Otter Tail Corporation | research notes

Otter Tail Corporation: A Leader in Energy, Construction, and Manufacturing

Introduction

Otter Tail Corporation is a diversified company that delivers essential services to communities across the Upper Midwest of the United States. With a history spanning over a century, Otter Tail has evolved into a multifaceted enterprise with a strong presence in various industries, including energy, construction, and manufacturing.

History and Evolution

The company's origins can be traced back to 1907, when a group of farmers in Otter Tail County, Minnesota, formed the Otter Tail Power Company to bring electricity to rural areas. Over the years, Otter Tail expanded its reach through acquisitions and strategic partnerships, becoming a leading provider of electric and natural gas services in the region.

Energy and Utilities

Otter Tail Power Company remains the company's core business. It serves approximately half a million electricity and natural gas customers in parts of North Dakota, South Dakota, Minnesota, and Wisconsin. The company invests heavily in renewable energy, operating several wind farms and solar power facilities.

Construction and Engineering

Otter Tail Construction is a full-service construction company that provides specialized services to the energy, industrial, and commercial sectors. Its capabilities include electrical, mechanical, and civil engineering, as well as staffing and training.

Manufacturing

Otter Tail Fabricators is a leading manufacturer of custom metal fabrication products. It specializes in complex steel structures, pressure vessels, and process equipment for various industries, including energy, mining, and environmental engineering.

Corporate Culture and Values

Otter Tail Corporation is committed to operating with integrity, safety, and a focus on customer service. Its core values include:

• Safety
• Reliability
• Innovation
• Excellence
• Community Involvement

Community Engagement

Recognizing its role as a vital part of the communities it serves, Otter Tail Corporation is actively involved in philanthropy and community development initiatives. The company supports educational programs, environmental conservation, and economic growth.

Financial Performance

Otter Tail Corporation has consistently delivered strong financial performance. Its revenues for the 2022 fiscal year exceeded $2 billion, with net income of approximately $140 million. The company has a solid credit rating and a history of paying dividends to shareholders.

Conclusion

Otter Tail Corporation is a well-established and respected company with a diverse portfolio of businesses. Its focus on energy, construction, and manufacturing makes it an essential provider of critical services in the Upper Midwest. With a commitment to innovation, safety, and community involvement, Otter Tail Corporation continues to play a pivotal role in shaping the region's future.

Otter Tail Corporation Business Model

Otter Tail Corporation is a diversified energy company that provides a range of electric, gas, and water utility services to customers in the United States. Its business model is comprised of the following key components:

Electric Utilities:

• Generates and transmits electricity through a network of owned and leased generation facilities.
• Distributes electricity to residential, commercial, and industrial customers.

Gas Utilities:

• Distributes and sells natural gas to residential, commercial, and industrial customers.
• Operates a pipeline system for natural gas transportation.

Water Utilities:

• Provides water treatment, storage, and distribution services to residential, commercial, and industrial customers.
• Maintains infrastructure for water systems.

Other Businesses:

• Renewable energy development, including wind and solar generation.
• Energy efficiency programs.
• Fiber-optic communications network.

Advantages to Competitors

Otter Tail Corporation has several advantages over its competitors, including:

• Focus on Regulated Utilities: A majority of Otter Tail's revenue is derived from regulated utility operations, providing stable and predictable cash flows.
• Strong Balance Sheet: The company maintains a strong financial position with low debt and ample liquidity, allowing it to invest in growth opportunities.
• Geographic Diversity: Otter Tail operates in a diversified geographic area, reducing its exposure to fluctuations in any single market.
• Clean Energy Initiatives: The company is committed to developing renewable energy projects, which aligns with growing customer demand for clean energy solutions.
• Customer-Centric Approach: Otter Tail prioritizes customer satisfaction and offers a range of energy efficiency programs and value-added services.
• Experienced Management Team: The company's management team has extensive experience in the energy industry, providing leadership and stability.
• Dividend Payout: Otter Tail has a consistent track record of paying dividends to shareholders, providing investors with a steady income stream.

Outlook of Otter Tail Corporation

Overall Business Performance

• Otter Tail Corporation is a diversified energy company with a strong financial performance.
• The company has consistently exceeded industry averages in key metrics such as revenue growth, operating margin, and Return on Equity (ROE).
• Otter Tail's long-term debt-to-capital ratio is conservative, providing financial flexibility and resilience.

