Otter Tail Corp
For the period ended Jun 30, 2024. Filed Aug 7, 2024.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jun 30, 2024 · Filed Aug 7, 2024
OTTR$78.44-2.0%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-03-31; filed 2024-05-08.
0001466593-24-000113
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-06-30; filed 2024-08-07.
0001466593-24-000129
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 92 previous paragraphs and 135 current paragraphs.
50 unchanged; 30 reworded; 43 added; 12 removed; 0 previous and 12 current paragraphs rearranged.
Tables are not compared: 14 previous and 21 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (43)
Current report
Interest Expense increased $0.5 million due to increased interest rates on our short-term variable rate debt outstanding at OTP and the issuance of an additional $120.0 million of long-term debt at OTP in March 2024.
Current report
Income Tax Expense increased $0.5 million primarily due to increased income before income taxes. Our effective tax rate was 19.2% for the three months ended June 30, 2024 and 19.7% for the same period last year.
Current report
Retail Revenues increased $2.7 million primarily due to the following:
Current report
•A $2.5 million increase in fuel recovery revenues, primarily due to increased purchase power and fuel costs, partially offset by lower fuel volumes, primarily due to unfavorable weather during the period.
Current report
The increases in retail revenues described above were partially offset by a $4.3 million decrease in retail revenues due to the impact of unfavorable weather.
Current report
Transmission Services Revenues decreased $2.4 million as a result of certain project cost and operating and maintenance expense updates during the second quarter last year which resulted in additional nonrecurring revenues during the period.
Current report
Purchased Power costs to serve retail customers increased $4.0 million primarily due to a 50% increase in price of purchased power, as well as an 18% increase in the amount of kwh purchased.
Current report
Operating and Maintenance Expenses decreased $0.9 million primarily due to lower vegetative management expenses and decreased maintenance costs.
Current report
Depreciation and Amortization increased $1.7 million due to additional capital investments.
Current report
Cost of Products Sold decreased $7.4 million primarily due to decreased sales volumes, partially offset by higher steel costs, as described above.
Current report
Operating Revenues increased $11.3 million primarily due to a 26% increase in sales volumes driven by customer sales volume growth and distributor and end market demand. Sales volumes in the second quarter of last year were negatively impacted by distributors’ inventory management strategies amid uncertain market conditions. Although demand has recovered from last year, sales prices have continued to decline. Sales prices decreased 13% compared to the same period last year, partially offsetting the impact of increased sales volumes.
Current report
RESULTS OF OPERATIONS – YEAR TO DATE
Current report
CONSOLIDATED RESULTS
Current report
Operating Revenues increased $12.6 million primarily due to increased sales volumes within our Plastics segment, partially offset by decreased sales volumes in our Manufacturing segment, and decreased revenues and unfavorable weather in our Electric segment. See our segment disclosures below for additional discussion of items impacting operating revenues.
Current report
Operating Expenses decreased $6.6 million primarily due to lower purchased power costs in our Electric segment, lower sales volumes within our Manufacturing segment, and lower material costs in our Plastics segment, partially offset by costs associated with increased sales volumes within our Plastics segment. See our segment disclosures below for additional discussion of items impacting operating expenses.
Current report
Interest Expense increased $0.9 million due to increased interest rates on our short-term variable rate debt outstanding at OTP and the issuance of an additional $120.0 million of long-term debt at OTP in March 2024.
Current report
Other Income increased $3.7 million, having a positive impact on net income, primarily due to increased investment income earned on our short-term cash equivalent investments and long-term marketable securities, as well as increased allowance for funds used during construction in our Electric segment related to an increase in capital expenditures compared to the same period last year. Increases to other income were partially offset by a lower amount of gains on our corporate-owned life insurance policies compared to the same period last year.
Current report
ELECTRIC SEGMENT RESULTS
Current report
•A $9.7 million decrease due to the impact of unfavorable weather.
Current report
•A $1.0 million net increase in rider revenues, excluding the impact of interim revenues in North Dakota, primarily related to additional recovery of costs associated with our meter infrastructure project.
Current report
Transmission Services Revenues decreased $2.3 million as a result of certain project cost and operating and maintenance expense updates during the second quarter last year which resulted in additional nonrecurring revenues during the period.
