Otter Tail Corp

Previous wording

Provided below is a summary and discussion of our operating results on a consolidated basis followed by a discussion of the operating results of each of our segments: Electric, Manufacturing and Plastics. In addition to the segment results, we provide an overview of our Corporate costs. Our Corporate costs do not constitute a reportable segment, but rather consist of unallocated general corporate expenses, such as corporate staff and overhead costs, the results of our captive insurance company and other items excluded from the measurement of segment performance. Corporate costs are added to operating segment totals to reconcile to totals on our consolidated statements of income.

Current wording

Provided below are a summary and discussion of our operating results on a consolidated basis followed by a discussion of the operating results of each of our segments: Electric, Manufacturing and Plastics. In addition to the segment results, we provide an overview of our Corporate costs. Our Corporate costs do not constitute a reportable segment, but rather consist of unallocated general corporate expenses, such as corporate staff and overhead costs, the results of our captive insurance company and other items excluded from the measurement of segment performance. Corporate costs are added to operating segment totals to reconcile to totals on our consolidated statements of income.

Previous wording

Operating Expenses increased $3.9 million primarily due to increased purchased power and fuel costs in our Electric segment, and the impact of increased sales volumes in our Plastics segment. These increases were partially offset by lower cost of goods sold from decreased sales volumes in our Manufacturing segment and the impact of lower material costs in our Plastics segment. See our segment disclosures below for additional discussion of items impacting operating expenses.

Current wording

Operating Expenses increased $8.4 million primarily due to an increase in production fuel costs in our Electric segment, increased material costs and sales volumes in our Manufacturing segment, and increased sales volumes in our Plastics segment, partially offset by a decrease in material costs in our Plastics segment. See our segment disclosures below for additional discussion of items impacting operating expenses.

Previous wording

Income Tax Expense decreased $20.5 million primarily due to a decrease in income before income taxes, as well as an increase in PTCs at OTP, driven by increased wind generation which qualified for tax credits. Our effective tax rate was 14.0% for the nine months ended September 30, 2025 and 18.8% for the same period last year. The decrease in our effective tax rate was primarily driven by an increase in PTCs from our wind generation assets.

Current wording

Income Tax Expense decreased $5.2 million primarily due to an increase in PTCs at OTP driven by increased wind generation which qualified for credits. Our effective tax rate was 6.3% for the three months ended March 31, 2026 and 12.9% for 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 and cooling degree days as a percent of normal for the three months ended September 30, 2025 and 2024.

Current wording

The operating results of our Electric segment are impacted by fluctuations in weather conditions and the resulting demand for electricity for heating. The following table shows heating degree days as a percent of normal for the three months ended March 31, 2026 and 2025.

Previous wording

Retail Revenues increased $0.8 million primarily due to increased fuel recovery revenue, increased sales volumes excluding the impact of weather, and increased rider revenue, primarily driven by the recovery of our investments in our wind repowering projects. These increases were partially offset by the impact of seasonal rate differences between interim and final rates in North Dakota, which went into effect in March 2025. The impact of unfavorable weather compared to the same period last year also negatively impacted operating revenues.

Current wording

These increases were partially offset by:

Previous wording

Purchased Power costs decreased $1.2 million primarily due to a 30% decrease in the amount of power purchased, partially offset by a 25% increase in the price of purchased power driven by higher market energy costs.

Current wording

Purchased Power costs decreased $3.9 million primarily due to a 32% reduction in purchased power volumes, partially offset by a 28% increase in the price of purchased power driven by higher market energy costs.

Previous wording

Depreciation and Amortization expense increased $1.7 million due to additional assets, including certain wind, transmission and distribution assets, being placed in service.

Current wording

Depreciation and Amortization expense increased $1.1 million as additional assets, including certain wind generation, distribution and transmission assets, were placed in service.

Previous wording

Income Tax Expense (Benefit)was a $9.2 million benefit in the current period, compared to a $0.7 million expense in the same period last year, primarily due to an increase in PTCs driven by increased wind generation that qualified for PTCs compared to last year. PTCs are generally credited to customers and result in a reduction of operating revenue as well as income taxes.

