10q10k10q10k.net

What changed in MDU RESOURCES GROUP INC's 10-K — 2022 vs 2023

vs

Paragraph-level year-over-year comparison of MDU RESOURCES GROUP INC's 2022 and 2023 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 2023 report.

+390 added−427 removedSource: 10-K (2024-02-22) vs 10-K (2023-02-24)

Top changes in MDU RESOURCES GROUP INC's 2023 10-K

390 paragraphs added · 427 removed · 271 edited across 5 sections

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

89 edited+12 added−39 removed85 unchanged
Biggest changeForm 10-K 33 Index Part I The Company’s accounting systems and its ability to collect information and invoice customers for products and services could be disrupted. If the Company’s operations are disrupted, it could result in decreased revenues and remediation costs that could adversely affect the Company's results of operations and cash flows.
Biggest changeIf the Company’s operations are disrupted, it could result in decreased revenues and remediation costs that could adversely affect the Company's results of operations and cash flows. The Company is subject to cybersecurity and privacy laws, regulations and security directives of many government agencies, including TSA, FERC and NERC.
In addition, neither the IRS private letter ruling nor the 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 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.
Further, the opinion(s) of tax advisors represent the judgment of such tax advisors and are not binding on the IRS or any court, and the IRS or a court may disagree with the conclusions in the opinion(s) of tax advisors.
Further, opinion(s) of tax advisors represent the judgment of such tax advisors and are not binding on the IRS or any court, and the IRS or a court may disagree with the conclusions in the opinion(s) of tax advisors.
The Company, primarily at its electric, natural gas distribution and pipeline businesses, is facing increasing stakeholder scrutiny related to environmental, social and governance matters. Recently, the Company has seen a rise in certain stakeholders, such as investors, customers, employees and lenders, placing increasing importance on the impacts and social cost associated with climate change.
The Company, primarily at its electric, natural gas distribution and pipeline businesses, is facing increasing stakeholder scrutiny related to environmental, social and governance matters. The Company has seen a rise in certain stakeholders, such as investors, customers, employees and lenders, placing increasing importance on the impacts and social cost associated with climate change.
The construction, startup and operation of natural gas pipelines and electric power generation and transmission facilities involve many risks, which may include delays; breakdown or failure of equipment; inability to obtain required governmental permits and approvals; inability to obtain or renew easements; public opposition; inability to complete financing; inability to negotiate acceptable equipment acquisition, construction, fuel supply, off-take, transmission, transportation or other material agreements; changes in markets and market prices for power; cost increases and overruns; the risk of performance below expected levels of output or efficiency; and the inability to obtain full cost recovery in regulated rates.
The construction, startup and operation of natural gas pipelines and electric power generation and transmission facilities involve many risks, which may include delays; breakdown or failure of equipment; inability to obtain required governmental permits and approvals; inability to obtain or renew easements; public opposition; inability to complete financing; inability to negotiate acceptable equipment acquisition, construction, fuel supply, off-take, transmission, transportation or other material agreements; contractor performance failures; changes in markets and market prices for power; cost increases and overruns; the risk of performance below expected levels of output or efficiency; and the inability to obtain full cost recovery in regulated rates.
The level of demand for construction products and services could be adversely impacted by the economic conditions in the industries the Company serves, as well as in the general economy. State and federal budget issues affect the funding available for infrastructure spending.
The level of demand for construction services could be adversely impacted by the economic conditions in the industries the Company serves, as well as in the general economy. State and federal budget issues affect the funding available for infrastructure spending.
The Company could also incur additional withdrawal liability if its withdrawal from a plan is determined by that plan to be part of a mass withdrawal. Technology disruptions or cyberattacks could adversely impact the Company's operations.
The Company could also incur an additional withdrawal liability if its withdrawal from a plan is determined by that plan to be part of a mass withdrawal. Technology disruptions or cyberattacks could adversely impact the Company's operations.
The Company's operations are exposed to fluctuations in prices for labor, oil, cement, 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, 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.
In 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.
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.
Notwithstanding receipt of the IRS private letter ruling and the opinion(s) of tax advisors, the IRS could determine that the 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 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.
Certain risks increase as the Company's energy delivery infrastructure ages, including breakdown or failure of equipment, pipeline leaks and fires developing from power lines, all of which have occurred and may recur in the future resulting in material costs. Aging infrastructure is more prone to failure, which increases maintenance costs, unplanned outages and the need to replace facilities.
Certain risks increase as the Company's energy delivery infrastructure ages, including breakdown or failure of equipment, pipeline leaks and fires developing from power lines, all of which have occurred and may reoccur in the future resulting in material costs. Aging infrastructure is more prone to failure, which increases maintenance costs, unplanned outages and the need to replace facilities.
Because the Company's electric and natural gas utility and pipeline systems are part of larger interconnecting systems, any attacks on the Company's infrastructure causing a disruption could result in a significant decrease in revenues and an increase in system repair costs negatively impacting the Company's financial position, results of operations and cash flows.
Because the Company's electric and natural gas utility and pipeline systems are part of larger interconnecting systems, any attacks on the interconnected systems or the Company's infrastructure causing a disruption could result in a significant decrease in revenues and an increase in system repair costs negatively impacting the Company's financial position, 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 proposed separation of Knife River Holding Company.
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.
These hazards and operating risks have occurred and may recur 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 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.
Economic volatility affects the Company's operations, as well as the demand for its products and services. Unfavorable economic conditions can negatively affect the level of public and private expenditures on projects and the timing of these projects which, in turn, can negatively affect demand for the Company's products and services, primarily at the Company's construction businesses.
Economic volatility affects the Company's operations, as well as the demand for its products and services. Unfavorable economic conditions can negatively affect the level of public and private expenditures on projects and the timing of these projects which, in turn, can negatively affect demand for the Company's products and services, primarily at the Company's construction business.
The Company is exposed to risk of loss resulting from the nonpayment and/or nonperformance by the Company's customers and counterparties . If the Company's customers or counterparties experience financial difficulties, which has occurred and may recur in the future, the Company could experience difficulty in collecting receivables.
The Company is exposed to risk of loss resulting from the nonpayment and/or nonperformance by the Company's customers and counterparties . If the Company's customers or counterparties experience financial difficulties, which has occurred and may reoccur in the future, the Company could experience difficulty in collecting receivables.
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 operation, costs of or access to capital and impact or limit business plans.
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.
The Company is subject to environmental laws and regulations affecting many aspects of its operations, including air and water quality, wastewater discharge, the generation, transmission and disposal of solid waste and hazardous substances, aggregate permitting and other environmental considerations.
The Company is subject to environmental laws and regulations affecting many aspects of its operations, including air and water quality, wastewater discharge, the generation, transmission and disposal of solid waste and hazardous substances, and other environmental considerations.
Nonpayment and/or nonperformance by the Company's customers and counterparties, particularly customers and counterparties of the Company’s pipeline, construction materials and contracting 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 and construction services businesses for large construction projects, could have a negative impact on the Company's results of operations and cash flows.
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, including COVID-19, 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.
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.
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, including COVID-19. • War. • Terrorist attacks. • Cyberattacks.
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.
The regulatory approval, permitting, construction, startup and/or operation of pipelines, power generation and transmission facilities, and aggregate reserves may involve unanticipated events, delays and unrecoverable costs.
The regulatory approval, permitting, construction, startup and/or operation of pipelines, power generation and transmission facilities may involve unanticipated events, delays and unrecoverable costs.
Adverse weather conditions, which have occurred and may recur, such as heavy or sustained rainfall or snowfall, storms, wind and colder weather may affect the demand for products and the ability to perform services at the construction businesses and affect ongoing operation and maintenance and construction activities for the electric and natural gas transmission and distribution businesses.
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.
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.
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.
Generally, these agreements are directly with a third-party client; however, services may be performed by the venture, the joint venture partners or a combination thereof. Engaging in joint venture contracts exposes the Company to risks and uncertainties, some of which are outside the Company's control.
Generally, these agreements are directly with a third-party client; however, services may be performed by the venture, the joint venture partners or a combination thereof. Engaging in joint venture contracts exposes the Company to risks and uncertainties, some of which are outside the Company's control. 24 MDU Resources Group, Inc.
To the extent financial markets view climate change and emissions of GHGs as a financial risk, this could negatively affect the Company's ability to access capital markets or result in less competitive terms and conditions.
To the extent financial markets view climate change and emissions of GHGs as a financial risk, this could negatively affect the Company's ability to access capital markets or result in less competitive terms and conditions. MDU Resources Group, Inc.
Plans classified as being in one of these statuses are required to adopt RPs or FIPs to improve their funded status through increased contributions, reduced benefits or a combination of the two.
Plans classified as being in one of these statuses are required to adopt RPs or FIPs to improve their funded status through increased contributions, reduced benefits or a combination of the two. MDU Resources Group, Inc.
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.
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.
The Company is reliant on joint venture partners to satisfy their contractual obligations, including obligations to commit working capital and equity, and to perform the work as outlined in the agreement. Failure to do so could result in the Company providing additional investments or services to address such performance issues.
Form 10-K Index Part I The Company is reliant on joint venture partners to satisfy their contractual obligations, including obligations to commit working capital and equity, and to perform the work as outlined in the agreement. Failure to do so could result in the Company providing additional investments or services to address such performance issues.
The Company, through the ordinary course of business, requires access to sensitive customer, supplier, employee and Company data. While the Company has implemented extensive security measures, including limiting the amount of sensitive information retained, a breach of its systems could compromise sensitive data and could go unnoticed for some time.
Form 10-K Index Part I The Company, through the ordinary course of business, requires access to sensitive customer, supplier, employee and Company data. While the Company has implemented extensive security measures, including limiting the amount of sensitive information retained, a breach of its systems could compromise sensitive data and could go unnoticed for some time.
Until the market has fully evaluated the Company's remaining businesses without Knife River Holding Company, the price at which shares of the Company common stock trade may fluctuate more significantly than might otherwise be typical, even with other market conditions, including general volatility, held constant.
Until the market has fully evaluated the Company's remaining businesses without MDU Construction Services, the price at which shares of the Company common stock trade may fluctuate more significantly than might otherwise be typical, even with other market conditions, including general volatility, held constant.
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, permitting and environmental compliance for construction material facilities, 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, particularly relating to electric generation, and natural gas transmission and storage operations.
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. Also, the regulatory 26 MDU Resources Group, Inc.
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.
This may include interruption of electric generation, transmission and distribution facilities, natural gas storage and pipeline facilities and facilities for delivery of construction materials or other products and services, 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.
Form 10-K I ndex Part I If the distribution, together with related transactions, fails to qualify as a transaction that is generally tax-free for U.S. federal income tax purposes under Sections 355 and 368(a)(1)(D) of the Code, in general, for U.S. federal income tax purposes, the Company would recognize taxable gain as if it had sold Knife River Holding Company common stock in a taxable sale for its fair market value (unless the Company and Knife River Holding Company jointly make an election under Section 336(e) of the Code with respect to the distribution, in which case, in general, (a) the Company would recognize a taxable gain as if Knife River Holding Company had sold all of its assets in a taxable sale in exchange for an amount equal to the fair market value of Knife River Holding Company common stock and the assumption of all of its liabilities and (b) Knife River Holding Company would obtain a related step-up in the basis of its assets) and, if the distribution fails to qualify as a transaction that is generally tax-free for U.S. federal income tax purposes under Section 355, the Company's stockholders who receive Knife River Holding Company shares in the distribution would be subject to tax as if they had received a taxable distribution equal to the fair market value of such shares.
If the distribution, together with related transactions, fails to qualify as a transaction that is generally tax-free for U.S. federal income tax purposes under Sections 355 and 368(a)(1)(D) of the Code, in general, for U.S. federal income tax purposes, the Company would recognize taxable gain as if it had sold MDU Construction Services common stock in a taxable sale for its fair market value (unless the Company and MDU Construction Services jointly make an election under Section 336(e) of the Code with respect to the distribution, in which case, in general, (a) the Company would recognize a taxable gain as if MDU Construction Services had sold all of its assets in a taxable sale in exchange for an amount equal to the fair market value of MDU Construction Services common stock and the assumption of all of its liabilities and (b) MDU Construction Services would obtain a related step-up in the basis of its assets) and, if the distribution fails to qualify as a transaction that is generally tax-free for U.S. federal income tax purposes under Section 355, the Company's stockholders who receive MDU Construction Services shares in the distribution would be subject to tax as if they had received a taxable distribution equal to the fair market value of such shares. 20 MDU Resources Group, Inc.
Form 10-K I ndex Part I process of approving rates for these businesses may not allow for timely and full recovery of the costs of providing services or a return on the Company's invested capital. Changes in regulatory requirements or operating conditions may require early retirement of certain assets.
Also, the regulatory process of approving rates for these businesses may not allow for timely and full recovery of the costs of providing services or a return on the Company's invested capital. Changes in regulatory requirements or operating conditions may require early retirement of certain assets.
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.
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.
The Company may also be required to increase its contributions to MEPPs if the other participating employers in such plans withdraw from the plans and are not able to contribute amounts sufficient to fund the unfunded liabilities associated with their participation in the plans.