Customer Base

• Otter Tail serves a stable customer base primarily in the upper Midwest and South Dakota.
• The company's diverse customer mix includes residential, commercial, industrial, and agricultural customers.
• Otter Tail has a strong brand reputation and customer loyalty, driven by its focus on reliability, affordability, and customer service.

Energy Generation Portfolio

• Otter Tail has a balanced energy generation portfolio that includes coal, natural gas, wind, solar, and hydroelectric power.
• The company is actively investing in renewable energy sources, with a goal of achieving a 50% renewable energy mix by 2025.
• Otter Tail's diverse generation portfolio reduces risk and provides flexibility to meet changing market demands.

Distribution and Transmission Networks

• Otter Tail owns and operates approximately 8,000 miles of electric distribution lines and 1,500 miles of electric transmission lines.
• The company's distribution network is well-maintained and provides reliable service to its customers.
• Otter Tail is actively investing in grid modernization to enhance reliability, efficiency, and resiliency.

Regulatory Environment

• Otter Tail operates in a regulated environment, which provides some stability and predictability.
• The regulatory landscape is evolving with increasing focus on decarbonization, renewable energy, and customer choice.
• Otter Tail engages actively with regulators to ensure that its interests and those of its customers are represented.

Industry Trends

• The energy industry is undergoing significant transformation driven by decarbonization, technological advancements, and evolving customer preferences.
• Otter Tail is well-positioned to capitalize on these trends through its balanced energy portfolio, customer focus, and commitment to innovation.

Growth Opportunities

• Otter Tail has identified several growth opportunities, including:
  • Expanding its renewable energy generation portfolio
  • Investing in grid modernization and energy efficiency
  • Providing value-added services to customers
  • Geographical expansion into adjacent markets

Financial Outlook

• Otter Tail has a solid financial outlook with expectations for continued revenue growth and operating efficiency improvements.
• The company's dividend has consistently increased over the past several years, reflecting its strong financial position.
• Otter Tail is well-positioned to navigate macroeconomic headwinds and capitalize on growth opportunities.

Overall

Otter Tail Corporation is a well-managed and financially strong company with a positive outlook for the future. Its diversified energy portfolio, stable customer base, and strong regulatory environment provide a foundation for continued growth and success.

Similar Companies to Otter Tail Corporation

1. Xcel Energy (https://www.xcelenergy.com/)

• Reason for customer appeal: Large, diversified energy provider with a strong emphasis on renewable energy and customer service.

2. Ameren Corporation (https://www.ameren.com/)

• Reason for customer appeal: Another major energy provider with a focus on reliable and affordable service, as well as environmental sustainability.

3. NextEra Energy (https://www.nexteraenergy.com/)

• Reason for customer appeal: Leading renewable energy developer and operator with a growing portfolio of solar and wind projects.

4. Dominion Energy (https://www.dominionenergy.com/)

• Reason for customer appeal: Integrated energy company with a strong presence in power generation, transmission, and distribution.

5. Duke Energy (https://www.duke-energy.com/)

• Reason for customer appeal: Fortune 125 company that provides electric, gas, and renewable energy to millions of customers.

6. CenterPoint Energy (https://www.centerpointenergy.com/)

• Reason for customer appeal: Gas and electric utility with a focus on safety, reliability, and customer engagement.

7. Eversource Energy (https://www.eversource.com/)

• Reason for customer appeal: New England-based energy provider with a strong commitment to renewable energy and customer satisfaction.

8. WEC Energy Group (https://www.wecenergygroup.com/)

• Reason for customer appeal: Midwest-based utility holding company with a focus on electric and natural gas infrastructure.

9. Sempra Energy (https://www.sempra.com/)

• Reason for customer appeal: Global energy company with operations in natural gas, electric, and renewable energy.

10. Consolidated Edison (https://www.coned.com/)

• Reason for customer appeal: One of the largest investor-owned energy companies in the United States, serving customers in New York City and surrounding areas.

Origins and Early Years

• 1900: Otter Tail Power Company is founded in Fergus Falls, Minnesota, by a group of local investors.
• 1901: The company builds its first coal-fired power plant in Fergus Falls.
• 1920s-1930s: Otter Tail Power Company expands its service area across western and southern Minnesota.
• 1953: The company completes the construction of its first hydroelectric plant on the Otter Tail River.

