We classify our five operating companies into three reportable segments consistent with our business strategy and management.management structure. The following table depicts our three segments and the subsidiary entities included within each segment:

Throughout the remainder of this report, we use the terms "Company", "us", "our", or "we" to refer to Otter Tail CorporationOTC and its subsidiaries collectively. We will also refer to our Electric, Manufacturing and Plastics segments and our individual subsidiaries as indicated above.

We maintain a moderate risk profile by investing in rate base growth opportunities in our Electric segment and organic growth opportunities in our Manufacturing and Plastics segments.segments (collectively, our manufacturing platform). This strategy and risk profile are designed to provide a more predictable and growing earnings stream, maintainsupport quality credit ratings, and provide for dividend payments.

Our long-term focus remains on executing our credit qualitystrategy to grow our business and preserveachieving operational, commercial and talent excellence to strengthen our ability to fund our dividend.position in the markets we serve. Our goal is to deliverlong-term financial objectives include achieving a compounded annual growth rate in earnings per share between fivein the range of 5 - 7%, with a long-term earnings mix of approximately 65% from our Electric segment and seven percent over35% from our manufacturing platform. We also are targeting an annual increase in our dividend to be in the next several years, using 2020 diluted earnings per share as the base for measurement.range of 5 - 7%. We expect our earnings growth and cash flow generation to come frombe driven by rate base investments in our Electric segment and from planned earnings growth arising from existing capacities and planned investments within our Manufacturing and Plastics segments.

Our actual mix of earnings in 2020, 2019, 2018and the average for the five-year periodyears ended December 31, 2020 is2023, 2022 and 2021 was as follows:

Our employees are a critical resource and an integral part of our success. We strive to provide an environment of opportunity and accountability where people are valued and empowered to do their best work. We are focused on the health and safety of our employees and creating a culture of inclusion, excellence and learning. Our human capital management efforts include monitoringlearning, and our executive annual incentive plan reflects those commitments. We monitor various metrics and objectives associated with i) employee safety, ii) workforce stability, iii) management and workforce demographics, including gender, racial and ethnic diversity, iv) leadership development and succession planning and v) productivity. We have established the following programs in furtherance of these efforts:

As of December 31, 2020,2023, we employed 2,0742,655 full-time employees:employees as shown in the table below:

At December 31, 2020, 3722023, 378 employees of OTP arewere represented by local unions of the International Brotherhood of Electrical Workers under two separate collective bargaining agreements expiring on August 31, 20232026 and October 31, 2023.2026. OTP has not experienced any strike, work stoppage or strike vote, and considers its present relations with employees to be good.

OTP, headquartered in Fergus Falls, Minnesota, is a vertically integrated, regulated utility with generation, transmission and distribution facilities to serve its more than 133,000 residential, industrialcommercial and commercialindustrial customers in a service area encompassing approximately 70,000 square miles of western Minnesota, eastern North Dakota and northeastern South Dakota.

Our service territory is predominantly rural and agricultural and includes over 400 communities, most of which have populations of less than 10,000. While our customer base includes relatively few large customers, sales to commercial and industrial customers are significant, with one industrial customertwo customers accounting for 11%21% of segment operating revenues for the year ended December 31, 2020.2023 and 16% for the year ended December 31, 2022.

In addition to retail revenue, our Electric segment also earnsgenerates operating revenues from the transmission of electricity for others over the transmission assets we wholly or jointly own with other transmission service providers, and from the sale of electricity we generate and sell into the wholesale electricity market.

Retail electric sales are made to customers in assigned service territories. As a result, most retail customers do not have the ability to choose their electric supplier. Competition is present in some areas from municipally owned systems, rural electric cooperatives and, in certain respects, from on-site generators and co-generators. Electricity also competes with other forms of energy.

Wholesale electricity markets are competitive under the FERC'sFederal Energy Regulatory Commission (FERC) open access transmission tariffs, which require utilities to provide nondiscriminatory access to all wholesale users. In addition, the FERC has established a competitive process for the construction and operation of certain new electric transmission facilities whereby electricunder federal regulation. Certain states have laws which provide the incumbent transmission providers, includingowner the Midcontinent Independent System Operator, Inc. (MISO), of which OTP is a member, are required to remove from their tariffs a federal right of first refusal to construct and own new transmission facilities selected in a regional transmission plan for purposes of cost allocation.

OTP has franchises to operate as an electric utility in substantially all of the incorporated municipalities it serves. Franchise rights generally require periodic renewal. No franchises are required to serve unincorporated communities in any of the three states that OTP serves.