Form 10-K 27 Index Part I The Company may also be required to increase its contributions to MEPPs if the other participating employers in such plans withdraw from the plans and are not able to contribute amounts sufficient to fund the unfunded liabilities associated with their participation in the plans.
The Company' construction businesses try to mitigate some or all cost increases through increases in selling prices, maintaining positive relationships with numerous raw material suppliers, and escalation clauses in contracting services contracts and fuel surcharges.
The Company's construction business tries to mitigate some or all cost increases through increases in selling prices, maintaining positive relationships with numerous raw material suppliers, and escalation clauses in contracting services contracts and fuel surcharges.
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.
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.
In the event the IRS were to prevail in such challenge, the Company and its stockholders could be subject to significant U.S. federal income tax liability. 24 MDU Resources Group, Inc.
In the event the IRS were to prevail in such challenge, the Company and its stockholders could be subject to significant U.S. federal income tax liability.
If oil and natural gas prices increase significantly, which has occurred and may reoccur, customer demand could decline for utility, pipeline and construction products and services, which could impact the Company's results of operations and cash flows.
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.
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 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.
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.
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.
The Company may not achieve these and/or other anticipated benefits for a variety of reasons, including, among others, that: (a) the separation will require significant time and effort from management, which may divert management’s attention from operating and growing the business; (b) following the separation and distribution, the Company may be more susceptible to stock market fluctuations and other adverse events; (c) following the separation and distribution, the Company may not be able to maintain its historical practices with respect to dividends; (d) following the separation and distribution, the Company's business will be less diversified than prior to the separation and distribution; and (e) the other actions required to separate the Company and Knife River Holding Company’s respective businesses could disrupt their operations.
The Company may be unable to achieve the full strategic and financial benefits expected to result from the proposed separation of MDU Construction Services, or such benefits may be delayed or not occur at all, for a variety of reasons, including, among others, that: (a) the separation will require significant time and effort from management, which may divert management’s attention from operating and growing the business; (b) following the separation and distribution, the Company may be more susceptible to stock market fluctuations and other adverse events; (c) following the separation and distribution, the Company may not be able to maintain its historical practices with respect to dividends; (d) following the separation and distribution, the Company's business will be less diversified than prior to the separation and distribution; and (e) the other actions required to separate the Company and MDU Construction Services respective businesses could disrupt their operations.
The proposed separation is also complex, and completion of the proposed separation and the timing of its completion will be subject to a number of factors and conditions, including the readiness of the new company to operate as an independent public company and finalization of the capital structure of the new company.
The proposed separation is complex, and completion of the proposed separation and the timing of its completion will be subject to a number of factors and conditions, including the readiness of the new company to operate as an independent public company, finalization of the capital structure of the new company and final approval by the board of directors, among other things.
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 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.
If the Company’s utility and pipeline operations do not receive timely and full recovery of GHG emission compliance costs from customers, then such costs could adversely impact the results of operations and cash flows. Significant reductions in demand for the MDU Resources Group, Inc.
If the Company’s utility and pipeline operations do not receive timely and full recovery of GHG emission compliance costs from customers, then such costs could adversely impact the results of operations and cash flows.
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. 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. MDU Resources Group, Inc. Form 10-K 21 Index Part I The Company's operations involve risks that may result from catastrophic events.
Form 10-K 31 Index Part I 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 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.
Unanticipated developments could delay, prevent or otherwise adversely affect the proposed separation, including, but not limited to, changes in general economic and financial market conditions, material adverse changes in business or industry conditions, unanticipated costs and potential problems or delays in obtaining various regulatory and tax approvals or clearances.
Unanticipated developments could delay, prevent or otherwise adversely affect the proposed separation, including, but not limited to, changes in general economic and financial market conditions and material adverse changes in business or industry conditions.
The following are additional factors that should be considered for a better understanding of the risks to the Company.
General risk factors that could impact the Company's businesses. The following are additional factors that should be considered for a better understanding of the risks to the Company.
Increases in severe weather conditions or extreme temperatures may cause infrastructure construction projects to be delayed or canceled and limit resources available for such projects resulting in decreased revenue or increased project costs at the construction materials and contracting and construction services businesses.
Increases in severe weather conditions or extreme temperatures may cause infrastructure construction projects to be delayed or canceled and limit resources available for such projects resulting in decreased revenue or increased project costs at the construction services business. Utility customers’ energy needs vary with weather conditions, primarily temperature and humidity.
The Company may not achieve some or all of the expected benefits of the separation, and the separation may materially and adversely affect its financial position, results of operations and cash flows.
Form 10-K Index Part I The Company may not achieve some or all of the expected benefits of the proposed separation of MDU Construction Services, and the separation may materially and adversely affect its financial position, results of operations and cash flows.
The Company must attract, develop and retain executive officers and other professional, technical and skilled labor forces with the skills and experience necessary to successfully manage, operate and grow the Company's businesses.
The Company's operations may be negatively affected if it is unable to obtain, develop and retain key personnel and skilled labor forces. The Company must attract, develop and retain executive officers and other professional, technical and skilled labor forces with the skills and experience necessary to successfully manage, operate and grow the Company's businesses.
As these regulations evolve, the Company may experience increased compliance costs and may be at higher risk for violating these standards. Experiencing a cybersecurity incident could cause the Company to be non-compliant with applicable laws and regulations, causing the Company to incur costs related to legal claims, proceedings and regulatory fines or penalties.
Experiencing a cybersecurity incident could cause the Company to be non-compliant with applicable laws and regulations, causing the Company to incur costs related to legal claims, proceedings and regulatory fines or penalties.
Additionally, foreseen and unforeseen costs may be incurred in connection with the proposed separation, including fees such as advisory, accounting, tax, legal, reorganization, debt breakage, restructuring, severance/employee benefit-related, regulatory, SEC filing and other professional services, some of which may be incurred regardless if the separation occurs.
Additionally, foreseen and unforeseen costs may be incurred with the proposed separation, including fees such as advisory, accounting, tax, legal, reorganization, restructuring, and various other, some of which may be incurred regardless if the proposed separation occurs.
If the distribution, together with certain related transactions, does not 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.
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.
The Company provides natural gas and electric utility service, as well as construction materials and 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, as well as construction services, for some states and communities that are economically affected by the agriculture industry.
Additionally, the Company's electric generation and transmission systems and natural gas pipelines are part of interconnected systems with other operators’ facilities; therefore, a cyber-related disruption in another operator’s system could negatively impact the Company's business. MDU Resources Group, Inc.
Additionally, the Company's electric generation and transmission systems and natural gas pipelines are part of interconnected systems with other operators’ facilities; therefore, a cyber-related disruption in another operator’s system could negatively impact the Company's business. The Company’s accounting systems and its ability to collect information and invoice customers for products and services could be disrupted.
The Company's construction materials and contracting and construction services businesses may be exposed to warranty claims. The Company, particularly its construction businesses, may provide warranties guaranteeing the work performed against defects in workmanship and material.
The Company, particularly its construction services business, may provide warranties guaranteeing the work performed against defects in workmanship and material.
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, such as aluminum and steel.
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. General risk factors that could impact the Company's businesses.
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.
The Company buys and sells electricity that might be generated outside its service territory, depending upon system needs and market 30 MDU Resources Group, Inc. Form 10-K I ndex Part I opportunities. Extreme temperatures may create high energy demand and raise electricity prices, which could increase the cost of energy provided to customers.
The Company buys and sells electricity that might be generated outside its service territory, depending upon system needs and market opportunities. Extreme temperatures may create high energy demand and raise electricity prices, which could increase the cost of energy provided to customers. Climate change may impact a region’s economic health, which could impact revenues at all of the Company's businesses.
In addition, the Company may be required under contractual arrangements with customers to warrant any defects from subcontractors or failures in materials the Company purchased from third parties. While the Company generally requires suppliers to provide warranties that are consistent with those the Company 32 MDU Resources Group, Inc.
In addition, the Company may be required under contractual arrangements with customers to warrant any defects from subcontractors or failures in materials the Company purchased from third parties.
The Company is a holding company and relies on cash from its subsidiaries to pay dividends. The Company's investments in its subsidiaries comprise the Company's primary assets. The Company depends on earnings, cash flows and dividends from its subsidiaries to pay dividends on its common stock.
The Company depends on earnings, cash flows and dividends from its subsidiaries to pay dividends on its common stock.
Separation Risks The proposed separation of Knife River Holding Company into an independent, publicly traded company is subject to various risks and uncertainties, and may not be completed on the terms or timeline currently contemplated, if at all.
Separation Risks The proposed separation of MDU Construction Services into an independent, publicly traded company is subject to various risks and uncertainties, and may not be completed on the terms or timeline currently contemplated, if at all. On November 2, 2023, the Company announced its intent to pursue a tax-free spinoff of its wholly-owned construction services business, MDU Construction Services.
The execution of the proposed separation has required and will continue to require significant time and attention from the Company’s senior management and employees, which could disrupt the Company’s ongoing business and adversely affect financial results and results of operations.
The execution of the separation has required and may continue to require significant time and attention from the Company’s senior management and employees, which could cause disruption in business processes and adversely affect the Company's financial results and its results operations. Further the Company's employees may be distracted due to uncertainty regarding the future state of the Company.
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. 28 MDU Resources Group, Inc. Form 10-K I ndex Part I Changes in tax law may negatively affect the Company's business.
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.
Assumptions regarding future costs, returns on investments, interest rates and other actuarial assumptions have a significant impact on the funding requirements and expense recorded relating to these plans. Adverse changes in economic indicators, such as consumer spending, inflation data, interest rate changes, political developments and threats of terrorism, among other things, can create volatility in the financial markets.
Adverse changes in economic indicators, such as consumer spending, inflation data, interest rate changes, political developments and threats of terrorism, among other things, can create volatility in the financial markets.
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.
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.
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 various businesses are seasonal and subject to weather conditions that could adversely affect the Company's operations, revenues and cash flows.
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.
Changes to the value of various tax credits could change the economics of resources and the resource selection for the electric generation business. Regulation incorporates changes in tax law into the rate-setting process for the regulated energy delivery businesses, which could create timing delays before the impact of changes are realized.
Regulation incorporates changes in tax law into the rate-setting process for the regulated energy delivery businesses, which could create timing delays before the impact of changes are realized. The Company's operations could be negatively impacted by import tariffs and/or other government mandates.
The Company is subject to cybersecurity and privacy laws, regulations and security directives of many government agencies, including TSA, FERC and NERC. NERC issues comprehensive regulations and standards surrounding the security of bulk power systems and continually updates these requirements, as well as establishing new requirements with which the utility industry must comply.
NERC issues comprehensive regulations and standards surrounding the security of bulk power systems and continually updates these requirements, as well as establishing new requirements with which the utility industry must comply. As these regulations evolve, the Company may experience increased compliance costs and may be at higher risk for violating these standards.
As a result, unusual or adverse weather conditions could negatively affect the Company's results of operations, financial position and cash flows. Competition exists in all of the Company's businesses. The Company's businesses are subject to competition. Construction services' competition is based primarily on price and reputation for quality, safety and reliability.
In addition, severe weather can be destructive, causing outages and property damage, which could require additional remediation costs. As a result, unusual or adverse weather conditions could negatively affect the Company's results of operations, financial position and cash flows. Competition exists in all of the Company's businesses. The Company's businesses are subject to competition.
The Company may be unable to achieve the full strategic and financial benefits expected to result from the separation, or such benefits may be delayed or not occur at all.
In addition, if the separation is completed, the Company may not be able to achieve the full strategic and financial benefits that are expected to result from the separation.
The backlogs at the Company's construction materials and contracting and construction services businesses 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. 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.
Changes to federal, state and local tax laws have the ability to benefit or adversely affect the Company's earnings and customer costs. 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.
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.
Potential conflicts of interest may also arise out of any commercial arrangements that the Company or Knife River Holding Company may enter into in the future. Following the separation, there may be a substantial change in the Company's stockholder base and its stock price may fluctuate significantly.
Following the proposed separation, there may be a substantial change in the Company's stockholder base and its stock price may fluctuate significantly.
The increased volatility of the Company's common stock price following the distribution may have a material adverse effect on its business, financial condition and results of operations. The Company could experience temporary interruptions in business operations and incur additional costs as it separates information technology infrastructure and systems.
The increased volatility of the Company's common stock price following the distribution may have a material adverse effect on its business, financial condition and results of operations. 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.

