MDU Resources Group, Inc. Stock

Ladies and gentlemen, thank you for joining us, and welcome to the MDU Resources Group, Inc. Q2 2026 Earnings Conference Call. [Operator Instructions]

I will now hand the conference over to Brent Miller, Treasurer of MDU Resources Group. Brent, please go ahead.

Thank you, and welcome, everyone, to the MDU Resources Group Second Quarter 2026 Earnings Conference Call. Our earnings release and supporting materials for this call are available on our website at mdu.com under the Investors section. Leading today's call are Nicole Kivisto, President and Chief Executive Officer; and Jason Vollmer, Chief Financial Officer of MDU Resources Group.

During today's call, we will make certain forward-looking statements within the meaning of the federal securities laws. Please refer to our SEC filings for a discussion of risks and uncertainties that could cause actual results to differ. I will now turn the call over to Nicole for her prepared remarks. Nicole?

Thank you, Brent, and good afternoon, everyone. We appreciate you joining us today and for your continued interest in MDU Resources. This morning, we reported second quarter 2026 earnings of $21.3 million or $0.10 per share. Our results reflected continued execution across our regulated utility and pipeline businesses. New rates, customer growth, investments such as Badger Wind Farm and higher retail sales volumes helped drive the results. We delivered solid results while also continuing to advance strategic infrastructure opportunities that continue to support long-term growth.

A key highlight for the quarter was certainly the continued advancement of the proposed Bakken East pipeline project. With recently signed precedent agreements, we now have executed agreements with all customers that submitted binding open season interest, totaling nearly 1.2 billion cubic feet per day of transportation capacity with a negotiated option in place that may increase contracted volumes to nearly all of the original interest from our binding open season. We continue to design the project for 1.4 billion cubic feet per day of transportation capacity.

Overall project design is being finalized based on confirmed customer volumes and delivery locations before a final investment decision is made, which is expected ahead of a FERC 7(c) filing. This application is now anticipated to be filed in the fourth quarter of 2026.

The proposed in-service dates of Phase 1 in late 2029 and Phase 2 in late 2030 remain unchanged. As development progresses, we continue to evaluate financing, partnership and other commercial options to support the projected $2.7 billion to $3.2 billion project. The potential Bakken East investment remains incremental to our current capital program.

We also continue to see encouraging development activity across our service territory, including data center opportunities and broader infrastructure demand. Our approach to serving data centers is grounded in protecting existing customers and ensuring that growth creates value for the communities we serve. Data center customers are responsible for paying the costs associated with connecting to and being served by the electric system, including infrastructure and energy-related expenses. At the same time, the additional revenue generated from serving these customers can help support the electric system and contribute to reducing certain fixed costs for existing retail customers by allocating them across a broader customer base. This current approach creates benefits for all customers.

During the quarter, we did enter into an electric service agreement with Applied Digital to serve Polaris Forge 3, an AI factory near Center, North Dakota. At full capacity, the campus would require 430 megawatts of electricity. Approval of the ESA and other regulatory filings by the North Dakota Public Service Commission is pending. We now have over 1 gigawatt of data center load under signed ESAs with approximately 240 megawatts currently online with additional volumes expected over the next few years as additional buildings are constructed.

On the electric regulatory front, we did file a North Dakota general rate case on June 30, 2026, requesting an annual revenue increase of approximately $34.5 million with interim rates of approximately $26.3 million requested to begin on September 1 of this year. The filing reflects electric infrastructure investments, normal depreciation, reliability improvements, system safety and higher operation and maintenance expense.

In Montana, interim rates reflecting an annual increase of approximately $10.4 million remain in effect subject to refund, and a settlement agreement of $10 million has been filed and is pending commission approval.

In Wyoming, our general rate case settlement was approved for an annual increase of $5.8 million with rates effective April 1, 2026.

Also in June, the North Dakota Public Service Commission approved the route permit for the Jamestown-to-Ellendale transmission project. This project is expected to enhance reliability, improve resiliency, reduce transmission congestion and support access to lower-cost energy across the region.

At our natural gas distribution segment, positive regulatory outcomes in Idaho, Washington, Montana and Wyoming, as well as higher retail sales volumes and continued customer growth supported improved year-over-year results. In Washington, we did file a multiyear natural gas case requesting an annual revenue increase of $25.1 million in year 1 and $18.1 million in year 2.

Our Oregon general rate case remains pending with a multiparty settlement agreement, which was filed on July 31, 2026, with a requested annual increase of approximately $12.2 million. We also do anticipate filing a Minnesota general rate case later this year.

At our pipeline segment, strategic growth initiatives continue to advance. The Line Section 32 expansion project remains on schedule following our FERC Section 7(c) application filing in March of 2026, and continues to target a late 2028 in-service date, subject to regulatory approvals. Development activities for the potential mine and industrial project also continue under agreements currently extended through late 2026.

In addition, our pipeline business filed a FERC rate case on May 29 of this year, requesting a $31 million annual revenue increase. Approximately 30% of the requested revenue increase is due to proposed new depreciation and amortization rates. FERC accepted and suspended the proposed rates on June 30, with rates to become effective December 1, 2026, subject to refund and the outcome of hearing procedures if a settlement with our customers and FERC is not reached.

Looking ahead, we are reaffirming our 2026 earnings per share guidance range of $0.93 to $1. This guidance is based on assumptions, including normal weather, economic and operating conditions for the remainder of the year, continued customer growth, successful execution of approved capital investment programs and constructive regulatory outcomes. Our long-term earnings per share growth objective remains at 6% to 8%.

Our capital program for 2026 through 2030 totals approximately $3.1 billion, with planned investments of approximately $1.1 billion in our electric business, $1.4 billion at our natural gas distribution business and $643 million at our pipeline. We remain focused on disciplined execution of this plan while advancing additional infrastructure opportunities that support customers, communities and stockholders.

As always, MDU Resources is committed to operating with integrity and with a focus on safety. We remain dedicated to delivering safe, reliable, cost-effective and environmentally responsible energy services while positioning the company for compelling long-term growth.

And with that, I will now turn the call over to Jason for the financial update. Jason?

Thank you, Nicole. As Nicole mentioned, we announced this morning second quarter earnings of $21.3 million or $0.10 per share compared to $13.7 million or $0.07 per share for the second quarter of 2025. On a year-to-date basis, earnings were $102.1 million or $0.49 per share compared to $95.7 million or $0.47 per share for the first 6 months of last year.

Turning to our individual businesses. Our electric utility reported second quarter earnings of $14.7 million compared to $10.4 million for the same period in 2025. Results benefited from higher retail sales revenue, including recovery mechanisms associated with renewable investments such as the Badger Wind Farm, which contributed $3.3 million in earnings during the quarter. Interim rates in Montana and new rates in Wyoming, along with higher retail sales volumes across all major customer classes also contributed to the increase.

Our natural gas distribution segment reported a seasonal second quarter loss of $3.9 million compared to a seasonal loss of $7.4 million in the second quarter of 2025. The improved year-over-year results was primarily driven by new rates in Idaho, Washington, Montana and Wyoming, as well as higher retail sales volumes across all customer classes. Retail sales volumes increased 6.7% and customer growth was 1.6% year-over-year. These benefits were partially offset by higher interest expense resulting from higher long-term debt balances.

The pipeline segment earned $14.4 million in the second quarter compared to $15.4 million in the same period in 2025. The decrease was driven by lower other income and higher depreciation and amortization expense from a growth project placed in service. These impacts were partially offset by continued customer demand for short-term natural gas transportation contracts and interruptible storage services, along with contributions from previously constructed growth projects, including a contracted volume increase.