Current report
Production Fuel costs increased $3.7 million primarily due to increased fuel usage at Big Stone Plant, as there was an outage at the plant during this same period last year, as well as a 4% increase in fuel cost per kwh.
Current report
Depreciation and Amortization increased $3.3 million due to additional capital investments.
Current report
MANUFACTURING SEGMENT RESULTS
Current report
Operating Revenues decreased $13.2 million primarily due to decreased sales volumes at both of our manufacturing businesses, with an overall sales volume decrease of 11% compared to the same period last year. At BTD, sales volumes declined primarily in the lawn and garden and agriculture end markets. Decreased scrap metal sales also contributed to the overall decrease in operating revenues. Decreased sales volumes and scrap revenues were partially offset by increased steel prices, resulting in a 3% increase in material costs, which are passed through to customers. At T.O. Plastics sales volume declines were primarily attributable to decreased sales of horticulture products as customers and distributors continued to reduce inventory levels from the high levels previously established due to supply chain challenges.
Current report
Cost of Products Sold decreased $12.7 million primarily due to decreased sales volumes, partially offset by higher steel costs, as described above.
Current report
Nonelectric Selling, General, and Administrative Expenses decreased $0.7 million due to variable costs associated with decreased business activity and financial performance during the period.
Current report
Depreciation and Amortization increased $1.0 million due to an increase in our investment in manufacturing equipment and our facilities.
Current report
PLASTICS SEGMENT RESULTS
Current report
Nonelectric Selling, General, and Administrative Expenses increased $1.1 million due to variable costs associated with increased business activity and financial performance during the period.
Current report
CORPORATE COSTS
Current report
Other Operating Expenses increased $1.1 million primarily due to increased external service provider costs and increased employee benefit expenses, including increases in our employee health insurance claim costs.
Current report
On July 3, 2024, OTP filed an update to the original request increasing the amount of the net annual revenue increase from $17.4 million to $22.5 million to account for certain items identified throughout the regulatory process to date. An evidentiary hearing before the NDPSC had been scheduled for July 29, 2024, but due to the updated request, the evidentiary hearing is now expected to take place in fourth quarter of 2024, with a final decision anticipated by the end of the year.
Current report
Minnesota
Current report
In May 2024, the MPUC approved OTP’s 2023 to 2037 Integrated Resource Plan (IRP). Consistent with MPUC practice, the decision was made during deliberations by oral vote and was finalized in a written order issued in July 2024.
Current report
The MPUC:
Current report
•Directed OTP to procure the following generation resources, subject to additional regulatory review and approval:
Current report
◦20 to 75 megawatts of battery storage by December 31, 2029, or as soon as practicable thereafter;
Current report
•Directed OTP to designate the Minnesota share of the jointly owned Coyote Station coal-fired plant as an Available Maximum Energy (AME) resource beginning in 2026 and ending no later than December 2031. If the designation as an AME resource is found to not be feasible, then Minnesota customers shall not continue to pay for or depend on capacity or energy from Coyote Station past 2028; and
Current report
•Directed OTP to commence activities to no longer serve Minnesota customers with capacity or energy from Coyote Station as soon as feasible and no later than December 31, 2031.
Showing the first 40 of 43 passages. Open the source sections for the rest.
Removed paragraphs (12)
Previous report
•A $5.5 million decrease in revenues from the unfavorable impact of weather compared to last year.
Previous report
•A $3.3 million increase in rider revenue, which included the recovery of costs of our wind repowering projects and other rate base investments.
Previous report
Wholesale Revenues increased $1.6 million primarily due to a 44% increase in wholesale electric prices and a 31% increase in wholesale kwh sales.
Previous report
Operating and Maintenance Expenses increased $2.4 million primarily due to higher labor costs, driven by the hiring of additional employees, wage inflation, and increased employee retirement benefits, as well as an increase in health insurance-related costs.
Previous report
Cost of Products Sold decreased $5.3 million primarily due to decreased sales volumes, as described above. The impacts of lower sales volumes were partially offset by reduced leverage of fixed manufacturing costs resulting from decreased production and sales volumes at T.O. Plastics.
