enhancements and additional requirements to protect the Company's infrastructure is ongoing.
There have been cyber and physical attacks within the energy industry on infrastructure, such as substations, and the Company continues to evaluate the safeguards implemented to protect its electric and natural gas utility systems. Implementation of enhancements and additional requirements to protect the Company's infrastructure is ongoing.
If the carrying value of a reporting unit exceeds its fair value, the Company must record an impairment loss for the amount that the carrying value of the reporting unit, including goodwill, exceeds the fair value of the reporting unit. For the years ended December 31, 2023, 2022 and 2021, there were no impairment losses recorded.
If the carrying value of a reporting unit exceeds its fair value, the Company must record an impairment loss for the amount that the carrying value of the reporting unit, including goodwill, exceeds the fair value of the reporting unit. For the years ended December 31, 2024, 2023 and 2022, there were no impairment losses recorded.
The Company recognizes construction contract revenue over time using an input method based on the cost-to-cost measure of progress for contracts because it best depicts the transfer of assets to the customer which occurs as the Company incurs costs on the contract.
The Company recognized construction contract revenue over time using an input method based on the cost-to-cost measure of progress for contracts because it best depicts the transfer of assets to the customer which occurs as the Company incurs costs on the contract.
The following table summarizes the outstanding revolving credit facilities of the Company's subsidiaries at December 31, 2023: Company Facility Facility Limit Amount Outstanding Letters of Credit Expiration Date (In millions) Montana-Dakota Utilities Co.
The following table summarizes the outstanding revolving credit facilities of the Company's subsidiaries at December 31, 2024: Company Facility Facility Limit Amount Outstanding Letters of Credit Expiration Date (In millions) Montana-Dakota Utilities Co.
The effect of a contract modification on the transaction price and the measure of progress for the performance obligation to which it relates, is recognized as an adjustment to revenue on a cumulative catch-up basis. The Company's construction contracts generally contain variable consideration including liquidated damages, performance bonuses or incentives, claims, unpriced change orders and penalties or index pricing.
The effect of a contract modification on the transaction price and the measure of progress for the performance obligation to which it relates, was recognized as an adjustment to revenue on a cumulative catch-up basis. The Company's construction contracts generally contained variable consideration including liquidated damages, performance bonuses or incentives, claims, unpriced change orders and penalties or index pricing.
The agreement contains customary covenants and provisions, including a covenant of the Company not to permit, at any time, the ratio of total debt to total capitalization to be greater than 65 percent. The covenants also include certain restrictions on the sale of certain assets, loans and investments.
The agreement contains customary covenants and provisions, including a covenant of Montana-Dakota not to permit, at any time, the ratio of total debt to capitalization to be greater than 65 percent. The covenants also include certain restrictions on the sale of certain assets, loans and investments.
Over the long-term, the Company expects overall electric demand to be positively impacted by increased electrification trends, including electric vehicle adoption, as a means to address economy-wide carbon emission concerns and changing customer conservation patterns.
Over the long-term, the Company expects overall electric demand to be positively impacted by increased electrification trends, including electric vehicle adoption, as a means to address economy-wide carbon emission concerns, data center growth and changing customer conservation patterns.
On May 31, 2023, the Company entered into a $200.0 million revolving credit agreement with a SOFR-based variable interest rate and a maturity date of May 31, 2028. Any borrowings under the revolving credit agreement are classified as long-term debt as they are intended to be refinanced on a long-term basis through continued borrowings.
MDU Resources Group, Inc. On May 31, 2023, the Company entered into a $200.0 million revolving credit agreement with a SOFR-based variable interest rate and a maturity date of May 31, 2028. Any borrowings under the revolving credit agreement are classified as long-term debt as they are intended to be refinanced on a long-term basis through continued borrowings.
For a discussion of the Company's most recent cases by jurisdiction, see Item 8 - Note 21. 36 MDU Resources Group, Inc. Form 10-K Index Part II In late summer and fall of 2023, electric fuel and purchased power prices increased across Montana-Dakota's integrated system.
For a discussion of the Company's most recent cases by jurisdiction, see Item 8 - Note 20. 34 MDU Resources Group, Inc. Form 10-K Index Part II In late summer and fall of 2023, electric fuel and purchased power prices increased across Montana-Dakota's integrated system.
Material short-term cash requirements of the Company include repayment of outstanding borrowings and interest payments on those agreements, payments on operating lease agreements, payment of obligations on purchase commitments and asset retirement obligations. At December 31, 2023, the current portion of asset retirement obligations was $784,000 and was included in other accrued liabilities on the Consolidated Balance Sheets.
Material short-term cash requirements of the Company include repayment of outstanding borrowings and interest payments on those agreements, payments on operating lease agreements, payment of obligations on purchase commitments and asset retirement obligations. At December 31, 2024, the current portion of asset retirement obligations was $296,000 and was included in Other accrued liabilities on the Consolidated Balance Sheets.
It is anticipated that all of the funds required for capital expenditures for the years 2024 through 2026 will be funded by various sources, including internally generated funds; credit facilities and commercial paper of the Company and its subsidiaries, as described later; and issuance of debt and equity securities if necessary.
It is anticipated that all of the funds required for capital expenditures for the years 2025 through 2027 will be funded by various sources, including internally generated funds; credit facilities and commercial paper of the Company and its subsidiaries, as described later; and issuance of debt and equity securities if necessary.
For more information on the assumptions used in determining plan costs, see Item 8 - Note 19. Income taxes The Company is required to make judgments regarding the potential tax effects of various financial transactions and ongoing operations to estimate the Company's obligation to taxing authorities. These tax obligations include income, real estate, franchise and sales/use taxes.
For more information on the assumptions used in determining plan costs, see Item 8 - Note 18. Income taxes The Company is required to make judgments regarding the potential tax effects of various financial transactions and ongoing operations to estimate the Company's obligation to taxing authorities. These tax obligations include income, property, franchise and sales/use taxes.
The variable amounts usually arise upon achievement of certain performance metrics or change in project scope.
The variable amounts usually arose upon achievement of certain performance metrics or change in project scope.
Assumptions as to the occurrence of future events and the likelihood and amount of variable consideration are made during the contract performance period. Estimates of variable consideration and assessment of anticipated performance and all information (historical, current and forecasted) that is reasonably available to management.
