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MDU Resources plans reorganization, unveils $2.3B CapEx plan through 2022

MDU Resources Group Inc. is exploring a potential reorganization to a holding company structure in a bid to make its divisions, Montana-Dakota Utilities Co. and Great Plains Natural Gas Co., into subsidiaries of the holding company.

"We will explore reorganizing the structure of our company for the purpose of simplifying it. If we proceed, all our operating companies would be subsidiaries of the MDU Resources Group holding company," President and CEO David Goodin said in the company's Nov. 21 press release. "We expect a reorganization would make it easier to transact business in a number of areas, including regulatory matters, risk management and debt financing."

The company will submit regulatory filings in concerned jurisdictions in 2018. Pending regulatory and other approvals, the reorganization is expected to be effective Jan. 1, 2019.

As part of the move, the company's existing common shares will be converted into the holding company's common stock on 1-for-1 basis and will continue to trade under the ticker symbol "MDU" at the NYSE.

Also on Nov. 21, MDU Resources announced a $2.32 billion capital plan for 2018 through 2022, which "reflects line-of-sight opportunities at all of our businesses, including substantial growth at our regulated operations and higher capital expenditures at our construction businesses," Goodin said.

The five-year CapEx plan calls for investments of $891 million in the natural gas distribution business, $617 million in the electric business, $466 million in the construction materials and services segment and $349 million in the pipeline and midstream business.

The company expects its electric and natural gas utility to grow its rate base by about 5% annually over the next five years on a compound basis.

The capital investment program at the electric segment includes an approximate 160-mile, 345-kV transmission line from Ellendale, N.D., to Big Stone City, S.D., which is currently under construction and is expected to be completed in 2019. Also included in the plan is the proposed purchase of power from the Thunder Spirit Wind Farm expansion, which will boost the combined production at the wind farm to about 150 MW and increase the company's renewable generation capacity to 27% from about 22%.

At the pipeline and midstream business, the plan includes the 38-mile Valley Expansion pipeline project that will deliver natural gas supply to eastern North Dakota and far western Minnesota; and includes an expansion of Line Section 27 in the Bakken producing area in northwestern North Dakota. The pipeline and midstream business is "focused on growth and improving existing operations through organic projects and acquisitions in all areas in which it operates," the company said.

The CapEx forecast for the company's construction materials and services businesses is focused primarily on normal equipment and plant replacements and upgrades.

MDU Resources expects to fund the program primarily through operating cash flows and modest issuances of debt securities. The company will determine acquisition financing based on size and timing of opportunities.

"We are focused on the potential for merger and acquisition opportunities in all of our businesses," Goodin said. "We expect, with a lower overall business-risk profile, to grow and generate solid, long-term value for MDU Resources' shareholders."