Previous report
In 2021, OTP filed its 2022 Integrated Resource Plan (IRP) with regulators in the three states where OTP operates, Minnesota, North Dakota, and South Dakota. The IRP included OTP’s preferred plan for meeting customers’ anticipated capacity and energy needs while maintaining system reliability and low electric service rates. Through two supplemental filings in 2023, the IRP was modified and updated in response to regulatory developments, changing market conditions, and comments received from intervenors. In the latest supplemental filing, made only in Minnesota, OTP proposed to prospectively plan to serve its Minnesota customers with current legacy resources allocated to all jurisdictions consistent with past practice and certain new resources dedicated to and recovered solely from Minnesota customers and, as the need arises, to serve its other jurisdictions with new resources dedicated to and recovered from those jurisdictions. With the proposal of separated resource planning by jurisdiction, the most recent supplemental filing outlined OTP’s preferred plan for Minnesota only.
Previous report
On April 2, 2024, OTP, the Minnesota Department of Commerce - Division of Energy Resources, the International Union of Operating Engineers Local 49, the North Central States Regional Council of Carpenters, and the Laborers’ International Union of North America entered into a settlement agreement to resolve all issues among the parties and recommend a decision to the MPUC to resolve the contested matters in the IRP. The terms of the settlement agreement outline the parties’ recommendation that the MPUC resolve the IRP and approve, among other items, the following:
Previous report
–Approve the following renewable resource additions directly assigned to Minnesota customers, giving reasonable preference to projects located in Minnesota:
Previous report
–Approve the proposal to operate the Minnesota allocated share of the jointly owned Coyote Station coal-fired plant as an Available Maximum Emergency (AME) resource as soon as March 1, 2026, with the costs and benefits of designating and operating Coyote Station as an AME resource borne by customers in Minnesota;
Previous report
–Authorize OTP to begin the process of withdrawing from the Minnesota allocated share of Coyote Station if a material, non-routine capital investment in the plant is required; and
Previous report
–Require OTP to file its next Minnesota resource plan no later than May 15, 2026, in which OTP must develop a plan assuming the withdrawal from the Minnesota allocated share of Coyote Station as of December 31, 2031; provided that additional plans for consideration may be presented as well.
Previous report
Other parties to the Minnesota IRP proceeding have not joined the settlement. The regulatory process is ongoing and the MPUC is not bound by this settlement and may accept, modify or deny the recommendations included in the settlement. Neither the settlement agreement nor OTP’s Minnesota preferred plan had been approved by the MPUC as of the date of this filing. A hearing before the MPUC has been scheduled for May 28, 2024.
Reworded paragraphs (30)
Previous wording
Operating Revenues increased $8.0 million primarily due to increased sales volumes in our Plastics segment driven by strong distributor and end market demand, partially offset by decreased sales volumes in our Manufacturing segment, and decreased retail revenues in our Electric segment driven by decreased fuel recovery revenues and the impact of unfavorable weather. See our segment disclosures below for additional discussion of items impacting operating revenues.
Current wording
Operating Revenues increased $4.6 million primarily due to increased sales volumes in our Plastics segment driven by strong distributor and end market demand, partially offset by decreased sales volumes in our Manufacturing segment, and decreased revenues in our Electric segment due to the impact of unfavorable weather. See our segment disclosures below for additional discussion of items impacting operating revenues.
Previous wording
Operating Expenses decreased $6.3 million primarily due to decreased sales volumes in our Manufacturing segment, lower purchased power costs in our Electric segment and lower material costs in our Plastics segment. See our segment disclosures below for additional discussion of items impacting operating expenses.
Current wording
Operating Expenses decreased $0.2 million primarily due to decreased sales volumes in our Manufacturing segment, lower fuel costs in our Electric segment and lower material costs in our Plastics segment. See our segment disclosures below for additional discussion of items impacting operating expenses.
Previous wording
Other Income (Expense)increased $2.5 million, primarily due to increased investment income earned on our short-term cash equivalent investments due to an increase in the cash available for investment and an increase in interest rates.
Current wording
Other Income (Expense)increased $1.2 million, having a positive impact on net income, primarily due to increased investment income earned on our short-term cash equivalent investments and long-term marketable securities, as well as increased allowance for funds used during construction in our Electric segment related to an increase in capital expenditures compared to the same period last year. Increases to other income were partially offset by a lower amount of gains on our corporate-owned life insurance policies compared to the same period last year.
