MDU 10-K & 10-Q changes, risk factors and insider trading
Mdu Resources Group Inc. · NYSE · Natural Gas Distribution · CIK 67716 · All filings on SEC.gov
At a glance
What changed in the latest 10-K
Risk Factors
New heading “Economic volatility affects the Company's operations, as well as the demand for its services.”
New heading “Demand for energy from high volume customers may impact the Company's business.”
New heading “The Company could be subject to penalties, reputational harm, and operational changes if it violates mandatory reliability and security requirements.”
New heading “Statutory, legal, and regulatory requirements may limit another party's ability to acquire the Company or impose conditions on an acquisition of or by the Company.”
Removed heading “Economic volatility affects the Company's operations, as well as the demand for its products and services.”
Largest changes
“The Company could be subject to penalties, reputational harm, and operational changes if it violates mandatory reliability and security requirements.”see in full comparison
“Liabilities from wildfires could have a negative impact on the Company's operations or financial performance, and the Company's protocols may not prevent such liability. The Company invests resources on initiatives designed to mitigate wildfire risks; however, the potential for a wildfire event exists even when effective mitigation procedures are followed. Despite the Company's wildfire mitigation initiatives, a wildfire could be ignited, spread and cause damages, which would subject the Company to significant liability. …”see in full comparison
“The United States government has implemented changes, and may do so again, to trade policy and introduced tariffs on a range of products from certain countries, in addition to applying baseline tariffs on imports from most countries. These actions have created uncertainty in global markets and have increased and may continue to increase the cost of raw materials, commodities, supplies and equipment purchased by the Company. …”see in full comparison
“Statutory, legal, and regulatory requirements may limit another party's ability to acquire the Company or impose conditions on an acquisition of or by the Company.”see in full comparison
“Economic volatility affects the Company's operations, as well as the demand for its products and services.”see in full comparison
“Economic volatility affects the Company's operations, as well as the demand for its services.”see in full comparison
Full comparison: every changed paragraph (65)
The Company is subject to government regulations that may have a negative impact on its business and its results of operations and cash flows. Statutory and regulatory requirements also may limit another party's ability to acquire the Company or impose conditions on an acquisition of or by the Company.
The Company's businesses are subject to comprehensive regulation by federal, state and local regulatory agencies with respect to, among other things, allowed rates of return and recovery of investments and costs; financing; rate structures; customer service; health care coverage and costs; taxes; franchises; recovery of fuel, purchased power and purchased natural gas costs; carbon compliance obligations costs; and construction and siting of generationgeneration, distribution and transmission facilities. These governmental regulations significantly influence the Company's operating environment and maymay, among other things, affect its ability to recover costs from its customers. The Company is unable to predict the impact on operating results from future regulatory activities of any of these agencies. Changes in regulations or the imposition of additional regulations could also have an adverse impact on the Company's results of operations and cash flows.
There can be no assurance that applicable regulatory commissions will determine that the Company's costs have been prudent, which could result in the disallowance of costs in setting rates for customers. Also, the regulatory process of approving rates for these businesses may not allow for timely and full recovery of the costs of providing services or a return on the Company's invested capital. Changes in regulatory requirements or operating conditions may require early retirement of certain assets. While regulation typically provides rate recovery for these retirements, there is no assurance regulators will allow full recovery of all remaining costs, which could leave stranded asset costs. Rising fuel costs could increase the risk that the utility businesses will not be able to fully recover those fuel costs from customers.
Economic volatility affects the Company's operations, as well as the demand for its products and services.
Economic conditions and population growth affect the electric and natural gas distribution businesses' growth in service territory, customer base and usage demand. Economic volatility in the markets served, along with economic conditions such as increased unemployment which could impact the ability of the Company's customers to make payments, could adversely affect the Company's results of operations, cash flows and asset values. Further, any material decreases in customers' energy demand, for economic or other reasons, could have an adverse impact on the Company's earnings and results of operations.
18 MDU Resources Group, Inc. Form 10-K 21
In the normal course of business, the Company often places assets in service and establishes historical test periods before rate cases that seek to adjust customer rates and the Company's allowed rate of return to recover those investments can be filed for. The rate case review policy varies by jurisdiction in which the Company operates and is as long as eleven months in certain states. Because of this process, the Company could have assets placed in service without the benefit of rate relief, commonly referred to as regulatory lag. In certain jurisdictions, regulatory authorities have approved various infrastructure and annual rate adjustment mechanisms to effectively reduce regulatory lag inherent in the rate making process. Regulatory lag could significantly increase if the regulatory authorities modify or terminate these rate mechanisms. There can be no assurance that applicable regulatory commissions will determine that the Company's costs have been prudent, which could result in the disallowance of costs in setting rates for customers. Also, the regulatory process of approving rates for these businesses may not allow for timely and full recovery of the costs of providing services or a return on the Company's invested capital. Changes in regulatory requirements or operating conditions may require early retirement of certain assets. While regulation typically provides rate recovery for these retirements, there is no assurance regulators will allow full recovery of all remaining costs, which could leave stranded asset costs. Rising fuel costs could increase the risk that the utility businesses will not be able to fully recover those fuel costs from customers.
The utility operates under franchise agreements granted by municipalities, which allow the Company to access public rights-of-way and provide utility services within city boundaries. These agreements typically require renewal every set number of years and risks include items such as potential non-renewal and renegotiation which could result in less favorable terms, additional fees or new operational obligations. Failure to obtain or renew franchise agreements on acceptable terms could materially affect the Company's ability to serve its customers in those jurisdictions.
Economic volatility affects the Company's operations, as well as the demand for its services.
Economic conditions and population growth affect the electric and natural gas distribution businesses' growth in service territory, customer base and usage demand. Economic volatility in the markets served, along with economic conditions such as increased customer rates and unemployment which could impact the ability of the Company's customers to make payments, could adversely affect the Company's results of operations, cash flows and asset values. Further, any material decreases in customers' energy demand, for economic or other reasons, could have an adverse impact on the Company's earnings and results of operations.
Demand for energy from high volume customers may impact the Company's business.
The ability to serve significant new commercial or industrial customers, including data centers and significant pipeline projects, may require certain regulatory approvals, and the activities and related costs could be significant. The inability or delays in obtaining regulatory approvals or securing necessary infrastructure to support such projects, due to supply chain risk, operational risk, or other factors, may impact the Company's ability, or the cost, to provide energy to new customers. The contract rates may not fully recover the costs, the contracts may increase counterparty credit risk, and the costs to provide service may be higher than expected. The addition of high volume customers or multiple customers serving the same industry, such as data center load, may increase the concentration of sales and increase revenue and earnings volatility.
Additionally, demand for electricity associated with data center expansion could lead to an increase in demand for electric power in the MISO and in the Company's service territory, which could lead to an increase in generation capacity and grid infrastructure needed and could impact prices for customer energy purchased on the MISO market. Alternatively, this rapid expansion of data centers and resulting increase in demand for electric power may not develop as planned.
Liabilities from wildfires could have a negative impact on the Company's operations or financial performance, and the Company's protocols may not prevent such liability. The Company invests resources on initiatives designed to mitigate wildfire risks; however, the potential for a wildfire event exists even when effective mitigation procedures are followed. Despite the Company's wildfire mitigation initiatives, a wildfire could be ignited, spread and cause damages, which would subject the Company to significant liability. Other potential risks associated with wildfires include the inability to secure sufficient insurance coverage, uninsured losses or losses in excess of current insurance coverage, increased costs of insurance, damage to the Company's reputation, regulatory recovery risk, litigation risk, the potential for a credit downgrade or the inability to access capital markets on reasonable terms.
The Company maintains insurance coverages from third party insurers as part of its overall risk management strategy and most of its customer contracts require the Company to maintain specific insurance coverage limits. The Company maintains insurance policies with respect to workers’ compensation, auto liability, general liability, excess liability, contractors pollution liability, legal liability, professional liability, directors and officers liability, employment practices liability, cyber policy, terrorism, property and other types of coverages, but these policies are subject to deductibles and the Company is self-insured up to the amount of those deductibles. Insurance losses are accrued based upon the Company's estimates of the ultimate liability for claims reported and an estimate of claims incurred but not yet reported. Insurance liabilities are difficult to assess and estimate due to unknown factors, including the frequency and severity of injuries, the magnitude of damage to or loss of property or the environment, the determination of the Company's liability in proportion to other parties, estimates of incidents not reported and the effectiveness of the Company's safety programs, and as a result, the Company's actual losses may exceed its estimates. There can be no assurance that the Company's current or past insurance coverages will be sufficient or effective under all circumstances or against all claims and liabilities, including claims resulting from wildfires or other natural disasters, to which the Company may be subject.