Growth and Diversification

• 1960s-1970s: Otter Tail Power Company acquires several smaller utility companies, expanding its reach into eastern Montana and North Dakota.
• 1980s: The company diversifies into telecommunications and cable television.
• 1994: The company merges with United Power Association, a cooperative serving eastern Minnesota and Wisconsin.
• 1999: Otter Tail Power Company changes its name to Otter Tail Corporation to reflect its expanding operations.

21st Century

• 2001: Otter Tail Corporation acquires Northern States Power Company of Minnesota, significantly increasing its customer base.
• 2004: The company acquires Big Stone Power II, a peaking power plant in South Dakota.
• 2009: Otter Tail Corporation acquires Montana-Dakota Utilities, a gas and electric utility serving parts of Montana, North Dakota, South Dakota, and Wyoming.
• 2011: The company sells its cable television assets.
• 2013: Otter Tail Corporation acquires Great Plains Natural Gas Company, a gas utility serving parts of Minnesota, North Dakota, and South Dakota.
• 2022: The company acquires North Dakota Natural Gas Company, further expanding its gas distribution operations in North Dakota and Minnesota.

Today

Otter Tail Corporation is a publicly traded company based in Fergus Falls, Minnesota. It is one of the largest utilities in the Upper Midwest, serving over 1 million electric customers and 240,000 natural gas customers in Minnesota, North Dakota, South Dakota, Montana, and Wyoming.

2022

• April: Otter Tail Corporation completes the acquisition of Montana-Dakota Utilities Co. (MDU), a regulated electric and natural gas utility serving customers in Montana, North Dakota, South Dakota, and Wyoming.
• June: The company announces a $2 billion capital investment plan for 2023-2025.
• September: Otter Tail Corporation releases its 2022 Corporate Sustainability Report, highlighting its efforts in environmental stewardship, social responsibility, and governance.

2021

• February: The company announces plans to acquire Montana-Dakota Utilities Co.
• May: Otter Tail Corporation completes the acquisition of JDS Industries, a leading provider of electrical infrastructure construction and maintenance services.
• November: The company reports record financial results for the year, including net income of $238 million and operating revenue of $2.3 billion.

2020

• March: The company announces the suspension of its dividend due to the COVID-19 pandemic.
• May: Otter Tail Corporation reports a net loss of $13 million for the first quarter of 2020.
• September: The company announces the resumption of its dividend.
• November: Otter Tail Corporation reports a net income of $110 million for the third quarter of 2020.

Recent timelines

• 2023: Otter Tail Corporation's capital investment plan for 2023-2025 includes a focus on renewable energy generation, transmission and distribution grid enhancements, and customer service improvements.
• 2024: The company expects to complete the construction of its new generation facility in Brookings County, South Dakota.
• 2025: Otter Tail Corporation plans to continue its expansion into new markets and explore opportunities in the clean energy sector.

Otter Tail Corporation: A Beacon of Excellence in Energy and Agriculture

Otter Tail Corporation is a shining beacon of excellence in the energy and agriculture industries. From their top-notch customer service to their unwavering commitment to sustainability, Otter Tail has consistently exceeded expectations.

Exceptional Customer Service

Otter Tail understands the importance of customer satisfaction. Their representatives are always friendly, knowledgeable, and eager to help. Whether you have questions about your energy bill or want to explore agriculture solutions, Otter Tail's team is there to guide you every step of the way.

Affordable and Reliable Energy

Otter Tail provides a wide range of energy services, including electricity, natural gas, and renewable energy. Their competitive rates and reliable infrastructure ensure that customers have access to affordable and dependable energy when they need it most.

Sustainable Agriculture Solutions

Otter Tail is a leader in sustainable agriculture practices. The company provides farmers with innovative solutions to improve productivity and reduce environmental impact. From precision agriculture to cover crops, Otter Tail is committed to helping farmers thrive while protecting the land.

Community Involvement

Otter Tail is deeply involved in the communities it serves. The company supports local organizations, schools, and initiatives that enhance the quality of life for residents. Their charitable contributions and volunteer efforts make a real difference in the communities where they operate.

Financial Stability and Growth

Otter Tail is a financially sound company with a strong track record of growth. The company's prudent management and commitment to innovation has allowed it to weather economic downturns and emerge stronger than ever.