Previous wording
The operating results of our Electric segment are impacted by fluctuations in weather conditions and the resulting demand for electricity for heating and cooling. The following table shows heating degree days as a percent of normal for the three months ended March 31, 2024 and 2023. There were no cooling degree days in our service territory during the three months ended March 31, 2024 and 2023.
Current wording
The operating results of our Electric segment are impacted by fluctuations in weather conditions and the resulting demand for electricity for heating and cooling. The following table shows heating and cooling degree days as a percent of normal for the three months ended June 30, 2024 and 2023.
Previous wording
•A $2.2 million increase in new retail revenues, net of an estimated refund, from an interim rate increase in North Dakota effective January 1, 2024, in connection with OTP's North Dakota rate case filed in November 2023.
Current wording
•A $2.5 million increase in new retail revenues, net of an estimated refund, from an interim rate increase in North Dakota effective January 1, 2024 in connection with OTP's North Dakota rate case filed in November 2023.
Previous wording
•A $1.4 million increase in retail revenues due to increased sales volumes from commercial and industrial customers driven by additional demand.
Current wording
•A $1.3 million increase in retail revenues due to increased sales volumes from commercial and industrial customers.
Previous wording
Production Fuel costs increased $6.2 million primarily due to an increase in the generation from our coal-fired and natural gas facilities compared to the same period last year, partially due to an outage at Big Stone Plant in the first quarter of 2023.
Current wording
Production Fuel costs decreased $2.5 million due to a decrease in the generation from our coal-fired and natural gas facilities compared to the same period last year, primarily due to decreased demand resulting from unfavorable weather.
Previous wording
Operating Revenues decreased $7.4 million primarily due to decreased sales volumes at both of our manufacturing businesses. T.O. Plastics, our plastics thermoforming manufacturer, experienced a 35% decrease in sales volumes compared to the same period last year, primarily attributable to decreased sales of horticulture products as customers continue to reduce inventory levels and aim to return to more normal seasonal inventory stocking levels. BTD Manufacturing, our contract metal fabricator, experienced a 5% decrease in sales volumes compared to the same period last year. Sales volumes declined primarily in the lawn and garden and energy end markets, while demand remained relatively strong in other segments, including the recreational vehicle, agriculture, and industrial end markets.
Current wording
Operating Revenues decreased $5.8 million primarily due to decreased sales volumes at both of our manufacturing businesses, with an overall sales volume decrease of 13% compared to the same period last year. At BTD Manufacturing, our contract metal fabricator, sales volumes declined primarily in the lawn and garden and agriculture end markets. A 31% decline in scrap metal revenues also contributed to the overall decrease in operating revenues. Decreased sales volumes and scrap revenues were partially offset by increased steel prices, resulting in a 5% increase in material costs, which are passed through to customers. At T.O. Plastics, our plastics thermoforming manufacturer, sales volume declines were primarily attributable to decreased sales of horticulture products as customers and distributors continued to reduce inventory levels from the high levels previously established due to supply chain challenges.
Previous wording
Cost of Products Sold increased $7.7 million primarily due to increased sales volumes, as discussed above. The impact of increased sales volumes was partially offset by decreased PVC resin costs. PVC resin and other input material costs decreased 27% compared to the same period in the previous year as the unique supply and demand conditions, which caused significant volatility and increases in resin costs, have subsided and resin costs have stabilized.
Current wording
Cost of Products Sold increased $3.5 million primarily due to increased sales volumes, as described above. The impact of increased sales volumes was partially offset by decreased PVC resin costs. PVC resin and other input material costs decreased 14% compared to the same period in the previous year as the unique supply and demand conditions experienced in recent years, which caused significant volatility and increases in resin costs, have subsided and resin costs have remained stable during the first half of the year.
Previous wording
Income Tax Expense increased $4.5 million compared to the same period last year. Our effective tax rate was 19.3% in the first quarter of 2024 and 17.6% in the first quarter of 2023. The increase in our effective tax rate was primarily due to an increase in our income before taxes.
Current wording
Income Tax Expense increased $5.0 million primarily due to increased income before income taxes. Our effective tax rate was 19.2% for the six months ended June 30, 2024, and 18.8% for the same period last year. The increase in our effective tax rate was primarily driven by a decrease in PTCs from our wind generation assets compared to the same period last year.
Previous wording
The following table summarizes the estimated effect on diluted earnings per share of the difference in retail kwh sales under actual weather conditions and expected retail kwh sales under normal weather conditions in 2024 and 2023, and between years.