The other category reported a second quarter net loss of $3.9 million compared to a net loss of $4.7 million in the same period last year. The year-over-year improvement was primarily due to discontinued operations and associated with a $1.5 million tax benefit related to strategic initiative costs. We continue to maintain a strong balance sheet and ample access to working capital to finance operations through our peak periods.

That summarizes our financial highlights for the quarter. We appreciate your interest in MDU Resources, and ask now that we open the line for questions. Operator?

[Operator Instructions] Your first question comes from the line of Constantine Lednev with Wells Fargo.

Actually, it's Andrew Kadavy on for Constantine right now. Maybe on the financing options for Bakken East. We've seen some peers use a variety of instruments to finance these bigger projects. Are you seeing any favorable markets out there that could help you efficiently finance the project?

Yes. Certainly, this is Jason. I can field that one. I think, again, as we've stated before, at this point, we're very excited to have reached executing all of the precedent agreements we have in place as we've been working towards that progress. We continue to look at all options as we think about financing a project of this size and scope. And I think, as you mentioned, we've seen others out there, too. So we've been very focused on getting these precedent agreements signed and getting to a point of a decision. And of course, you need to get in front of our Board to look at a final investment decision on this project. So I think it's safe to say we'll look at all options out there. We feel very confident in the ability to finance a project like this and certainly some good appetite out there for these types of assets today.

And would that, I guess, the financing options would be -- would that be part of the Board's FID decision? And is that still on schedule for the third quarter? Or is that -- were you looking at fourth quarter for that?

Yes. So right now, what we've stated in a little bit of a new update in our release this quarter, we are looking to make our 7(c) filing in the fourth quarter. I think we would have previously looked at third quarter based on the schedule. Certainly, some of the precedent agreement negotiations took a little bit longer. As Nicole mentioned, these have been -- some of these recently signed here.

So we will continue to bring our Board up to speed on where we're at with the project. They've been certainly involved all the way along. Work is continuing on this project and has continued from the beginning since we started looking at this. So I'm not going to be specific on a time line date yet. I think we need to go through the process of now getting the right information in front of our Board to make a decision in the right manner. But certainly, would happen ahead of the 7(c) filing, which we are now expecting to happen in the fourth quarter.

Your next question comes from the line of Julien Dumoulin-Smith with Jefferies.

It's actually Tanner on for Julien. Thanks for the new Bakken East disclosures here. Could you maybe provide a little more information on the negotiated option in place, the strategic rationale behind it? And how you would classify the commercial alternatives and not taking the option?

Yes, I can take that. So I appreciate the question. And I guess I just want to start by echoing what Jason said. I really want to give a shout out to the WBI team, extremely proud of the milestone here that we announced today with the recently signed precedent agreements that get us to all customers really that were in the nonbinding open season showed up here. So that's real positive news.

We did reference the option, as you mentioned. And essentially, what we've done with that customer is they're working -- all customers are working on timing with their applicable customers. And so we worked an arrangement out where they have an option to essentially add more volumes at an already negotiated agreement. And so essentially, if that happens, what we alluded to in the release is that gets us very close to that open season amount.

Now saying that, I will say a key data point that we disclosed here also would be that we still are designing the project at 1.4 Bcf a day. So I feel good about that. And then just highlighting a couple of the other key updates, which Jason alluded to, too, which is with the precedent agreements being recently signed, we did allude to moving that 7(c) filing back to the fourth quarter and note that we would make a final investment decision ahead of that. In-service dates, as we mentioned, they'll remain unchanged.

Understood. Great. Is the state backstop a portion of the executed agreements? Or have they or have you found an offtaker to stand in their place?

Yes. The state is part of the precedent agreements that we have signed.

Understood. And then maybe just following up on the Polaris Forge 3 ESA. You're in front of the commission requesting approval. Can you speak to the magnitude of margin uplift here relative to what we're seeing at the Ellendale campus? And maybe zooming out since you've also recently just filed your electric rate case in the state. Does this give you confidence to be able to elongate the period between filings, given the support to earned ROEs from the capital-light ESA?

Yes, absolutely. We certainly are excited about the ESA that we signed as we disclosed, it's 430 megawatts. As you mentioned, rightfully so, we do have this in front of the state of North Dakota for approval. And so as you can imagine, we would be waiting to get the appropriate approvals before we'd contemplate including that in any of our numbers or providing any financial guidance. So right now, that would not be contemplated in what we're talking about from a long-term growth rate perspective.

Certainly, the way we are working through these negotiations with data center customers, you've heard us talk about this in the past. We are working under a capital-light model as of today. And so incremental margin on data center load is a benefit to the company, but I would say it's also a benefit to our customers. So we really do feel like it's a win-win. So yes, there is a benefit to the company. But as we've talked about with investors in the past, we are sharing a piece of that margin with our retail customers. So they are getting a credit on their bill as well. And then in addition to that, the data center takes on more of that transmission expense that otherwise would have been allocated to our retail customers. So we're also seeing bill impacts, bill reductions to retail customers because of that.

So that kind of gives you -- here's the company side of it, and here's the customer side of it. But the bottom line is the Center ESA right now, we are still waiting for approval and final move forward on that with the state before we would incorporate something like that in our guidance.

Your next question comes from the line of Aidan Kelly with JPMorgan.

Yes, of course. So I just want to hone in on Bakken East again, clearly, strong commercial momentum to date with the 1.2 Bcf secured you mentioned. And you're still kind of designing for 1.4 Bcf. I guess my question is, are there any factors that would cause you to expand the Bakken East pipe? I know in the past, you've kind of spoken to an overbuild scenario as a consideration. So just curious if you could comment on the potential there and your thoughts in general.

Yes. So as we mentioned in the news release, and I also reiterated as part of my talking points here today, we are still currently working through that overall design. So with these recently signed precedent agreements, we will look at what makes sense in terms of designing the projects so that we can have expandability but also designing the project so that it meets the financial hurdles we need from a Board as well as a shareholder perspective. So it's a balancing act, but certainly, we will be looking at that and contemplating that as we move to a final investment decision.

Great. Understood. Makes sense. And I guess just teeing it all up, you kind of laid out potential FID coming before the 7(c) filing in 4Q and you kind of need to go to the Board for some considerations there. I guess just like for the investment community, when should we kind of expect you to refresh the capital plan and kind of roll in this Bakken East estimate? Is that like kind of on the tails of 4Q? Just any kind of color on the timing there as you kind of see it today.

Aidan, I can take that one. So our normal process for updating capital would really be kind of that late November time frame. So typically, after our third quarter Board meeting, meeting with our Board, updating along the way. Now that said, something the size of a Bakken East project here would be incrementally a large increase to that.

So I think when we get to the Board and we've got an FID decision, a little more clarity around exactly what impact this could have should we decide to proceed here, then I think we would update the market at that point with some sort of a maybe revised range. As you know right now, we've put a range out there in the neighborhood of $2.7 billion to $3.2 billion of the capital range, sorry, on that one. So that is something that we will continue to refine as we go along as we get closer to the ultimate decision here. But I think we'll probably narrow that in. And certainly, by the time we get to our November normal capital increase cycle, we would have kind of a working assumption built into our capital plan, again, if our Board decides to move forward with this project. And certainly, again, at this point, we're excited about the progress we've made to date.

Great. Sorry, just one follow-up question on my first question, actually. It's just -- so it is possible upside? And then like, I guess, when would that decision be made, if so?

Yes. And I can maybe just comment on that. So again, we're designing for 1.4 Bcf, and it's really going to support the demand that we are getting here throughout the contracting process where we've got to at this point in time. To Nicole's point, there would be the ability for us to expand on that in the future should we see additional demand arise in the future. That would probably take some additional capital, maybe in the form of additional compression, things like that. So those are the things we'll make decisions on as we go. But right now, we are designing to the demand that we have today, but we would have the ability to potentially upsize this in the future if more demand showed up in future periods.