Conclusion

Otter Tail Corporation is a company that truly values its customers, employees, and communities. Their unwavering commitment to excellence, sustainability, and customer satisfaction makes them an industry leader. I highly recommend Otter Tail to anyone looking for reliable energy, innovative agriculture solutions, or a company that cares about its stakeholders.

Explore the Enduring Legacy of Innovation: Visit Otter Tail Corporation's Website Today!

Established in 1913, Otter Tail Corporation has been a trusted partner in energy, manufacturing, and technology for over a century. With a commitment to innovation and sustainability, Otter Tail has consistently delivered exceptional products and services that have shaped the lives of countless communities.

Discover a World of Innovation:

Visit our website at [Website Link] and immerse yourself in an unparalleled array of innovative solutions:

• Energy Expertise: As a leading energy provider, Otter Tail offers reliable and affordable power to homes and businesses across the Midwest. Explore our renewable energy initiatives, including wind and solar power, and learn how we're shaping the future of sustainable energy.
• Manufacturing Excellence: From glass containers to custom metal products, Otter Tail's manufacturing capabilities are second to none. Discover our state-of-the-art facilities and witness the precision and expertise that goes into creating high-quality products.
• Cutting-Edge Technology: Otter Tail leads the way in technology with our advanced metering and distribution systems. Learn about our smart grid solutions, cybersecurity protections, and how we're empowering customers with greater control over their energy usage.

Engage with Industry Leaders:

Connect with our team of experts and industry thought leaders through our website. Access insightful blog posts, technical whitepapers, and exclusive behind-the-scenes content that will keep you informed and ahead of the curve.

Experience Unparalleled Customer Service:

At Otter Tail, we believe in building lasting relationships with our customers. Our dedicated customer service team is available to assist you with any inquiries, provide support, and ensure your complete satisfaction.

Join the Otter Tail Community:

Become part of the Otter Tail family by following us on social media and subscribing to our email newsletter. Stay up to date on our latest advancements, special promotions, and inspiring stories of how we're making a difference.

Visit Our Website Today:

Don't miss this opportunity to explore the enduring legacy of innovation at Otter Tail Corporation. Visit our website at [Website Link] and discover the world of possibilities that awaits you. Together, let's shape a brighter future through partnership and innovation.

Main Supplier of Otter Tail Corporation

Name: Allete Clean Energy

Website: https://www.alletecleanenergy.com/

Services Provided:

• Renewable energy generation, including wind and solar power
• Development and construction of renewable energy projects
• Energy storage solutions
• Transmission and distribution services

Other Key Suppliers:

In addition to Allete Clean Energy, Otter Tail Corporation also has relationships with numerous other suppliers that provide essential goods and services to support its operations. These suppliers include:

• Fuel suppliers: These companies provide natural gas and other fuels used to generate electricity.
• Equipment manufacturers: These companies supply turbines, generators, and other equipment used in power plants.
• Engineering and construction firms: These companies design, build, and maintain power plants and other facilities.
• Transportation and logistics providers: These companies transport fuel, equipment, and other materials to Otter Tail Corporation's facilities.
• Information technology providers: These companies provide software, hardware, and support services to manage Otter Tail Corporation's business operations.

Importance of Supplier Relationships

Strong relationships with suppliers are crucial for Otter Tail Corporation's success. Reliable and cost-effective supplies of fuel, equipment, and other resources are essential for the company to generate and deliver electricity to its customers. Otter Tail Corporation works closely with its suppliers to ensure that these resources are available when needed and at competitive prices.

Supplier Management

Otter Tail Corporation has a comprehensive supplier management program in place to identify, evaluate, and manage its relationships with suppliers. The company uses a variety of criteria to assess suppliers, including quality, reliability, cost, and sustainability. Otter Tail Corporation also works with suppliers to improve their performance and reduce costs.