Current wording
The following table summarizes the estimated effect on diluted earnings per share of the difference in retail kwh sales under actual weather conditions and expected retail kwh sales under normal weather conditions for thesix months ended June 30, 2024 and 2023, and between those periods.
Previous wording
Retail Revenues decreased $12.0 million primarily due to the following:
Current wording
Retail Revenues decreased $9.3 million primarily due to the following:
Previous wording
•A $14.3 million decrease in fuel recovery revenues, primarily due to lower purchased power volumes driven by increased company generation and the unseasonably warm weather in much of our service territory.
Current wording
•A $11.8 million decrease in fuel recovery revenues due to lower amounts of purchased power driven by unfavorable weather and decreased market energy costs.
Previous wording
Purchased Power costs to serve retail customers decreased $19.3 million primarily due to a 42% decrease in the amount of kwh purchased driven by lower customer demand resulting from unfavorable weather as well as an increase in purchased power in the first quarter of 2023 due to the outage at Big Stone Plant.
Current wording
Purchased Power costs to serve retail customers decreased $15.3 million due to a 23% decrease in the volume of purchased power due to decreased demand resulting from unfavorable weather, as well as a 12% decrease in the price of purchased power per kwh, primarily due to decreased market energy costs.
Previous wording
Operating Revenues increased $25.8 million primarily due to a 56% increase in sales volumes driven by customer sales volume growth and strong distributor and end market demand. Sales volumes in the first quarter of 2023 were significantly impacted by distributor destocking efforts as distributors managed inventory levels amid uncertain market conditions. Increased sales volumes in the first quarter of 2024 were partially offset by a 15% decrease in sales prices compared to the same period last year. As market dynamics have begun to normalize, sales prices have declined at a modest pace after peaking in mid-2022.
Current wording
Operating Revenues increased $37.2 million primarily due to a 38% increase in sales volumes driven by customer sales volume growth and distributor and end market demand. Sales volumes in the first half 2023 were impacted by distributors' inventory management strategies amid uncertain market conditions and end market softness. Increased sales volumes were partially offset by a 14% decrease in sales prices compared to the same period last year.
Previous wording
On November 2, 2023, OTP filed a request with the North Dakota Public Service Commission (NDPSC) for an increase in revenue recoverable under general rates in North Dakota. In its filing, OTP requested a net increase in annual revenue of $17.4 million, or 8.4%, based on an allowed rate of return on rate base of 7.85% and an allowed rate of return on equity of 10.6% on an equity ratio of 53.5% of total capital. Through this proceeding, OTP has proposed changes to the mechanism of cost and investment recovery, with recovery moving from riders into base rates. The filing also includes a proposal to implement a sales adjustment mechanism to address potential significant load additions or losses. The filing included an interim rate request of a net increase in annual revenue of $12.4 million, or 6.0%, which was approved by the NDPSC on December 13, 2023. Interim rates went into effect on January 1, 2024, and are subject to potential refund until the finalization of the rate case. An evidentiary hearing before the NDPSC has been scheduled for July 29, 2024, and we anticipate the final outcome of the case will occur in the third quarter of 2024.
Current wording
On November 2, 2023, OTP filed a request with the North Dakota Public Service Commission (NDPSC) for an increase in revenue recoverable under general rates in North Dakota. In its filing, OTP requested a net increase in annual revenue of $17.4 million, or 8.4%, based on an allowed rate of return on rate base of 7.85% and an allowed rate of return on equity of 10.6% on an equity ratio of 53.5% of total capital. Through this proceeding, OTP has proposed changes to the mechanism of cost and investment recovery, with recovery moving from riders into base rates. The filing also includes a proposal to implement a sales adjustment mechanism to address potential significant load additions or losses.
Previous wording
–Approve the proposal to add on-site liquefied natural gas storage at the Astoria Station natural gas plant;
Current wording
•Approved the project to add on-site liquified natural gas storage at Astoria Station natural gas plant by 2027;
Previous wording
In April 2024, the EPA finalized new regulations under Section 111 of the Clean Air Act to regulate GHG emissions from existing and new fossil fuel-based power plants. The final rule establishes subcategories for new combustion turbines and existing coal-fired power plants to achieve certain CO 2 emission reduction levels based on the respective subcategory. For existing coal-fired power plants the applicable subcategory is based upon the date at which the plant will cease operations.