[Operator Instructions] Your next question comes from the line of Chris Ellinghaus with Siebert Williams Shank.

So could you just give a little color... [Technical Difficulty]

Chris, are you still there? We can't hear you right now.

[Operator Instructions] Your next question comes from the line of Ryan Levine with Citi.

I wanted to start off on the North Dakota data center front. Given that we're seeing broad calls and at least publicly around increased community engagement from -- on some of the concerns around data centers in the state. How is MDU approaching the engagement on those potential issues and trying to advance projects that may support load growth in the region?

Yes. So as it relates to where we are currently serving, I'm assuming you're talking about the data center load and conversations around that balancing act. I just want to make sure I'm answering your question.

Correct, correct.

Yes. So I think as we think about where we're at today in the communities that we've got signed ESAs, we feel pretty good about how that community conversation is moving forward. That being said, we do believe that we need to continue to tell our story in terms of how we are serving data centers and what the potential benefit is, not only to our existing retail customers, but to the communities at large. So we have been engaged with the communities. We've been engaged in other discussions locally in terms of getting that message out, highlighting that information on our website, visiting with our employees about it, et cetera, just to make sure that it's understood in terms of how we are serving data center loads. But specifically, as it relates to those conversations in the areas where we have signed ESAs, we feel good about where we're at today.

And then just to clarify, given all the momentum around the pipeline expansion and you're indicating that no FID until the fourth quarter. Just to confirm, there's no meaningful milestones that need to be achieved between now and then to move forward with the project? Or any clarification you're able to make around that particular issue?

Yes. I guess I would just clarify your question with the response that is making sure you understand. What we said is we would intend to have an FID before the 7(c) filing, and the 7(c) filing is scheduled for the fourth quarter. So I just want to clarify, we didn't technically say for sure that's when we would move forward with an FID would be the fourth. We said it would be before the filing of that 7(c). So I just want to clarify that.

In terms of other major milestones, as you can imagine, we have continued work on this project all the way through this as we were negotiating precedent agreements, we have been doing numerous things, whether it's boots on the ground activity, whether it's continuing to think about how we might finance a project of this size. So throughout that whole process, we have certainly been engaged with our Board in this discussion as well. And so we'll continue to do that as we head into a final investment decision.

There are no further questions at this time. I will now turn the call back to Nicole Kivisto for closing remarks.

All right. I want to thank everyone again for joining us today and for your thoughtful questions. We certainly appreciate your continued interest in and support of MDU Resources. As we move through the remainder of 2026, we remain focused on disciplined execution of our capital program, constructive regulatory engagement and advancing infrastructure opportunities that support safe, reliable and affordable energy for our customers.

Finally, I want to close by thanking all of our employees for their ongoing commitment to safety, reliability, operational excellence and customer service. And with that, we look forward to staying engaged with all of you throughout the year. Operator, you may conclude the call.

This concludes today's call. Thank you for attending. You may now disconnect.

Hello, everyone. Thank you for joining us, and welcome to the MDU Resources Group Inc. Q1 2026 Earnings Conference Call. [Operator Instructions]

I will now hand the conference over to Brent Miller, Treasurer. Brent, please go ahead.

Thank you, Warren, and welcome, everyone, to the MDU Resources Group First Quarter 2026 Earnings Conference Call. Our earnings release and supporting materials for this call are available on our website at mdu.com under the Investors section. Leading today's call are Nicole Kivisto, President and Chief Executive Officer; and Jason Vollmer, Chief Financial Officer of MDU Resources Group.

During today's call, we will make certain forward-looking statements within the meaning of the federal securities laws. Please refer to our SEC filings for a discussion of risks and uncertainties that could cause actual results to differ.

I will now turn the call over to Nicole for her prepared remarks. Nicole?

Thank you, Brent, and good afternoon, everyone. We appreciate you joining us today and for your continued interest in MDU Resources. This morning, we reported first quarter 2026 earnings of $80.8 million or $0.39 per share. Results reflected strong operational performance across our businesses offset by mild winter weather impacts, which reduced earnings by approximately $0.03 per share. At the same time, rate relief and recent investments such as Badger Wind Farm and other pipeline expansions, contributed positive results, and we continue to see encouraging demand trends, including interest tied to data center development.

During the quarter, we concluded our binding open season for the proposed Bakken East Pipeline project with continued strong interest received. As a reminder, we have not yet reached a final investment decision on this potential project, but we are certainly encouraged with the approximate 1.4 billion cubic feet per day of submitted interest received in the open season. Of that total, approximately 40% has been signed under precedent agreements with additional precedent agreements in active negotiation. Included in the signed precedent agreements is a firm capacity commitment of $50 million annually for 10 years from the state of North Dakota.

With these results, we are now expecting the design of the potential project to include approximately 353 miles of 42-inch, 36-inch and 30-inch diameter mainline pipe, approximately 21 miles of 30-inch, 24-inch and 20-inch diameter lateral pipelines, additional compression at 3 existing compressor stations and the construction of 3 new compressor stations. Based on these assumptions, we are projecting total capital investment for the potential project in the range of $2.7 billion to $3.2 billion, which would be incremental to our current $3.1 billion capital investment forecast.

We are encouraged by the level of interest and ongoing commercial discussions that demonstrate continued demand for additional takeaway capacity from the Bakken region, which the Bakken East project could provide. This potential project would also provide natural gas transportation service to meet growing customer demand from industrial, power generation and local distribution companies in the region. As we look to finance a project of this size and scope, we will evaluate all options, including using our balance sheet to finance the project, pursuing potential partnerships and various other options.

Also during the quarter, we saw a continued ramp of our data center load. We currently have 580 megawatts under signed electric service agreements, of which 180 megawatts has been online since mid-year 2023. 50 megawatts from the second data center is currently online with an additional 50 megawatts currently ramping online. An additional 150 megawatts is expected online later this year, with another 100 megawatts expected online in 2027 and the remaining 50 megawatts expected online in 2028.

Our current approach to serve these large load customer opportunities is with a capital-light business model, which not only benefits our earnings and returns, but also provides cost savings to our other retail customers. Currently, our average retail customer receives an approximate $70 per year credit on their bill from this approach, and we anticipate this credit to increase to potentially over $200 per year when all volumes are fully online.

We do continue to pursue additional discussions with potential data center customers and will provide further updates when we reach executed electric service agreements. Depending on the structure of future agreements, we would consider investing capital into new generation, substation and transmission assets to serve the increased load. Aside from data center load, we also continue to evaluate other potential capital projects related to safely and reliably meeting existing customer demand as well as grid resiliency.

On the regulatory front, we are continuing to execute on our plan of filing 3 to 5 rate cases annually and working to achieve constructive outcomes in all jurisdictions. At our electric segment, our Wyoming rate case was approved with rates effective April 1, 2026. In our Montana case, interim rates were approved for an annual increase of $10.4 million with rates also effective April 1, subject to refund. We also anticipate filing a general rate case in North Dakota yet this year.

On a slightly separate but related note, during the quarter, the South Dakota legislature approved legislation enabling utilities to reduce wildfire risk through the submission of wildfire mitigation plans and providing associated liability protection. With this action, all 4 states in which we provide electric service now have wildfire mitigation and liability relief frameworks in place.

Moving on to our natural gas regulatory update. New rates from our Idaho case, were effective January 1, reflecting an annual increase of $13 million. In Washington, year 2 rates under our approved multiyear rate plan, representing an annual increase of $10.8 million, were effective March 1, 2026. In April, we did file a revision to decrease revenue by $2.1 million annually due to forecasted capital investments that were not placed in service as of December 31, 2025. Our Oregon rate case is still pending before the commission, where we requested an annual increase of $16.4 million. As we look ahead, we anticipate filing another multiyear rate case in Washington this year and also plan to file a general rate case in Minnesota later in 2026.