Current wording

Income Tax Benefit increased $1.2 million primarily due to an increase in PTCs driven by increased wind generation that qualified for PTCs compared to the same period last year. Our wind repowering project was completed in the first quarter of 2026. The completion of these facility repowering projects results in the commencement of PTCs earned from the generation from these facilities as they are placed back into service. PTCs are credited to customers, resulting in a reduction of both operating revenue and income taxes.

Previous wording

Selling, General, and Administrative Expenses increased $1.2 million due to variable compensation costs associated with financial results during the period and expectations for full-year performance.

Current wording

Selling, General, and Administrative Expenses increased $1.6 million, driven by variable compensation costs associated with financial results during the period and expectations for full-year performance.

Previous wording

Cost of Products Sold decreased $2.9 million primarily due to a 16% decrease in the cost of input materials, including PVC resin. The decrease has been driven by global supply and demand dynamics which continue to result in elevated resin supply. The impact of decreased material costs was partially offset by a 4% increase in sales volumes, as discussed above.

Current wording

Cost of Products Sold decreased $0.1 million primarily due to a 12% decrease in the cost of input materials, including PVC resin, however, the decrease was largely offset by a 7% increase in sales volumes.

Previous wording

Income Tax Benefit increased $1.7 million due to the internal allocation of interim tax expense to arrive at the appropriate consolidated effective tax rate.

Current wording

Income Tax Benefit increased $1.3 million due to the internal allocation of interim tax expense.

Previous wording

On June 4, 2025, OTP filed a request with the SDPUC for an increase in revenue recoverable under general rates in South Dakota. In its filing, OTP requested a net increase in annual revenue of $5.7 million, or 12.50%, based on an allowed rate of return on rate base of 8.29% and an allowed ROE of 10.80% on an equity ratio of 53.54% of total capital. Through this proceeding, OTP has proposed changes to the mechanism of certain cost and investment recovery, with recovery moving from riders into base rates. If the SDPUC does not issue its decision on OTP's request within 180 days, OTP can increase rates on an interim basis beginning December 1, 2025. These interim rate revenues, when collected, are subject to potential refund until the finalization of the rate case.

Current wording

On June 4, 2025, OTP filed a request with the SDPUC for an increase in revenue recoverable under general rates in South Dakota. In its filing, OTP requested a net increase in annual revenue of $5.7 million, or 12.50%, based on an allowed rate of return on rate base of 8.29%. Interim rates went into effect on December 1, 2025, and were subject to potential refund until the finalization of the rate case.

Previous wording

On October 31, 2025, OTP filed a request with the Minnesota Public Utilities Commission (MPUC) for an increase in revenue recoverable under general rates in Minnesota. In its filing, OTP requested a net increase in annual revenue of $44.8 million, or 17.7%, based on an allowed rate of return on rate base of 7.92% and an allowed ROE of 10.65% on an equity ratio of 53.5% of total capital. The request includes, among other items, accelerated recovery of the remaining investment of the jurisdictionally allocated share of Coyote Station, which has a $4.3 million annual impact. The request for accelerated recovery is driven by the MPUC’s order in OTP’s most recent Integrated Resource Plan to discontinue serving Minnesota customers with capacity and energy from Coyote Station by December 2031. If this part of the request is granted, we anticipate the amounts collected would be deferred and recognized over the remaining estimated useful life of the plant, which extends until 2041.

Current wording

On October 31, 2025, OTP filed a request with the MPUC for an increase in revenue recoverable under general rates in Minnesota. In its filing, OTP requested a net increase in annual revenue of $44.8 million, or 17.7%, based on an allowed rate of return on rate base of 7.92% and an allowed ROE of 10.65% on an equity ratio of 53.5% of total capital. The request includes, among other items, accelerated recovery of the remaining investment of the jurisdictionally allocated share of Coyote Station, which has a $4.3 million annual impact. The request for accelerated recovery is driven by the MPUC’s order in OTP’s most recent IRP to discontinue serving Minnesota customers with capacity and energy from Coyote Station by December 2031. If this part of the request is granted, we anticipate the amounts collected would be deferred and recognized over the remaining estimated useful life of the plant, which extends until 2041. The filing also included an interim rate request for a net increase in annual revenue of $31.8 million, or 12.6%.