Otter Tail Corporation's Main Customers (Downstream Companies)

Otter Tail Corporation is a diversified energy company headquartered in Fergus Falls, Minnesota. Its primary operations include regulated electric utilities, renewable energy generation, and natural gas distribution. The company's main customers are:

1. Electric Utility Customers:

• Otter Tail Power Company provides electricity to approximately 140,000 customers in Minnesota, North Dakota, and South Dakota.
• Otter Tail Power Company's website: https://ottertailpower.com/

2. Renewable Energy Customers:

• Otter Tail Corporation owns and operates a portfolio of renewable energy generation facilities, including wind and solar farms. Its customers include:
  • Utilities that purchase renewable energy credits (RECs)
  • Large corporate entities with sustainability goals
• Otter Tail Corporation's renewable energy website: https://ottertailcorp.com/renewable-energy/

3. Natural Gas Distribution Customers:

• Otter Tail Gas Company provides natural gas to approximately 94,000 customers in Minnesota, North Dakota, and South Dakota.
• Otter Tail Gas Company's website: https://ottertailgas.com/

Other Downstream Companies:

• Otter Tail Power Services: Provides energy consulting, engineering, and construction services.
• Otter Tail Water Resources: Operates a network of hydroelectric dams and reservoirs.
• Otter Tail Technologies: Develops and markets energy efficiency and demand response solutions.

Additional Information:

• Otter Tail Corporation reports that approximately 80% of its total revenue is generated from its regulated electric utility business.
• The company's customer base is primarily residential, commercial, and industrial businesses.

Key Revenue Streams and Estimated Annual Revenue of Otter Tail Corporation

Otter Tail Corporation is a diversified energy company headquartered in Fergus Falls, Minnesota. The company has operations in generation, transmission, distribution, and retail electric and gas services. Otter Tail also provides a variety of energy-related services, including engineering, construction, and consulting.

Key Revenue Streams:

1. Electric Generation and Sales (~$950 million)

• Generation and sale of electricity from a portfolio of diverse generation sources, including wind, coal, natural gas, and hydro.
• Sale of electricity to wholesale and retail customers.

2. Electric Transmission and Distribution (~$320 million)

• Transmission and distribution of electricity through an extensive network of transmission and distribution lines.
• Fees charged to other utilities for transmitting their electricity.

3. Natural Gas Distribution (~$250 million)

• Purchase and distribution of natural gas to residential, commercial, and industrial customers.

4. Energy Services (~$120 million)

• Provision of a range of energy-related services, including:
  • Engineering, procurement, and construction services for electric and gas utilities.
  • Consulting services for renewable energy development and energy efficiency.
  • Metering and billing services for electric and gas utilities.

Estimated Annual Revenue:

Otter Tail Corporation's total annual revenue is estimated to be approximately $1.64 billion.

Additional Information:

• Otter Tail Corporation serves over 540,000 electric customers and 121,000 natural gas customers in Minnesota, North Dakota, South Dakota, and Montana.
• The company has a renewable energy portfolio of over 1,000 megawatts, including wind, solar, and biomass projects.
• Otter Tail Corporation is committed to providing safe, reliable, and affordable energy services to its customers.

Key Partners of Otter Tail Corporation

1. Utilities

• NextEra Energy: Provides renewable energy, including solar and wind power.
• Xcel Energy: Supplies electricity and natural gas to customers in the Midwest and Southwest.
• American Transmission Company (ATC): Operates and maintains the high-voltage power grid in the Midwest.

2. Technology Providers

• Siemens: Provides electrical equipment and automation solutions.
• GE Grid Solutions: Manufactures high-voltage electrical equipment.
• Open Systems International (OSI): Develops software for electric utilities.

3. Equipment Manufacturers

• Caterpillar: Supplies engines and generators.
• Kubota: Manufactures small engines and equipment.
• Doosan Heavy Industries: Provides heavy equipment for construction and mining.

4. Distribution Partners

• Home Depot: Sells home appliances and equipment powered by Otter Tail Corporation's energy.
• Lowe's: Offers a range of products and services related to home energy and construction.
• Ace Hardware: Provides essential hardware and tools for home improvement.

5. Financial Institutions

• Wells Fargo: Offers banking and financial services to Otter Tail Corporation.
• PNC Bank: Provides financing for capital projects.
• United Bank: Provides investment and wealth management services.

6. Academic and Research Institutions

• University of Minnesota: Partners on research in renewable energy and energy efficiency.
• North Dakota State University: Collaborates on projects related to agriculture and rural electrification.
• University of Wisconsin-Madison: Conducts research on electric grid technologies.

7. Government Agencies

• Federal Energy Regulatory Commission (FERC): Regulates the interstate transmission of electricity.
• Environmental Protection Agency (EPA): Oversees environmental regulations related to energy production.
• Department of Energy: Supports research and development of sustainable energy technologies.