Moving on to our pipeline segment. We filed our FERC Section 7C application in March for our Line Section 32 expansion project, marking an important regulatory milestone in this project's development. This expansion will provide natural gas transportation service to an electric generating facility being constructed in Northwest North Dakota. The project is dependent on regulatory approvals with construction targeted to be complete in late 2028, with a total capital investment of approximately $70 million, which is included in our $3.1 billion capital plan.

We also extended the signed agreement to support the early-stage development of the potential Minot industrial pipeline project through late 2026. This project would be approximately a 90-mile pipeline from Tioga, North Dakota, to Minot, North Dakota and would provide incremental natural gas transportation capacity for anticipated industrial demand should we decide to proceed. This project is included in our outer years of the $3.1 billion capital plan, and we will continue to provide updates as the project progresses.

Looking ahead, continued strong customer demand at our pipeline segment and progress in our utility regulatory schedule should provide opportunities to meet our long-term EPS growth rate target as we move forward. In addition, our utility experienced combined retail customer growth of 1.4% when compared to this time last year, which is within our targeted annual growth rate of 1% to 2%. This demand and growth provide investment opportunity for customer-driven growth projects at our pipeline and in our utility infrastructure. I am proud of our employees whose dedication to our core strategy continues to drive our business to deliver exceptional performance and positions MDU Resources with compelling long-term growth prospects.

Despite the mild weather headwinds experienced in the first quarter, we are affirming our 2026 earnings per share guidance range of $0.93 to $1 per share. We remain confident in our ability to execute our long-term growth strategy and believe our operational focus and financial discipline continue to position us well for delivering safe and reliable energy, customer value and strong stockholder returns. We also continue to anticipate a long-term EPS growth rate of 6% to 8%, while targeting a 60% to 70% annual dividend payout ratio.

As always, MDU Resources is committed to operating with integrity and with a focus on safety. We remain dedicated to delivering value as a leading energy provider and employer of choice.

I will now turn the call over to Jason for a financial update. Jason?

Thank you, Nicole. This morning, we announced first quarter earnings of $80.8 million or $0.39 per share compared to first quarter 2025 earnings of $82 million or $0.40 per share. As Nicole mentioned in her opening comments, milder weather had an approximate impact of $0.03 per share on a consolidated basis for the quarter.

Turning to our individual businesses. Our electric utility reported first quarter earnings of $14.5 million compared to $15 million for the same period in 2025. The first full quarter of Badger Wind Farm being in service was a benefit in the quarter, but was more than offset by lower retail sales volumes from 10% to 30% milder weather across our service territory, which impacted earnings results by approximately $2 million when compared to the first quarter of 2025.

Our natural gas utility reported earnings of $44.2 million in the first quarter compared to $44.7 million in 2025. Similar to our electric results, warmer weather impacted volumes for the quarter, resulting in an approximately $5 million impact to earnings compared to last year, including temperatures 20% warmer in Idaho, 30% warmer in Montana and 10% to 30% higher across the rest of our service territory when compared to the prior year.

Weather normalization mechanisms in certain states helped to offset the weather -- the warmer temperatures experienced in the quarter. Largely offsetting the lower volumes was rate relief in Washington, Idaho, Montana and Wyoming. The pipeline reported earnings of $15.3 million compared to first quarter record earnings of $17.2 million last year. The decreased earnings was driven by lower interruptible natural gas storage withdrawals along with higher operation and maintenance expense, primarily due to increased material costs and payroll-related expenses. Higher Montana property tax accruals also contributed to the decrease in earnings. Partially offsetting the impacts was strong customer demand for short-term natural gas transportation contracts as well as contributions from the Minot expansion project placed in service late last year.

Finally, MDU Resources continues to maintain a strong balance sheet and has ample access to working capital to finance our operations through our peak seasons. In connection with the company's December 2025 follow-on equity offering, a portion of the related forward sales agreements were settled in March 2026, resulting in the issuance of 4.3 million shares of new common stock for proceeds of approximately $81.3 million.

That summarizes the financial highlights for the quarter. We appreciate your interest in MDU Resources and ask now that we open the line for questions. Operator?

[Operator Instructions] Your first question comes from the line of Julien Dumoulin-Smith with Jefferies.

Again, congratulations, just really great outcomes here of late. So kudos to you guys on that front. Look, if I could just kick it off here. I mean, just a remarkable backdrop. Just wanted to talk a little bit more about this 40% signed under precedent agreements relative to the remaining 60%. I know you guys talk about a $3 billion-plus number here now, but just kind of backing that with customers; investors have been really focused on that today. Can you talk a little bit about that, the time line to really zip that up, if you will?

Yes, absolutely. And thank you, Julien, for the question. So as we think about where we are today, and maybe I'll just take a step back, when we entered into the binding open season from the start, really what ended up showing up and what we reported today is what we expected. So we feel really encouraged in terms of where we are in our initial expectations on the overall project. So encouraged by that. In terms of the 40%, very encouraged that we have 40% of that under signed and executed precedent agreements. That's as of this date. We -- as we mentioned on the call and in the earnings release, we're in active negotiations on the remaining. We believe we've agreed in large part to many of the key business terms with these remaining customers, but we'll continue to work through those.

In terms of the overall kind of next steps following that, certainly, as we move forward with executing the remaining agreements. The next step is obviously to finalize design based on what shows up there and then certainly work with our Board on a final investment decision. As you know, we did prefile this project with FERC December of last year. In that filing, we laid out a schedule that would indicate that we would file the 7C here in the third quarter of this year. So as I think about where we're at today, I'm comfortable with the schedule to date and certainly both WBI and our potential customers hope to reach an FID as soon as practical.

Got it. Right. So you feel pretty good about getting it done. If you're still on track with that third quarter target time line, I suspect. Maybe if I can follow that up real quickly here. How do you think about laterals here? I mean whether it's Ellendale or frankly, some of these other potential customers? And maybe related to that, as far as laterals go, how do you think about the gas strategy perhaps leading an electric or electric gas gen strategy here on the utility side as well, right?

So very much appreciate what you're doing and the expanding scope of what you're doing with this pipeline, but how do you think about that marrying up with what you have on the utility front at the same time, whether that's incremental laterals or actually building gas gen here? And I'll note your comments in the remarks about being capital light thus far. How do you think about that being more capital-intensive prospectively?

Yes. So there are a couple of questions packed in there. I'll see maybe take them in the order that I kind of heard them, but let me talk about the utility first. As we think about where we're at there, you know that our method has really been -- we've come forward with -- to the market when we've got signed ESAs. So what we did talk about here today in the script is that we continue in conversations with others noting those conversations. We also leaned into and I talked about the fact that we may consider changing that strategy a bit and leaning into some investment. And so more to follow in terms of those final decisions being made, but we are continuing to discuss with potential customers the ability to serve them from a large load perspective.

Now as it relates to the pipeline, one of the things that we've talked about that I think is beneficial for our company, and we've talked about this with investors for a while is, as we think about the data center theme and that build-out whether our utility can serve that or not is to me kind of obviously some upside, but the pipeline has the opportunity to serve that, whether the utility would be the provider of that data center or not. So certainly, as you're referencing our proposed Bakken East Pipeline, we continue to think about how do we serve some of that data center load. But there -- if we don't, it still is a benefit to the overall potential project at large.