OTP primarily relies on company-owned generation, supplemented by power purchase power agreements, to supply the energy to meet our customer needs. Wholesale market purchases and sales of electricity are used as necessary to balance supply and demand. Our mix of owned generation and wholesale market energy purchases to meet customer demand as seasonal or other variations occur.are impacted by wholesale energy prices and the relative cost of each energy source.

Under MISOMidcontinent Independent System Operator (MISO) requirements, OTP is required to haveprovide sufficient capacity through wholly or jointly-ownedjointly owned generating capacity or purchased power purchase agreements to meet its monthly weather-normalized forecast demand, plus a reserve obligation. OTP met its obligation forMISO operates under a seasonal resource adequacy construct in which generation resources are accredited and planning reserve margin requirements are implemented on a seasonal basis. Current planning reserve margin requirements range between 7.4% and 25.5%, depending on the 2019-2020 planning year and anticipates meeting this obligation prospectively.season.

As part of our investment plan to meet our future energy needs, we have the following projects at various stages of planning and construction or have been recently completed:undertaken, completed, or acquired:

We have based these goals on our December 2023 supplemental Integrated Resource Plan (IRP) filing in Minnesota. While modified from our previously published goals, they reflect current market conditions, including the impact of higher natural gas prices, and higher than originally forecasted dispatch levels of our co-owned, coal-fired power plants.

We have undertaken numerous initiatives to reduce our carbon footprint and mitigate greenhouse gas (GHG) emissions in the endprocess of 2023.generating electricity for our customers. Our recent initiatives include retiring the 140-MW coal-fired Hoot Lake Plant, adding the 150-MW Merricourt Wind Energy Center and the 49-MW Hoot Lake Solar facility to our resource mix and sponsoring energy conservation programs. We anticipate our Minnesota retail sales will be 80% carbon free by 2030, in compliance with Minnesota clean energy requirements.

Coal is the principal fuel burned at our jointly owned Big Stone and Coyote and Hoot LakeStation generating plants. Coyote Station, a mine-mouth facility, burns North Dakota lignite coal. Hoot Lake Plant and Big Stone Plant burnburns western subbituminous coal transported by rail. We source coal for our coal-fired power plants through requirements contracts which do not include minimum purchase requirements but do require all coal necessary for the operation of the respective plant to be purchased from the counterparty. Our coal supply contracts for our Hoot Lake Plant, Big Stone Plant and Coyote Station have expiration dates in 2023, 20222024 and 2040, respectively.

The supply agreement between the Coyote Station owners, including OTP, and the coal supplier includes provisions requiring the Coyote Station owners to purchase the membership interests and pay off or assume loan and lease obligations of the coal supplier, as well as complete mine closing and post-mining reclamation, in the event of certain early termination events and at the expiration of the coal supply agreement in 2040. See below and Note 1 to our consolidated financial statements included in this report on Form 10-K for additional information.

Coal is transported to our non-mine-mouth facilities, Big Stone Plant and Hoot Lake Plant by rail and is provided under a common carrier rate which includes a mileage-based fuel surcharge.

Our transmission and distribution assets deliver energy from energy generation sources to our customers. In addition, we earn revenue from the transmission of electricity over our wholly or jointly owned transmission assets for others under approved rate tariffs. As of December 31, 2020,2023, we were the wholesole or partialjoint owner of over 8,900approximately 14,000 miles of transmission and distribution lines.

MISO is an independent, non-profit organization that operates the transmission facilities owned by other entities, including OTP, within its regional jurisdiction and administers energy and generation capacity markets. MISO has operational control of our transmission facilities above 100 kV.kilovolts (kV). MISO seeks to optimize the efficiency of the interconnected system, provide solutions to regional planning needs and minimize risk to reliability through its security coordination, long-term regional planning, market monitoring, scheduling and tariff administration functions.

Electricity demand is affected by seasonal weather differences, with peak demand occurring in the summer and winter months. As a result, our Electric segment operating results mayregularly fluctuate on a seasonal basis. In addition, fluctuations in electricity demand within the same season but

between years can impact our operating results. We monitor the level of heating and cooling degree days in a period to assess the impact of weather-related effects on our operating results between periods.

OTP is subject to regulation of rates and other matters in each of the three states in which it operates and by the federal government for, certainamong other matters, the interstate operations.transmission of electricity. OTP operates under approved retail electric tariff rates in all three states it serves. Tariff rates are designed to recover plant investments, a return on those investments, and operating costs. In addition to determining rate tariffs, state regulatory commissions also authorize ROE,return on equity (ROE), capital structure, and depreciation rates of our plant investments. Decisions by our regulators can significantly impact our operating results, financial position, and cash flows.