8. Non-Profit Organizations

• Conservation Corps of Minnesota & Iowa: Provides conservation and environmental restoration services.
• Renewable Energy Foundation: Promotes the adoption of renewable energy sources.
• Great Plains Institute: Advocates for sustainable energy policies.

Key Cost Structure of Otter Tail Corporation

Cost of Goods Sold (COGS)

• Primary components:
  • Fuel
  • Purchased power
  • Purchased renewable energy
  • Transmission and distribution expenses
  • Operations and maintenance expenses
• Estimated annual cost (2021): $1.2 billion

Operating Expenses

• Primary components:
  • Salaries and wages
  • Employee benefits
  • Depreciation and amortization
  • Administrative and general expenses
  • Marketing and promotional expenses
• Estimated annual cost (2021): $560 million

Interest Expense

• Interest on debt: Interest expense on long-term debt and other borrowings
• Estimated annual cost (2021): $210 million

Other Expenses

• Primary components:
  • Property taxes
  • Regulatory fees
  • Insurance premiums
• Estimated annual cost (2021): $100 million

Key Cost Trends

• Rising fuel costs: Fluctuations in natural gas, coal, and renewable energy prices significantly impact COGS.
• Increasing environmental regulations: Costs associated with compliance and renewable energy investments are expected to continue rising.
• Labor market dynamics: Employee wages and benefits are rising due to a shortage of skilled workers.
• Upgrading and modernizing infrastructure: Capital expenditures on transmission and distribution system upgrades are expected to remain high.

Cost-Saving Initiatives

• Operational efficiency: Implementing automation and technology to improve efficiency and reduce operating costs.
• Renewable energy investments: Investing in wind and solar power to reduce reliance on fossil fuels and stabilize COGS.
• Debt refinancing: Refinancing debt at lower interest rates to minimize interest expenses.
• Strategic partnerships: Exploring cost-sharing opportunities and joint ventures to spread capital costs.

Estimated Annual Cost Summary (2021)

• Cost of Goods Sold: $1.2 billion
• Operating Expenses: $560 million
• Interest Expense: $210 million
• Other Expenses: $100 million

Total Estimated Annual Cost: $2.07 billion

Otter Tail Corporation: Sales Channels

Otter Tail Corporation utilizes multiple sales channels to distribute its products and services to its customers, with each channel targeting specific customer segments and market dynamics. The primary sales channels employed by the company include:

1. Distribution & Wholesale (85% of total sales): This channel primarily involves the sale of Otter Tail's products to distributors and wholesalers, who then resell them to retail stores, contractors, and other businesses. This channel is particularly important for the company's electrical products, which are widely used in construction and industrial settings.

2. Retail (10% of total sales): Otter Tail operates a network of retail stores under the "Ace Hardware" brand, which offer a wide range of home improvement products and services. These stores primarily serve individual consumers and small businesses in the company's service area.

3. Direct Sales (5% of total sales): The company also engages in direct sales through its own sales force, primarily targeting commercial and industrial customers with specialized needs. This channel allows Otter Tail to provide customized solutions and build strong relationships with key customers.

4. Online Sales: Otter Tail has an online presence through its website and e-commerce platforms, which allow customers to purchase products and services remotely. This channel is growing in importance as more customers prefer the convenience of online shopping.

Estimated Annual Sales (2023)

Based on the available information, the estimated annual sales for Otter Tail Corporation in 2023 are approximately $1.5 billion. This figure represents a consolidated estimate across all of the company's operating segments and sales channels.

Note: The sales channel percentages and estimated annual sales are subject to change based on market conditions and the company's strategic initiatives.

Customer Segments of Otter Tail Corporation

1. Residential Electric Customers

• Estimated Annual Sales: $450 million
• Description: Otter Tail Corporation provides electricity to over 120,000 residential customers in Minnesota, North Dakota, and South Dakota. These customers use electricity for a variety of purposes, including heating, cooling, lighting, and cooking.

2. Commercial Electric Customers

• Estimated Annual Sales: $250 million
• Description: Otter Tail Corporation provides electricity to over 20,000 commercial customers in its service area. These customers include businesses of all sizes, from small businesses to large corporations.

3. Industrial Electric Customers

• Estimated Annual Sales: $200 million
• Description: Otter Tail Corporation provides electricity to over 1,000 industrial customers in its service area. These customers use electricity to power their manufacturing operations, processing plants, and other industrial facilities.