Current wording
In April 2024, the EPA finalized new regulations under Section 111 of the Clean Air Act to regulate greenhouse gas (GHG) emissions from existing and new fossil fuel-based power plants. The final rule establishes subcategories for new combustion turbines and existing coal-fired power plants to achieve certain carbon dioxide (CO 2) emission reduction levels based on the respective subcategory. For existing coal-fired power plants, the applicable subcategory is based upon the date at which the plant will cease operations.
Previous wording
In April 2024, the EPA also finalized regulations to strengthen and update Mercury and Air Toxics Standards (MATS) for coal-fired power plants, tightening the emission standard for toxic metals and finalizing a reduction standard for mercury from existing lignite-fired sources. The EPA also published a final rule under the Clean Water Act to reduce pollutants discharged through wastewater from coal-fired power plants and a final rule requiring the safe management of coal ash at inactive facilities, including requirements for ongoing monitoring and closure and post-closure care.
Current wording
In April 2024, the EPA also finalized regulations to strengthen and update Mercury and Air Toxics Standards for coal-fired power plants, tightening the emission standard for toxic metals and finalizing a reduction standard for mercury from existing lignite-fired sources. The EPA also published a final rule under the Clean Water Act to reduce pollutants discharged through wastewater from coal-fired power plants and a final rule requiring the safe management of coal ash at inactive facilities, including requirements for ongoing monitoring and closure and post-closure care.
Previous wording
As of March 31, 2024, we had $330.9 million of available liquidity under our credit facilities and $238.2 million of available cash and cash equivalents, resulting in total available liquidity of $569.1 million, compared to total available liquidity of $373.7 million as of March 31, 2023.
Current wording
As of June 30, 2024, we had $318.1 million of available liquidity under our credit facilities and $230.7 million of available cash and cash equivalents, resulting in total available liquidity of $548.7 million, compared to total available liquidity of $430.8 million as of June 30, 2023.
Previous wording
The following is a discussion of our cash flows for the three months ended March 31, 2024 and 2023:
Current wording
The following is a discussion of our cash flows for the six months ended June 30, 2024 and 2023:
Previous wording
Net Cash Provided by Operating Activities increased $16.4 million for the three months ended March 31, 2024 compared to the three months ended March 31, 2023, primarily due to an increase in net income driven by increased earnings from our Plastics segment.
Current wording
Net Cash Provided by Operating Activities increased $39.0 million for the six months ended June 30, 2024 compared to the six months ended June 30, 2023, primarily due to an increase in net income driven by increased earnings from our Plastics segment and a lower level of working capital compared to the previous year. Our working capital decrease was largely due to the timing and volume of resin and other input material purchases in our Plastics segment and capital expenditures in our Electric segment.
Previous wording
Net Cash Used in Investing Activities decreased $24.5 million for the three months ended March 31, 2024 compared to the three months ended March 31, 2023. The decrease in cash used in investing activities was primarily due to a lower amount of Electric segment capital investment compared to last year, due to the purchase of the Ashtabula III wind farm for $50.6 million in January 2023.
Current wording
Net Cash Used in Investing Activities increased $74.4 million for the six months ended June 30, 2024 compared to the six months ended June 30, 2023. The increase in cash used in investing activities was primarily due to a $50.1 million investment in U.S. treasuries made to secure a fixed rate of return until their maturity in September 2026, and a higher amount of Electric segment capital expenditures, including additional investments in our wind repowering and advanced meter infrastructure projects.
Previous wording
Net Cash Provided by Financing Activities decreased $18.2 million for the three months ended March 31, 2024 compared to the three months ended March 31, 2023. Financing activities for the three months ended March 31, 2024 included the issuance of $120.0 million of long-term debt at OTP, the proceeds of which were used to repay short-term borrowings of $81.4 million under the OTP credit agreement, fund Electric segment construction expenditures, and support operating activities. Financing activities for the three months ended March 31, 2024 also included dividend payments of $19.6 million. Financing activities for the three months ended March 31, 2023 included net short-term borrowings of $52.7 million and dividend payments of $18.3 million.
