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MDU Resources expects customer growth, on schedule with transmission project

MDU Resources Group Inc. expects its customer base to continue growing by 1% to 2% each year for the next five years, according to company President and CEO David Goodin.

Speaking on the company's second-quarter 2017 earnings call Aug. 2, Goodin said MDU Resources Group is also predicting a 4% rate base growth over the next five years, compounded annually, based on its plans to invest close to $1.2 billion across its eight-state service territory.

The company's combined utility business reported earnings of $5 million for the quarter, up from $200,000 for the comparable quarter in 2016, Goodin said. "While our natural gas utility group experienced a normal seasonal loss of $2.8 million, this is significantly less than the loss of $7.8 million we saw in the second quarter last year," he said. "This decrease in the seasonal loss was largely due to colder weather across our service territory, which resulted in 19% higher natural gas retail volumes across all service territories and higher natural gas retail sales margins in those jurisdictions that we do not have weather normalization or decoupling mechanisms in place."

Additionally, the company's regulatory activity continues to contribute to earnings growth, Goodin said, adding that its electric utility, Montana-Dakota Utilities Co., saw earnings of $7.8 million compared to $8 million in 2016.

"The electric business saw an approximate 2% decline in sales volumes and recorded a true-up of interim rates stemming from the finalization of a regulatory case here in North Dakota," he noted. "These impacts were partially offset by approved rate recovery. The interim rate true-up affected second quarter only, and the approved rate recovery will generate incremental revenue on a go-forward basis."

Montana-Dakota Utilities is on track to finish construction in 2019 of an 160-mile, 345 kV transmission line, along with Otter Tail Corp. subsidiary Otter Tail Power Co. The line runs from Big Stone City, S.D., to Ellendale, N.D., according to Goodin. It is the Midcontinent ISO's multivalue project number 6.

In June, Montana-Dakota Utilities filed its 2017 Integrated Resource Plan in North Dakota, Goodin said, noting that the plan includes the purchase of the Thunder Spirit Wind Farm expansion project and the development and design of a large, combined-cycle, natural gas-fired facility. In December 2016, the company signed a 25-year agreement to purchase the power from an expansion of the existing Thunder Spirit wind farm, and the agreement included the option to buy the project when construction was complete.

At end of the second quarter, the company filed an advance determination of prudence to purchase the expansion with the North Dakota Public Service Commission, according to Goodin. "We are excited about moving forward with the purchase option as this expansion will increase the company's renewable portfolio" from 22% to 27%, he said.

MDU Resources Group on Aug. 1 reported second-quarter 2017 earnings from continuing operations of $43.8 million, or 22 cents per share, down from $46.1 million, or 24 cents per share, in the same quarter in 2016. The results fall below the S&P Capital IQ normalized EPS consensus estimate of 25 cents.

MDU's operating revenues for the second quarter of 2017 climbed to $74.6 million from $73.8 million a year ago, while operating income ticked up to $13.6 million from $13.4 million in the same quarter in 2016.

MDU Resources continues to target 2017 EPS in the range of $1.10 to $1.25.