… 60 more changes not shown on this page.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

1 edited+0 added−0 removed1 unchanged
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.
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.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

3 edited+2 added−1 removed1 unchanged
Biggest changeThe following table includes information with respect to the Company's purchase of equity securities: ISSUER PURCHASES OF EQUITY SECURITIES Period (a) Total Number of Shares (or Units) Purchased (1) (b) Average Price Paid per Share (or Unit) (c) Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs (2) (d) 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, 2022 — — — — November 1 through November 30, 2022 40,800 $30.64 — — December 1 through December 31, 2022 — — — — Total 40,800 $30.64 — — (1) Represents shares of common stock purchased on the open market in connection with annual stock grants made to the Company's non-employee directors and for those directors who elected to receive additional shares of common stock in lieu of a portion of their cash retainer.
Biggest changeThe 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 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 12.
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.
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, 2022, the Company's common stock was held by approximately 9,600 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 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.
Removed
The Company depends on earnings and dividends from its subsidiaries to pay dividends on common stock. The Company has paid uninterrupted dividends to stockholders for 85 consecutive years with an increase in the payout amount for the last 32 consecutive years.
Added
The 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.
Added
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.

Item 7. Management's Discussion & Analysis

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

174 edited+105 added−116 removed84 unchanged
Biggest changeForm 10-K 41 Index Part II 2022 compared to 2021 : Natural gas distribution earnings decreased $6.4 million as a result of: • Revenue increased $301.9 million, largely from: ◦ Higher purchased natural gas sold of $273.3 million recovered in customer rates that was offset in expense, as described below. ◦ Higher retail sales volumes of 13.7 percent across all customer classes due to colder weather, partially offset by weather normalization and decoupling mechanisms in certain jurisdictions. ◦ Higher revenue-based taxes recovered in rates of $10.1 million that were offset in expense, as described below. ◦ Approved rate relief of $3.6 million in certain jurisdictions and higher pipeline replacement mechanisms of $1.8 million. • Purchased natural gas sold increased $274.1 million, primarily due to: ◦ Higher natural gas costs as a result of higher market prices of $198.1 million, including the higher recovery of purchase gas adjustments related to the February 2021 cold weather event and the 2018 Enbridge pipeline rupture. ◦ Higher volumes of natural gas purchased due to increased retail sales volumes. ◦ Purchased natural gas sold includes the disallowance of $845,000 ordered by the MNPUC, as discussed in Note 20. • Operation and maintenance increased $11.2 million, primarily due to: ◦ Higher contract services of $6.4 million, primarily higher subcontractor costs. ◦ Higher payroll-related costs, including higher straight-time payroll of $4.7 million, partially offset by lower incentive accruals of $3.3 million. ◦ Higher other costs, partially resulting from inflation, including higher expected credit losses of $1.8 million from higher receivables balances associated with colder weather and higher gas costs; higher software costs of $1.6 million; higher vehicle fuel cost of $1.3 million; and higher office, travel, materials and other miscellaneous employee costs. • Depreciation, depletion and amortization increased $3.4 million. ◦ Largely from increased property, plant and equipment balances from growth and replacement projects placed in service. ◦ Partially offset by decreased depreciation rates in certain jurisdictions of $1.0 million. • Taxes, other than income increased $10.5 million, largely resulting from higher revenue-based taxes which are recovered in rates. • Other income decreased $4.8 million primarily related to lower returns on the Company's nonqualified benefit plan investments of $7.0 million, as discussed in Note 8, partially offset by increased interest income. • Interest expense increased $4.9 million, primarily from higher long-term debt balances and interest rates, partially offset by higher AFUDC debt largely due to higher rates. • Income tax expense decreased $600,000 due to lower income taxes of $1.5 million related to lower taxable income, partially offset by higher permanent tax adjustments. 2021 compared to 2020 Natural gas distribution earnings increased $7.6 million as a result of: • Revenue increased $123.7 million . ◦ Largely as a result of: ▪ Higher purchased natural gas sold of $93.9 million recovered in customer rates and was offset in expense, as described below. ▪ Approved rate relief in certain jurisdictions of $15.9 million. ▪ Increased retail sales volumes of 0.7 percent across all customer classes, including the benefit of weather normalization and decoupling mechanisms in certain jurisdictions. ▪ Increased transportation volumes of 9 percent, primarily to electric generation customers. ▪ Higher revenue-based taxes recovered in rates of $2.3 million that were offset in expense, as described below. ▪ Higher non-regulated project revenues of $1.7 million. ▪ Increased basic service charges due to customer growth and increased per unit average rates of $1.5 million each. • Purchased natural gas sold increased $93.9 million, primarily due to higher natural gas costs as a result of higher market prices. • Operation and maintenance increased $8.7 million. ◦ Primarily due to: ▪ Higher payroll-related costs of $4.3 million, largely related to health care costs and straight-time payroll. ▪ Decreased credits of $2.4 million for costs associated with the installation of meters partially from delaying meter replacements for safety measures implemented as a result of the COVID-19 pandemic. ▪ Higher expenses for materials, new software, insurance and vehicle fuel. ◦ Partially offset by: ▪ The absence of the write-off of an abandoned project in the third quarter of 2020 for $1.2 million. ▪ Decreased bad debt expense of $1.0 million as the impacts of the COVID-19 pandemic began to subside. • Depreciation, depletion and amortization increased $1.4 million. ◦ Largely from increased property, plant and equipment balances from growth and replacement projects placed in service. ◦ Partially offset by decreased depreciation rates in certain jurisdictions of $4.0 million. 42 MDU Resources Group, Inc.
Biggest changeForm 10-K 41 Index Part II • Operation and maintenance increased $11.2 million. ◦ Primarily due to: ▪ Higher contract services of $6.4 million, primarily higher subcontractor costs. ▪ Higher payroll-related costs, including higher straight-time payroll of $4.7 million, partially offset by lower incentive accruals of $3.3 million. ▪ Higher other costs, partially resulting from inflation, including higher expected credit losses of $1.8 million from higher receivables balances associated with colder weather and higher gas costs; higher software costs of $1.6 million; higher vehicle fuel cost of $1.3 million; and higher office, travel, materials and other miscellaneous employee costs. • Depreciation and amortization increased $3.4 million. ◦ Largely from: ▪ Increased property, plant and equipment balances from growth and replacement projects placed in service. ◦ Partially offset by: ▪ Decreased depreciation rates in certain jurisdictions of $1.0 million. • Taxes, other than income increased $10.5 million, largely resulting from higher revenue-based taxes which are recovered in rates. • Other income decreased $4.8 million primarily related to lower returns on the Company's nonqualified benefit plan investments of $7.0 million, as discussed in Note 9, partially offset by increased interest income. • Interest expense increased $4.9 million, primarily from higher long-term debt balances and interest rates, partially offset by higher AFUDC debt largely due to higher rates. • Income tax expense decreased $600,000 due to lower income taxes of $1.5 million related to lower taxable income, partially offset by higher permanent tax adjustments.
Within the past year, there have been cyber and physical attacks within the energy industry on energy 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.
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.
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. 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.
Intermountain 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. 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.
Larger or more complex projects typically result in higher margin opportunities since the segment assumes a higher degree of performance risk and there is greater utilization of the segment's resources for longer construction timelines. However, larger or more complex projects have a higher risk of regulatory and seasonal or cyclical delay.
Larger or more complex projects typically result in higher margin opportunities since the segment assumes a higher degree of performance risk and there is greater utilization of the segment's resources for longer construction timelines. However, larger or more complex projects can have a higher risk of regulatory and seasonal or cyclical delay.
MISO and NERC have recently announced concerns with reliability of the electric grid due to capacity shortages, which has resulted from rapid expansion of renewables and rapid reduction of baseload resources such as coal, while load growth has increased faster than expected.
Recently, MISO and NERC announced concerns with reliability of the electric grid due to capacity shortages, which has resulted from rapid expansion of renewables and rapid reduction of baseload resources such as coal, while load growth has increased faster than expected.
While the Company believes there will continue to be varying pressures on natural gas production levels and prices, the long-term outlook for natural gas prices continues to provide growth opportunity for industrial supply-related projects and seasonal pricing differentials provide opportunities for storage services.
While the Company believes there will continue to be varying pressures on natural gas production levels and prices, the long-term outlook for natural gas prices continues to provide growth opportunity for industrial supply and demand related projects and seasonal pricing differentials provide opportunities for natural gas storage services.
Montana-Dakota Montana-Dakota's objective is to maintain acceptable credit ratings in order to access the capital markets through the issuance of commercial paper. Historically, downgrades in credit ratings have not limited, nor are currently expected to limit, Montana-Dakota's ability to access the capital markets.
Montana-Dakota's objective is to maintain acceptable credit ratings in order to access the capital markets through the issuance of commercial paper. Historically, downgrades in credit ratings have not limited, nor are currently expected to limit, Montana-Dakota's ability to access the capital markets.