In addition, the Company performs work in hazardous environments and its employees are exposed to a number of hazards. Incidents can occur, regardless of fault, that may be catastrophic and adversely impact the Company's employees and third parties by causing serious personal injury, loss of life, damage to property or the environment, and interruption of operations. In locations or environments where claims have become more frequent or severe in recent years, insurance may become difficult or impossible to obtain. The Company's contracts may require it to indemnify its customers, project owners and other parties for injury, damage or loss arising out of the Company's presence at its customers’ location, or in the performance of the Company's work, in both cases regardless of fault, and provide for warranties of materials and workmanship. The Company also may be required to name the customer and others as an additional insured party under its insurance policies. The Company maintains limited insurance coverage against these and other risks associated with its business. This insurance may not protect the Company against liability for certain events, and the Company cannot guarantee that its insurance will be adequate in risk coverage or policy limits to cover all losses or liabilities that it may incur. Any future damages caused by the Company's services that are not covered by insurance or are in excess of policy limits could negatively affect its business, financial condition, results of operations and cash flows.
In addition, the Company performs work in hazardous environments and its employees are exposed to a number of hazards. Incidents can occur, regardless of fault, that may be catastrophic and adversely impact the Company's employees and third parties by causing serious personal injury, loss of life, damage to property or the environment, and interruption of operations. In locations or environments where claims have become more frequent or severe in recent years, insurance may become difficult or impossible to obtain. The Company's contracts may require it to indemnify other parties for injury, damage or loss arising out of the Company's presence at its customers’ location, or in the performance of the Company's work, in both cases regardless of fault, and provide for warranties of materials and workmanship. The Company also may be required to name other parties as an additional insured party under its insurance policies. The Company maintains limited insurance coverage against these and other risks associated with its business. This insurance may not protect the Company against liability for certain events, and the Company cannot guarantee that its insurance will be adequate in risk coverage or policy limits to cover all losses or liabilities that it may incur. Any future damages caused by the Company's services that are not covered by insurance or are in excess of policy limits could negatively affect its business, financial condition, results of operations and cash flows.
The Company is subject to capital market, debtdebt, and interest rate risks.risks and may be unable to obtain the financing required at acceptable terms, or at all.
The Company's operations and growth plans require significant capital investment. Consequently, the timing, magnitude, and sources of capital required may exceed cash flows from operations and, as such, the Company relies on financing sources and capital markets as sources of liquidity for capital requirements notand satisfiedmay byrequire cashnon-traditional flowsfinancing fromsources, operations.such as partnerships. If the Company is not able to access capital at competitive rates, the ability to implement business plans, make capital expenditures or pursue acquisitions the Company would otherwise rely on for future growth may be adversely affected. Market disruptions may increase the cost of borrowing or adversely affect the Company's ability to access one or more financial markets. Such disruptions could include items such as a significant economic downturn, the financial distress of unrelated industry leaders in the same line of business, the deterioration of capital market conditions, turmoil in the financial services industry, volatility in commodity prices, increased trade tariffs and trade disputes with other countries, supply chain weaknesses, pandemics, natural disasters, war, terrorist attacks and cyberattacks.
Significant changes in prices for commodities, laborlabor, or other production and delivery inputs and other environmental compliance costs could negatively affect the Company's businesses.
The Company's operations are exposed to fluctuations in prices for labor, petroleum products, raw materials and services.services, pipeline transportation charges, and costs of credits for carbon allowance programs. Prices are generally subject to change in response to fluctuations in supply and demand and other general economic and market conditions beyond the Company's control.
20 MDU Resources Group, Inc. Form 10-K
In 2024,2025, 20232024 and 2022,2023, the Company experienced elevated commodity and supply chain costs at varying degrees over the 3-year timeframe, including the costs of labor, raw materials, energy-related products and other inputs used infor constructing the productionfacilities andthe distributionCompany ofuses to provide its products and services.
The Company's operations could be negatively impacted by import tariffstariffs, changes in trade policy, and/or other government mandates.
The United States government has implemented changes, and may do so again, to trade policy and introduced tariffs on a range of products from certain countries, in addition to applying baseline tariffs on imports from most countries. These actions have created uncertainty in global markets and have increased and may continue to increase the cost of raw materials, commodities, supplies and equipment purchased by the Company. Additionally, the tariff and trade policy changes could cause supply chain disruptions and delays in sourcing materials and equipment which could delay large capital projects and negatively impact the Company's financial condition and results of operations. If the Company's regulators do not determine the increased costs are prudent, or otherwise disallow certain costs, it could impact the Company's ability to recover the cost increases through rates or on a timely basis, which could adversely affect the Company's financial condition and results of operations.
Reductions in the Company's credit ratings or inability to obtain a credit rating could increase financing costs.
There is no assurance the Company's current credit ratings, or those of its subsidiaries, will remain in effect or that a rating will not be lowered or withdrawn by a rating agency. Events affecting the Company'sCompany's, including its subsidiaries', financial results may impact its cash flows and credit metrics, potentially resulting in a change in the Company's or its subsidiaries' credit ratings. The Company's or its subsidiaries' credit ratings may also change as a result of the differing methodologies or changes in the methodologies used by the rating agencies.
The Company's self-insured costs of health care benefits for eligible employees continues to increase. Increasing quantities of large individual health care claims and an overall increase in total health care claims could have an adverse impact on operating results, financial position and liquidity. Complying with any new legislation and regulation at both the federal and state levellevels related to health care, unemployment tax rates and workers' compensation rates, among others, could adversely affect the Company's results of operations as well as change the Company's benefit program and costs.
Changes to federal, state and local tax laws have the ability to benefit or adversely affect the Company's earnings and customer costs. Significant changes to corporate tax rates could result in the impairment of deferred tax assets that are established based on existing law at the time of deferral. The U.S.electric administrationbusiness has introduced uncertainty regarding the continuation of the IRAowns and aoperates potential shift in federalrenewable energy policiesgenerating regardingfacilities. cleanThese energyfacilities projects. Changes in regulations that impact the value of various tax credits, includinggenerate production tax credits couldused changeto reduce the economicsCompany's federal income tax liability. The amount of resourcesproduction tax credits earned depends on the date the qualifying generating facilities are placed in service and thevarious resourceoperating selectionand economic factors, including facility generation, transmission constraints, and wind production. These factors could impact current and/or future projects for the electric generation business and the developmentlevel of other renewable energy projects, such as RNG. Such actions could adversely affect the Company's ability to secureproduction tax credits and other incentives that support the development of renewable energy projects.credits. Regulation incorporates changes in tax law into the rate-setting process, which could create timing delays before the impact of changes are realized.
MDU Resources Group, Inc. Form 10-K 21
Certain risks increase as the Company's energy delivery infrastructure ages, including breakdown or failure of equipment, pipeline leaks and fires developing from power lines, all of which have occurred and may reoccur in the future resulting in material costs. Aging infrastructure is more prone to failure, which increases maintenance costs, unplanned outages and the need to replace facilities. Even if properly maintained, reliability may ultimately deteriorate and negatively affect the Company’s ability to serve its customers, which could result in increased costs associated with regulatory oversight. The costs associated with compliance with PHMSA rules related to pipeline integrity and other similar programs, maintaining the aging infrastructure and capital expenditures for new or replacement infrastructure could cause rate volatility and/or regulatory lag in some jurisdictions. If, at the end of its life, the investment costs of a facility have not been fully recovered, the Company may be adversely affected if regulatory commissions do not allow such costs to be recovered in rates. Such impacts of aging infrastructure could adversely affect the Company’s results of operations and cash flows.
The Company could be subject to penalties, reputational harm, and operational changes if it violates mandatory reliability and security requirements.
The Company is subject to potentially adverse publicity as a result of the reliability of the Company’s services and how quickly the Company responds to certain outages. Adverse publicity could have a negative impact on the Company’s reputation as well as the way that state legislatures, utility commissions and other regulatory authorities view the Company and/or lead to less favorable legislative and regulatory outcomes or increased regulatory oversight. The imposition of any of the foregoing on the Company as a result of its actual or alleged failure to comply with reliability and security requirements could have a negative effect on the Company’s results of operations and financial condition.
The Company’s ability to successfully implement and execute its long-term strategic plan is dependent on many factors. The Company’s strategies may require significant capital investment and management attention. If the Company cannot successfully execute its strategic growth initiatives or if the long-term plan does not adequately address the challenges or opportunities the Company faces, its financial condition and results of operations may be adversely affected. Additionally, failure to meet stockholder expectations, particularly with respect to financials, cost-cutting programs, operating margins, and earnings per share, could result in volatility in the market value of the Company’s stock.
The regulatory approval, permitting, construction, startupstartup, and/or operation of pipelines, power generation and transmission facilities may involve unanticipated events, delaysdelays, and unrecoverable costs.
The construction, startup and operation of natural gas pipelines and electric power generation and transmission facilities involve many risks, which may include delays; breakdown or failure of equipment; inability to obtain or remain in compliance with required governmental permits and approvals; inability to obtain or renew easements; public opposition; inability to complete financing; inability to negotiate acceptable equipment acquisition, construction, fuel supply, off-take, transmission, transportation or other material agreements; contractor performance failures; changes in markets and market prices for power; cost increases and overruns; the risk of performance below expected levels of output or efficiency; and the inability to obtain full cost recovery in regulated rates.rates; and the inability to recover preliminary costs incurred prior to receiving regulatory approval. Such unanticipated events could negatively impact the Company's ability to execute on its capital plan, its business, and its results of operations and cash flows.