So my point being the theme of data center development is certainly a benefit on both sides of our business, whether that be the utility and the pipeline. Your questions on laterals, certainly, as we think about finalizing our precedent agreements with our customers, we will keep those in mind. And I think as what we've seen across the country in some particular cases is once these pipelines do become announced to the extent we get to a final investment decision, other opportunities may come forward. And we've seen that in some of our peer companies as well. So we will be thinking about that also. Looks like, Jason, you might want to add something here, too.

I was just going to jump in. I think that's -- thanks, Nicole, for that lead in there. I think when you talk -- you mentioned specifically the Ellendale lateral, Julien, as part of your question. If you look at the updated map and there you will not see that lateral built into that map right now. So as we think about the open season process, we did not get interest at that location, we're delivering gas to that site. But what I will say is right where Nicole was as far as the volumes that we're seeing on the initial pipe compared to what we had expected going into the open season, we did see volume show up along the mainline that really are in the same -- get us to the same point along that way.

So we will see additional laterals, I believe, develop over time off of this pipe. It is a good growth process going forward, should we decide to proceed with it. But that Ellendale lateral is currently not contemplated in the design and the new map that you would see there today.

Right. So the current CapEx budget doesn't necessarily include and could be itself upsized yet again in the context of any laterals, it would seem. But quickly, Jason, while you got the mic? Just with respect to financing this, I mean, this is an incredibly big bite now that you contemplate, how do you think about financing this? Is there -- are there partnerships, are there sell-downs to get this done? I mean, just curious if you can tackle that one real quickly.

Yes. No, I appreciate the question, Julien. And certainly, we've been clear before, I think, with the market that we weren't giving a number until we got to a point where we have more clarity around the size, scope, design of the project. So certainly, by coming out with a range today, we've got a much better view of that today. So I really wanted to get this new market update out there for everyone there. It is a very large number, especially in consideration of our current capital plan that we have of $3.1 billion without this project included. We've got -- this would be a significant bite in addition to that. I would say all options are on the table as we look at ways to finance this.

So we've mentioned there, again, I think, a FERC-regulated project with contracted demand for a long period of time is going to have a lot of ways of getting that financing done, whether that's doing that ourselves, whether it's incorporating partnerships along the way or various other things we look at. I think we will look at all options here. Our primary focus is going to be to try to find an option that provides the best return for our shareholders over the long term, but also gives us the ability to have a majority stake in this project that is going to be connected to our existing system as we stand today. So very important that we're sitting in a majority of partnership along that way if we do go down the partnership path.

[Operator Instructions] Your next question comes from the line of Ryan Levine with Citi.

Regarding the Montana rate case, any color around if you're still pursuing a settlement there given the deadline is coming up later this week.

Yes. Thanks, Ryan. I can take that one. So Montana rate case, certainly encouraged, I think, by having interim rates were approved, which went into effect here on April 1, subject to refund, of course, until we get through the actual rate case process. As of right now, we have a hearing, I think, scheduled for July earlier this summer here that we'll be looking towards on the next steps on that. Typically, as we look at these types of cases, we look for potential settlements along the way where we can. And certainly, we'll continue to be in discussions on that. So nothing to state other than certainly a settlement would be something we would be open to along the way, but we're just proceeding to the next hearing date, and we will continue to update once we find out more.

Okay. Then in terms of the Bakken East more broadly, given crude price evolution as negotiations continued and the potential increase in associated gas production from the region, how is that impacting your contracting conversations from the supply side and any incremental opportunities that, that could enable?

Yes. I would -- great question. And certainly, market dynamics right now are interesting in the commodity space. All of the interest that we've talked about with the Bakken East project has been demand pull. This is industrial customers, power gen, LDCs, not driven by supplier push. I certainly think this is a project that will have interest from suppliers once it's in service and we move forward, but we are not relying on supplier push to get to the volumes we're talking about here today. This is all demand pull.

And in the cost estimate that's outlined in your slides, what are the key variables that push you to the higher or lower end of that range?

Yes. I think where we sit today on that range would be a couple of things. So the construction period of this is 2029, 2030 time frame for the first in-service late '29 and second -- for the second piece of this or second phase late 2030 in-service time frame. We have not reached our final decision yet. So therefore, we have not locked up contractors as an example. So there could be some variability in labor as we, kind of, see that progress. Steel prices have been moving a little bit as we've looked at this. So we wanted to have a range that could encapsulate some of that.

So I think there's a few things that would push us throughout that. I think where we're at, at this point, understanding at least now from the customer demand side of things where they would like to see facilities located and where it would interconnect with their projects they have underway. We've got a better thought on that front. We've got, I think, 97% of the routes with permission to survey on that. So we've been able to line a lot of that out along the way.

So I think we're in a good spot from that perspective, really ends up being just uncertainty around until we get steel prices locked in for the pipe itself, compression ordered to understand what that looks like and get the labor figured out from the construction of this. There's just a little bit of some variables there yet until we get to that point. So we want to give a range to at least get the market to understand the size and scope of how exciting this project can be, but also be thoughtful that things can move around a little bit before we get it locked down.

Your next question comes from the line of Aidan Kelly with JPMorgan.

Thanks for the time today. I just want to pick up on the Bakken East project, I guess, from a different angle of it. Could you talk about the data center opportunities on top of what you've already been talking about the pipeline, specifically the power plants to be built off laterals in certain towns. Are there conversations occurring with large load customers around this opportunity?

So yes, certainly, I'll take that. One of the things to think about is, as Jason mentioned, as we think about the scope of what showed up here in the binding open season and those that we have precedent agreements signed. We indicated that's demand pull, right? And so as we think about demand pull, well, what's in that number? Some of that is power gen. So a piece of what's showing up here is power generation to serve potential data centers.

Now saying that, I think your question goes beyond that in terms of is the utility working with some of these customers or not? Or is there opportunity to have additional power gen that shows up after we've made a final investment decision on this pipeline, and that's yet to be seen in terms of where those things land. So -- but where we are at today, this is a demand pull project, and there is power generation that's showing up within the binding open season.

Great. Makes sense. And then just separately on kind of like, the equity side again. Obviously, it's a big CapEx project. It's got maybe some thinking along the lines of potential partnership opportunities. Could you just kind of comment to what extent you kind of see that as a possibility? And then if so, how we should kind of think about that, whether that be another utility or, like some kind of private equity arrangement. Just any thoughts on your appetite to kind of partner up with anyone.

Yes. Thanks, Aidan. I'll address that. I think as I mentioned in the previous question, I think, we're -- all options are kind of on the table as we think about financing a project of this size and scope, given the -- again, how excited we are about how big this project could be for the company here. Right now, the team is focused on getting us to a final investment decision. That's the primary focus, I would say. Certainly, how we finance it once we get to that point, will be the next key step along with that. So we're certainly thinking about that, but really just getting to the point where we are getting the rest of these precedent agreements executed and getting to a position where we can get in front of our board and discuss a final investment decision on this project going forward.

If we do decide to go down the partnership path, I think then we would step back and take a look at what, again, makes the most sense for the shareholder over the long term here. As this strategic partner certainly could have a fit, I think, financial partners would certainly probably have appetite here, too. But we're going to step back and really analyze that and make sure that we take a look at what makes the most long-term sense for the shareholders for what's going to be a very long-lived and important project for the company, should we decide to proceed.

There are no further questions at this time. I will now turn the call back to Nicole Kivisto, President and CEO, for closing remarks.

Thank you again for joining us today and for your thoughtful questions. We certainly appreciate your continued interest in and support of MDU Resources. As we move through the remainder of 2026, we remain focused on disciplined execution of our capital plan, constructive regulatory engagement and delivering safe, reliable and affordable energy for our customers.