Under Minnesota law, utilities are required to submit for approval by the MPUCMinnesota Public Utilities Commission (MPUC) a 15-year advance IRP.Integrated Resource Plan (IRP). An IRP is a set of resource options a utility could use to meet the service needs of its customers over the forecast period, including an explanation of the utility’s supply and demand circumstances, and the extent to which each resource option would be used to meet those service needs. The MPUC’s findings of fact and conclusions regarding IRPs are considered to be prima facie evidence, subject to rebuttal, in future rate reviews and other proceedings. Typically, IRPs are submitted every two years.

On April 26, 2017In 2021, the MPUC approved OTP’s 2017-2031North Dakota Legislative Assembly enacted a provision requiring investor-owned electric utilities to submit an IRP filing with modificationsto the North Dakota Public Service Commission (NDPSC) and setting requirementsgranted the NDPSC the authority to adopt rules and regulations for the next IRP.preparation and submission of IRPs. The approvedNDPSC's rules and regulations were finalized and became effective on January 1, 2023. Under the finalized regulation, utilities are required to submit a 15-year advance IRP with modifications included the following items:every three years.

Minnesota law requires an annual filing of a capital structure petition with the MPUC. In this filing the MPUC reviews and approves OTP's capital structure. Once approved, OTP may issue securities without further petition or approval, provided the issuance is consistent with the purposes and amounts set forth in the approved petition. The MPUC approved OTP’s most recentcurrent capital structure petitionapproved by the MPUC on July 15, 2020, allowingAugust 29, 2023, allows for an equity-to-total-capitalization ratio between 47.5%48.3% and 58.1%59.1%, with total capitalization not to exceed $1.70 billion until$1.958 billion.

In February 2023, Minnesota enacted the Clean Energy Bill, which requires electric utilities to generate or procure sufficient electricity from carbon-free resources, to provide retail customers in Minnesota with at least the following percentages of carbon-free electric energy: 80% by 2030, 90% by 2035, and 100% by 2040. Carbon-free resources include wind, solar, hydropower, and nuclear generation. To provide flexibility, the law allows electric utilities to use RECs to offset carbon emissions and for the MPUC issuesto consider whether a new capital structure order for 2021.regulated utility's requirement to meet established standards should be delayed due to affordability or reliability impacts. We expect to meet these requirements based on our existing and projected renewable generation fleet and the purchase of RECs.

OTP is subject to stringent federal and state environmental standards and regulations regarding, among other things, air, water and solid waste pollution. OTP's facilities have been designed, constructed and, as necessary, updated to operate in compliance with applicable environmental regulations. However, new or amended laws and regulations or changes in interpretations of current laws and regulations may require additional pollution control equipment or emission reduction measures, and there can be no assurance that our facilities will remain economic to operate. Prudent expenditures incurred to comply with environmental regulations are eligible to be recovered in rates grantedauthorized by regulators in jurisdictions in which we operate; however, there can be no assurance that future costs will be grantedauthorized for recovery. Alternatively, additional pollution control equipment or other emission reduction measures may prove to be uneconomic, withpotentially leading to the potentialexiting of a facility earlier than originally planned. As it relates to leadour jointly owned facilities, we may determine it is necessary to antransfer, sell or otherwise divest of our ownership, or the ownership group may determine the early closure or repurposing of a facility.facility is necessary.

For the five-year period ended December 31, 2020,2023, OTP invested approximately $13.5$6.6 million including $0.4 million in 2020, in environmental control facilities. Our 2021 and 2022 construction budgets include approximatelyfacilities, including $1.4 million and $1.2in 2023. Our construction budget for the next five years includes approximately $7.5 million for such expenditures.of capital investments in environmental control equipment. The timing and amount of our expenditures may change as the regulatory environment changes.

The Environmental Protection Agency (EPA) adopted the Regional Haze Rule (RHR) could have the most significant impact on our operating results, financial condition and cash flows.

Coyote Station OTP's co-owned coal-fired power plant in North Dakota is subject to assessment in the second implementation period under the North Dakota state implementation plan.SIP for the RHR. The North Dakota Department of Environmental Quality (NDDEQ) submitted its proposed RHR SIP to the EPA for approval in August 2022. In its plan, the NDDEQ concluded it is not reasonable to require additional emission controls during this planning period. The EPA submitted comments during the development of the SIP requesting NDDEQ to reassess its determination for Coyote Station. See Note 13 to our consolidated financial statements included in the report on Form 10-K for additional information.