The Company relies on third-party vendors and manufacturers to supply many of the materials necessary for its operations. Global logistic disruptions have impacted the flow of materials and restricted global trade flows. Manufacturers are competing for a limited supply of key commodities and logistical capacity which has impacted lead times, pricing, supply and demand. Disruptions or delays in receiving materials; price increases from suppliers or manufacturers; or inability to source needed materials, which have occurred and could reoccur, could adversely affect the Company’s capital expenditure programs, growth plans, results of operations, financial condition and cash flows.
MDU Resources Group, Inc. Form 10-K 27
The Company's operations could be adversely impacted by severe weather.weather and changing weather patterns.
SevereChanging weather patterns and severe weather events, such as tornadoes, fires, rain, drought, ice and snowstorms, and high and low temperature extremes, occur in regions in which the Company operates and maintains infrastructure. Climate change could change the frequency and severity of these weather events, which may create physical and financial risks to the Company. Such risks could have an adverse effect on the Company's financial condition, results of operations and cash flows.
28 MDU Resources Group, Inc. Form 10-K 23
The Company has faced and may continue to face stakeholder scrutiny related to ESG matters. Certain stakeholders of the Company, such as investors, customers, employeesemployees, and lenders, have increased their scrutiny of the impacts and social cost associated with ESG matters, including climate change. Concern that GHG emissions contribute to global climate change has led to international, federal, state and localcertain legislative and regulatory proposals to reduce or mitigate the effects of GHG emissions. The Companystakeholders may experiencehold significantdivergent futureopinions costson associatedthese with compliance of such legislative actions. The Company’s primary GHG emission is carbon dioxide from fossil fuels combustion at Montana-Dakota's electric generating facilities, particularly its jointly owned coal-fired facilities.issues.
Certain states and customers are seeking cleaner energy sources and may demand alternatives to traditional energy sources. If state or customer sentiment shifts more rapidly than expected, the Company may face reduced demand for its existing services or be pressured to offer new low-carbon solutions. Decarbonization policies on building electrification initiatives could slow or reduce future customer additions in the Company's service territories. Jurisdictions pursuing aggressive GHG reduction strategies may adopt building codes or incentive structures that discourage new natural gas hookups, potentially impacting the Company's long-term growth assumptions. Concern that GHG emissions contribute to global climate change has led to international, federal, state and local legislative and regulatory proposals to reduce or mitigate the effects of GHG emissions. The Company may experience significant future costs associated with compliance of such legislative actions. The Company’s primary GHG emission is carbon dioxide from fossil fuels combustion at Montana-Dakota's electric generating facilities, particularly its jointly owned coal-fired facilities.
MDU Resources Group, Inc. Form 10-K 29
Ownership of the Company's Common Stock Risks
Statutory, legal, and regulatory requirements may limit another party's ability to acquire the Company or impose conditions on an acquisition of or by the Company.
The Company’s amended and restated certificate of incorporation, bylaws, and Delaware law each contain provisions that may discourage or delay an acquisition of the Company, which could decrease the trading price of the Company’s common stock.
The Company’s amended and restated certificate of incorporation, bylaws, and Delaware law each contain provisions that are intended to deter coercive takeover practices and inadequate takeover bids by making such practices or bids more expensive to the acquirers and to encourage prospective acquirers to negotiate with the Company’s board of directors rather than attempt a hostile takeover of the Company. These provisions include rules regarding how stockholders may present proposals or nominate directors for election at stockholder meetings and the right of the Company’s board of directors to issue preferred stock without stockholder approval. In addition, Section 203 of the Delaware General Corporation Law may discourage, delay, or prevent a change in control of the Company. Any delay or prevention of a change of control or change in management that stockholders might otherwise consider to be favorable could cause the market price of the Company’s common stock to decline.
In addition, the Company enters into equity FSAs from time to time under which the Company may, at its election and subject to customary conditions, settle all or a portion of the agreements by physical delivery of shares of its common stock in exchange for cash proceeds, net share settlement, or cash settlement. Equity FSA's can expose the Company to risks associated with fluctuations in the market price of its common stock and certain forward-price adjustment factors, which may reduce the net proceeds the Company ultimately receives or increase its settlement obligation. These agreements also expose the Company to counterparty and timing risks and there can be no assurance that settling the agreements will ultimately prove to be beneficial to the Company's stockholders.
30 MDU Resources Group, Inc. Form 10-K
The Company’s ability to successfully implement and execute its long-term strategic plan is dependent on many factors. The Company’s strategies may require significant capital investment and management attention. If the Company cannot successfully execute its strategic growth initiatives, its capital investment plan, or if the long-term plan does not adequately address the challenges or opportunities the Company faces, its financial condition and results of operations may be adversely affected. Additionally, failure to meet stockholder expectations, particularly with respect to financials, cost-cutting programs, operating margins, and earnings per share, could result in volatility in the market value of the Company’s stock.
Publicly-traded companies are subject to campaigns by stockholders advocating corporate actions related to matters, such as corporate governance, operational practices, and strategic direction. The Company has, and may again in the future, become subject to such stockholder activity and demands. Such activities could interfere with its ability to execute its business plans, affect the allocation of capital, be costly and time-consuming, disrupt operations, and divert the attention of management, any of which could have an adverse effect on the Company’s business or stock price.
The Company's businesses are seasonal and subject to weather conditions that could adversely affect the Company's operations, revenuesrevenues, and cash flows.
The Company's businesses are subject to competition. The electric utility and natural gas businesses also experience competitive pressures as a result of consumer demands, technological advancesadvances, and other factors. The pipeline business competes with several pipelines for access to natural gas supplies and for transportation and storage business. New acquisition opportunities are subject to competitive bidding environments which impact prices the Company must pay to successfully acquire new properties and acquisition opportunities to grow its business. The Company's failure to effectively compete could negatively affect the Company's results of operations, financial position and cash flows.
The Company's operations may be negatively affected if it is unable to obtain, developdevelop, and retain key personnel and skilled labor forces.
MDU Resources Group, Inc. Form 10-K 31
Publicly-traded companies are subject to campaigns by stockholders advocating corporate actions related to matters, such as corporate governance, operational practices, and strategic direction. The Company has, and may again in the future, become subject in the future to such stockholder activity and demands. Such activities could interfere with its ability to execute its business plans, affect the allocation of capital, be costly and time-consuming, disrupt operations, and divert the attention of management, any of which could have an adverse effect on the Company’s business or stock price.
The Company uses technology in substantially all aspects of its business operations and requires uninterrupted operation of information technology and operation technology systems, including disaster recovery and backup systems and network infrastructure. These systems may be vulnerable to physical and cybersecurity failures or unauthorized access, due to hacking, human error, theft, sabotage, malicious software, ransomware, third-party compromise, acts of terrorism, acts of war, acts of nature or other causes. Emerging artificial intelligence driven threats, such as biased outputs, artificial intelligence assisted phishing, deepfakes, and malicious use of generative artificial intelligence could further increase cybersecurity and operational risk.
The Company’s accounting systems and its ability to collect information and invoice customers for products and services could be disrupted. If the Company’s operations are disrupted, it could result in decreased revenues and remediation costs that could adversely affect the Company's results of operations and cash flows.
32 MDU Resources Group, Inc. Form 10-K
Management's Discussion & Analysis (MD&A)
New heading “New Accounting Standards”
New heading “Critical Accounting Estimates”
New heading “Regulatory accounting”
New heading “Pension and other postretirement benefits”
Largest changes
“The EPA's GHG and mercury emissions standards finalized in May 2024 would have required additional pollution controls for Coyote Station to operate beyond 2031 and 2027, respectively. In April 2025, the EPA granted a two year extension for Coyote Station to add pollution controls to comply with the mercury emissions standard. In June 2025, the EPA proposed rules to repeal both the mercury emissions standard and the electric generation GHG emissions standard. If the rules go into effect, it could require owners of Coyote station to incur significant new costs. …”see in full comparison
Debt resources Certain debt instruments of the Company and its subsidiaries contain restrictive and financial covenants and cross-default provisions. In order to borrow under the respective debt agreements, the Company and its subsidiaries must be in compliance with the applicable covenants and certain othersee in full comparisonconditions,conditions.allIntermountain was not in compliance with its minimum interest coverage ratio for the period ended September 30, 2025, which constituted an event ofwhichdefault under the terms of the Intermountain NPAs. In addition, the event of default under the terms of the Intermountain NPAs constituted a cross-default under the terms of certain NPAs of MDU Energy Capital and revolving credit agreements held by the Company and Intermountain. Subsequent to September 30, 2025, Intermountain and MDU Energy Capital obtained waivers for this non-compliance from the holders of a majority of their respective outstanding notes, and Intermountain and the Company obtained waivers from the lenders of the revolving credit agreements, which collectively cured the impact of any events of default. The Company and itssubsidiaries, as applicable,subsidiaries were in compliance with applicable covenants at December 31,2024.2025. In the event the Company or its subsidiaries do not comply with the applicable covenants and other conditions, alternative sources of funding may need to be pursued. As of December 31,2024,2025, the Company had investment grade credit ratings at all entities issuing debt which carried public ratings. For more information on the covenants, certain other conditions and cross-default provisions, outstanding revolving credit facilities, and new long-term debt issuances, see Item 8 - Note10.9.