Assumptions as to the occurrence of future events and the likelihood and amount of variable consideration were made during the contract performance period. Estimates of variable consideration and assessment of anticipated performance and all information (historical, current and forecasted) that was reasonably available to management.
Outlook In 2023, the Company experienced rate base growth of 8.5 percent and expects these segments will grow rate base by approximately 7 percent annually over the next five years on a compound basis. Operations are spread across eight states where the Company expects customer growth to be higher than the national average.
Outlook In 2024, the utility business experienced rate base growth of 6.8 percent and expects these segments will grow rate base by approximately 7 percent to 8 percent annually over the next five years on a compound basis. Operations are spread across eight states where the Company expects customer growth to be higher than the national average.
This was caused by transmission congestion in northwest North Dakota due to delays in additional SPP transmission line build-out, as well as additional load growth in the Bakken region. Electric fuel and purchased power prices remained elevated into November.
This was caused by transmission congestion in northwest North Dakota due to delays in additional SPP transmission line build-out, as well as additional load growth in the Bakken region. Electric fuel and purchased power prices remained elevated through January 2024.
The agreement contains customary covenants and provisions, including a covenant of Cascade not to permit, at any time, the ratio of debt to total capitalization to be greater than 65 percent. Other covenants include restrictions on the sale of certain assets, limitations on indebtedness and the making of certain investments.
The credit agreement contains customary covenants and provisions, including a covenant of Cascade not to permit, at any time, the ratio of total debt to total capitalization to be greater than 65 percent. Other covenants include restrictions on the sale of certain assets, limitations on indebtedness and the making of certain investments. 50 MDU Resources Group, Inc.
To assist in the recovery of higher natural gas costs, Intermountain filed an out-of-cycle purchased gas adjustment with the IPUC that was effective February 1, 2023, and is collecting interest costs associated with short-term borrowing with rates effective October 1, 2023.
To assist in the recovery of higher natural gas costs, Intermountain filed an out-of-cycle purchased gas adjustment with the IPUC that was effective February 1, 2023, and collected interest costs associated with short-term borrowing.
In 2023 and 2022, these segments experienced retail customer growth of approximately 1.3 percent and 1.6 percent, respectively, and the Company expects customer growth to continue to average 1 percent to 2 percent per year.
In 2024 and 2023, these segments experienced retail customer growth of approximately 1.4 percent and 1.3 percent, respectively, and the Company expects customer growth to continue to average 1 percent to 2 percent per year.
As a project commences, estimates are continually monitored and revised as information becomes available and actual costs and conditions surrounding the job become known. If a loss is anticipated on a contract, the loss is immediately recognized. Contracts are often modified to account for changes in contract specifications and requirements.
As a project commences, estimates were continually monitored and revised as information became available and actual costs and conditions surrounding the job became known. If a loss was anticipated on a contract, the loss was immediately recognized. Contracts are often modified to account for changes in contract specifications and requirements.
A 50 basis point change in the assumed discount rate and the expected long-term return on plan assets would have had the following effects at December 31, 2023: Pension Benefits Other Postretirement Benefits 50 Basis Point Increase 50 Basis Point Decrease 50 Basis Point Increase 50 Basis Point Decrease Discount rate (In millions) Projected benefit obligation as of December 31, 2023 $ (12.0) $ 13.0 $ (1.7) $ 1.9 Net periodic benefit cost (credit) for 2024 $ .1 $ (.1) $ (.2) $ .2 Expected long-term return on plan assets Net periodic benefit cost (credit) for 2024 $ (1.4) $ 1.4 $ (.4) $ .4 A 100 basis point change in the assumed health care cost trend rates would have had the following effects at December 31, 2023: 100 Basis Point Increase 100 Basis Point Decrease (In millions) Service and interest cost components for 2024 $ — $ — Postretirement benefit obligation as of December 31, 2023 $ 0.4 $ (0.4) The Company plans to continue to use its current methodologies to determine plan costs.
A 50 basis point change in the assumed discount rate and the expected long-term return on plan assets would have had the following effects at December 31, 2024: Pension Benefits Other Postretirement Benefits 50 Basis Point Increase 50 Basis Point Decrease 50 Basis Point Increase 50 Basis Point Decrease Discount rate (In millions) Projected benefit obligation as of December 31, 2024 $ (10.5) $ 11.3 $ (1.5) $ 1.6 Net periodic benefit cost (credit) for 2025 $ .1 $ (.1) $ (.2) $ .2 Expected long-term return on plan assets Net periodic benefit cost (credit) for 2025 $ (1.3) $ 1.3 $ (.4) $ .4 A 100 basis point change in the assumed health care cost trend rates would have had the following effects at December 31, 2024: 100 Basis Point Increase 100 Basis Point Decrease (In millions) Service and interest cost components for 2025 $ — $ — Postretirement benefit obligation as of December 31, 2024 $ 0.3 $ (0.3) The Company plans to continue to use its current methodologies to determine plan costs.
Form 10-K 53 Index Part II The increase in cash provided by financing activities in 2023 from 2022 was primarily due to higher issuance of short-term borrowings associated with the debt for equity exchange of the Knife River retained shares, as well as the issuance of short-term borrowings at the natural gas distribution business to fund higher natural gas costs.
The increase in cash provided by financing activities in 2023 from 2022 was primarily due to higher issuance of short-term borrowings associated with the debt for equity exchange of the Knife River retained shares, as well as the issuance of short-term borrowings at the natural gas distribution business to fund higher natural gas costs.
The Company estimates the amount of revenue to be recognized on variable consideration using one of the two prescribed estimation methods, the expected value method or the most likely amount method, depending on which method best predicts the most likely amount of consideration the Company expects to be entitled to or expects to incur.
The Company estimated the amount of revenue to be recognized on variable consideration using one of the two prescribed estimation methods, the expected value method or the most likely amount method, depending on which method best predicted the most likely amount of consideration the Company expected to be entitled to or expected to incur.
At full capacity, the data center requires 180 megawatts of electricity, which is the equivalent of about 28 percent of the Company's generation portfolio. The Applied Digital Corporation's load will be purchased from the MISO market and will not impact other customers' power supply.
At full capacity, the data center requires 180 megawatts of electricity, which is the equivalent of about 28 percent of the Company's generation portfolio. Applied Digital's load is purchased from the MISO market and does not impact other customers' power supply.