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 2023.
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.
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 17.
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.
Project schedules fluctuate, which can affect the amount of work performed in a given period. Smaller or less complex projects typically have a greater number of companies competing for them, and competitors at times may be more aggressive when pursuing available work.
Project schedules fluctuate, which can affect the amount of work performed in a given period. Smaller or less complex projects typically have a greater number of companies competing for them, and competitors at times may be more aggressive on pricing when pursuing available work.
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, 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.
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, 2022, 2021 and 2020, 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, 2023, 2022 and 2021, there were no impairment losses recorded.
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, the rate of compensation increase and health care cost trend rates.
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.
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, 2022.
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 December 2022 and January 2023, natural gas prices significantly increased across the Pacific Northwest from multiple price-pressuring events including wide-spread below-normal temperatures; higher natural gas consumption; reduced natural gas flows due to pipeline constraints, including maintenance in West Texas; and historically low regional natural gas storage levels.
In December 2022 and January 2023, natural gas prices significantly increased across the Pacific Northwest from multiple price-pressuring events including wide-spread below-normal temperatures and higher natural gas consumption; reduced natural gas flows due to pipeline constraints, including maintenance in West Texas; and historically low regional natural gas storage levels. Natural gas prices stabilized by March 2023.
The following table summarizes the outstanding revolving credit facilities of the Company's subsidiaries at December 31, 2022: 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, 2023: Company Facility Facility Limit Amount Outstanding Letters of Credit Expiration Date (In millions) Montana-Dakota Utilities Co.
Factors noted in Item 1A - Risk Factors can cause revenues to be realized in periods and at levels that are different from originally projected. 54 MDU Resources Group, Inc.
Factors noted in Item 1A - Risk Factors can cause revenues to be realized in periods and at levels that are different from originally projected. 50 MDU Resources Group, Inc.
For more information on the Company's tracking mechanisms and recent 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.
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.
In the event the subsidiaries do not comply with the applicable covenants and other conditions, alternative sources of funding may need to be pursued. As of December 31, 2022, the Company had investment grade credit ratings at all entities issuing debt. For more information on the covenants, certain other conditions and cross-default provisions, see Item 8 - Note 9.
In the event the subsidiaries do not comply with the applicable covenants and other conditions, alternative sources of funding may need to be pursued. As of December 31, 2023, the Company had investment grade credit ratings at all entities issuing debt. For more information on the covenants, certain other conditions and cross-default provisions, see Item 8 - Note 10.
Outlook In 2022, the Company experienced rate base growth of 7.8 percent and expects these segments will grow rate base by approximately 6 percent to 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 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.
In addition, inflationary or other pressures may increase the cost of materials under fixed-price contracts and may result in decreased margins on the project. The Company has worked to implement provisions in project contracts to allow for the pass-through of inflationary costs to customers where feasible and will continue to do so to mitigate the impacts.
In addition, inflationary or other pressures may increase the cost of materials under fixed-price contracts and may result in decreased margins on the project. The Company has worked to implement provisions in project contracts to allow for the pass-through of inflationary costs to customers where feasible and will continue to do so to mitigate the impacts. MDU Resources Group, Inc.
The Company continues to have bidding opportunities in the specialty contracting markets in which it operated in during 2022, as evidenced by the segment's backlog.
The Company continues to have bidding opportunities in the specialty contracting markets in which it operated in during 2023, as evidenced by the segment's backlog.
Productivity and performance on a project can vary period to period based on a number of factors, including unexpected project difficulties; unexpected project site conditions; project location, including locations with challenging operating conditions or difficult geographic characteristics; whether the work is on an open or encumbered right of way; inclement weather or severe weather events; environmental restrictions or regulatory delays; political or legal challenges related to a MDU Resources Group, Inc.
Productivity and performance on a project can vary period to period based on a number of factors, including unexpected project difficulties; unexpected project site conditions; project location, including locations with challenging operating conditions or difficult geographic characteristics; whether the work is on an open or encumbered right of way; inclement weather or severe weather events; environmental restrictions or regulatory delays; political or legal challenges related to a project; and the performance of third parties.
Business Segment Financial and Operating Data Following are key financial and operating data for each of the Company's business segments. Also included are highlights on key growth strategies, projections and certain assumptions for the Company and its subsidiaries and other matters of the Company's business segments.
A discussion of key financial data from the Company's business segments follows. Business Segment Financial and Operating Data Following are key financial and operating data for each of the Company's business segments. Also included are highlights on key growth strategies, projections and certain assumptions for the Company and its subsidiaries and other matters of the Company's business segments.
Based on the Company's assessment, the estimated fair value of the natural gas distribution reporting unit exceeded its carrying value, which includes $345.7 million of goodwill, by approximately 8 percent as of October 31, 2022.
Based on the Company's assessment, the estimated fair value of the natural gas distribution reporting unit exceeded its carrying value, which includes $345.7 million of goodwill, by approximately 4 percent as of October 31, 2023.
Partially offsetting the increase in cash flows provided by operating activities was higher working capital needs at the construction services business due to fluctuations in job activity resulting in higher receivables in the period, as well as lower collections of accounts receivable compared to 2021, offset in part by increased accounts payable.
Partially offsetting the increase was higher working capital needs at the construction services business due to fluctuations in job activity resulting in higher receivables in the period, as well as lower collections of accounts receivable compared to 2021, offset in part by increased accounts payable.
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 5.0 percent in 2021 to 6.4 percent 2022, which directly correlates with the treasury rates at the date of the test.
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.
In 2022 and 2021, these segments experienced retail customer growth of approximately 1.6 percent and 1.7 percent, respectively, and the Company expects customer growth to continue to average 1 percent to 2 percent per year.
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.
Form 10-K Index Part II The Company continues to proactively monitor and work with its manufacturers to reduce the effects of increased pricing and lead times on delivery of certain raw materials and equipment used in electric generation, transmission and distribution system and natural gas pipeline projects.
The Company continues to proactively monitor and work with its manufacturers to reduce the effects of increased pricing and lead times on delivery of certain raw materials and equipment used in electric generation, transmission and distribution system and natural gas pipeline projects.
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, 2022, the current portion of asset retirement obligations was $4.6 million 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, 2023, the current portion of asset retirement obligations was $784,000 and was included in other accrued liabilities on the Consolidated Balance Sheets.
The agreement contains customary covenants and provisions, including a covenant of MDU Energy Capital not to permit, at any time, the ratio of total debt to total capitalization to be greater than 70 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 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.
It is anticipated that all of the funds required for capital expenditures for the years 2023 through 2025 will be funded by various sources, including internally generated funds; credit facilities and commercial paper of the Company's 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 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.
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.
The credit 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 Company expects to meet its obligations for debt maturing within 12 months and its other operating and capital requirements from various sources, including internally generated funds; credit facilities and commercial paper of the Company's subsidiaries, as described later in Capital resources; and the issuance of debt and equity securities if necessary. MDU Resources Group, Inc.
The Company expects to meet its obligations for debt maturing within one year and its other operating and capital requirements from various sources, including internally generated funds; credit facilities and commercial paper of the Company and its subsidiaries, as described in Capital resources; and issuance of debt and equity securities if necessary.
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, 2022 and 2021, the Company's regulatory assets were $494.8 million and $476.5 million, respectively, and regulatory liabilities were $474.9 million and $445.1 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, 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.
While the amount of commercial paper outstanding does not reduce available capacity under the respective revolving credit agreements, Montana-Dakota and Centennial do not issue commercial paper in an aggregate amount exceeding the available capacity under their credit agreements.