“The Company performs its goodwill impairment testing annually in the fourth quarter. In addition, the test is performed on an interim basis whenever events or circumstances indicate that the carrying amount of goodwill may not be recoverable. Examples of such events or circumstances may include a significant adverse change in business climate, weakness in an industry in which the Company's reporting units operate or recent significant cash or operating losses with expectations that those losses will continue.”see in full comparison
“The Company continues to proactively monitor and work with its manufacturers to reduce the effects of increased pricing and lead times on delivery of certain raw materials and equipment used in electric generation, transmission and distribution system and natural gas pipeline projects. …”see in full comparison
“At October 31, 2025, the Company's annual impairment testing indicated there was no impairment at its natural gas distribution reporting unit. The estimated fair value of the natural gas distribution reporting unit substantially exceeded its carrying value ("cushion"), which includes $345.7 million of goodwill, by approximately 41 percent. …”see in full comparison
“Goodwill impairment, if any, is measured by comparing the fair value of each reporting unit to its carrying value. If the fair value of a reporting unit exceeds its carrying value, the goodwill of the reporting unit is not impaired. If the carrying value of a reporting unit exceeds its fair value, the Company must record an impairment loss for the amount that the carrying value of the reporting unit, including goodwill, exceeds the fair value of the reporting unit. For the years ended December 31, 2025, 2024, and 2023, there were no impairment losses recorded.”see in full comparison
Full comparison: every changed paragraph (377)
The Company generates, transmits and distributes electricity and provides natural gas distribution, transportation and storage services. Through a strategy focusing on its "CORE," the Company strives to deliver superior value and achieve industry-leading performance as a pure-play regulated energy delivery company, while pursuing organic growth opportunities. The Company's "CORE" strategy prioritizes customers and communities, operational excellence, returns focused initiatives and an employee driven culture.
The Company provides essential services, delivering reliable energy that powers lives. Through its infrastructure investments and operations the Company drives economic growth, supports communities, and energizes businesses that keep America moving.
Strategic Initiatives On May 31, 2023, the Company completed the separation of Knife River, its construction materials and contracting business, resulting in Knife River becoming an independent, publicly-traded company. The Company's board of directors approved the distribution of approximately 90 percent of the issued and outstanding shares of Knife River to the Company's stockholders. Stockholders of the Company received one share of Knife River common stock for every four shares of the Company's common stock held on May 22, 2023, the record date for the distribution. The Company retained approximately 10 percent or 5.7 million shares of Knife River common stock immediately following the separation, which were disposed of in a tax-free exchange in November 2023. The separation of Knife River was a tax-free spinoff transaction to the Company's stockholders for U.S. federal income tax purposes.purposes, except for cash received in lieu of fractional shares.
The Company incurred costs in connection with the strategic initiatives in 2022,2023, 20232024 and 2024,2025, as noted in the Business Segment Financial and Operating Data section, and expects the majority of the separation costs have already been incurred.section.
One Big Beautiful Bill Act On July 4, 2025, the reconciliation bill was enacted into law, extending key provisions of the 2017 Tax Cuts and Jobs Act while scaling back clean energy tax incentives of the IRA. Changes in tax laws may affect recorded deferred tax assets and deferred tax liabilities or the Company's effective tax rates in the future. The Company has evaluated new legislation, and it does not expect a material impact to the consolidated financial statements or ongoing tax rate as a result of this legislation.
Based on the Company becoming a pure-play regulated energy delivery business, the Company's board of directors established a long-term dividend payout ratio target of 60 percent to 70 percent of regulated energy delivery earnings. The Company has an 87-year history of uninterrupted dividend payments to stockholders and remains committed to paying a competitive dividend.
Market Trends The Company continues to manage the inflationary pressures experienced throughout the United States, including the impact that inflation, higher interest rates, changes in tariffs, commodity price volatility and supply chain disruptions may have on its business and customers and proactively looks for ways to lessen the impact to its business. The Company has observed supply chain improvements in lead times for certain commodities. Although theThe Company has started to see some reduction to interest rates, they remain elevated and have resulted in and may continue to result in increased borrowing costs on new debt,experienced impacts related to the Company'schanges assetin valuationstariffs and negativelycontinues impactingto navigate the purchasingcurrent powerenvironment ofand itsmonitor customers.the future for impacts that could occur. For more information on possible impacts to the Company's businesses, see the Outlook for each segment below and Item 1A - Risk Factors.
38 MDU Resources Group, Inc. Form 10-K 31
The Company completed the separations of Knife River on May 31, 2023, its former construction materials and contracting segment, and of Everus on October 31, 2024, its former construction services segment, into new independent publicly-traded companies. As a result of these separations, the historical results of operations for Knife River and Everus are shown in discontinued operations, net of tax, except for allocated general corporate overhead costs of the Company, which did not meet the criteria for discontinued operations and are reflected in Other. Also included in discontinued operations are certain strategic initiative costs associated with the separations of Knife River and Everus. Other includes activity for Everus for ten months in 2024 compared to the full year in 2023 and Knife River activity for five months in 2023 compared to the full year in 2022.2023.
Results of Operations The Company's discussion and analysis for the year ended December 31, 2025 compared to 2024 is included herein. For discussion and analysis for the year ended December 31, 2024 compared to 2023 refer to Part II, Item 7. "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Company's report on Form 10-K for the year ended December 31, 2024, filed with the SEC on February 20, 2025.
20242025 compared to 20232024 The Company's consolidated earnings decreased $133.6$90.7 million primarily due to the absence of theincome Company'sfrom 2023discontinued gain of $186.6 million related to the tax-free exchange of its retained sharesoperations in Knife River,2025, partially offset by increased earnings at the pipelinenatural andgas electricdistribution businesses.business.
•Earnings at the electric business were impacted by higher operation and maintenance expense, primarily increased payroll-related costs, contract services related to Coyote Station planned outage-related costs, software expense, which include certain costs associated with services provided under the Transition Services Agreement with Everus that are recovered in other income, and insurance expense. Partially offsetting the increased operation and maintenance expense were higher retail sales revenue and retail sales volumes, partially driven by a data center near Ellendale, North Dakota.
•Increased earnings at the natural gas distribution business was largely the result of higher retail sales revenue, driven largely by rate relief in Washington, Montana, South Dakota and Wyoming. The increase was partially offset by higher operation and maintenance expense, primarily higher insurance expense, payroll-related costs, and software expense, which include certain costs associated with services provided under the Transition Services Agreement with Everus that are recovered in other income.
•The electric business experienced higher retail sales revenue due to rate relief in North Dakota, South Dakota and Montana. Lower volumes from the majority of customers, primarily due to cooler weather in the second quarter, and higher operation and maintenance expense, primarily contract services costs, partially offset the increases.
•Decreased earnings at the natural gas distribution business was largely the result of higher operation and maintenance expense, primarily higher contract services costs, higher payroll-related costs, and higher software expenses. Also decreasing net income was higher depreciation and amortization expense, primarily due to increased asset additions. These decreases were partially offset by higher retail sales revenue, primarily due to rate relief in North Dakota and South Dakota.
•The pipeline's earnings increase was driven by higher transportation volumes, primarily from growth projects placed in service in November 2023 and throughout 2024 and increased contracted volume commitments beginning February 2023. Higher storage-related revenue and a full year of new transportation and storage service rates in 2024 further drove the increase. The business also benefited from proceeds received from a customer settlement that was recorded in other income and a decrease in the Company's effective state income tax rate. The increase was offset in part by higher operation and maintenance expense primarily attributable to payroll-related costs and higher materials, contract services and pipeline safety fees. The business incurred higher depreciation and amortization expense due to growth projects placed in service as discussed earlier, which was partially offset by fully depreciated assets. The business also incurred higher interest expense largely as a result of higher debt balances and higher property taxes.
•Other was impacted by the absence of the Company's 2023 gain of $186.6 million related to the tax-free exchange of its retained shares in Knife River. Partially offsetting the decrease in net income was lower operation and maintenance expense, largely a result of corporate overhead costs classified as continuing operations allocated to the construction materials business in 2023, which are not included in Other in 2024, and lower strategic initiative costs. Other also benefited from lower interest expense due to lower borrowings associated with funding strategic initiatives.
32 MDU Resources Group, Inc. Form 10-K 39
•The pipeline's slight earnings increase was driven by growth projects placed in service throughout 2024 and in late 2025 and customer demand for short-term firm natural gas transportation contracts. Higher use of the company's interruptible natural gas transportation services further drove the increase. The increase was partially offset by higher operation and maintenance expense primarily attributable to payroll-related costs. The increase was further offset by the absence of $1.5 million, net of tax proceeds received in 2024 from a customer settlement as well as the absence of a benefit from an adjustment related to the Company's effective state income tax rate change. The business also incurred higher depreciation expense due to growth projects placed in service, as previously discussed, and higher property taxes in Montana.
•Other was impacted by the absence of the income from discontinued operations in 2025. Partially offsetting the decrease was lower operation and maintenance expense, largely a result of corporate overhead costs classified as continuing operations allocated to the construction services business in 2024, which are not included in Other in 2025.