Finally, I do want to close once again by thanking all of our employees for their dedication and commitment. And with that, we look forward to staying engaged with you throughout the year. Operator, you may now conclude the call.

This concludes today's call. Thank you for attending. You may now disconnect.

Ladies and gentlemen, thank you for joining us, and welcome to the MDU Resources Group, Inc. Year-end 2025 Earnings Call. [Operator Instructions]

I will now hand the conference over to Brent Miller, Treasurer. Brent, please go ahead.

Thank you, Kevin, and welcome, everyone, to the MDU Resources Group Year-end 2025 Earnings Conference Call. You can find our earnings release and supplemental materials for this call on our website at mdu.com under the Investors heading. Leading today's call are Nicole Kivisto, President and Chief Executive Officer; and Jason Vollmer, Chief Financial Officer of MDU Resources Group.

During today's call, we will make certain forward-looking statements within the meaning of the Federal Securities Laws. For more information about the risks and uncertainties that could cause our actual results to vary from any forward-looking statements, please refer to our most recent SEC filings.

I will now turn the call over to Nicole for her remarks. Nicole?

Thank you, Brent, and thank you, everyone, for joining us today and for your continued interest in MDU Resources.

2025 was our first full year as a pure-play regulated energy delivery business, and I am extremely proud of our team's performance. This morning, we reported 2025 earnings of $190.4 million, or $0.93 per share, which was in the middle of our earnings per share guidance range. In 2025, we deployed $792 million of capital, advancing key projects. We made meaningful progress on the regulatory front and delivered record results at our pipeline business. In addition, our utility experienced combined retail customer growth of 1.5% when compared to 2024, which is within our targeted annual growth rate of 1% to 2%.

Included in our $792 million of capital investment was the 49% ownership interest in Badger Wind Farm, which was acquired and placed in service on December 31, 2025. This project, along with other capital investment placed in service at our utility, resulted in utility rate base growing 16% year-over-year. Our 2026 through 2030 capital investment plan released last November had included the acquisition of Badger Wind in 2026, with the expectation that final payment would occur in 2026. We were excited to close the transaction earlier than planned and add our ownership share of this cost-effective energy resource to our diversified generation portfolio. As such, we have revised our 2026 through 2030 capital investment plan to $3.1 billion, which is reflected in the table in our earnings release.

As I mentioned, 2025 was an active year on the regulatory front, which not only was a benefit to 2025 results, but should also set us up for future growth as we continue to execute on our capital investment plans. We filed for recovery of the Badger Wind Farm investment in North Dakota through an updated renewable resource cost adjustment on October 31, 2025. The North Dakota Public Service Commission approved the cost adjustment on January 26 of this year. We also filed an out-of-period update in South Dakota to the infrastructure rider on October 31, 2025, reflecting recovery of the Badger Wind Farm.

We filed an electric general rate case in Montana on September 30, 2025, which also included recovery of Badger Wind Farm, along with other investments made since our last regulatory proceeding in 2023, as well as increased operating costs. The Montana Public Service Commission has 9 months to rule on the case. We had requested interim rates to be effective January 1, 2026, However, the Montana PSC denied the interim rate relief. We subsequently filed a request for reconsideration of interim rates on December 26 last year. The request for reconsideration went before the Montana PSC on February 3. However, no action was taken.

In our Wyoming electric case, the settlement agreement was filed with an annual increase of $5.8 million in a stipulation to withdraw the requested reliability and safety rider. Rates are anticipated to be effective April 1, 2026. The final item I would like to comment on regarding the electric side of the business would be on the filings of our wildfire mitigation plans in the states of North Dakota, Montana and Wyoming, and those were filed late in December.

On the gas side of the business, our natural gas general rate case settlement agreement in Idaho was approved on December 30 for an annual increase of $13 million with rates effective January 1, 2026. In the state of Washington, our second year rate increase from our multiyear rate plan will go into effect on March 1, 2026, reflecting an increase from rates currently in effect of $10.8 million annually, subject to the completion of a provisional plan review. We also did file a general rate case in Oregon on November 25, 2025, with rates anticipated to be effective October 31, 2026.

Moving on to the data center front. We currently have 580 megawatts of data center load under signed electric service agreements. Of that total, 180 megawatts have been online since May of 2023, with an additional 100 megawatts ramping online currently, an additional 150 megawatts expected online later this year, and the remaining 150 megawatts expected online in 2027. Our current approach to serve these large customer opportunities is with a capital-light business model, which not only benefits our earnings and returns, but also provides cost savings to our other retail customers through a lower transmission allocation and margin sharing.

We continue to pursue additional discussions with potential data center customers. Should these discussions progress to signed agreements, we would consider investing capital into new generation, transmission and related assets to serve the increased load. Aside from data center load, we also continue to evaluate other potential capital projects related to safely and reliably meeting existing customer demand, as well as grid resiliency.

At our pipeline segment, we continue to make progress on required surveys for our Line Section 32 expansion project, which will provide natural gas transportation service to electric generation facility being constructed in Northwest, North Dakota. We anticipate filing our FERC application in March of this year for this project and are targeting construction to be complete in late 2028.

We also signed an agreement to support the early-stage development of the potential Minot industrial pipeline project through the second quarter of 2026. This project could consist of an approximately 90-mile pipeline from Tioga, North Dakota to Minot, North Dakota, and provide incremental natural gas transportation capacity for anticipated industrial demand. We will continue to provide updates as this project progresses.

In regard to our proposed Bakken East pipeline project, the FERC prefiling request was submitted December 23, 2025. A binding open season began on February 2 of this year and will close on March 13. The company continues contract negotiation with several interested parties. Pursuant to the results of the open season and these negotiations, we would look to confirm the final design of the project in order to make a final investment decision. Upon that decision, we would plan to make our FERC 7C filing and update the market on any relevant changes to our capital investment forecast as well as growth targets.

As a reminder, projected in-service dates for the proposed projects are late 2029 for the Western portion and late 2030 for the Eastern portion of the pipeline. This project would provide natural gas transportation service for additional industrial, power generation and local distribution companies to meet growing demand, and also provide much needed takeaway capacity to meet forecasted natural gas production growth in the Bakken region. This project is not currently in our 5-year capital forecast and would be incremental should we determine to proceed. As we look to finance a project of this size and scope, we will evaluate all options, including using our balance sheet to finance the project, pursuing potential partnerships and various other options. We will continue to provide updates on this potential project as we learn more.

As we look forward to 2026, we are initiating earnings per share guidance in the range of $0.93 to $1 per share. This range reflects continued strong performance across our segments while also accounting for equity financing used for our growth projects. We remain confident in our ability to execute our long-term growth strategy and believe our operational focus and financial discipline continue to position us well for delivering safe and reliable energy, customer value and strong stockholder returns.

We also continue to anticipate a long-term EPS growth rate of 6% to 8%, while targeting a 60% to 70% annual dividend payout ratio. As always, MDU Resources is committed to operating with integrity and with a focus on safety. We remain dedicated to delivering value as a leading energy provider and employer of choice.

Before I turn over the discussion to Jason for the financial update, I want to close with a thank you to all of our employees for their hard work and dedication as we worked through a very successful year. Throughout 2025, our employees worked tirelessly to ensure our customers received safe and reliable energy, while also executing the significant milestones I noted and countless other projects. We could not be successful without these efforts.

I will now turn the call over to Jason for the financial update. Jason?

Thanks, Nicole. I'm excited to share our results for 2025. This morning, we announced our full year earnings of $190.4 million, or $0.93 per share, compared to 2024 earnings of $281.1 million, or $1.37 per share. It's important to note that certain costs associated with the spin-off of Everest in October of 2024, as well as its historical results of operations, are reported in discontinued operations in our results. 2025 income from continuing operations was $191.4 million, or $0.93 per share diluted, compared to $181.1 million, or $0.88 per diluted share in 2024.