With the exception of the rate base trading multiple, the Company adds a reasonable control premium when calculating the fair value utilizing the peer multiples, which is estimated as the premium that would be received in a sale in an orderly transaction between market participants.
With the exception of the rate base trading multiple, the Company adds a reasonable control premium when calculating the fair value utilizing the peer multiples, which is estimated as the premium that would be received in a sale in an orderly transaction between market participants. The Company used a 20 percent control premium in 2024, 2023 and 2022.
Pretax pension income reflected in the Consolidated Statements of Income for the years ended December 31, 2023, 2022 and 2021, was $580,000, $2.3 million and $1.7 million, respectively. The Company's pension expense is currently projected to be approximately $800,000 in 2024. Funding for the pension plans is actuarially determined.
Pretax pension income reflected in the Consolidated Statements of Income for the years ended December 31, 2023 and 2022, was $580,000 and $2.3 million, respectively. The Company's pension expense is currently projected to be approximately $3.4 million in 2025. Funding for the pension plans is actuarially determined.
The term loan agreement contains customary covenants and provisions, including a covenant of the Company not to permit, at any time, the ratio of total debt to total capitalization to be greater than 65 percent. The covenants also include certain restrictions on the sale of certain assets, loan and investments.
The agreement contains customary covenants and provisions, including a covenant of WBI Energy Transmission not to permit, at any time, the ratio of total debt to total capitalization to be greater than 65 percent. The covenants also include certain restrictions on the sale of certain assets, loans and investments.
The Company believes that the accounting subject to rate regulation remains appropriate and its regulatory assets are probable of recovery in current rates or in future rate proceedings. At December 31, 2023 and 2022, the Company's regulatory assets were $619.6 million and $494.8 million, respectively, and regulatory liabilities were $591.8 million and $474.9 million, respectively.
The Company believes that the accounting subject to rate regulation remains appropriate and its regulatory assets are probable of recovery in current rates or in future rate proceedings. At December 31, 2024 and 2023, the Company's regulatory assets were $537.8 million and $619.6 million, respectively, and regulatory liabilities were $596.3 million and $591.8 million, respectively.
The Company has determined that the reporting units for its goodwill impairment test are its operating segments, or components of an operating segment, that constitute a business for which discrete financial information is available and for which segment management regularly reviews the operating results. For more information on the Company's operating segments, see Item 8 - Note 18.
The Company has determined that the reporting units for its goodwill impairment test are its operating segments, or components of an operating segment, that constitute a business for which discrete financial information is available and for which segment management regularly reviews the operating results.
The Company considers contract modifications to exist when the modification either creates new or changes the existing enforceable rights and obligations.
The Company considered contract modifications to exist when the modification either created new or changes the existing enforceable rights and obligations.
The Company only includes variable consideration in the estimated transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur or when the uncertainty associated with the variable consideration is resolved. Changes in circumstances could impact management's estimates made in determining the value of variable consideration recorded.
The Company only included variable consideration in the estimated transaction price to the extent it was probable that a significant reversal of cumulative revenue recognized would not occur or when the uncertainty associated with the variable consideration was resolved. Changes in circumstances could have impacted management's estimates made in determining the value of variable consideration recorded.
Defined benefit pension plans The Company has noncontributory qualified defined benefit pension plans for certain employees. Plan assets consist of investments in equity and fixed-income securities. Various actuarial assumptions are used in calculating the benefit expense (income) and liability (asset) related to the pension plans. Actuarial assumptions include assumptions about the discount rate and expected return on plan assets.
Plan assets consist of investments in equity and fixed-income securities. Various actuarial assumptions are used in calculating the benefit expense (income) and liability (asset) related to the pension plans. Actuarial assumptions include assumptions about the discount rate and expected return on plan assets.
Form 10-K Index Part II Earnings overview - The following information summarizes the performance of the pipeline segment. 2023 vs. 2022 2022 vs. 2021 Years ended December 31, 2023 2022 2021 Variance Variance (In millions) Operating revenues $ 177.6 $ 155.6 $ 142.6 14 % 9 % Operating expenses: Operation and maintenance 70.8 60.9 61.3 16 % (1) % Depreciation and amortization 26.8 26.9 20.5 — % 31 % Taxes, other than income 10.8 12.3 12.7 (12) % (3) % Total operating expenses 108.4 100.1 94.5 8 % 6 % Operating income 69.2 55.5 48.1 25 % 15 % Other income 3.9 1.3 9.4 200 % (86) % Interest expense 13.3 10.1 6.7 32 % 51 % Income before income taxes 59.8 46.7 50.8 28 % (8) % Income tax expense 12.4 10.5 9.7 18 % 8 % Income from continuing operations $ 47.4 $ 36.2 $ 41.1 31 % (12) % Discontinued operations, net of tax* $ (.5) $ (.9) $ (.2) (44) % NM Net income $ 46.9 $ 35.3 $ 40.9 33 % (14) % *Discontinued operations includes interest on debt facilities repaid in connection with the Knife River separation.
Form 10-K 43 Index Part II Earnings overview - The following information summarizes the performance of the pipeline segment. 2024 vs. 2023 2023 vs. 2022 Years ended December 31, 2024 2023 2022 Variance Variance (In millions) Operating revenues $ 211.8 $ 177.6 $ 155.6 19 % 14 % Operating expenses: Operation and maintenance 75.7 70.8 60.9 7 % 16 % Depreciation and amortization 29.4 26.8 26.9 10 % — % Taxes, other than income 12.2 10.8 12.3 13 % (12) % Total operating expenses 117.3 108.4 100.1 8 % 8 % Operating income 94.5 69.2 55.5 37 % 25 % Other income 6.5 3.9 1.3 67 % 200 % Interest expense 15.5 13.3 10.1 17 % 32 % Income before income taxes 85.5 59.8 46.7 43 % 28 % Income tax expense 17.5 12.4 10.5 41 % 18 % Income from continuing operations 68.0 47.4 36.2 43 % 31 % Discontinued operations, net of tax* — (.5) (.9) (100) % (44) % Net income $ 68.0 $ 46.9 $ 35.3 45 % 33 % *Discontinued operations includes interest on debt facilities repaid in connection with the Knife River separation.
These programs include new tax incentives for solar, battery storage and hydrogen development along with funding to expand the production of electric vehicles and the build out of infrastructure to support electric vehicles. The Company will continue to monitor the implementation of these legislative items.