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.
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.
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.
The risk adjusted cost of capital varies by reporting unit and was in the range of 6 percent to 10 percent in 2022, 5 percent to 9 percent for 2021 and 4 percent to 8 percent for 2020.
The risk adjusted cost of capital varies by reporting unit and was in the range of 6 percent to 10 percent in 2023, 6 percent to 9 percent for 2022 and 5 percent to 8 percent for 2021 from its continuing reporting units.
Form 10-K 39 Index Part II 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 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, depletion 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 8, 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. 2021 compared to 2020 Electric earnings decreased $3.7 million as a result of: • Revenue increased $17.6 million ◦ Higher fuel and purchased power costs of $7.2 million recovered in customer rates and offset in expense, as described below. ◦ Higher transmission revenues of $3.3 million. ◦ Higher transmission interconnect upgrades of $2.4 million. ◦ Higher MISO revenue of $2.0 million. ◦ Higher demand revenues of $1.5 million. ◦ Increased retail sales volumes of 2.1 percent, largely as a result of increased industrial and commercial sales volumes, offset in part by lower residential sales volumes, as the impacts of the COVID-19 pandemic began to reverse and businesses reopened. • Electric fuel and purchased power increased $7.2 million attributable to higher MISO costs as a result of increased energy costs, partially offset by decreased fuel costs associated with the Lewis & Clark Station plant closure. • Operation and maintenance expense increased $3.6 million. ◦ Primarily the result of: ▪ Higher planned maintenance outage costs of $2.1 million at Big Stone Station and $800,000 higher maintenance fees at Thunder Spirit. ▪ Higher other miscellaneous expenses. ◦ Partially offset by lower payroll-related costs of $700,000, which includes lower employee incentive accruals, offset in part by higher health care costs. • Depreciation, depletion and amortization increased $3.8 million largely resulting from: ◦ Increased property, plant and equipment balances, primarily related to transmission projects placed in service. ◦ Increased amortization of plant retirement and closure costs of $1.7 million recovered in operating revenues, as discussed in Item 8 - Note 6. • Taxes, other than income was comparable to the same period in the prior year. 40 MDU Resources Group, Inc.
Form 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.
At October 31, 2022, the fair value substantially exceeded the carrying value at the Company's reporting units with goodwill, with the exception of the natural gas distribution reporting unit. The Company's annual impairment testing indicated the natural gas distribution reporting unit's fair value is not substantially in excess of its carrying value ("cushion").
At October 31, 2023, the fair value substantially exceeded the carrying value at the Company's construction services reporting unit. The Company's annual impairment testing indicated the natural gas distribution reporting unit's fair value is not substantially in excess of its carrying value ("cushion").
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. For 2022, the Company MDU Resources Group, Inc.
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.
For more information on the Company's pension plans, see Item 8 - Note 18. Capital expenditures The Company's capital expenditures for 2020 through 2022 and as anticipated for 2023 through 2025 are summarized in the following table.
For more information on the Company's pension plans, see Item 8 - Note 19. Capital expenditures The Company's capital expenditures for 2021 through 2023 and as anticipated for 2024 through 2026 are summarized in the following table.
The agreement contains customary covenants and provisions, including a covenant of Centennial not to permit, at any time, the ratio of debt to total capitalization to be greater than 60 percent. Other covenants include restrictions on the sale of certain assets, limitations on indebtedness and the making of certain investments.
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.
Intersegment Transactions Amounts presented in the preceding tables will not agree with the Consolidated Statements of Income due to the Company's elimination of intersegment transactions.
Form 10-K 51 Index Part II Intersegment Transactions Amounts presented in the preceding tables will not agree with the Consolidated Statements of Income due to the Company's elimination of intersegment transactions.
The construction of new electric generating facilities, transmission lines and other service facilities is subject to increasing costs and lead times, extensive permitting procedures, and federal and state legislative and regulatory initiatives, which may necessitate increases in electric energy prices.
The construction of new electric generating facilities, transmission lines and other service facilities is subject to increasing costs and lead times, extensive permitting procedures, and federal and state legislative and regulatory initiatives, which may necessitate increases in electric energy prices. As the industry continues to expand the use of renewable energy sources, the need for additional transmission infrastructure is growing.
Form 10-K 51 Index Part II project; and the performance of third parties. In addition, the type of contract can impact the margin on a project. Under fixed-price contracts, which are more common with larger or more complex projects, the segment assumes risk related to project estimates versus execution.
In addition, the type of contract can impact the margin on a project. Under fixed-price contracts, which are more common with larger or more complex projects, the segment assumes risk related to project estimates versus actual execution.
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 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 completion of organic growth projects has contributed to higher volumes of natural gas the Company transports through its system. Associated natural gas production in the Bakken fell during the COVID-19 pandemic delaying previously 46 MDU Resources Group, Inc. Form 10-K Index Part II forecasted production growth.
The completion of organic growth projects has contributed to higher volumes of natural gas the Company transports through its system. Associated natural gas production in the Bakken fell during the COVID-19 pandemic delaying previously forecasted production growth.
The increase in cash flows provided by operating activities from 2022 to 2021 was largely driven by higher 2022 accounts payable for natural gas purchases due to higher natural gas prices and colder weather, partially offset by the associated increased receivables from customers.
The increase in cash flows provided by operating activities in 2022 from 2021 was driven by higher 2022 accounts payable for natural gas purchases due to higher natural gas prices and colder weather at the natural gas distribution business.
The segment's management continually monitors its operating margins and has been proactive in addressing the inflationary impacts seen across the United States. The segment is currently experiencing continued labor constraints and increased fuel and material costs, as well as impacts from delays in the national supply chain.
Form 10-K 47 Index Part II The segment's management continually monitors its operating margins and has been proactive in attempting to mitigate the inflationary impacts seen across the United States. The segment is currently experiencing continued labor constraints and material costs, as well as impacts from delays in the national supply chain.
The commercial paper borrowings may vary during the period, largely the result of fluctuations in working capital requirements due to the seasonality of certain operations of the Company's subsidiaries. Total equity as a percent of total capitalization was 54 percent and 55 percent at December 31, 2022 and 2021, respectively.
The commercial paper and revolving credit agreement borrowings may vary during the period, largely the result of fluctuations in working capital requirements due to the seasonality of certain operations of Montana-Dakota. Total equity as a percent of total capitalization was 55 percent at December 31, 2023 and 54 percent at December 31, 2022, which includes discontinued operations.
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 9, 10 and 21.
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.
Changes in such assumptions and factors could cause actual future results to differ materially from the Company's growth and earnings projections. MDU Resources Group, Inc. Form 10-K 37 Index Part II For information pertinent to various commitments and contingencies, see Item 8 - Notes to Consolidated Financial Statements.
Changes in such assumptions and factors could cause actual future results to differ materially from the Company's growth and earnings projections. For information pertinent to various commitments and contingencies, see Item 8 - Notes to Consolidated Financial Statements. For a summary of the Company's business segments, see Item 8 - Note 18. MDU Resources Group, Inc.
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.
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.
On October 14, 2022, the Company filed a request for the use of deferred accounting for costs related to the rule and began deferring those costs. • On April 22, 2022, the Washington State Building Code Council approved revisions to the state's commercial energy code that will significantly limit the use of natural gas for space and water heating in new and retrofitted commercial and multifamily buildings and proposed the review of similar restrictions in the future for residential buildings.
The WUTC approved the deferred accounting order on February 28, 2023. • On April 22, 2022, the Washington State Building Code Council approved revisions to the state's commercial energy code that will significantly limit the use of natural gas for space and water heating in new and retrofitted commercial and multifamily buildings and proposed the review of similar restrictions in the future for residential buildings.
(e) The commercial paper program is supported by a revolving credit agreement with various banks (provisions allow for increased borrowings, at the option of Centennial on stated conditions, up to a maximum of $700.0 million). At December 31, 2022, there were no amounts outstanding under the revolving credit agreement. The respective commercial paper programs are supported by revolving credit agreements.
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.