As we turn to our individual segments, our electric utility reported earnings of $64.9 million, compared to $74.8 million in 2024. Higher retail sales revenue and volumes positively impacted results for the year, but were more than offset by higher operation and maintenance expense, primarily from higher payroll-related costs, higher contract services related to electric generation station outages, higher software expense and higher insurance expense.

Our natural gas utility reported earnings of $56.1 million compared to $46.9 million in 2024, which is a 19.6% year-over-year increase. This increase was driven primarily by higher retail sales revenue, largely from rate relief across multiple jurisdictions, including Washington, Montana, South Dakota and Wyoming. Higher operation and maintenance expense, primarily higher insurance, payroll-related costs and software expenses partially offset the increase.

Our pipeline business posted record earnings of $68.2 million in 2025, which compares to $68 million last year. The slight increase in earnings was driven by expansion projects placed in service throughout 2024 and late in 2025, and customer demand for short-term firm transportation contracts. The increase in earnings was partially offset by higher operation and maintenance expense, primarily due to payroll-related costs. The increase was further offset by the absence of proceeds received in 2024 from a customer settlement, as well as the absence of a benefit from an adjustment related to a rate change in the company's effective state income tax rate, which together totaled about a $2.7 million benefit in 2024. Higher depreciation expense due to capital investments and higher property taxes, primarily in Montana, further offset the increase in earnings.

As I noted earlier, the spin-off of Everest was completed on October 31, 2024. Activity for the 10 months that Everest was part of MDU Resources is accounted for in discontinued operations and other as shown in our press release. The results shown in other for 2025 are expected to be more reflective of our future expectations as activity from our strategic separations fall away in future periods. Corporate and overhead costs that were previously allocated to Everest are now allocated to the remaining business segments.

Finally, MDU Resources continues to maintain a strong balance sheet and have ample access to working capital to finance our operations through our peak seasons. In December, we completed a follow-on public offering of just over 10.15 million shares of common stock at a public offering price of $19.70 per share. In addition, the underwriters exercised their option to purchase approximately 1.5 million additional shares of common stock.

Pursuant to forward sales agreements entered into in connection with the offering, the company has discretion to settle the forward sale agreements on one or more settlement dates prior to December 6, 2027, subject to certain price adjustments as set forth in the forward sale agreements as well, as adjustments for transaction and other associated fees. Roughly 11.7 million shares of common stock are expected to meet all of the company's 2026 equity issuance needs to fund growth and a significant portion of 2027 equity needs as well.

As a result of the Badger Wind Farm acquisition that closed right at year-end, our consolidated debt-to-capitalization ratio increased slightly to 49.1% debt as a percentage of our total capitalization. We expect to reduce this percentage as we settle the forward sale agreements from the follow-on offering that we completed in December.

That summarizes our financial highlights for the year. We appreciate your interest in and commitment to MDU Resources and would ask that we now open the line for questions. Operator?

[Operator Instructions] And your first question comes from the line of Julien Dumoulin-Smith with Jefferies.

This is Tanner on for Julien. Yes. Maybe first here on the '26 guidance. Just eyeballing the math here. If you delivered even just 6% EPS growth year-over-year, you'd kind of be toward the top end of the EPS range for the year. What are the year-over-year headwinds embedded in the guidance formally?

Yes. Thanks, Tanner. Happy to jump in and walk through that. So as we look at the growth that we saw in 2025, certainly excited with how we finished the year on that front. As we look forward into 2026 and look at the guidance there, long-term guidance range, we do push a 6% to 8% guidance range that we expect -- 6% to 8% EPS growth rate over the long term. And I think as we've said before, we will have years where we exceed that and we will have years where we probably don't meet that full amount.

As we look into 2026, we've got a lot of exciting things underway. We've got a lot of rate case activity in front of us here, which we will see some partial impacts from throughout the year. The addition of the Badger Wind Farm as we see in 2026 will be a benefit here as well. Certainly, some of that growth has taken some equity issuance on our side as well. So we do see some impacts of that as we look for that piece of it. But overall, as we look at 2026, we are expecting growth as we look at from that perspective, the midpoint of our range would show growth over where we ended this year.

To your point, if you look at the midpoint of the range, it probably doesn't meet that 6% to 8% long-term range that we've talked about, but we are certainly, over the long term, expecting that, that will hold true for us over the next several years.

Appreciate that. And can you elaborate on the continued contract negotiations with several interested parties for the Bakken East pipeline? And I see on the slide, you provide the path toward FID, but there aren't any formal dates attached. Could you maybe help set a rough expectation for how we should be thinking about some of the more important parts of the process like FID and then formally formal integration into the CapEx plan?

Yes, absolutely. So kind of -- what I hear you asking is how do we articulate next steps as it relates to Bakken East? And as we disclosed in the script and otherwise, we've got the open season out publicly right now. So that goes through March 13, or mid-March. And so as we think about the binding open season, it's probably a little bit too early to discuss results coming out of that. As you know, we've been in ongoing discussions with customers on the project and are certainly pleased with the level of interest we're seeing. We like our strategic location.

As a reminder, this is really a demand/pull type of project versus producer/push. And so you're really getting to, how do we continue to advance this? And so the open season, I mentioned, we will continue with discussions to get committed interest. Following that, we would look to finalize the ultimate design of the project, execute customer agreements and then essentially at that juncture, be prepared to make a final investment decision on the project.

We did do our prefiling with FERC in December of last year. And in that filing, we also included some time lines as it relates to a final 7C with FERC in the third quarter of 2026. So those are kind of the time lines we're looking at right now, but certainly continue to be pleased with the level of interest in the discussions we're having with customers.

[Operator Instructions] I see no further questions at this time. I will now turn the call back to Nicole Kivisto for closing remarks.

All right. We want to thank you all again for joining us today, and I want to thank our employees again for a successful 2025. We certainly appreciate your interest and support of MDU Resources and look forward to connecting with you as we progress throughout 2026.

With that, I will turn the call back over to you, operator.

Thank you. This concludes today's call. Thank you for attending. You may now disconnect.

Ladies and gentlemen, thank you for joining us, and welcome to the MDU Resources Group, Inc. Q3 2025 Earnings Call. [Operator Instructions]

I will now hand the conference over to Jason Vollmer, Chief Financial Officer. Jason, please go ahead.

Thank you, Nicole, and welcome, everyone, to our third quarter 2025 earnings conference call. You can find our earnings release and supplemental materials for this call on our website at www.mdu.com under the Investors tab.

Leading today's discussion with me is Nicole Kivisto, President and CEO of MDU Resources. During our call, we will make certain forward-looking statements within the meaning of federal securities laws. For more information about the risks and uncertainties that could cause our actual results to vary from any forward-looking statements, please refer to our most recent SEC filings.

I'll provide consolidated financial results later during the call, but we'll first turn the call over to Nicole for her remarks. Nicole?

All right. Thank you, Jason, and thank you, everyone, for joining us today and for your continued interest in MDU Resources. This morning, we reported income from continuing operations of $18.4 million or $0.09 per share for the third quarter of 2025, an increase of $2.8 million or $0.01 per share over the third quarter of 2024.

Strong performance at our Pipeline segment drove results for the quarter. Typically, this is a less impactful quarter from an earnings perspective at the utility as we approach the beginning of the heating season. Increased operating costs across our business segments did impact our third quarter results.

Continued strong customer demand at our Pipeline segment and progress in our utility regulatory schedule should provide opportunity as we move forward. In addition, our utility experienced combined retail customer growth of 1.5% when compared to this time last year, which is within our targeted annual growth rate of 1% to 2%. This demand and growth provides investment opportunity for customer-driven growth projects at our pipeline and in our utility infrastructure to meet the demands of our growing customer base.