These programs include new tax incentives for solar, battery storage and hydrogen development along with funding to expand the production of electric vehicles and the build out of infrastructure to support electric vehicles.
To assist in the recovery of the higher fuel and purchased power costs, Montana-Dakota filed waiver requests with the NDPSC and SDPUC, which were approved on October 24, 2023 and November 7, 2023, respectively, deferring the increased costs to the annual fuel clause adjustment. In Montana, the waiver request is filed monthly and is unopposed by the MTPSC.
To assist in the recovery of the higher electric fuel and purchased power costs, Montana-Dakota filed waiver requests with the NDPSC and SDPUC, which were approved deferring the increased costs to the annual fuel clause adjustment. In Montana, the waiver request is filed monthly and was unopposed by the MTPSC.
NM - not meaningful Operating statistics 2023 2022 2021 Transportation volumes (MMdk) 567.2 482.9 471.1 Customer natural gas storage balance (MMdk): Beginning of period 21.2 23.0 25.5 Net injection (withdrawal) 16.5 (1.8) (2.5) End of period 37.7 21.2 23.0 2023 compared to 2022 Pipeline earnings increased $11.6 million as a result of: • Revenues increased $22.0 million. ◦ Driven by increased transportation volumes, largely due to: ▪ Increased contracted volume commitments and a full year of benefit from the North Bakken Expansion project of $9.9 million. ▪ Increased transportation volumes and demand revenue from other organic growth projects placed in service in November 2023 and August 2022. ◦ New rates effective August 1, 2023 of $5.0 million. ◦ Higher storage-related revenues. ◦ Higher non-regulated project revenues of $2.6 million. ◦ Partially offsetting these increases was non-renewal of certain contracts. • Operation and maintenance increased $9.9 million. ◦ Primarily due to: ▪ Higher payroll-related costs of $6.9 million, largely related to higher incentive accruals and benefit-related costs. ▪ Higher non-regulated project costs of $1.2 million directly associated with higher non-regulated project revenues, as previously discussed. ▪ Higher contract services and insurance costs. • Depreciation and amortization decreased $100,000 due to fully depreciated plant, largely offset by higher plant balances associated with growth projects placed in-service, as previously discussed. • Taxes, other than income decreased $1.5 million largely resulting from lower property taxes in Montana. • Other income increased $2.6 million, primarily due to: ◦ Higher returns on the Company's nonqualified benefit plan investments, as discussed in Note 9. ◦ Higher AFUDC of $800,000 for the construction of the company's growth projects. • Interest expense in continuing operations increased $3.2 million, resulting from higher average interest rates and higher debt balances to fund capital expenditures, partially offset by higher AFUDC, as previously discussed. • Income tax expense in continuing operations increased $1.9 million, largely due to higher income before income taxes, partially offset by permanent tax adjustments.
Form 10-K Index Part II 2023 compared to 2022 Pipeline earnings increased $11.6 million as a result of: • Revenues increased $22.0 million. ◦ Driven by increased transportation volume revenues, largely due to: ▪ Increased contracted volume commitments and a full year of benefit from the North Bakken Expansion project of $9.9 million. ▪ Increased transportation volumes and demand revenue from other organic growth projects placed in service in November 2023 and August 2022. ◦ New rates effective August 1, 2023, of $5.0 million. ◦ Higher storage-related revenues ◦ Higher non-regulated project revenues of $2.6 million. ◦ Partially offsetting these increases was the non-renewal of certain contracts. • Operation and maintenance increased $9.9 million. ◦ Primarily due to: ▪ Higher payroll-related costs of $6.9 million, largely related to lower incentive accruals and benefit-related costs. ▪ Higher non-regulated project costs of $1.2 million directly associated with higher non-regulated project revenues, as previously discussed. ▪ Higher contract services and insurance costs. • Depreciation and amortization decreased $100,000 due to fully depreciated plant, largely offset by higher plant balances associated with growth projects placed in-service, as previously discussed. • Taxes, other than income decreased $1.5 million, largely resulting from lower property taxes in Montana. • Other income increased $2.6 million, primarily due to: ◦ Higher returns on the Company's nonqualified benefit plan investments, as discussed in Note 9. ◦ Higher AFUDC of $800,000 for the construction of the company's growth projects. • Interest expense in continuing operations increased $3.2 million, resulting from higher average interest rates and higher debt balances to fund capital expenditures, partially offset by higher AFUDC, as previously discussed. • Income tax expense in continuing operations increased $1.9 million, largely due to higher income before income taxes, partially offset by permanent tax adjustments.
On March 4, 2023, the Company began to provide power for Applied Digital Corporation's data center near Ellendale, North Dakota under an interim electric service agreement approved by the NDPSC, and on June 6, 2023, the NDPSC unanimously approved the Company's electric service agreement request.
Form 10-K Index Part II On March 4, 2023, the Company began to provide power for Applied Digital's data center near Ellendale, North Dakota under an interim electric service agreement approved by the NDPSC, and on June 6, 2023, the NDPSC unanimously approved the Company's electric service agreement request.
The decrease in the natural gas distribution reporting unit's cushion from the prior year was primarily attributable to the risk adjusted cost of capital increasing from 6.4 percent in 2022 to 6.7 percent 2023, which directly correlates with the treasury rates at the date of the test.
The increase in the natural gas distribution reporting unit's cushion from the prior year was primarily attributable to the risk adjusted cost of capital decreasing from 6.7 percent in 2023 to 5.9 percent in 2024, which directly correlates with the treasury rates at the date of the test.
As a result of the separation, the historical results of operations for Knife River are shown in discontinued operations, net of tax, except for allocated general corporate overhead costs of the Company, which are reflected in Other and do not meet the criteria for income (loss) from discontinued operations.
As a result of these separations, the historical results of operations for Knife River and Everus are shown in discontinued operations, net of tax, except for allocated general corporate overhead costs of the Company, which did not meet the criteria for discontinued operations and are reflected in Other.
If the owners decide to incur such costs, the costs could, dependent on determination by state regulatory commissions on approval to recover such costs from customers, negatively impact the Company's results of operations, financial position and cash flows. The NDDEQ submitted its state implementation plan to the EPA in August 2022.
If the owners decide to incur such costs, the costs could, dependent on determination by state regulatory commissions on approval to recover such costs from customers, negatively impact the Company's results of operations, financial position and cash flows.