Previous wording

We believe our financial condition is strong and our cash and cash equivalents, other liquid assets, operating cash flows, existing lines of credit, access to capital markets, and borrowing ability because of investment-grade credit ratings, when taken together, provide us ample liquidity to conduct our business operations, fund our short- and long-term capital expenditure plans and satisfy our obligations as they become due. Our liquidity, including our operating cash flows and access to capital markets, could be impacted by macroeconomic factors outside of our control, including higher interest rates and debt capital costs, and diminished credit availability. In addition, our liquidity could be impacted by non-compliance with certain financial covenants under our various debt instruments. As of September 30, 2025, we were in compliance with all financial covenants (see the Financial Covenants section under Capital Resources below).

Current wording

We believe our financial condition is strong and our cash and cash equivalents, other liquid assets, operating cash flows, existing lines of credit, access to capital markets and borrowing ability because of investment-grade credit ratings, when taken together, provide us ample liquidity to conduct our business operations, fund our capital expenditure program and satisfy our obligations as they become due. Our liquidity, including our operating cash flows and access to capital markets, could be impacted by macroeconomic factors outside of our control, including higher interest rates and debt capital costs, and diminished credit availability. In addition, our liquidity could be impacted by non-compliance with certain financial covenants under our various debt instruments. As of March 31, 2026, we were in compliance with all financial covenants (see the Financial Covenants section under Capital Resources below).

Previous wording

As of September 30, 2025, we had $379.5 million of available liquidity under our credit facilities and $325.8 million of available cash and cash equivalents, resulting in total available liquidity of $705.3 million.

Current wording

As of March 31, 2026, we had $310.5 million of available liquidity under our credit facilities and $348.4 million of available cash and cash equivalents, resulting in total available liquidity of $658.9 million.

Previous wording

The following is a discussion of our cash flows for the nine months ended September 30, 2025 and 2024:

Current wording

The following is a discussion of our cash flows for the three months ended March 31, 2026 and 2025:

Previous wording

Net Cash Provided by Operating Activities decreased $33.8 million for the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024, primarily due to the timing of fuel cost and rider recoveries from our utility customers and a decrease in earnings. Net cash provided by operating activities in our Electric segment is regularly affected by the timing of payments made for operating costs and the various mechanisms used to recover costs from or return amounts to our utility customers. The timing of recoveries and refunds can vary by the recovery or refund mechanism. Due to the numerous factors that impact the timing of our cash receipts and cash payments, our cash provided by operating activities can vary significantly from our net income for the period.

Current wording

Net Cash Provided by Operating Activities increased $31.1 million for the three months ended March 31, 2026 compared to the three months ended March 31, 2025, primarily due to a decrease in working capital requirements, largely driven by the timing of vendor payments and the recovery of fuel cost and rider revenue from our utility customers. Net cash provided by operating activities in our Electric segment is regularly affected by the timing of payments made for operating costs and the various mechanisms used to recover costs from or return amounts to our utility customers. The timing of recoveries and refunds can vary by the recovery or refund mechanism. Due to the numerous factors that impact the timing of our cash receipts and cash payments, our cash provided by operating activities can vary significantly from our net income for the period.

Previous wording

Net Cash (Used in) Provided by Financing Activities for the nine months ended September 30, 2025 included the issuance of $100.0 million of long-term debt at OTP, the proceeds of which were used to repay short-term borrowings 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 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.

Current wording

Net Cash Provided by Financing Activities for the three months ended March 31, 2026 included the issuance of $100.0 million of long-term debt at OTP, the proceeds of which were used to repay short-term borrowings 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 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

Financing activities for the nine months ended September 30, 2025 also included net repayments of short-term borrowings of $69.6 million and dividend payments of $66.0 million. Financing activities for the nine months ended September 30, 2024 included the issuance of $120.0 million of long-term debt at OTP, net repayments of short-term debt of $14.0 million and dividend payments of $58.7 million.