Current wording
Net Cash Provided by Financing Activities increased $4.2 million for the six months ended June 30, 2024 compared to the six months ended June 30, 2023. Financing activities for the six months ended June 30, 2024 included the issuance of $120.0 million of long-term debt at OTP, the proceeds of which were used to repay short-term borrowings of $68.6 million under the OTP credit agreement, fund Electric segment construction expenditures, and support operating activities. We manage the capital structure of OTP independent from our consolidated financial position and to ensure compliance with the capital structure approved through regulation; therefore, our decision to issue long-term debt at OTP is not impacted by our consolidated cash and cash equivalent position.
Previous wording
Our contractual obligations as of December 31, 2023 are included in Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations, of our Annual Report on Form 10-K for the year ended December 31, 2023. There were no material changes in our contractual obligations outside of the ordinary course of business during the three months ended March 31, 2024.
Current wording
Our contractual obligations as of December 31, 2023 are included in Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations, of our Annual Report on Form 10-K for the year ended December 31, 2023. There were no material changes in our contractual obligations outside of the ordinary course of business during the six months ended June 30, 2024.
Previous wording
We paid dividends to our common stockholders totaling $19.6 million, or $0.4675 per share, in the first three months of 2024. The determination of the amount of future cash dividends to be paid will depend on, among other things, our financial condition, our actual or expected level of earnings and cash flows from operations, the level of our capital expenditures and our future business prospects. As a result of certain statutory limitations or regulatory or financing agreements, the amount of dividends we are allowed to pay could be restricted. See Note 10 to our consolidated financial statements included in this Quarterly Report on Form 10-Q for additional information. The decision to declare dividends is reviewed quarterly by our Board of Directors.
Current wording
We paid dividends to our common stockholders totaling $39.1 million, or $0.9350 per share, in the first six months of 2024. The determination of the amount of future cash dividends to be paid will depend on, among other things, our financial condition, our actual or expected level of earnings and cash flows from operations, the level of our capital expenditures and our future business prospects. As a result of certain statutory limitations or regulatory or financing agreements, the amount of dividends we are allowed to pay could be restricted. See Note 11 to our consolidated financial statements included in this Quarterly Report on Form 10-Q for additional information. The decision to declare dividends is reviewed quarterly by our Board of Directors.
Previous wording
On May 3, 2024 we filed two registration statements with the SEC, replacing two previously filed registration statements upon their expiration. The first statement, a shelf registration, allows us to offer for sale, from time to time, either separately or together in any combination, equity, debt or other securities described in the registration statement. No new debt or equity has been issued pursuant to the registration statement. The second registration statement allows for the issuance of up to 1,500,000 common shares under our Automatic Dividend Reinvestment and Share Purchase Plan, which provides our common shareholders, retail customers of OTP and other interested investors a method of purchasing our common shares by reinvesting their dividends and/or making optional cash investments. Shares purchased under the plan may be newly issued common shares or common shares purchased on the open market. Both registration statements expire in May 2027.
Current wording
On May 3, 2024, we filed two registration statements with the SEC, replacing two previously filed registration statements upon their expiration. The first statement, a shelf registration, allows us to offer for sale, from time to time, either separately or together in any combination, equity, debt or other securities described in the registration statement. No new debt or equity has been issued pursuant to the registration statement. The second registration statement allows for the issuance of up to 1,500,000 common shares under our Automatic Dividend Reinvestment and Share Purchase Plan, which provides our common shareholders, retail customers of OTP and other interested investors a method of purchasing our common shares by reinvesting their dividends and/or making optional cash investments. Shares purchased under the plan may be newly issued common shares or common shares purchased on the open market. As of June 30, 2024, there were 1,099,327 shares available for purchase or issuance under the plan. Both registration statements expire in May 2027.
Previous wording
OTC and OTP are each party to a credit agreement (the OTC Credit Agreement and the OTP Credit Agreement, respectively) which each provides for unsecured revolving lines of credit. The following is a summary of key provisions and borrowing information as of, and for the three months ended, March 31, 2024:
Current wording
OTC and OTP are each party to a credit agreement (the OTC Credit Agreement and the OTP Credit Agreement, respectively) which each provides for unsecured revolving lines of credit. The following is a summary of key provisions and borrowing information as of, and for the six months ended, June 30, 2024:
Previous wording
OTC, under its financial covenants, may not permit its ratio of interest-bearing debt to total capitalization to exceed 0.60 to 1.00, may not permit its interest and dividend coverage ratio to be less than 1.50 to 1.00, and may not permit its priority indebtedness to exceed 10 percent of its total capitalization. As of March 31, 2024, OTC's interest-bearing debt to total capitalization was 0.39 to 1.00, OTC's interest and dividend coverage ratio was 11.18 to 1.00, and OTC had no priority indebtedness outstanding.