In order to borrow under the respective debt instruments, the subsidiary companies must be in compliance with the applicable covenants and certain other conditions, all of which the subsidiaries, as applicable, were in compliance with at December 31, 2023.
In order to borrow under the respective debt agreements, the Company and its subsidiaries must be in compliance with the applicable covenants and certain other conditions, all of which the Company and its subsidiaries, as applicable, were in compliance with at December 31, 2024.
The accuracy of revenues reported on the Consolidated Financial Statements depends on, among other things, management's estimates of total costs to complete projects because the Company uses the cost-to-cost measure of progress on construction contracts for revenue recognition.
The recognition of revenue requires the Company to make estimates and assumptions that affect the reported amounts of revenue. The accuracy of revenues reported on the Consolidated Financial Statements depends on, among other things, management's estimates of total costs to complete projects because the Company used the cost-to-cost measure of progress on construction contracts for revenue recognition.
On May 31, 2023, the Company entered into a $150.0 million revolving credit agreement with a SOFR-based variable interest rate and a maturity date of May 29, 2024. At December 31, 2023, the Company had no amount outstanding.
On May 31, 2023, the Company entered into a $150.0 million revolving credit agreement with a SOFR-based variable interest rate and a maturity date of May 29, 2024. At December 31, 2023, the Company had no amount outstanding, which remained that way until this agreement matured and subsequently terminated in May 2024.
Also contributing were higher issuance of long-term debt at the Company to replace the Centennial debt repayment and to fund capital expenditures and increased cash provided by discontinued operations. Partially offsetting the increase was higher repayments of short-term and long-term debt at the construction services and natural gas distribution businesses.
Also contributing was higher issuance of long-term debt at the Company to replace the Centennial debt repayment and to fund capital expenditures. Partially offsetting the increase was higher repayments of short-term and long-term debt at the natural gas distribution businesses.
When determining if the variable consideration is constrained, the Company considers if factors exist that could increase the likelihood of the magnitude of a potential reversal of revenue.
When determining if the variable consideration was constrained, the Company considered if factors existed that could increase the likelihood of the magnitude of a potential reversal of revenue.
The amounts related to these items were as follows: Years ended December 31, 2023 2022 2021 (In millions) Intersegment transactions: Operating revenues $ 71.4 $ 69.7 $ 65.9 Operation and maintenance 9.3 11.5 7.0 Purchased natural gas sold 62.1 58.2 58.9 Other income 13.6 0.6 0.1 Interest expense 13.6 0.6 0.1 For more information on intersegment eliminations, see Item 8 - Note 18.
The amounts related to these items were as follows: Years ended December 31, 2024 2023 2022 (In millions) Intersegment transactions: Operating revenues $ 69.6 $ 63.1 $ 59.3 Operation and maintenance $ 0.7 $ 1.0 $ 1.1 Purchased natural gas sold $ 68.9 $ 62.1 $ 58.2 Other income $ 15.4 $ 13.6 $ 0.6 Interest expense $ 15.4 $ 13.6 $ 0.6 For more information on intersegment eliminations, see Item 8 - Note 17. 46 MDU Resources Group, Inc.
Consequently, the Company's financial position or results of operations may be materially different when reported under different conditions or when using different assumptions in the application of the following critical accounting estimates. Goodwill The Company performs its goodwill impairment testing annually in the fourth quarter.
Consequently, the Company's financial position or results of operations may be materially different when reported under different conditions or when using different assumptions in the application of the following critical accounting estimates. 52 MDU Resources Group, Inc. Form 10-K Index Part II Goodwill The Company performs its goodwill impairment testing annually in the fourth quarter.
Additionally, the Infrastructure Investment and Jobs Act, was enacted in the fourth quarter of 2021 and is providing long-term opportunities by designating funds for investments for upgrades to electric and grid infrastructure, transportation systems, airports and electric vehicle infrastructure, all industries this segment supports. In addition, the IRA provides $369 billion in new funding for clean energy programs.
The Infrastructure Investment and Jobs Act, commonly known as the Bipartisan Infrastructure Law, was enacted in the fourth quarter of 2021 and is providing long-term opportunities by designating funds for investments such as upgrades to electric and grid infrastructure, transportation systems, and electric vehicle infrastructure. In addition, the IRA provides $369 billion in new funding for clean energy programs.
Also included in discontinued operations are strategic initiative costs associated with the separation of Knife River.
Also included in discontinued operations are certain strategic initiative costs associated with the separations of Knife River and Everus.
Bakken natural gas production outlook remains positive with continued growth expected due to new oil wells and increasing gas to oil ratios. Increases in national and global natural gas supply has moderated pressure on natural gas prices and price volatility.
Bakken natural gas production is currently at or near record levels and the outlook remains positive with continued growth expected due to new oil wells and increasing gas to oil ratios. Increases in national and global natural gas supply have moderated pressure on natural gas prices and price volatility.
Capital resources The Company requires significant cash to support and grow its businesses. The primary sources of cash other than cash generated from operating activities are cash from revolving credit facilities, the issuance of long-term debt and the sale of equity securities. Debt resources Certain debt instruments of the Company's subsidiaries contain restrictive and financial covenants and cross-default provisions.
Capital resources The Company requires significant cash to support and grow its businesses. The primary sources of cash other than cash generated from operating activities are cash from revolving credit facilities, the issuance of long-term debt and the sale of equity securities.
Purchased natural gas sold includes the absence of the prior year disallowance of $845,000 ordered by the MNPUC. • Operation and maintenance increased $14.4 million. ◦ Primarily due to: ▪ Higher payroll-related costs of $12.6 million, primarily higher employee incentive accruals and straight-time payroll ▪ Increased uncollectible accounts expense of $1.6 million, largely due to higher revenue. ▪ Higher insurance expense of $1.0 million. ▪ Higher software related expenses of $900,000. ◦ Partially offset by: ▪ Lower contract services of $1.2 million, largely lower subcontract labor and consulting fees. ▪ Decreased other expenses, including regulatory deferrals, miscellaneous employee expenses, and gain on sale of the Company's customer service center. • Depreciation and amortization increased $5.9 million, primarily resulting from growth and replacement projects placed in service. • Taxes, other than income increased $4.1 million, largely from higher revenue-based taxes of $6.1 million which are recovered in rates, partially offset by lower property taxes due to lower assessed values of $2.3 million. • Other income increased $17.5 million, driven by higher interest income of $11.3 million, largely related to purchased gas costs, and higher returns on the Company's nonqualified benefit plans of $6.9 million, as discussed in Note 9.