2023 compared to 2022 The Company's consolidated earnings increased $47.2 million. The Company experienced increased earnings at each of its continuing businesses.
•The electric business experienced higher retail sales due to rate relief in North Dakota and Montana, an electric service agreement to provide power to a data center near Ellendale, North Dakota, and higher transmission interconnect upgrades. Electric earnings were partially offset by lower residential volumes, primarily due to cooler weather in the third quarter of the year.
•Natural gas distribution experienced higher retail sales revenue due to rate relief in Idaho and Washington, higher basic service charges, and recovery of short-term debt interest expense in Idaho related to increased gas costs. These increases were largely offset by higher operation and maintenance expense, primarily higher payroll-related costs. The natural gas distribution business also experienced a 6.6 percent decrease in retail sales volumes to all customer classes, largely due to warmer weather, which was partially offset by weather normalization and decoupling mechanisms.
•The pipeline's earnings increase was driven by higher transportation volumes, primarily from increased contracted volume commitments from the North Bakken Expansion project and a full year of benefit from this project; as well as organic growth projects placed in service in November 2023 and August 2022. In addition, revenues increased from new transportation and storage rates effective August 1, 2023 and higher storage-related activity. The pipeline also benefited from higher allowance for funds used during construction on organic growth projects, lower property taxes and higher non-regulated project margin. The increase was offset in part by higher operation and maintenance expense primarily attributable to payroll-related costs and contract services. The pipeline business also incurred higher interest expense as a result of higher interest rates and higher debt balances.
•Other experienced a realized gain of $186.6 million related to the tax-free exchange of its retained interest in Knife River and higher interest income. Partially offsetting these items were higher interest expense, primarily related to debt issued in connection with the Knife River separation. Other also benefited from improved claims experience at the captive insurer in 2023 compared to 2022.
•The Company's earnings from continuing operations were further impacted by $18.6 million in higher returns on the Company's nonqualified benefit plan investments, as discussed in Note 9, partially offset by higher costs incurred in connection with other strategic initiatives of $6.1 million, after tax.
FollowingThe following are key financial and operating data for each of the Company's business segments. AlsoHighlights included are highlights onof key growth strategies, projections and certain assumptions for the Company and its subsidiariessubsidiaries, and other matters ofconcerning the Company's business segments.segments are included below. Many of these highlighted points are "forward-looking statements." For more information, see Part I - Forward-Looking Statements. There is no assurance that the Company's projections, including estimates for growth and changes in earnings, will in fact be achieved. Please refer to assumptions contained in this section, as well as the various important factors listed in Item 1A - Risk Factors. Changes in such assumptions and factors could cause actual future results to differ materially from the Company's projections.
The Company’s CODM, the chief executive officer of MDU Resources Group, Inc., regularly reviews discrete financial information of each reportable segment and uses net income to assess performance of each reportable segment. The CODM uses this information to assess performance and make decisions about resources to be allocated to each reportable segment, including capital and personnel. The information provided to the CODM is prepared at the reportable segment level in quarterly financial packages and on a more summarized basis monthly. Budget and forecast information is also provided to the CODM at the reportable segment level.
40 MDU Resources Group, Inc. Form 10-K
Strategy and challenges The electric and natural gas distribution segments provide electric and natural gas distribution services to customers, as discussed in ItemsItem 1 and 2 - Business Properties.Business. Both segments strive to be top performing utility companies with a commitment to customersutilities and communities, operational excellence, returns focused initiatives and an employee driven culture. The segments provide safe, reliable, competitively priced and environmentally responsible energy serviceservices to customers while focusing on growth and expansion opportunities within and beyond its existing territories.customers. The Companysegments isare focused on cultivating organic growth while managing operating costs and monitoring opportunities for these segments to retain, grow and expand their customer base through extensions of existing operations, including building and upgrading electric generation, transmission and distribution, and natural gas systems, and through selected acquisitions of companies and properties with similar operating and growth objectives at prices that will provide stable cash flows and an opportunity to earn a competitive return on investment.systems. The continued efforts to create operational improvements and efficiencies across both segments promotes the Company's business integration strategy. The primary factors that impact the results of these segments are the ability to earn authorized rates of return; weather; climate change laws, regulations and initiatives; competitive factors in the energy industry; population growth; and economic conditions in the segments' service areas.
MDU Resources Group, Inc. Form 10-K 33
The electric and natural gas distribution segments are subject to extensive regulation in the jurisdictions where they conduct operations with respect to costs, timely recovery of investments and permitted returns on investment. The Company is focused on modernizing utility infrastructure to meet the varied energy needs of both its customers and communities while ensuringworking theto delivery ofdeliver safe, reliable, affordable and environmentally responsible energy. The segments continue to invest in facility upgrades to be in compliance with existing and known future regulations. To assist in the reduction of regulatory lag in obtaining revenue increases to align with increased investments, tracking mechanisms have been implemented in certain jurisdictions. The Company also seeks rate adjustments for operating costs and capital investments, as well as reasonable returns on investments not covered by tracking mechanisms. For more information on the Company's tracking mechanisms and recent rate cases, see ItemsItem 1 and 2 - Business Properties and Item 8 - Note 20.6.
To date, many states have enacted, and others are considering, mandatory clean energy standards requiring utilities to meet certain thresholds of renewable and/or carbon-free energy supply. Over the long-term, the Company expects overall electric demand to be positively impacted by increased electrification trends, including electric vehicle adoption,trends as a means to address economy-wide carbon emission concerns, large data center growth and changing customer conservation patterns. Recently, MISO and NERC announced concerns with reliability of the electric grid due to rapid expansion of renewables and retirement of baseload resources such as coal and the uncertainty of adequate energy production during certain periods of time, while load growth has increased faster than expected.expected due to growth in the data center industry. Montana-Dakota filed its 2024 IRP with the NDPSC onin July 12, 2024. With MISO's filed changes in resources adequacy at FERC and the adoption of direct loss of load accreditation for generation resources around riskiest hours on the system versus peak load hours, Montana-Dakota is seeingidentified the need to add additional capacity resources to its system inby 2028 versus 2034 as identified in its previous IRP. The Company previously executed a PPA for 150 MW of output from Badger Wind Farm, which included the option to purchase a 49 percent ownership interest. With the closing now complete, the PPA has been reduced to 27.5 MW. The ownership stake in Badger Wind Farm reduced the Company's capacity and energy purchase requirements as identified in the 2024 IRP. The Company will continue to monitor the progress of these changeschanges, including the impacts associated with the implementation of MISO's direct loss of load accreditation in 2028, and assess the potential impacts they may have on its stakeholders, business processes, results of operations, cash flows and disclosures.
Revenues are impacted by both customer growth and usage, the latter of which is primarily impacted by weather, as well as impacts associated with commercial and industrial slow-downs, including economic recessions, and energy efficiencies. Very cold winters increase demand for natural gas and to a lesser extent, electricity, while warmer than normal summers increase demand for electricity, especially among residential and commercial customers. Average consumption among both electric and natural gas customers has tended to decline as more efficient appliances and furnaces are installed, and as the Company has implemented conservation programs. Natural gas weather normalization and decoupling mechanisms in certain jurisdictions have been implemented to largely mitigate the effect that would otherwise be caused by variations in volumes sold to these customers due to weather and changing consumption patterns on the Company's distribution margins, as further discussed in ItemsItem 1 and 2 - Business Properties.Business.
In December 2022 and January 2023, natural gas prices significantly increased across the Pacific Northwest from multiple price-pressuring events including wide-spread below-normal temperatures and higher natural gas consumption; reduced natural gas flows due to pipeline constraints, including maintenance in West Texas; and historically low regional natural gas storage levels. Natural gas prices stabilized by March 2023. The higher natural gas prices in December 2022 and January 2023 impacted both Intermountain and Cascade, both of which borrowed short-term debt of $125.0 million and $150.0 million, respectively, in January 2023 to finance the increased natural gas costs. To assist in the recovery of higher natural gas costs, Intermountain filed an out-of-cycle purchased gas adjustment with the IPUC that was effective February 1, 2023, and collected interest costs associated with short-term borrowing. Effective November 1, 2023, as approved by the WUTC, Cascade started recovery in Washington of these increased gas costs over a period of two years rather than the normal one year period. In January 2024, Cascade and Intermountain made the final repayment on short-term debt of $50.0 million and $45.0 million, respectively. For a discussion of the Company's most recent cases by jurisdiction, see Item 8 - Note 20.