I'm extremely proud of our employees whose dedication to our core strategy continues to drive our business and to deliver exceptional performance while positioning MDU Resources with compelling long-term growth prospects.

At our Electric segment, the North Dakota Public Service Commission approved the advanced determination of prudence filing for the proposed acquisition of a 49% ownership interest in the Badger Wind Farm, which equates to 122.5 megawatts of the project's total 250 megawatts of generation capacity. As a result, we will complete the acquisition of this investment upon commercial operation, which we expect to be around year-end. This investment is currently in our 2026 capital budget.

We also filed a general rate case in Montana during the quarter, requesting an increase of $14.1 million annually that includes recovery of Montana's share of our investment in the Badger Wind Farm. This filing included a request for a systems management cost adjustment mechanism for cost recovery of transmission and wildfire-related costs.

Interim rates were requested to be effective January 1, 2026, and the Montana PSC has up to 9 months to issue its decision. Recently, we also filed for recovery of our investment in Badger Wind in North Dakota through our annual update filing to our renewable resource cost adjustment and in South Dakota through our annual update filing to our infrastructure rider.

On our wildfire mitigation plans, those remain on track for filings in North Dakota, Montana and Wyoming before year-end. At our electric utility, we currently have 580 megawatts of data center load under signed electric service agreements. Of that total, 180 megawatts is currently online with an additional 100 megawatts expected to start ramping online late this year and continue into 2026. An additional 150 megawatts is expected online later in '26 with the remaining 150 megawatts expected online in 2027.

Our current approach is to serve these large customer opportunities with a capital-light business model, which not only benefits our earnings and returns, but also provides cost savings to our other retail customers. We do continue to pursue additional discussions with potential data center customers. And should these discussions progress to signed agreements, we would consider investing capital into new generation and transmission assets to serve the increased load.

Aside from data center load, we also continue to evaluate other potential capital projects related to safely and reliably meeting existing customer demand as well as grid resiliency. An example of this would be we recently signed a nonbinding memorandum of understanding for a potential investment in the North Plains Connector project.

At our Natural Gas segment, a Settlement agreement was approved in our Wyoming general rate case for an annual increase of $2.1 million with rates effective August 1, 2025. Additionally, in Wyoming, we filed for a mechanism to recover pipeline replacement costs during the quarter. A Settlement in our general rate case in Montana was also approved on October 7, finalizing a $7.3 million annual increase with final rates effective November 1, 2025.

Moving to Idaho, a general rate case Settlement agreement was filed on October 20 for an annual increase of $13 million. The hearing on this case is scheduled for November 18 and 19 with rates expected to be effective January 1, 2026. Looking ahead, we also plan to file a general rate case in Oregon before the end of this year.

Moving on to our Pipeline segment. Our Minot expansion project was placed in service earlier this month and added approximately 7 million cubic feet of natural gas transportation capacity per day. We also continue to make progress on required surveys for our Line Section 32 Expansion Project, which will provide natural gas transportation service to an electric generation facility being constructed in Northwest North Dakota.

We anticipate filing our FERC application in the first quarter of 2026 for this project and are targeting construction to be complete in late 2028. In regard to our proposed Bakken East pipeline project that could run approximately 350 miles from Western North Dakota to the eastern part of the state plus additional pipeline laterals, the project was selected by the North Dakota Industrial Commission for firm pipeline capacity commitments of up to $50 million annually for 10 years.

We continue to actively market this project and engage with all interested parties to further define the project scope, time lines and commercial terms. This project would provide natural gas transportation service for additional industrial, power generation and local distribution companies, growing demand and also provide much needed takeaway capacity to meet forecasted natural gas production growth in the Bakken region. This project is currently not in our 5-year capital forecast and would be incremental should we determine to proceed.

The final route, time line and cost of this project will be determined later as we finalize discussions with potential shippers, including delivery points and contracted volume commitments. As we look to finance a project of this size and scope, we will evaluate all options, including using our balance sheet to finance the project, pursuing potential partners and various other options.

We currently plan to conduct a binding open season during the first quarter of 2026, and we'll continue to provide updates on this potential project as we learn more. We also signed an agreement to support the early-stage development of the potential Minot Industrial Pipeline project, which would be an approximate 90-mile pipeline from Tioga, North Dakota to Minot, North Dakota. The project would provide incremental natural gas transportation capacity for anticipated industrial demand. We will provide updates as the project progresses to final investment decision.

With the performance we have experienced during the third quarter and our view for the remainder of the year, we are raising the bottom end of our earnings per share guidance to a new range of $0.90 to $0.95 per share from our previous range of $0.88 to $0.95 per share. This, of course, remains dependent on normal weather and operating conditions in the fourth quarter.

We remain confident in our ability to execute on our long-term growth strategy and believe our operational focus and financial discipline continue to position us well for delivering safe and reliable energy, customer value and strong stockholder returns. We also continue to anticipate a long-term EPS growth rate of 6% to 8% while targeting a 60% to 70% annual dividend payout ratio.

As always, MDU Resources is committed to operating with integrity and with a focus on safety. We remain dedicated to delivering value as a leading energy provider and employer of choice. I will now turn the call back over to Jason for the financial update. Jason?

Thanks, Nicole. This morning, we announced third quarter earnings of $18.4 million or $0.09 per share compared to third quarter 2024 earnings of $64.6 million or $0.32 per share. Third quarter income from continuing operations was $18.4 million or $0.09 per share compared to $15.6 million or $0.08 per share in the prior year. Income from continuing operations excludes the impacts of Everest, which was separated in a spin-off transaction on October 31, 2024.

Turning to our individual businesses. Our Electric Utility reported third quarter earnings of $21.5 million compared to $24.3 million for the same period in 2024. Higher retail sales revenues positively impacted results for the quarter, but were more than offset by higher operation and maintenance expense, primarily from higher payroll-related costs and higher contract services related to electric generation station outages this year. Higher depreciation expense associated with capital projects placed in service further impacted the results.

Our Natural Gas utility reported a seasonal loss of $18.2 million in the third quarter compared to a loss of $17.5 million in 2024. Increased operation and maintenance expense, primarily, again, higher payroll-related costs as well as higher depreciation expense related to capital projects placed in service drove the loss in the quarter. Higher retail sales revenue due to rate relief in Washington, Montana and Wyoming partially offset the seasonal loss.

The Pipeline posted record third quarter earnings of $16.8 million compared to third quarter earnings of $15.1 million last year. The increase in earnings was driven by higher transportation revenue from growth projects placed in service in late 2024 and customer demand for short-term firm natural gas transportation contracts. Higher operation and maintenance expense, along with increased property taxes and depreciation, partially offset the earnings increase.

And finally, MDU Resources continues to maintain a strong balance sheet with ample access to working capital to finance our operations. While we have no equity needs in 2025 based on our current capital plan, our capital investment program moving forward will require access to the equity capital markets. As such, we reestablished an ATM program during the quarter to meet those needs.

We will update our forward-looking capital investment plan later this month, and we'll provide further details around the size and timing of the near-term equity needs at that same time. That summarizes our financial highlights for the third quarter. We appreciate your interest in and commitment to MDU Resources and ask that we now open the line for any questions. Operator?

[Operator Instructions]

There are no questions at this time. I will now turn the call back to Nicole Kivisto for closing remarks.

Thank you, everyone, for joining us today. We certainly appreciate your continued interest and support of MDU Resources and look forward to connecting with you as we finish out the year. And with that, I'll turn the call back over to the operator.

This concludes today's call. Thank you for attending. You may now disconnect.