Form 10-K 39 Index Part II • Operation and maintenance increased $14.4 million. ◦ Primarily due to: ▪ Higher payroll-related costs of $12.6 million, primarily higher employee incentive accruals and straight-time payroll. ▪ Increased uncollectible accounts expense of $1.6 million, largely due to higher revenue. ▪ Higher insurance expense of $1.0 million. ▪ Higher software related expenses of $900,000. ◦ Partially offset by: ▪ Lower contract services of $1.2 million, largely lower subcontract labor and consulting fees. ▪ Decreased other expenses, including regulatory deferrals, miscellaneous employee expenses, and gain on sale of the Company's customer service center. • Depreciation and amortization increased $5.9 million, primarily resulting from growth and replacement projects placed in service. • Taxes, other than income increased $4.1 million, largely from higher revenue-based taxes of $6.1 million which are recovered in rates, partially offset by lower property taxes due to lower assessed values of $2.3 million. • Other income increased $17.5 million. ◦ Driven by: ▪ Higher interest income of $11.3 million, largely related to purchased gas costs. ▪ Higher returns on the Company's nonqualified benefit plans of $6.9 million, as discussed in Note 9. ◦ Offset in part by higher pension and postretirement expense. • Interest expense increased $15.4 million, primarily from higher short-term and long-term debt balances from debt issued in 2023 and 2022 and higher interest rates, partially offset by higher AFUDC debt of $2.6 million, due to higher rates. • Income tax expense decreased $900,000 largely the result of higher permanent tax adjustments, partially offset by higher income before income taxes.
The fair value of each reporting unit is determined using a weighted combination of income and market approaches. The Company believes that the estimates and assumptions used in its impairment assessments are reasonable and based on available market information. 58 MDU Resources Group, Inc.
The fair value of each reporting unit is determined using a weighted combination of income and market approaches. The Company believes that the estimates and assumptions used in its impairment assessments are reasonable and based on available market information. The Company uses a discounted cash flow methodology for its income approach.
The electric and natural gas distribution segments are subject to extensive regulation in the jurisdictions where they conduct operations with respect to costs, timely recovery of investments and permitted returns on investment.
MDU Resources Group, Inc. Form 10-K 33 Index Part II The electric and natural gas distribution segments are subject to extensive regulation in the jurisdictions where they conduct operations with respect to costs, timely recovery of investments and permitted returns on investment.
Based on this assessment, management must evaluate the need for, and amount of, a valuation allowance against the deferred tax assets. As facts and circumstances change, adjustment to the valuation allowance may be required.
Based on this assessment, management must evaluate the need for, and amount of, a valuation allowance against the deferred tax assets. As facts and circumstances change, adjustment to the valuation allowance may be required. MDU Resources Group, Inc. Form 10-K 55 Index Part II
Form 10-K Index Part II The Company uses a discounted cash flow methodology for its income approach. Under the income approach, the discounted cash flow model determines fair value based on the present value of projected cash flows over a specified period and a residual value related to future cash flows beyond the projection period.
Under the income approach, the discounted cash flow model determines fair value based on the present value of projected cash flows over a specified period and a residual value related to future cash flows beyond the projection period.
Effective November 1, 2023, as approved by the WUTC, Cascade started recovery in Washington of these increased gas costs over a period of two years rather than the normal one year period. As of December 2023, Intermountain and Cascade have repaid $80.0 million and $100.0 million of the $125.0 million and $150.0 million short-term debt, respectively.
Effective November 1, 2023, as approved by the WUTC, Cascade started recovery in Washington of these increased gas costs over a period of two years rather than the normal one year period. In January 2024, Cascade and Intermountain made the final repayment on short-term debt of $50.0 million and $45.0 million, respectively.
Revolving credit agreement $ 200.0 (e) $ — $ 8.9 5/31/28 (a) The commercial paper program is supported by a revolving credit agreement with various banks (provisions allow for increased borrowings, at the option of Montana-Dakota on stated conditions, up to a maximum of $250.0 million). At December 31, 2023, there were no amounts outstanding under the revolving credit agreement.
Revolving credit agreement $ 200.0 (d) $ — $ 12.1 (c) 5/31/28 (a) The commercial paper program is supported by a revolving credit agreement with various banks (provisions allow for increased borrowings, at the option of Montana-Dakota on stated conditions, up to a maximum of $250.0 million).
Form 10-K 37 Index Part II Earnings overview - The following information summarizes the performance of the electric segment. 2023 vs. 2022 2022 vs. 2021 Years ended December 31, 2023 2022 2021 Variance Variance (In millions) Operating revenues $ 401.2 $ 377.1 $ 349.6 6 % 8 % Operating expenses: Electric fuel and purchased power 107.9 92.0 74.1 17 % 24 % Operation and maintenance 119.6 120.7 124.9 (1) % (3) % Depreciation and amortization 64.2 67.8 66.8 (5) % 1 % Taxes, other than income 16.7 16.9 17.5 (1) % (3) % Total operating expenses 308.4 297.4 283.3 4 % 5 % Operating income 92.8 79.7 66.3 16 % 20 % Other income 5.8 .5 4.6 NM (89) % Interest expense 28.0 28.5 26.7 (2) % 7 % Income before income taxes 70.6 51.7 44.2 37 % 17 % Income tax benefit (1.0) (5.4) (7.7) (81) % (30) % Net income $ 71.6 $ 57.1 $ 51.9 25 % 10 % NM - not meaningful Operating statistics 2023 2022 2021 Revenues (millions) Retail sales: Residential $ 134.1 $ 135.4 $ 123.0 Commercial 164.1 142.7 133.3 Industrial 42.3 43.0 40.5 Other 7.1 7.3 6.8 347.6 328.4 303.6 Other 53.6 48.7 46.0 $ 401.2 $ 377.1 $ 349.6 Volumes (million kWh) Retail sales: Residential 1,180.2 1,226.4 1,164.8 Commercial 2,350.5 1,437.7 1,433.0 Industrial 583.7 596.1 589.4 Other 81.8 83.7 84.4 4,196.2 3,343.9 3,271.6 Average cost of electric fuel and purchased power per kWh $ .024 $ .026 $ .021 2023 compared to 2022 Electric earnings increased $14.5 million as a result of: • Revenue increased $24.1 million. ◦ Largely attributable to: ▪ Higher fuel and purchased power costs of $15.9 million recovered in customer rates and offset in expense, as described below. ▪ Rate relief of $4.4 million in North Dakota and Montana. ▪ Higher data center revenue of $3.4 million, including net transmission. ▪ Higher transmission interconnect upgrades of $2.9 million. ◦ Partially offset by lower retail sales volumes of $2.4 million, driven primarily by lower residential volumes, largely due to cooler weather in the third quarter of the year.