34 MDU Resources Group, Inc. Form 10-K
In late summer and fall of 2023, electric fuel and purchased power prices increased across Montana-Dakota's integrated system. This was caused by transmission congestion in northwest North Dakota due to delays in additional SPP transmission line build-out, as well as additional load growth in the Bakken region. Electric fuel and purchased power prices remained elevated through January 2024. To assist in the recovery of the higher electric fuel and purchased power costs, Montana-Dakota filed waiver requests with the NDPSC and SDPUC, which were approved deferring the increased costs to the annual fuel clause adjustment. In Montana, the waiver request is filed monthly and was unopposed by the MTPSC. Montana-Dakota filed a complaint with FERC related to this issue on January 23, 2024. MISO also filed its own complaint with FERC against SPP on March 8, 2024. On September 10, 2024, FERC issued an order denying both Montana-Dakota and MISO's complaint regarding the issue. On October 10, 2024, Montana-Dakota and MISO filed with FERC for rehearing on FERC's decision to deny these complaints. Both rehearing requests were denied by operation of law on November 11, 2024. On January 2, 2025, Montana-Dakota filed a petition for review of the FERC decision with the United States Court of Appeals for the Eighth Circuit. MISO filed a petition for review of the FERC decision on January 8, 2025. On December 26, 2024, Montana-Dakota filed a request with the NDPSC for authorization to defer external legal expenses related to this congestion litigation and record those deferred expenses into a regulatory asset. Effective April 1, 2024, as approved by the NDPSC, Montana-Dakota started recovery in North Dakota of these increased costs over a period of two years rather than one year, which will lessen the impact to customers and allow more time for Montana-Dakota's FERC complaint to mature and have greater certainty of the outcome. In South Dakota and Montana, Montana-Dakota started recovery of these costs over a one-year period effective July 1, 2024.
The Company continues to proactively monitor and work with its manufacturers to reduce the effects of increased pricing and lead times on delivery of certain raw materials and equipment used in electric generation, transmission and distribution system and natural gas pipeline projects. Long lead times are attributable to increased demand for steel products from pipeline companies as they continue pipeline system safety and integrity replacement projects driven by PHMSA regulations, as well as delays in the manufacturing and shipping of electrical equipment and increased demand for electrical equipment due to regulatory activity and grid expansion. The Company has been able to minimize the effects by working closely with suppliers or obtaining additional suppliers, as well as modifying project plans to accommodate extended lead times and increased costs. The Company expects these delays and inflationary pressures to continue.
The ability to grow through acquisitions is subject to significant competition and acquisition premiums. In addition, the ability of the segments to grow their service territory and customer base is affected by regulatory constraints, the economic environment of the markets served, population changes and competition from other energy providers and fuel. The construction of new electric generating facilities, transmission lines and other service facilities is subject to increasing costs and lead times, extensive permitting procedures, and federal and state legislative and regulatory initiatives, which may necessitate increases in electric energy prices. As the industry continues to expand the use of renewable energy sources, the need for additional transmission infrastructure is growing. As part of MISO's long range transmission plan, in August 2022, the Company announced its intent to develop, construct and co-own JETx with Otter Tail Power Company in central North Dakota. On October 6, 2023, the FERC issued an order approving the Company's request for CWIP Incentive Rate and Abandoned Plant Incentive treatment on this project.
In the second half of 2023, electric fuel and purchased power prices increased across Montana-Dakota's integrated system and remained elevated through January 2024. This was caused by transmission congestion in northwest North Dakota due to delays in additional SPP transmission line build-out, as well as additional load growth in the Bakken region. To assist in the recovery of the higher electric fuel and purchased power costs, Montana-Dakota filed waiver requests with the NDPSC and SDPUC, deferring the increased costs to the annual fuel clause adjustment. In Montana, the waiver request is filed monthly and was unopposed by the MTPSC. Effective April 1, 2024, as approved by the NDPSC, Montana-Dakota started recovery in North Dakota of these increased costs over a period of two years rather than one year. In South Dakota and Montana, Montana-Dakota recovered these costs over a one-year period effective July 1, 2024. In July 2025, the NDPSC approved Montana-Dakota's request to defer external legal expenses related to this congestion litigation and record those deferred expenses into a regulatory asset. Montana-Dakota and MISO each filed a petition for review of the FERC decision with the Eighth Circuit with a decision expected in the first half of 2026.
The Company continues to proactively monitor and work with its manufacturers to reduce the effects of increased pricing and lead times on delivery of certain raw materials and equipment used in electric generation, transmission and distribution system and natural gas pipeline projects. Long lead times are attributable to increased demand for steel products from pipeline companies as they continue pipeline system safety and integrity replacement projects driven by PHMSA regulations, as well as delays in the manufacturing and shipping of electrical equipment and increased demand for electrical equipment due to regulatory activity and grid expansion. The Company has been able to minimize the effects by working closely with suppliers or obtaining additional suppliers, as well as modifying project plans to accommodate extended lead times and increased costs. The Company expects these delays to continue. Inflationary pressures have moderated but costs for goods and services remain high. The Company also continues to monitor the impact tariffs will have on its costs. Tariff increases on raw materials could negatively affect the Company's construction projects and maintenance work. For additional discussion regarding risks and uncertainties, see Item 1A - Risk Factors.
The ability to grow through acquisitions is subject to significant competition and acquisition premiums. In addition, the ability of the segments to grow their service territory and customer base is affected by regulatory constraints, the economic environment of the markets served, population changes and competition from other energy providers and fuel. The construction of new electric generating facilities, transmission lines and other service facilities is subject to higher costs and long lead times for equipment, extensive permitting procedures, and federal and state legislative and regulatory initiatives, which may necessitate increases in electric energy prices. As the industry continues to expand the use of renewable energy sources, the need for additional transmission infrastructure is growing. As part of MISO's long range transmission plan, in August 2022, the Company announced its intent to develop, construct and co-own JETx with Otter Tail Power Company in central North Dakota. In October 2023, the FERC issued an order approving the Company's request for CWIP Incentive Rate and Abandoned Plant Incentive treatment on this project. Montana-Dakota and Otter Tail Power Company received approval of a Certificate of Public Convenience and Necessity from the NDPSC in November 2024 on this project. The route permit for the JETx line was filed with the NDPSC in August 2025. JETx is expected to be placed in service at the end of 2028.
42 MDU Resources Group, Inc. Form 10-K
MDU Resources Group, Inc. Form 10-K 43
20242025 compared to 20232024 Electric earnings increaseddecreased $3.2$9.9 million as a result of:
▪Rate relief of $7.1 million in North Dakota, South Dakota and Montana.
▪Higher fuel and purchased power costs of $6.4 million recovered in customer rates and offset in expense, as described below.
▪Higher miscellaneous revenue of $2.4 million, including higher transmission interconnect upgrades.
◦Partially offset by lower retail sales volumes of $2.6 million, driven primarily by lower residential volumes due to 37.0 percent cooler weather in the second quarter of 2024. There was a 1.2 percent increase in volumes, which includes an increase in commercial volumes from the data center as further discussed in the Outlook section.
36 MDU Resources Group, Inc. Form 10-K
•Electric fuel and purchased power increased $6.4 million, largely the result of higher commodity prices.
•Operation and maintenance increased $2.3 million, largely the result of increased contract services and higher payroll-related costs.
•Depreciation and amortization increased $2.3 million.
◦Largely due to:
▪Increased depreciation of $2.2 million associated with higher property, plant and equipment balances, as a result of transmission projects placed in service to improve reliability and update aging infrastructure.
▪Higher depreciation rates, which are recovered in operating revenues.
•Taxes, other than income increased $900,000, largely as a result of higher payroll tax and higher property tax, primarily in Montana.
•Other income increased $2.4 million, primarily from:
◦Higher interest income of $2.7 million, largely related to a data center project of $1.6 million.
◦Higher short term investment balances.
What changed in the latest 10-Q
Risk Factors
Please refer to the Company's risk factors that are disclosed in Part I, Item 1A. Risk Factors in the 2025 Annual Report that could be materially harmful to the Company's business, prospects, financial condition or financial results if they occur. At June 30, 2026, there were no material changes to the Company's risk factors provided in Part I, Item 1A. Risk Factors in the 2025 Annual Report.
Full comparison: every changed paragraph (1)
Please refer to the Company's risk factors that are disclosed in Part I, Item 1A. Risk Factors in the 2025 Annual Report that could be materially harmful to the Company's business, prospects, financial condition or financial results if they occur. At MarchJune 31,30, 2026, there were no material changes to the Company's risk factors provided in Part I, Item 1A. Risk Factors in the 2025 Annual Report.
Management's Discussion & Analysis (MD&A)
Largest changes
Market Trends The Company continues to manage the inflationary pressures experienced throughout the United States, including the impact that inflation, higher interest rates, changes in tariffs, commodity price volatility and supply chain disruptions may have on its business and customers and proactively looks for ways to lessen the impact to its business.see in full comparisonThe Company has observed supply chain improvements in lead times for certain commodities. The Company has experienced impacts related to the changes in tariffs and continues to navigate the current environment and monitor the future for impacts that could occur.For more information specific to each of the Company's businesses, see the following discussion in each business segment's Outlook section. For more information on the possible impacts, see Part I, Item 1A. Risk Factors in the 2025 Annual Report.