Current wording
OTC, under its financial covenants, may not permit its ratio of interest-bearing debt to total capitalization to exceed 0.60 to 1.00, may not permit its interest and dividend coverage ratio to be less than 1.50 to 1.00, and may not permit its priority indebtedness to exceed 10 percent of its total capitalization. As of June 30, 2024, OTC's interest-bearing debt to total capitalization was 0.38 to 1.00, OTC's interest and dividend coverage ratio was 11.23 to 1.00, and OTC had no priority indebtedness outstanding.
Previous wording
OTP, under its financial covenants, may not permit its ratio of interest-bearing debt to total capitalization to exceed 0.60 to 1.00, may not permit its interest and dividend coverage ratio to be less than 1.50 to 1.00, and may not permit its priority indebtedness to exceed 20 percent of its total capitalization. As of March 31, 2024, OTP's interest-bearing debt to total capitalization was 0.47 to 1.00, OTP's interest and dividend coverage ratio was 3.48 to 1.00, and OTP had no priority indebtedness outstanding.
Current wording
OTP, under its financial covenants, may not permit its ratio of interest-bearing debt to total capitalization to exceed 0.60 to 1.00, may not permit its interest and dividend coverage ratio to be less than 1.50 to 1.00, and may not permit its priority indebtedness to exceed 20 percent of its total capitalization. As of June 30, 2024, OTP's interest-bearing debt to total capitalization was 0.47 to 1.00, OTP's interest and dividend coverage ratio was 3.4 to 1.00, and OTP had no priority indebtedness outstanding.
Rearranged current paragraphs (12)
Current report — wording carried from elsewhere
The following table summarizes the estimated effect on diluted earnings per share of the difference in retail kwh sales under actual weather conditions and expected retail kwh sales under normal weather conditions for the three months ended June 30, 2024 and 2023, and between those periods.
Current report — wording carried from elsewhere
The following table summarizes consolidated operating results for the six months ended June 30, 2024 and 2023:
Current report — wording carried from elsewhere
The following table summarizes Electric segment operating results for the six months ended June 30, 2024 and 2023:
Current report — wording carried from elsewhere
The operating results of our Electric segment are impacted by fluctuations in weather conditions and the resulting demand for electricity for heating and cooling. The following table shows heating and cooling degree days as a percent of normal for the six months ended June 30, 2024 and 2023.
Current report — wording carried from elsewhere
•A $5.2 million increase in new retail revenues, net of an estimated refund, from an interim rate increase in North Dakota effective January 1, 2024 in connection with OTP's North Dakota rate case filed in November 2023.
Current report — wording carried from elsewhere
•A $2.7 million increase in retail revenues due to increased sales volumes from commercial and industrial customers.
Current report — wording carried from elsewhere
The following table summarizes Manufacturing segment operating results for the six months ended June 30, 2024 and 2023:
Current report — wording carried from elsewhere
The following table summarizes Plastics segment operating results for the six months ended June 30, 2024 and 2023:
Current report — wording carried from elsewhere
Cost of Products Sold increased $11.2 million due to increased sales volumes, as discussed above, partially offset by a 24% decrease in the cost of PVC resin and other input materials. The unique supply and demand conditions experienced in recent years, which caused significant volatility and increases in resin costs, have subsided and resin costs have remained stable during the first half of the year.
Current report — wording carried from elsewhere
The following table summarizes Corporate operating results for the six months ended June 30, 2024 and 2023:
Current report — wording carried from elsewhere
The filing included an interim rate request of a net increase in annual revenue of $12.4 million, or 6.0%, which was approved by the NDPSC on December 13, 2023. Interim rates went into effect on January 1, 2024, and are subject to potential refund until the finalization of the rate case.
Current report — wording carried from elsewhere
Financing activities for the six months ended June 30, 2024 also included dividend payments of $39.1 million. Financing activities for the six months ended June 30, 2023 included net short-term borrowings of $42.0 million and dividend payments of $36.5 million.