Earnings overview - The following information summarizes the performance of the natural gas distribution segment. 2022 vs. 2021 2021 vs. 2020 Years ended December 31, 2022 2021 2020 Variance Variance (In millions) Operating revenues $ 1,273.8 $ 971.9 $ 848.2 31 % 15 % Operating expenses: Purchased natural gas sold 816.1 542.0 448.1 51 % 21 % Operation and maintenance 205.3 194.1 185.4 6 % 5 % Depreciation, depletion and amortization 89.4 86.0 84.6 4 % 2 % Taxes, other than income 71.1 60.6 57.0 17 % 6 % Total operating expenses 1,181.9 882.7 775.1 34 % 14 % Operating income 91.9 89.2 73.1 3 % 22 % Other income 3.3 8.1 13.5 (59) % (40) % Interest expense 42.2 37.3 36.8 13 % 1 % Income before income taxes 53.0 60.0 49.8 (12) % 20 % Income tax expense 7.8 8.4 5.8 (7) % 45 % Net income $ 45.2 $ 51.6 $ 44.0 (12) % 17 % Operating statistics 2022 2021 2020 Revenues (millions) Retail sales: Residential $ 715.5 $ 548.1 $ 480.5 Commercial 450.9 330.4 281.2 Industrial 41.5 31.1 26.2 1,207.9 909.6 787.9 Transportation and other 65.9 62.3 60.3 $ 1,273.8 $ 971.9 $ 848.2 Volumes (MMdk) Retail sales: Residential 74.8 65.6 65.5 Commercial 51.0 44.7 44.2 Industrial 5.4 5.0 4.8 131.2 115.3 114.5 Transportation sales: Commercial 2.0 1.9 2.0 Industrial 165.7 172.5 158.0 167.7 174.4 160.0 Total throughput 298.9 289.7 274.5 Average cost of natural gas per dk $ 6.22 $ 4.70 $ 3.91 MDU Resources Group, Inc.
Form 10-K 39 Index Part II Earnings overview - The following information summarizes the performance of the natural gas distribution segment. 2023 vs. 2022 2022 vs. 2021 Years ended December 31, 2023 2022 2021 Variance Variance (In millions) Operating revenues $ 1,287.5 $ 1,273.8 $ 971.9 1 % 31 % Operating expenses: Purchased natural gas sold 805.1 816.1 542.0 (1) % 51 % Operation and maintenance 219.7 205.3 194.1 7 % 6 % Depreciation and amortization 95.3 89.4 86.0 7 % 4 % Taxes, other than income 75.2 71.1 60.6 6 % 17 % Total operating expenses 1,195.3 1,181.9 882.7 1 % 34 % Operating income 92.2 91.9 89.2 — % 3 % Other income 20.8 3.3 8.1 NM (59) % Interest expense 57.6 42.2 37.3 36 % 13 % Income before income taxes 55.4 53.0 60.0 5 % (12) % Income tax expense 6.9 7.8 8.4 (12) % (7) % Net income $ 48.5 $ 45.2 $ 51.6 7 % (12) % NM - not meaningful Operating statistics 2023 2022 2021 Revenues (millions) Retail sales: Residential $ 726.1 $ 715.5 $ 548.1 Commercial 441.2 450.9 330.4 Industrial 45.0 41.5 31.1 1,212.3 1,207.9 909.6 Transportation and other 75.2 65.9 62.3 $ 1,287.5 $ 1,273.8 $ 971.9 Volumes (MMdk) Retail sales: Residential 69.3 74.8 65.6 Commercial 47.9 51.0 44.7 Industrial 5.4 5.4 5.0 122.6 131.2 115.3 Transportation sales: Commercial 1.9 2.0 1.9 Industrial 188.4 165.7 172.5 190.3 167.7 174.4 Total throughput 312.9 298.9 289.7 Average cost of natural gas per dk $ 6.57 $ 6.22 $ 4.70 40 MDU Resources Group, Inc.
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, 2022: 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, 2022 $ (13.7) $ 14.8 $ (2.5) $ 2.7 Net periodic benefit cost (credit) for 2023 $ — $ (.1) $ (.2) $ .2 Expected long-term return on plan assets Net periodic benefit cost (credit) for 2023 $ (1.6) $ 1.6 $ (.4) $ .4 A 100 basis point change in the assumed health care cost trend rates would have had the following effects at December 31, 2022: 100 Basis Point Increase 100 Basis Point Decrease (In millions) Service and interest cost components for 2023 $ .1 $ (.1) Postretirement benefit obligation as of December 31, 2022 $ 1.8 $ (1.6) 64 MDU Resources Group, Inc.
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.
The Company updates its estimate of the transaction price each reporting period and the effect of variable consideration on the transaction price is recognized as an adjustment to revenue on a cumulative catch-up basis. The Company believes its estimates surrounding the cost-to-cost method are reasonable based on the information that is known when the estimates are made.
The Company updates its estimate of the transaction price each reporting period and the effect of variable consideration on the transaction price is recognized as an adjustment to revenue on a cumulative catch-up basis.
The amounts related to these items were as follows: Years ended December 31, 2022 2021 2020 (In millions) Intersegment transactions: Operating revenues $ 84.1 $ 77.6 $ 77.0 Operation and maintenance 25.9 18.7 19.1 Purchased natural gas sold 58.2 58.9 57.9 For more information on intersegment eliminations, see Item 8 - Note 17.
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.
Morgan Securities LLC and MUFG Securities Americas Inc., as sales agents. This agreement, as amended, allows the offering, issuance and sale of up to 6.4 million shares of the Company's common stock in connection with an “at-the-market” offering. The common stock may be offered for sale, from time to time, in accordance with the terms and conditions of the agreement.
Morgan Securities LLC and MUFG Securities Americas Inc., as sales agents. This agreement, as amended, allows the offering, issuance and sale of up to 6.4 million shares of the Company's common stock in connection with an “at-the-market” offering. On August 10, 2023, the Company terminated the distribution agreement.
These increases were partially offset by lower transmission and storm work projects. ◦ Partially offset by: ▪ Lower industrial revenues driven by decreased demand for maintenance, high-tech and refinery projects and lower service revenues driven by decreased demand for the repair and maintenance of electrical and mechanical projects. ▪ Lower transportation revenues, primarily from lower customer demand for street lighting projects of $39.8 million. • Gross profit increased $28.1 million. ◦ Largely due to the increased electrical and mechanical revenues previously discussed. ◦ Partially offset by higher operating costs related to inflationary pressures, including labor, materials and equipment costs. • Selling, general and administrative expense increased $9.2 million resulting from higher payroll-related costs of $5.7 million, increased expected credit losses of $2.4 million due to changes in estimates during 2021 and higher office expenses. • Other income increased $4.7 million, primarily related to the Company's joint ventures. • Interest expense increased $2.8 million due to higher working capital needs and higher interest rates. • Income tax expense increased $5.4 million as a result of higher income before income taxes. 2021 compared to 2020 Construction services earnings decreased $300,000 as a result of: • Revenues decreased $44.1 million. ◦ Largely due to: ▪ The completion of several large commercial projects in early 2021 and 2020 in the Las Vegas market of $129.0 million. ▪ Decreased institutional projects of $15.0 million from less available work and the completion of a larger project. ▪ The completion of a significant industrial project of $43.0 million. ▪ Decreased demand for electric transportation projects which includes traffic signalization and street lighting. ◦ Partially offset by: ▪ Higher industrial work due to the number of projects awarded and progress on significant projects of $96.0 million. ▪ Increased service work of $37.0 million related to the repair and maintenance of electrical, mechanical and fire protection systems. ▪ Strong demand for utility projects including the progress on substations of $21.0 million and power line repair of $3.0 million.
These increases were partially offset by lower transmission and storm work projects. ◦ Partially offset by: ▪ Lower industrial revenues driven by decreased demand for maintenance, high-tech and refinery projects and lower service revenues driven by decreased demand for the repair and maintenance of electrical and mechanical projects. ▪ Lower transportation revenues, primarily from lower customer demand for street lighting projects of $39.8 million. • Gross profit increased $28.1 million. ◦ Largely due to the increased electrical and mechanical revenues previously discussed. ◦ Partially offset by higher operating costs related to inflationary pressures, including labor, materials and equipment costs. • Selling, general and administrative expense increased $9.2 million resulting from higher payroll-related costs of $5.7 million, increased expected credit losses of $2.4 million due to changes in estimates during 2021 and higher office expenses. • Other income increased $4.7 million, primarily related to the Company's joint ventures. • Interest expense in continuing operations increased $300,000 due to higher working capital needs and higher interest rates. • Income tax expense in continuing operations increased $6.0 million as a result of higher income before income taxes.
The Company has also seen rapidly growing needs for services across the electric vehicle charging, wind generation and energy storage markets that complement existing renewable projects performed by the Company.
The Company has also seen rapidly growing needs for services across the electric vehicle charging, solar generation and energy storage markets that complement existing renewable projects performed by the Company. Backlog consists of the uncompleted portion of services to be performed under job-specific contracts.
The Company has contract administration, accounting and management control systems in place that allow its estimates to be updated and monitored on a regular basis.
The Company believes its estimates surrounding the cost-to-cost method are reasonable based on the information that is known when the estimates are made. The Company has contract administration, accounting and management control systems in place that allow its estimates to be updated and monitored on a regular basis.
Natural gas production has rebounded to pre-pandemic levels and drilling rig activities have increased, and the Company expects continued gradual increases over the next 2 years. The production delay, along with long-term contractual commitments on the North Bakken Expansion project placed in service in February 2022, has negatively impacted customer renewals of certain contracts.
The production delay, along with the long-term contractual commitments on the North Bakken Expansion project placed in service in February 2022, negatively impacted customer renewal of certain contracts. Natural gas production has since rebounded, and is currently at record levels and the Company expects gradual increases in oil well drilling activity over the next two years.
Rising interest rates have resulted in, and will likely continue to result in, higher borrowing costs on new debt, resulting in impacts to the Company's asset valuations and negatively impacting the purchasing power of its customers.
Rising interest rates have resulted in and may continue to result in higher borrowing costs on new debt, resulting in impacts to the Company's asset valuations and negatively impacting the purchasing power of its customers. The Company has continued to evaluate its businesses and has increased pricing for its products and services where possible.
Long lead times are attributable to increased demand for steel products from pipeline companies as they continue pipeline system safety and integrity replacement projects driven by PHMSA regulations, as well as delays in the manufacturing and shipping of electrical equipment as a result of the lingering effects of the COVID-19 pandemic, staffing shortages across multiple industries and global conflicts.
Long lead times are attributable to increased demand for steel products from pipeline companies as they continue pipeline system safety and integrity replacement projects driven by PHMSA regulations, as well as delays in the manufacturing and shipping of electrical equipment and increased demand for electrical equipment due to regulatory activity and grid expansion.
The Company continues to focus on improving existing operations and growth opportunities through organic projects in all areas in which it operates, which includes additional projects with local distribution companies, Bakken area producers and industrial customers in various stages of development. In July 2021, the Company announced plans for a natural gas pipeline expansion project in eastern North Dakota.