Form 10-K 35 Index Part II Earnings overview - The following information summarizes the performance of the electric segment. 2024 vs. 2023 2023 vs. 2022 Years ended December 31, 2024 2023 2022 Variance Variance (In millions) Operating revenues $ 414.5 $ 401.2 $ 377.1 3 % 6 % Operating expenses: Electric fuel and purchased power 141.2 134.8 119.4 5 % 13 % Operation and maintenance 95.0 92.7 93.3 2 % (1) % Depreciation and amortization 66.5 64.2 67.8 4 % (5) % Taxes, other than income 17.6 16.7 16.9 5 % (1) % Total operating expenses 320.3 308.4 297.4 4 % 4 % Operating income 94.2 92.8 79.7 2 % 16 % Other income 8.2 5.8 .5 41 % NM Interest expense 30.0 28.0 28.5 7 % (2) % Income before income taxes 72.4 70.6 51.7 3 % 37 % Income tax benefit (2.4) (1.0) (5.4) 140 % (81) % Net income $ 74.8 $ 71.6 $ 57.1 4 % 25 % Operating statistics 2024 2023 2022 Revenues (millions) Retail sales: Residential $ 139.9 $ 134.1 $ 135.4 Commercial 165.8 164.1 142.7 Industrial 42.3 42.3 43.0 Other 7.8 7.1 7.3 355.8 347.6 328.4 Other 58.7 53.6 48.7 $ 414.5 $ 401.2 $ 377.1 Volumes (million kWh) Retail sales: Residential 1,159.5 1,180.2 1,226.4 Commercial 2,474.5 2,350.5 1,437.7 Industrial 528.9 583.7 596.1 Other 81.6 81.8 83.7 4,244.5 4,196.2 3,343.9 Average cost of electric fuel and purchased power per kWh $ .025 $ .024 $ .026 Cooling degree days (% warmer (colder) than prior year) 1 Montana (0.7) % (1.0) % (16.1) % North Dakota (2.2) % (5.4) % (26.8) % South Dakota (27.0) % (9.8) % (15.0) % Wyoming 46.1 % (26.4) % (9.3) % 1 Cooling degree days are a measure of the energy demand for cooling. 2024 compared to 2023 Electric earnings increased $3.2 million as a result of: • Revenue increased $13.3 million. ◦ Largely attributable to: ▪ Rate relief of $7.1 million in North Dakota, South Dakota and Montana. ▪ Higher fuel and purchased power costs of $6.4 million recovered in customer rates and offset in expense, as described below. ▪ Higher miscellaneous revenue of $2.4 million, including higher transmission interconnect upgrades. ◦ Partially offset by lower retail sales volumes of $2.6 million, driven primarily by lower residential volumes due to 37.0 percent cooler weather in the second quarter of 2024.
These estimates and assumptions are subject to a number of variables and are expected to change in the future. Estimates and assumptions will be affected by changes in the discount rate, the expected long-term return on plan assets and health care cost trend rates.
Estimates and assumptions will be affected by changes in the discount rate, the expected long-term return on plan assets and health care cost trend rates.
Goodwill impairment, if any, is measured by comparing the fair value of each reporting unit to its carrying value. If the fair value of a reporting unit exceeds its carrying value, the goodwill of the reporting unit is not impaired.
If the fair value of a reporting unit exceeds its carrying value, the goodwill of the reporting unit is not impaired.
Form 10-K Index Part II Planned utility investments in the Company's estimated capital expenditures for 2024 through 2026 include construction of electric transmission lines and substations, as well as natural gas delivery infrastructure, to serve a customer base that is expected to continue growing at 1 percent to 2 percent annually over the next five years; construction of JETx, a MISO approved project, in partnership with Otter Tail Power Company; and replacing and modernizing certain existing electric and natural gas utility infrastructure to ensure continued safe and reliable service to customers.
Planned utility investments in the Company's estimated capital expenditures for 2025 through 2027 include construction of electric transmission lines and substations, as well as natural gas delivery infrastructure, to serve a customer base that is expected to continue growing at 1 percent to 2 percent annually over the next five years, construction of JETx, power generation projects, and replace and modernize existing electric and natural gas utility infrastructure to ensure continued safe and reliable service to customers.
The decrease in cash flows provided by operating activities in 2023 from 2022 was largely driven by increased cash used in discontinued operations, primarily cash used at Knife River in the five months of 2023 compared to cash provided by Knife River in the twelve months of 2022 and higher costs incurred in 2023 associated with the Knife River separation.
Also contributing were lower cash provided by discontinued operations, primarily cash used at Knife River in the five months of 2023 compared to cash provided by Knife River in the twelve months of 2022 and higher costs incurred in 2023 associated with the Knife River separation.
The Company continues to actively evaluate cybersecurity processes and procedures, including changes in the industry's cybersecurity regulations, for opportunities to further strengthen its cybersecurity protections. Implementation of enhancements and additional requirements is ongoing.
The pipeline segment is subject to extensive regulation related to certain operational and environmental compliance, cybersecurity, permit terms and system integrity. The Company continues to actively evaluate cybersecurity processes and procedures, including changes in the industry's cybersecurity regulations, for opportunities to further strengthen its cybersecurity protections. Implementation of enhancements and additional requirements is ongoing.
A shortage of skilled personnel can create a competitive labor market which could increase costs incurred by the segment. Competition from other pipeline companies can also have a negative impact on the segment. 44 MDU Resources Group, Inc.
The industry in which it operates relies on a skilled workforce to construct energy infrastructure and operate existing infrastructure in a safe manner. A shortage of skilled personnel can create a competitive labor market which could increase costs incurred by the segment. Competition from other pipeline companies can also have a negative impact on the segment. MDU Resources Group, Inc.
