Business Description

Otter Tail Corporation (OTC) is a holding company which has strategically invested in a portfolio of diversified operations including an electric utility and manufacturing and plastic pipe businesses. Our corporate offices are located in Fergus Falls, Minnesota and Fargo, North Dakota. We classify our five operating companies into three reportable segments consistent with our business strategy and management structure. The following table depicts our three segments and the subsidiary entities included within each segment: ELECTRIC SEGMENT MANUFACTURING SEGMENT PLASTICS SEGMENT Otter Tail Power Company (OTP) BTD Manufacturing, Inc. (BTD) Northern Pipe Products, Inc. (Northern Pipe) T.O. Plastics, Inc. (T.O. Plastics) Vinyltech Corporation (Vinyltech) Electric includes the generation, purchase, transmission, distribution and sale of electric energy in western Minnesota, eastern North Dakota and northeastern South Dakota. Otter Tail Power (OTP), our primary business, serves approximately 134,000 customers in more than 400 communities across a predominantly rural and agricultural service territory. Manufacturing consists of businesses which provide metal fabrication services and manufacture thermoformed plastic products. These businesses have manufacturing facilities in Georgia, Illinois and Minnesota and sell products primarily in the United States. Plastics consists of businesses producing polyvinyl chloride (PVC) pipe primarily used in municipal water infrastructure at plants in North Dakota and Arizona. The PVC pipe is sold primarily in the western half of the United States and Canada. Throughout the remainder of this report, we use the terms "Company," "us," "our," or "we" to refer to OTC and its subsidiaries collectively. We also refer to our Electric, Manufacturing and Plastics segments and our individual subsidiaries as indicated above. INVESTMENT AND GROWTH STRATEGY Our investment and growth strategy is driven by planned investments in our Electric segment and complemented by our strategic diversification. Otter Tail Power, our foundational business dating back to 1907, is a high-performing electric utility with a robust five-year capital investment and growth plan. Our electric operations are complemented by the long-term ownership of our Manufacturing and Plastics segment businesses (collectively, our Manufacturing Platform). Our strategic diversification positions us to provide earnings, cash flow and dividend growth over long-term investment and economic cycles, and to produce shareholder returns above the utility industry average. We drive growth through rate base investments in our Electric segment and organic growth opportunities in our Manufacturing Platform. We are able to efficiently redeploy cash generated by our Manufacturing Platform to finance our Electric segment investments. Our strategy and risk profile are designed to provide a predictable earnings stream, investment grade credit ratings and continuous dividend payments to our shareholders. Our long-term focus remains on executing our strategy to grow our business and achieving operational, commercial and talent excellence to strengthen our position in the markets we serve. Our long-term financial objectives include achieving a compounded annual growth rate in earnings per share in the range of 7 to 9%, with a long-term earnings mix target of approximately 70% from our Electric segment and 30% from our Manufacturing Platform. We also are targeting an annual increase in our dividend to be in the range of 6 to 8%. We expect our earnings growth and cash flow generation to be driven by rate base investments in our Electric segment and from recent investments within our Manufacturing and Plastics segments. Since 2021, our earnings mix has diverged from our long-term target of 70% from our Electric segment and 30% from our Manufacturing Platform and our earnings growth rate has exceeded our long-term targeted growth rate primarily due to market conditions within the PVC pipe industry. These conditions have led to significant revenue, earnings and cash flow growth in our Plastics segment. Currently, we expect these industry conditions to gradually normalize through 2027. As they do, we expect earnings and cash flow generation within our Plastics segment to moderate from current levels. Once these industry conditions have normalized, we expect to achieve our long-term financial objectives as outlined above.…