Current wording

Financing activities for the three months ended March 31, 2026 also included net short-term borrowings of $7.7 million and dividend payments of $24.3 million. Financing activities for the three months ended March 31, 2025 included the issuance of $50.0 million of long-term debt at OTP, net repayments of short-term debt of $10.8 million and dividend payments of $22.0 million.

Previous wording

Our contractual obligations as of December 31, 2024 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, 2024. There were no material changes in our contractual obligations outside of the ordinary course of business during the nine months ended September 30, 2025.

Current wording

Our contractual obligations as of December 31, 2025 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, 2025. There were no material changes in our contractual obligations outside of the ordinary course of business during the three months ended March 31, 2026, except for the land leases discussed above.

Previous wording

We paid dividends to our shareholders totaling $66.0 million, or $1.58 per share, in the first nine months of 2025. 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 shareholders totaling $24.3 million, or $0.5775 per share, in the first three months of 2026. 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. As of September 30, 2025, there were 1,354,358 shares available for purchase or issuance under the plan. 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 March 31, 2026, there were 1,306,321 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 nine months ended, September 30, 2025:

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 three months ended, March 31, 2026:

Previous wording

On March 27, 2025, OTP entered into a Note Purchase Agreement pursuant to which OTP issued, in a private placement transaction, $100.0 million of senior unsecured notes consisting of (a) $50.0 million of 5.49% Series 2025A Senior Unsecured Notes due March 27, 2035, and (b) $50.0 million of 5.98% Series 2025B Senior Unsecured Notes due June 5, 2055. The Series 2025A Notes were issued on March 27, 2025, upon entering into the agreement. The Series 2025B Notes were issued on June 5, 2025. We do not anticipate or plan to issue any additional long-term debt in 2025.

Current wording

On March 19, 2026, OTP entered into a Note Purchase Agreement pursuant to which OTP issued, in a private placement transaction, $170.0 million of senior unsecured notes consisting of (a) $100.0 million of 5.33% Series 2026A Senior Unsecured Notes due March 19, 2036, and (b) $70.0 million of 6.04% Series 2026B Senior Unsecured Notes due June 4, 2056. The Series 2026A Notes were issued on March 19, 2026, upon entering into the agreement. The Series 2026B Notes are expected to be issued on June 4, 2026, subject to the satisfaction of certain customary conditions to closing.

Previous wording

As of September 30, 2025, we had $1.0 billion of principal outstanding under long-term debt arrangements. These instruments generally provide for unsecured borrowings at fixed rates of interest with maturities ranging from 2026 to 2055. Note 6 to our consolidated financial statements included in this Quarterly Report on Form 10-Q includes additional information regarding these long-term debt instruments.

Current wording

As of March 31, 2026, we had $1.1 billion of principal outstanding under long-term debt arrangements. These instruments generally provide for unsecured borrowings at fixed rates of interest with maturities ranging from 2026 to 2055. Note 7 to our consolidated financial statements included in this Quarterly Report on Form 10-Q includes additional information regarding these long-term debt instruments.

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 or 0.65 to 1.00, depending on the debt agreement, 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 September 30, 2025, OTC's interest-bearing debt to total capitalization was 0.37 to 1.00, OTC's interest and dividend coverage ratio was 8.3 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 or 0.65 to 1.00, depending on the debt agreement, 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, 2026, OTC's interest-bearing debt to total capitalization was 0.40 to 1.00, OTC's interest and dividend coverage ratio was 7.76 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 or 0.65 to 1.00, depending on the debt agreement, 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 September 30, 2025, OTP's interest-bearing debt to total capitalization was 0.45 to 1.00, OTP's interest and dividend coverage ratio was 2.93 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 or 0.65 to 1.00, depending on the debt agreement, 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, 2026, OTP's interest-bearing debt to total capitalization was 0.50 to 1.00 or 0.48 to 1.00, depending on the debt agreement, OTP's interest and dividend coverage ratio was 3.13 to 1.00 and OTP had no priority indebtedness outstanding.