•Potential Bakken East Pipeline project, which could consist of 350 miles of pipeline construction from western North Dakota to the eastern part of the state, plus additional pipeline laterals. A Binding Open Season concluded in March 2026, with customer requests of approximately 1.4 billion cubic feet per day of natural gas transportation capacity obtained through this process.see in full comparisonOfWith recently signed Precedent Agreements, the Company has now executed agreements with all customers thattotal,submittedapproximatelybinding40%openhasseasonbeeninterestsignedtotalingundernearlyPrecedent1.2Agreementsbillion cubic feet per day of firm natural gas transportation capacity, withadditionalaPrecedentnegotiatedAgreementsoption inactiveplacenegotiation.that may increase contracted volumes to nearly all of the original interest from the Binding Open Season. The Company continues 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 Section 7(c) application. This application is now anticipated to be filed in the fourth quarter of 2026. Included in the open season results is a firm capacity commitment from the State of North Dakota of up to $50 million annually for 10 years, reinforcing the strategic importance of the project to the region's energy infrastructure and economic development opportunities.BasedAsondevelopmentcurrent assumptions,progresses, thetotalCompanycapitalcontinuesinvestmenttoisevaluateestimatedallbetweenfinancing options to support the projected $2.7 billion to $3.2billion.billion project. This investment would be incremental to the Company's capital investment plan.While a final investment decision has not been made, theThe Company continues to advance engineering,civilenvironmental review andenvironmentalpre-filingsurveyactivitieswork alongfor thepotentialproposedrouteBakkenasEastwell as supply chain planningProject andriskincurmanagementpreliminaryactivities.development costs associated with those activities, which are included in other noncurrent assets on the Company's Consolidated Balance Sheets. The Companywillhasevaluatecertainallcontractualoptionsand commercial arrangements in place that are intended tofinance a project of this size and scope, including usingmitigate the Company'sbalancefinancialsheet,exposurepursuingassociatedpotentialwithpartnerships,these investments andvariouswillothercontinueoptions.to evaluate these amounts and their classification in conjunction with project developments as they occur. Phase One of the proposed project is targeted to be complete inNovemberlate 2029, with Phase Two targeted to be complete inNovemberlate 2030.
“The cash used in investing activities decreased compared to 2025, primarily due to excess cash above the 125% funding limit withdrawn from the Company's unfunded, nonqualified defined benefit plans.”see in full comparison
“•In June 2026, the Bend, Oregon City Council passed a Climate Pollution Fee to discourage the use of natural gas in new residential construction. The ordinance is set to take effect in April 2027 and fees apply to certain natural gas appliances in new single-family homes, duplexes, townhomes and accessory dwelling units. It does not apply to manufactured homes, triplexes or larger housing developments, existing buildings, renovations, replacements or commercial construction.”see in full comparison
•In July 2024, the ODEQ published its proposed rules to create a new CPP. The OEQC adopted the rules in November 2024. In April 2026, Cascade joined with 28 other companies, organizations and individuals in filing a lawsuit in the Oregon Court of Appeals challenging the OEQC's statutory authority to adopt the CPP and asking the court to invalidate the CPP. In May 2026, the Oregon Court of Appeals granted a motion to expedite litigation challenging the CPP. The Company will continue to strive to satisfy all requirements set by the CPP while this litigation is underway. The Company intends to meet its obligations first through no-cost emissions allowances and will fill remaining compliance obligations by investing in additional customer conservation and energy efficiency programs, purchasing community climate investment credits, and acquiring environmental attributes from low-carbon fuel projects such as RNG. Compliance costs for these regulations are being recovered through customer rates. Due to the timing of regulatory recovery, future compliance obligation purchases could impact the Company's operating cash flow.see in full comparison
Three and Six Months Endedsee in full comparisonMarchJune31,30, 2026, Compared to Three and Six Months EndedMarchJune31,30, 2025
Full comparison: every changed paragraph (182)
Market Trends The Company continues to manage the inflationary pressures experienced throughout the United States, including the impact that inflation, higher interest rates, changes in tariffs, commodity price volatility and supply chain disruptions may have on its business and customers and proactively looks for ways to lessen the impact to its business. The Company has observed supply chain improvements in lead times for certain commodities. The Company has experienced impacts related to the changes in tariffs and continues to navigate the current environment and monitor the future for impacts that could occur. For more information specific to each of the Company's businesses, see the following discussion in each business segment's Outlook section. For more information on the possible impacts, see Part I, Item 1A. Risk Factors in the 2025 Annual Report.
Three Months Ended MarchJune 31,30, 2026, Compared to Three Months Ended MarchJune 31,30, 2025 The Company's consolidated earnings decreasedincreased $1.2$7.6 million. Drivers of the earnings decreaseincrease include:
•The electric business earnings increase was largely the result of higher retail sales revenue, primarily from recovery mechanisms associated with renewable investments including Badger Wind Farm. Interim rates in Montana and new rates in Wyoming, along with higher retail sales volumes across all major customer classes, further drove the increase. The increase was partially offset by higher interest expense associated with debt issuances for recent capital investments, including Badger Wind Farm, as well as higher depreciation expense and operation and maintenance expense, primarily related to Badger Wind Farm.
•The natural gas distribution business reported a decreased seasonal loss, primarily driven by new rates in Idaho, Washington, Montana and Wyoming, as well as higher retail sales volumes across all customer classes. These impacts were partially offset by higher interest expense resulting from higher long-term debt balances.
•The electric business earnings decrease was largely the result of higher interest expense associated with debt issuances for recent capital investments including Badger Wind Farm. Lower retail sales volumes due to warmer weather and higher depreciation expense, primarily Badger Wind Farm, further drove the decrease. Higher retail revenues, primarily from recovery mechanisms associated with renewable investments including Badger Wind Farm, largely offset the decrease.
•The natural gas distribution business reported a decrease in earnings, largely the result of lower retail sales volumes due to warmer weather. Lower electric generation transportation volumes driven by warmer weather, higher operation and maintenance expense, primarily payroll-related expense and contract services, and higher interest expense further drove the decrease. The decrease was largely offset by higher retail sales revenue due to rate relief in Washington, Idaho, Montana, and Wyoming.
•The earnings decrease at the pipeline business was driven by lower interruptibleother natural gas storage withdrawals. Higher operationincome and maintenancehigher depreciation and amortization expense primarilyfrom attributablea togrowth higherproject materialsplaced andin payroll-relatedservice. costsThese alsoimpacts contributed, as well as higher Montana property tax accruals. The decrease waswere partially offset by continued strong customer demand for short-term natural gas transportation contracts,contracts and interruptible storage services, as well as impactscontributions from apreviously constructed growth projectprojects, placed in service in 2025 andincluding a contracted volume increase associated with a previously constructed growth project.increase.
•Other experienced an increase in net income primarily due to income from discontinued operations associated with a $1.5 million tax benefit related to an election to change the tax method for certain strategic initiative costs. Other also reflects income tax adjustments related to the Company's annualized estimated tax rate. Partially offsetting the increase was higher operation and maintenance expense.
Six Months Ended June 30, 2026, Compared to Six Months Ended June 30, 2025 The Company's consolidated earnings increased $6.4 million. Drivers of the earnings increase include:
•The electric business earnings increase was largely the result of higher retail sales revenue, primarily from recovery mechanisms associated with renewable investments including Badger Wind Farm. Interim rates in Montana and new rates in Wyoming further drove the increase. The increase was partially offset by higher interest expense associated with debt issuances for recent capital investments, including Badger Wind Farm, as well as higher depreciation expense and operation and maintenance expense, primarily related to Badger Wind Farm.
•The natural gas distribution business reported an increase in earnings, primarily driven by new rates in Washington, Idaho, Montana and Wyoming. The increase was partially offset by lower retail sales and electric generation transportation volumes due to warmer first quarter weather. Higher interest expense resulting from higher debt balances, lower other income, and higher operation and maintenance expense, primarily attributable to increased payroll-related costs, further offset the increase.
•The decrease in earnings at the pipeline business was driven by lower other income. The business also incurred higher operation and maintenance expense, primarily attributable to higher payroll-related costs, materials, and consulting and legal costs associated with the business's recently filed rate case. Lower interruptible natural gas storage withdrawals and higher Montana property tax accruals also contributed to the decrease. These impacts were partially offset by continued customer demand for short-term natural gas transportation contracts, as well as contributions from previously constructed growth projects, including a contracted volume increase.
•Other experienced an increase in net income primarily due to income from discontinued operations associated with a $1.5 million tax benefit related to an election to change the tax method for certain strategic initiative costs. Other also reflects income tax adjustments related to the Company's annualized estimated tax rate.
To date, many states have enacted and others are considering, mandatory energy standards requiring utilities to meet certain thresholds of renewable and/or carbon-free energy supply. Over the long-term, the Company expects overall electric demand to be positively impacted by increased electrification trends as a means to address economy-wide carbon emission concerns, large data center growth and changing customer conservation patterns. MISO and NERC announced concerns with reliability of the electric grid due to rapid expansion of renewables and retirement of baseload resources such as coal and the uncertainty of adequate energy production during certain periods of time, while load growth has increased faster than expected due to growthlarge inpower the data center industry.users. The Company will continue to monitor the progress of these changes, including the impacts associated with the implementation of MISO's direct loss of load accreditation in 2028, and assess the potential impacts they may have on its stakeholders, business processes, results of operations, cash flows and disclosures.