4. Wholesale Electric Customers

• Estimated Annual Sales: $100 million
• Description: Otter Tail Corporation sells electricity to other electric utilities in its service area. These utilities then resell the electricity to their own customers.

5. Natural Gas Customers

• Estimated Annual Sales: $150 million
• Description: Otter Tail Corporation provides natural gas to over 50,000 customers in Minnesota and North Dakota. These customers use natural gas for heating, cooking, and water heating.

6. Other

• Estimated Annual Sales: $50 million
• Description: Otter Tail Corporation also provides a variety of other products and services, including renewable energy, energy efficiency programs, and telecommunications services.

Otter Tail Corporation Value Proposition

Headline: Unlocking the Power of Local Energy and Essential Services

Target Audience:

• Residential and commercial customers
• Governments and municipalities
• Businesses and industries
• Investors and stakeholders

Value Proposition Elements:

1. Reliable and Affordable Energy

• Provides a secure and stable supply of electricity, natural gas, and renewable energy to over 1 million customers in Minnesota, North Dakota, and South Dakota.
• Invests in infrastructure and technology to maintain high reliability standards and reduce outages.
• Offers competitive pricing options and energy efficiency programs to help customers manage their energy costs.

2. Local and Sustainable Solutions

• Supports local communities by investing in renewable energy projects, such as wind farms and solar installations.
• Partners with local businesses and organizations to promote sustainability and economic development.
• Prioritizes environmental stewardship and carbon reduction initiatives.

3. Essential Services for Businesses and Industries

• Provides telecommunications services, including voice, data, and fiber optics, to businesses and industrial customers.
• Offers a range of digital and cloud solutions to enhance productivity and efficiency.
• Ensures reliable and secure connectivity for critical operations and remote work.

4. Customer-Focused Service

• Maintains a strong local presence with offices and customer service centers in the communities it serves.
• Provides 24/7 customer support and emergency response services.
• Focuses on building long-term relationships and meeting the specific needs of its customers.

5. Financial Strength and Stability

• Consistently generates strong financial performance and pays regular dividends to shareholders.
• Maintains a conservative balance sheet with low debt levels.
• Committed to long-term growth and investment in its core businesses.

6. Corporate Responsibility and Citizenship

• Embraces environmental, social, and governance (ESG) principles.
• Supports charitable organizations and community initiatives.
• Encourages employee volunteerism and diversity and inclusion programs.

Overall Value:

Otter Tail Corporation offers a comprehensive value proposition by providing reliable and affordable energy, local and sustainable solutions, essential services for businesses, customer-focused service, financial strength and stability, and a commitment to corporate responsibility. By leveraging its local presence, community partnerships, and innovative technologies, the company empowers customers, supports communities, and drives economic growth in the regions it serves.

Credit Risk

Otter Tail Corporation (OTTR) has a high credit risk, as indicated by its Moody's Baa3 credit rating. This rating reflects the company's relatively small size, limited diversification, and exposure to the highly competitive electric utility industry. Additionally, OTTR has a significant amount of debt, which could make it vulnerable to interest rate increases or a downturn in the economy.

Operational Risk

OTTR's operational risk is moderate. The company has a long history of safe and reliable operations, and it has invested heavily in its infrastructure. However, OTTR is exposed to a number of operational risks, including:

• Weather: OTTR's operations are subject to weather events, such as storms and floods, which could damage its infrastructure and disrupt its service.
• Cybersecurity: OTTR's operations are increasingly reliant on technology, which exposes the company to cybersecurity risks.
• Regulatory: OTTR is subject to a variety of federal and state regulations, which could change and impact the company's operations.

Financial Risk

OTTR's financial risk is moderate. The company has a strong balance sheet, with a high level of liquidity. However, OTTR has a significant amount of debt, which could make it vulnerable to interest rate increases or a downturn in the economy. Additionally, OTTR's earnings are somewhat volatile, which could impact the company's ability to meet its financial obligations.

Investment Risk

OTTR's investment risk is moderate. The company's stock price is relatively volatile, and it has a low dividend yield. Additionally, OTTR's earnings are somewhat volatile, which could impact the company's stock price.

Overall Risk

OTTR's overall risk is moderate. The company has a high credit risk, moderate operational risk, and moderate financial risk. OTTR's investment risk is also moderate. Investors should be aware of these risks before investing in OTTR.