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MDU to seek prudence approval of new ND gas plant in Q3

MDU Resources Group Inc. plans to ask North Dakota regulators during the third quarter to approve a natural gas-fired peaker that would replace the output of older coal-fired plants the utility has decided to retire.

MDU announced the retirement plans and the gas peaker addition in February. "While the decision to retire these plants was difficult, the company's analysis shows these plants will no longer be cost-competitive for our customers," President and CEO David Goodin said July 31 in discussing MDU's second-quarter earnings results.

The company will file a request with the North Dakota Public Service Commission for an advanced determination of prudence for an 88-MW simple-cycle turbine at the Heskett Station site in Morton County, N.D., where the 101-MW Morton CT Plant (Heskett) unit began operating in 2014. It is expected to be in service in 2023. About 144 MW of coal-fired capacity is to be retired by the end of 2021.

The company booked second-quarter net income of $61.8 million, or 31 cents per share, up from $43.8 million, or 22 cents per share, in the comparable period in 2018.

Based on the performance of its midstream and construction businesses, resulting in an overall increase in profitability year over year, MDU Resources raised its 2019 EPS guidance to $1.45 to $1.60.

In response to an analyst's question, Goodin described MDU as "an infrastructure company. We talk about that being beyond pipes and wires, but also the transportation sector and certainly in the services area as well."

"The increase in earnings was driven by record transportation volumes in the quarter primarily related to the organic growth projects that were placed into service in the second half of 2018," CFO and Treasurer Jason Vollmer said.

The construction business booked $22.8 million in quarterly earnings, compared to $14.1 million in the same period of 2018.

"This business also announced a record second-quarter backlog of $1.15 billion and expects to complete a significant amount of that work over the next 12 months," Goodin said.

MDU Resources reported earnings of $7.5 million in the electricity utility segment, down from $9.1 million in the comparable quarter of 2018. A $2 million write-down of a nonutility investment during the second quarter also impacted the electricity segment. Higher production tax credits and gross margin from rate recovery partially offset the decrease in electricity income.

The midstream and construction business had a profitable quarter, with suitable weather playing a role in clearing out the backlog. The pipeline business recorded $7.1 million in earnings, compared to $5.7 million in the same period of 2018. Organic growth and acquisitions played a part in the increased profitability, the company said.