The Company continues to proactively monitor and work with its manufacturers to reduce the effects of increased pricing and lead times on delivery of certain raw materials and equipment used in electric generation, transmission and distribution system and natural gas pipeline projects. Long lead times are attributable to increased demand for steel products from pipeline companies as they continue pipeline system safety and integrity replacement projects driven by PHMSA regulations, as well as delays in the manufacturing and shipping of electrical equipment and increased demand for electrical equipment due to regulatory activity and grid expansion. The Company has been able to minimize the effects by working closely with suppliers or obtaining additional suppliers, as well as modifying project plans to accommodate extended lead times and increased costs. The Company expects these delays to continue. Inflationary pressures haveremain moderatedvolatile butand costs for goods and services also remain high. The Company also continues to monitor the impact tariffs will have on its costs. Tariff increases on raw materials could negatively affect the Company's construction projects and maintenance work. For additional discussion regarding risks and uncertainties, see Part I, Item 1A. Risk Factors in the 2025 Annual Report.
The ability to grow through acquisitions is subject to significant competition and acquisition premiums. In addition, the ability of the segments to grow their service territory and customer base is affected by regulatory constraints, the economic environment of the markets served, population changes and competition from other energy providers and fuel. The construction of new electric generating facilities, transmission lines and other service facilities is subject to higher costs and long lead times for equipment, extensive permitting procedures, and federal and state legislative and regulatory initiatives, which may necessitate increases in electric energy prices. As the industry continues to expand the use of renewable energy sources, the need for additional transmission infrastructure is growing. As part of MISO's long range transmission plan, in August 2022, the Company announced its intent to develop, construct and co-own JETx with Otter Tail Power Company in central North Dakota. In October 2023, the FERC issued an order approving the Company's request for CWIP Incentive Rate and Abandoned Plant Incentive treatment on this project. Montana-Dakota and Otter Tail Power Company received approval of a Certificate of Public Convenience and Necessity from the NDPSC in November 2024 on this project. The route permit for the JETx line was filedapproved withby the NDPSC in AugustJune 2025. JETx is expected to be placed in service in 2029.2026.
Three Months Ended MarchJune 31,30, 2026, Compared to Three Months Ended MarchJune 31,30, 2025 Electric earnings decreasedincreased $500,000$4.3 million as a result of:
◦Largely due to:
▪New rates approved in regulatory proceedings of $3.4 million in Montana and Wyoming.
▪Higher retail sales volumes of $1.8 million across all major customer classes.
◦Partially offset by lower retail sales volumes of $2.6 million, driven primarily by lower residential and commercial volumes, largely due to warmer weather. There was an increase in commercial volumes from data centers as further discussed in the Outlook section.
•Electric fuel and purchased power increased $2.4$3.7 million, largely the result of higher demand costs,costs primarilyand drivenhigher by data centers.volumes.
•Operation and maintenance increased $1.3 million.
◦Largely the result of:
▪Higher contract services related to Badger Wind Farm of $1.0 million. Big Stone Station planned outage-related costs were more than offset by absence of prior year Coyote Station planned outage-related costs.
▪Higher payroll-related costs of $600,000.
◦Partially offset by absence of prior year costs associated with services provided to Everus as part of the TSA, offset in other income as described below, and timing of software expenses.
•Depreciation and amortization increased $2.9 million, largely due to increased property, plant and equipment balances, primarily related to Badger Wind Farm.
•Other income decreased $800,000, largely the result of lower TSA income, as described above, partially offset by higher returns on the Company's nonqualified benefit plan investments.
•Interest expense increased $3.6 million, primarily due to higher long-term debt balances.
•Income tax benefit decreased $700,000, largely due to higher income before income taxes, partially offset by higher production tax credits of $500,000 driven by Badger Wind Farm as discussed above.
Six Months Ended June 30, 2026, Compared to Six Months Ended June 30, 2025 Electric earnings increased $3.8 million as a result of:
•Revenue increased $26.8 million.
▪Higher renewable tracker revenues of $14.4 million, largely due to Badger Wind Farm, which was placed in service in December 2025, partially offset by higher production tax credits offset in income tax benefit, as described below.
▪Higher fuel and purchased power costs of $6.1 million recovered in customer rates and offset in expense, as described below.
▪New rates approved in regulatory proceedings of $3.6 million in Montana and Wyoming.
◦Partially offset by lower retail sales volumes of $800,000, driven primarily by lower residential and commercial volumes, largely due to warmer weather in the first quarter of the year. There was an increase in commercial volumes from data centers as further discussed in the Outlook section.
•Electric fuel and purchased power increased $6.1 million, largely the result of higher demand costs and higher volumes.
◦Largely the result of:
▪ Higher contract services related to Badger Wind Farm of $2.0 million. Big Stone Station planned outage-related costs were more than offset by absence of prior year Coyote Station and Wygen III generating station outage-related costs.
▪Higher payroll-related costs of $1.4 million.
◦Partially offset by timing of software expenses and absence of prior year costs associated with services provided to Everus as part of the TSA, offset in other income as described below.
•Depreciation and amortization increased $5.3 million, largely due to increased property, plant and equipment balances, primarily related to Badger Wind Farm.
•Taxes, other than income increased $1.4 million, largely as a result of higher property tax, primarily in North Dakota and Montana.
•Other income decreased $1.4 million, largely the result of lower TSA income, as described above, and lower AFUDC due to lower average CWIP balances, partially offset by higher returns on the Company's nonqualified benefit plan investments.
•Interest expense increased $7.6 million, primarily due to higher long-term debt balances.
•Income tax benefit increased $400,000, largely due to higher production tax credits of $1.5 million driven by Badger Wind Farm as discussed above, partially offset by higher income before income taxes.
Three Months Ended June 30, 2026, Compared to Three Months Ended June 30, 2025 Natural gas distribution reported a decreased seasonal loss of $3.5 million as a result of:
•Revenue increased $5.7 million.
▪New rates approved in regulatory proceedings of $7.7 million, primarily in Idaho, Washington, Montana and Wyoming.
▪Higher Montana property tax tracker of $700,000 that was offset in expense, as described below.
▪A 6.7 percent or $500,000 increase in retail sales volumes to all customer classes, offset in part by weather normalization and decoupling mechanisms in certain jurisdictions.
▪Lower purchased natural gas sold of $2.4 million, including net environmental compliance costs, recovered in customer rates and offset in expense, as described below.
▪Transportation volumes decreased 14.8 percent or $500,000 primarily the result of lower electric generation volumes.
▪Lower revenue-based taxes of $400,000, recovered in rates and offset in expense, as described below.
•Purchased natural gas sold decreased $2.4 million, largely due to lower commodity costs of $9.6 million, partially offset by higher volumes of natural gas purchased of $7.0 million, and net environmental compliance costs of $200,000.
◦Largely the result of $1.4 million higher contract services related to Badger Wind Farm of $900,000 and timing of tree trimming of $400,000. Big Stone Station planned outage-related costs were more than offset by absence of prior year Coyote Station and Wygen III generating station outage-related costs.
◦Partially offset by timing of software expenses.
•Depreciation and amortization increased $2.4 million, largely due to increased property, plant and equipment balances, primarily related to Badger Wind Farm.
•Other income decreased $600,000, largely the result of lower AFUDC due to lower average CWIP balances.
MDU insider buying and selling (Form 4)
Since 2026-04-11, insiders reported open-market purchases in 0 Form 4 filings and open-market sales in 0 filings. Totals add up every open-market (code P and S) line in those filings, using the prices reported in the filings. Awards, option exercises, tax withholding and gifts are listed below but not counted.
| Trade date | Insider | Transaction | Shares | Price | Value |
|---|---|---|---|---|---|
| 2026-09-30 | Durkin Marian M |
Grant/award | 172 | — | — |
| 2026-09-30 | Dosch Vernon A. |
Grant/award | 1,462 | — | — |
| 2026-06-30 | Durkin Marian M |
Grant/award | 152 | — | — |
| 2026-06-30 | Dosch Vernon A. |
Grant/award | 1,293 | — | — |
Well-known investors holding MDU (13F)
| Investor | Quarter | Shares | Reported value | % of their 13F | Change vs prior quarter |
|---|---|---|---|---|---|
| Citadel Advisors (Ken Griffin) | 2026-06-30 | 1,909,701 | $40.5M | 0.02% | Added 74% |
| Renaissance Technologies | 2026-06-30 | 957,150 | $20.3M | 0.03% | Added 3% |
| Two Sigma Investments | 2026-06-30 | 898,508 | $19.1M | 0.01% | Added 86% |
| Gotham Asset Management (Joel Greenblatt) | 2026-06-30 | 726,661 | $15.4M | 0.04% | Added 44% |
| Millennium Management (Israel Englander) | 2026-06-30 | 624,798 | $13.3M | 0.01% | Added 87% |
| D. E. Shaw & Co. | 2026-06-30 | 450,754 | $9.6M | 0.01% | Reduced 4% |
| AQR Capital Management (Cliff Asness) | 2026-06-30 | 235,208 | $5.0M | 0.0% | Added 45% |
| Bridgewater Associates | 2026-06-30 | 80,657 | $1.7M | 0.01% | Added 53% |