Also included in Other is insurance activity at the Company's captive insurer and general and administrative costs and interest expense previously allocated to the exploration and production and refining businesses that do not meet the criteria for income (loss) from discontinued operations.
Also included in discontinued operations are certain strategic initiative costs associated with the separations of Knife River and Everus. Also included in Other is insurance activity at the Company's captive insurer and general and administrative costs and interest expense previously allocated to the exploration and production and refining businesses that did not meet the criteria for discontinued operations.
In March, April and May 2023, Intermountain paid down $20.0 million, $30.0 million and $30.0 million, respectively, of the outstanding balance, with the final $45.0 million repayment made on January 19, 2024.
On January 20, 2023, Intermountain entered into a $125.0 million term loan agreement with a SOFR-based variable interest rate and a maturity date of January 19, 2024. In March, April and May 2023, Intermountain paid down $20.0 million, $30.0 million and $30.0 million, respectively, of the outstanding balance, with the final $45.0 million repayment made on January 19, 2024.
Partially offsetting these items was higher cash from receivables due to the timing of the job activity, billing fluctuations and higher cash collections at the construction services business and the timing of collection of accounts receivable from customers at the natural gas distribution business.
Partially offsetting these items was higher cash from receivables due to the timing of collection of accounts receivable from customers at the natural gas distribution business. MDU Resources Group, Inc.
On May 31, 2023, the Company completed the separation of Knife River, formerly the construction materials and contracting segment, which resulted in two independent, publicly traded companies, MDU Resources Group, Inc. and Knife River. The Company's board of directors approved the distribution of approximately 90 percent of the issued and outstanding shares of Knife River to the Company's stockholders.
Strategic Initiatives On May 31, 2023, the Company completed the separation of Knife River, its construction materials and contracting business, resulting in Knife River becoming an independent, publicly-traded company. The Company's board of directors approved the distribution of approximately 90 percent of the issued and outstanding shares of Knife River to the Company's stockholders.
The Company will continue to monitor natural gas prices, as well as oil and natural gas production levels. In May 2022, the Company began construction of Heskett Unit 4, an 88-MW simple-cycle natural gas-fired combustion turbine peaking unit at the existing Heskett Station near Mandan, North Dakota.
In May 2022, the Company began construction of Heskett Unit 4, an 88-MW simple-cycle natural gas-fired combustion turbine peaking unit at the existing Heskett Station near Mandan, North Dakota. Heskett Unit 4 was in service and fully operational in July 2024.
Dividend restrictions For information on the Company's dividends and dividend restrictions, see Item 8 - Note 13. Material cash requirements For more information on the Company's contractual obligations on long-term debt, operating leases and purchase commitments, see Item 8 - Notes 10, 11 and 22.
Dividend restrictions For information on the Company's dividends and dividend restrictions, see Item 8 - Note 12. MDU Resources Group, Inc. Form 10-K 51 Index Part II Material cash requirements For more information on the Company's contractual obligations on long-term debt, operating leases and purchase commitments, see Item 8 - Notes 10 and 21.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

3 edited+2 added−1 removed2 unchanged
Biggest changeThe Company from time to time has utilized interest rate swap agreements to manage a portion of the Company's interest rate risk and may take advantage of such agreements in the future to minimize such risk. For additional information on the Company's long-term debt, see Item 8 - Notes 9 and 10.
Biggest changeFor additional information on the Company's long-term debt, see Item 8 - Notes 9 and 10. At December 31, 2024 and 2023, the Company had no outstanding interest rate hedges.
At December 31, 2023 and 2022, these contracts were not material. For more information on the Company's derivatives, see Item 8 - Note 2. 62 MDU Resources Group, Inc. Form 10-K Index Part II
At December 31, 2024 and 2023, these contracts were not material. For more information on the Company's derivatives, see Item 8 - Note 2. 56 MDU Resources Group, Inc. Form 10-K Index Part II
Form 10-K 61 Index Part II The following table shows the amount of long-term debt, which excludes unamortized debt issuance costs and discount, and related weighted average interest rates, both by expected maturity dates, as of December 31, 2023. 2024 2025 2026 2027 2028 Thereafter Total Fair Value (Dollars in millions) Long-term debt: Fixed rate $ 61.3 $ 157.7 $ 140.7 $ 20.7 $ 75.7 $ 1,468.2 $ 1,924.3 $ 1,672.1 Weighted average interest rate 4.2 % 4.0 % 5.8 % 7.3 % 4.4 % 4.4 % 4.5 % Variable rate $ — $ 190.0 $ — $ 46.1 $ 144.2 $ — $ 380.3 $ 380.3 Weighted average interest rate — % 6.6 % — % 8.5 % 5.9 % — % 6.6 % Commodity price risk The Company enters into commodity price derivative contracts to minimize the price volatility associated with natural gas costs for its customers at its natural gas distribution segment.
The following table shows the amount of long-term debt, which excludes unamortized debt issuance costs and discount, and related weighted average interest rates, both by expected maturity dates, as of December 31, 2024. 2025 2026 2027 2028 2029 Thereafter Total Fair Value (Dollars in millions) Long-term debt: Fixed rate $ 161.7 $ 144.7 $ 24.7 $ 79.7 $ 74.7 $ 1,562.4 $ 2,047.9 $ 1,718.7 Weighted average interest rate 4.0 % 5.7 % 6.9 % 4.4 % 4.5 % 4.5 % 4.6 % Variable rate $ — $ — $ — $ 81.4 $ 169.7 $ — $ 251.1 $ 251.1 Weighted average interest rate — % — % — % 4.8 % 5.8 % — % 5.5 % Commodity price risk The Company enters into commodity price derivative contracts to minimize the price volatility associated with natural gas costs for its customers at its natural gas distribution segment.
Removed
At December 31, 2023 and 2022, the Company had no outstanding interest rate hedges. MDU Resources Group, Inc.
Added
As of December 31, 2024, approximately 10.9 percent of the outstanding debt recorded on the balance sheet consisted of variable interest rate facilities (which uses SOFR as the benchmark rate).
Added
An increase of 1 percent in the interest rate on the Company's outstanding variable interest rate facilities over the next 12 months, based on the balances outstanding for these borrowings as of December 31, 2024, would result in an estimated $2.5 million pre-tax annual increase in interest expense.

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