The Company continues to focus on improving existing operations and growth opportunities through organic projects in all areas in which it operates, which includes additional projects with local distribution companies, Bakken area producers and industrial customers in various stages of development. 46 MDU Resources Group, Inc.
Funding for the pension plans is actuarially determined. The Company has no minimum funding requirements for its defined benefit pension plans for 2023 due to an additional contribution of $20.0 million in 2019, which created prefunding credits to be used in future periods. There were no minimum required contributions for the years ended December 31, 2022 and 2021 or 2020.
The Company expects to contribute the minimum funding requirement of $3.3 million in 2024. There were no minimum required contributions for the years ended December 31, 2023, 2022, or 2021 due to an additional contribution of $20.0 million in 2019, which created prefunding credits that were used in future periods.
At December 31, 2022 and 2021, regulatory assets in recovery were $427.8 million and $367.7 million, respectively, and regulatory assets not in recovery were $67.0 million and $108.8 million, respectively.
At December 31, 2023 and 2022, regulatory assets in recovery were $496.1 million and $427.8 million, respectively, and regulatory assets not in recovery were $123.5 million and $67.0 million, respectively.
In addition, 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 2022 and a 15 percent control premium in 2021 and 2020.
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.
See Item 1A - Risk Factors for a description of the risks and uncertainties with the proposed future structure. The Company incurred costs in connection with the announced strategic initiatives in 2022, as noted in the Business Segment Financial and Operating Data section, and expects to continue to incur these costs until the initiatives are completed.
The Company incurred costs in connection with the announced strategic initiatives in 2022 and 2023, as noted in the Business Segment Financial and Operating Data section, and expects to continue to incur these costs until the initiatives are completed.
Changes in estimates could have a material effect on the Company's results of operations, financial position and cash flows. For the years ended December 31, 2022 and 2021, the Company's total construction contract revenue was $3.8 billion and $3.0 billion, respectively. Several factors are evaluated in determining the bid price for contract work.
Changes in estimates could have a material effect on the Company's results of operations, financial position and cash flows. For the years ended December 31, 2023 and 2022, the Company's total construction contract revenue was $2.8 billion and $2.6 billion, respectively. MDU Resources Group, Inc.
The Company uses significant judgment in estimating its five-year forecast. The assumptions underlying cash flow projections are in sync as applicable with the Company's strategy and assumptions. Future projections are heavily correlated with the current year results of operations. Future results of operations may vary due to economic and financial impacts.
The Company used a 20 percent control premium in 2023 and 2022 and a 15 percent control premium in 2021. The Company uses significant judgment in estimating its five-year forecast. The assumptions underlying cash flow projections are in sync as applicable with the Company's strategy and assumptions. Future projections are heavily correlated with the current year results of operations.
Outlook Funding for public projects is highly dependent on federal and state funding, such as appropriations to the Federal Highway Administration. The American Rescue Plan provides $1.9 trillion in COVID-19 relief funding for states, schools and local government including broadband infrastructure.
Some of the construction services projects are publicly funded, which is highly dependent on federal and state funding. The American Rescue Plan provides $1.9 trillion in COVID-19 relief funding for states, schools and local government including broadband infrastructure.
Therefore, expected recovery or refund of these deferred items generally is based on specific ratemaking decisions or precedent for each item. If future recovery of costs is no longer probable, the Company would be required to include those costs in the statement of income or accumulated other comprehensive loss in the period in which it is no longer deemed probable.
If future recovery of costs is no longer probable, the Company would be required to include those costs in the statement of income or accumulated other comprehensive loss in the period in which it is no longer deemed probable.
At December 31, 2022, there were no amounts outstanding under the revolving credit agreement. (b) Certain provisions allow for increased borrowings, up to a maximum of $125.0 million. (c) Outstanding letter(s) of credit reduce the amount available under the credit agreement. (d) Certain provisions allow for increased borrowings, up to a maximum of $125.0 million.
(b) Certain provisions allow for increased borrowings, up to a maximum of $125.0 million. (c) Outstanding letter(s) of credit reduce the amount available under the credit agreement. (d) Certain provisions allow for increased borrowings, up to a maximum of $125.0 million. (e) Certain provisions allow for increased borrowings, up to a maximum of $250.0 million. MDU Resources Group, Inc.
Form 10-K Index Part II Earnings overview - The following information summarizes the performance of the pipeline segment. 2022 vs. 2021 2021 vs. 2020 Years ended December 31, 2022 2021 2020 Variance Variance (In millions) Operating revenues $ 155.6 $ 142.6 $ 143.9 9 % (1) % Operating expenses: Operation and maintenance 60.9 61.3 59.9 (1) % 2 % Depreciation, depletion and amortization 26.9 20.5 21.7 31 % (6) % Taxes, other than income 12.3 12.7 12.9 (3) % (2) % Total operating expenses 100.1 94.5 94.5 6 % — % Operating income 55.5 48.1 49.4 15 % (3) % Other income 1.3 9.4 2.9 (86) % 224 % Interest expense 11.3 7.0 7.6 61 % (8) % Income before income taxes 45.5 50.5 44.7 (10) % 13 % Income tax expense 10.2 9.6 7.7 6 % 25 % Net income $ 35.3 $ 40.9 $ 37.0 (14) % 11 % Operating statistics 2022 2021 2020 Transportation volumes (MMdk) 482.9 471.1 438.6 Natural gas gathering volumes (MMdk) — — 8.6 Customer natural gas storage balance (MMdk): Beginning of period 23.0 25.5 16.2 Net injection (withdrawal) (1.8) (2.5) 9.3 End of period 21.2 23.0 25.5 2022 compared to 2021 Pipeline earnings decreased $5.6 million as a result of: • Revenues increased $13.0 million. ◦ Driven by increased transportation volume revenues of $16.4 million, largely due to the North Bakken Expansion project placed in service in February 2022. ◦ Partially offset by: ▪ Lower non-regulated project revenues of $2.3 million. ▪ Lower transmission rates due to expired negotiated contracts converted to tariff rates. • Operation and maintenance decreased $400,000. ◦ Primarily due to: ▪ Lower payroll-related costs of $2.2 million, largely related to lower incentive accruals and benefit-related costs. ▪ Lower non-regulated project costs of $1.3 million directly associated with lower non-regulated project revenues, as previously discussed. ◦ Partially offset by higher legal, maintenance materials and contract services. • Depreciation, depletion and amortization increased $6.4 million due to increased property, plant and equipment balances, largely related to the North Bakken Expansion project. • Taxes, other than income decreased $400,000 resulting from lower property taxes of $700,000 in Montana, partially offset by higher property taxes in North Dakota. • Other income decreased $8.1 million, primarily due to: ◦ Lower AFUDC of $7.8 million as a result of the completion of the North Bakken Expansion project placed in service in February 2022. ◦ Lower returns on the Company's nonqualified benefit plan investments, as discussed in Note 8. • Interest expense increased $4.3 million, resulting from interest associated with higher debt balances to fund capital expenditures and lower AFUDC as a result of the North Bakken Expansion project placed in service in February 2022. • Income tax expense increased $600,000, largely a result of a reduction in tax credits, partially offset by lower income before income taxes.
Form 10-K 45 Index Part II 2022 compared to 2021 Pipeline earnings decreased $5.6 million as a result of: • Revenues increased $13.0 million. ◦ Driven by increased transportation volume revenues of $16.4 million, largely due to the North Bakken Expansion project placed in service in February 2022. ◦ Partially offset by: ▪ Lower non-regulated project revenue of $2.3 million. ▪ Lower transmission rates due to expired negotiated contracts converted to tariff rates. • Operation and maintenance decreased $400,000. ◦ Primarily due to: ▪ Lower payroll-related costs of $2.2 million, largely related to lower incentive accruals and benefit-related costs. ▪ Lower non-regulated project costs of $1.3 million directly associated with lower non-regulated project revenues, as previously discussed. ◦ Partially offset by higher legal, maintenance materials and contract services. • Depreciation and amortization increased $6.4 million due to increased property, plant and equipment balances, largely related to the North Bakken Expansion project. • Taxes, other than income decreased $400,000 resulting from lower property taxes of $700,000 in Montana, partially offset by higher property taxes in North Dakota. • Other income decreased $8.1 million, primarily due to: ◦ Lower AFUDC of $7.8 million as a result of the completion of the North Bakken Expansion project placed in service in February 2022. ◦ Lower returns on the Company's nonqualified benefit plan investments, as discussed in Note 9. • Interest expense in continuing operations increased $3.4 million, resulting from interest associated with higher debt balances to fund capital expenditures and lower AFUDC as a result of the North Bakken Expansion project placed in service in February 2022. • Income tax expense in continuing operations increased $800,000, largely a result of a reduction in tax credits, partially offset by lower income before income taxes.
Liquidity and Capital Commitments At December 31, 2022, the Company had cash and cash equivalents of $80.5 million and available borrowing capacity of $427.3 million under the outstanding credit facilities of the Company's subsidiaries.
Liquidity and Capital Commitments At December 31, 2023, the Company had cash, cash equivalents and restricted cash of $77.0 million and available borrowing capacity of $525.8 million under the outstanding credit facilities of the Company and its subsidiaries.
This ratio is calculated as the Company's total equity, divided by the Company's total capital. Total capital is the Company's total debt, including short-term borrowings and long-term debt due within 12 months, plus total equity. Management believes this ratio is an indicator of how the Company is financing its operations, as well as its financial strength.
This ratio is calculated as the Company's total equity, divided by the Company's total capital. Total capital is the Company's total debt, excluding debt in discontinued operations and including short-term borrowings and long-term debt due within 12 months, plus total equity.

