Otter Tail Corporation (NYSE:OTTR) reported 3Q13 earnings that included strong contributions from the company’s infrastructure business, as the company reported progress on a major transmission initiative in North and South Dakota.
“Strong overall 2013 third quarter results reflect our belief that we have the company firmly back on track, producing more predictable earnings with continuing improved performance,” Jim McIntyre, Otter Tail president and CEO, said during the company’s 3Q13 earnings call Nov. 5.
Consolidated revenues from continuing operations were $229.8m compared to $215.3m for 3Q12, with the increased revenues slightly offset by dips in sales and net income from the company’s electric segment. Net income from continuing operations totaled $14.8m, compared to $4.8m for 3Q12, though the company noted that 3Q12 net income included a $7.9m after-tax charge related to the early retirement of a senior unsecured note that had been due in November 2017.
Infrastructure aids corporate growth
“We’re especially pleased with results for our manufacturing and infrastructure businesses under Varistar, which had marked improvement over 3Q12 net income,” McIntyre said, noting that “these businesses … are benefiting from a more disciplined, hands-on approach to their operations.”
McIntrye said two projects related to the Big Stone coal-fired generating plant near Milbank, S.D., made progress during 3Q13 and into October. Those projects include a transmission project and an air quality project at the generating station.
Otter Tail Power and project partner Montana-Dakota Utilities (MDU), a subsidiary of MDU Resources Group (NYSE:MDU), on Aug. 23 filed a facilities permit application with the South Dakota Public Utilities Commission (PUC) for the multi-value transmission project (MVP) known as the Big Stone South to Ellendale project.
On Oct. 18, the project team filed a combined application with the North Dakota Public Service Commission (PSC), seeking a corridor certificate and route permit in that state. The company has held public input meetings with the South Dakota PUC, and has initiated landowner negotiations resulting in the signing of approximately one-third of the required options, McIntyre said.
The new 145-mile, 345-kV project, which is included as an MVP in the Midcontinent ISO’s (MISO) 2013 MISO Transmission Expansion Plan (MTEP), will originate at the Ellendale substation in North Dakota and terminate at the Big Stone South substation. When completed, the project will significantly increase the ability to move power out of North Dakota and to load centers to the east.
Otter Tail and MDU are equal partners in the transmission project, with each responsible for half of the projected $340m price tag. Construction is scheduled to start in 2016 and be completed in 2019, according to McIntyre.
In addition, the air quality control system project (ACQS) at the Big Stone power plant is on schedule and within budget.
“The AQCS project will result in an 80% to 90% reduction in sulfur dioxide, nitrogen oxide, and mercury emissions when completed in 2016,” McIntyre said, noting that “Particulate emissions are already within regional haze guidelines.”
MDU and NorthWestern Energy (NYSE:NWE) are partners in the Big Stone power plant and will share in the total cost of the ACQS project, which is estimated at $405m. Otter Tail Power is responsible for approximately $218m, according to McIntyre.
The company also reported gains in its construction segment, manufacturing segment, and plastics segment.
Ratings upgraded, earnings guidance revised
“As a result of our overall improved outlook, and a further indication of reducing risk across our mix of businesses, all three rating agencies have recently upgraded their ratings or outlooks for both Otter Tail Corporation and Otter Tail Power Company,” McIntyre said, referring to Moody’s Investors Service, Fitch Ratings and Standard & Poor’s Rating Services.
Based on strong third quarter and year-to-date results from its manufacturing and infrastructure businesses, as well as the continued execution of the utility’s rate base growth strategy, the company narrowed its earnings per share guidance for 2013 from the prior range of $1.30 to $1.50 per share to a range of $1.38 to $1.50 per share.