… 315 more changes not shown on this page.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

4 edited+0 added−0 removed2 unchanged
Biggest changeForm 10-K 65 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, 2022. 2023 2024 2025 2026 2027 Thereafter Total Fair Value (Dollars in millions) Long-term debt: Fixed rate $ 78.1 $ 61.4 $ 177.8 $ 140.8 $ 100.8 $ 1,743.9 $ 2,302.8 $ 1,930.7 Weighted average interest rate 3.7 % 4.2 % 4.0 % 5.7 % 5.5 % 4.3 % 4.4 % Variable rate $ — $ 415.5 $ — $ — $ 130.0 $ — $ 545.5 $ 545.5 Weighted average interest rate — % 5.1 % — % — % 6.3 % — % 5.4 % 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.
Biggest changeForm 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 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 8 and 9.
The 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.
At December 31, 2022 and 2021, the Company had no outstanding interest rate hedges. MDU Resources Group, Inc.
At December 31, 2023 and 2022, the Company had no outstanding interest rate hedges. MDU Resources Group, Inc.
At December 31, 2022 and 2021, these contracts were not material. For more information on the Company's derivatives, see Item 8 - Note 2. 66 MDU Resources Group, Inc. Form 10-K Index Part II
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

Other MDU 10-K year-over-year comparisons