The implementation of climate change programs, such as the Paris Agreement, the Minnesota Clean Energy Bill, and other federal or state regulations targeting GHG emissions may have a significant impact on our utility business. Specific regulatory measures to address climate change continue to evolve.

The proposal also includes emission standards for existing large (greater than 300 mega-watt), frequently used (those that operate at a capacity factor over 50%) natural gas combustion turbines, including which emission standard would reflect the use of Appeals forCCS by 2035 or co-firing with low-GHG hydrogen at incremental portions in 2032 (30% of volume) and 2038 (96% of volume). Under the District of Columbia Circuit and remandedproposed rule, each state must submit a plan to the EPA for further consideration. Future federal regulatory measures, including in response to implement standards that are at least as stringent as the vacatedEPA’s emission guidelines, unless states demonstrate that due to remaining useful life and other factors, a facility cannot reasonably achieve the standards. The EPA is proposing to require states to submit their plans within 24 months of the effective date of the final regulation. This proposed rule ACE Rule, will be impacted byhas the Biden administration's prioritiespotential to impact the emissions controls needed at OTP’s coal-fired power plants, which could have an impact on our operating results, financial condition and objectives. While the eventual outcome of GHG regulation is unknown, we are taking steps to reduce our carbon footprint and mitigate CO2 emission levels in the process of generating electricity for our customers. Our initiatives include increasing the efficiency of our plants, adding renewable energy to our resource mix, and sponsoring energy conservation programs.liquidity.

While the future financial impact of any current, proposed, or pending litigation or regulation of GHG or other emissions is unknown at this time, any capital or operating costs incurred for additional pollution control equipment or emission reduction measures could materially adversely impact our future operating results, financial position, and cash flowsliquidity unless such costs could be recovered through related rates and/or future market prices for energy.

Manufacturing consists of businesses engaged in the following activities: contract machining, metal parts stamping, fabrication and painting, and production of plastic thermoformed horticultural containers, life science and industrial packaging, and material handling components and extruded raw material stock. The following is a brief description of each of these businesses:

Our metal fabrication business primarily serves Midwestern and Southeastern U.S. manufacturers in the recreational vehicle, agricultural, oil and gas, lawn and garden, agricultural, construction, and industrial and energy equipment end markets. Our plastic products business serves primarily U.S. customers in the

horticulture, medical and life sciences, industrial, recreational and electronics industries. The principal method of production distribution is by direct shipment to our customers through direct customer pick-up or common carrier ground transportation.

No single customer or product of our manufacturingManufacturing segment businesses accounted for 10% or more of our consolidated operating revenuerevenues in 2020.2023. However, the top threetwo customers combined to account for 46%30% of our 2020 Manufacturing segment operating revenue.revenues for the year ended December 31, 2023 and 40% for the year ended December 31, 2022.

The various marketsWe compete in which we compete are characterized by intensea highly fragmented market with competition from both foreigndomestic and domestic manufacturers. Theseinternational entities. Our competitors vary in size, ranging from small companies focused on certain end markets or geographical area, to large companies with broad manufacturing capabilities and geographical reach. Competition can be geographically regionalized as customers procure products locally to manage cost and minimize logistical complexities. Certain competitors may have many established manufacturers with broader product lines, more manufacturing capacity, and greater distribution capabilities greater capital resources, excess capacity, labor advantages and larger marketing, research and development staffs and facilities than our own.we do.

We believe the principal competitive factors in our Manufacturing segment are product performance, quality, price, technical innovation, cost effectiveness, customer service and breadth of product line. We intend to continue to compete based on high-performancehigh quality products, innovative production technologies, cost-effective manufacturing techniques, close customer relations and support, and increasing product offerings. 

We use raw materials in the products we manufacture, including, among others, steel, aluminum, and polystyrene and other plastics resins. Managing price volatility and ensuring raw material availability are important aspects of our business. We attempt to pass increases in the costs of these raw materials onthrough to our customers. Increases in the costs of raw materials that cannot be passed on to customers could have a negative effect on profit margins. Additionally, a certain amount of residual material (scrap) is a by-product of the manufacturing and production processes. Declines in commodity prices for these scrap materials due to weakened demand or excess supply can negatively impact the profitability of our Manufacturing segment as it reduces their ability to mitigate the costcosts associated with excess material.

Our manufacturing businesses are subject to environmental, health and safety laws and regulations, including those governing discharges to air and water, the management and disposal of hazardous substances, the cleanup of contaminated sites and health and safety matters.

Plastics consists of businesses producing PVC pipe at plants in North Dakota and Arizona. The following is a brief description of these businesses:

PVC pipe is manufactured through aan extrusion process, known as extrusion. During this process,during which PVC compound (a dry powder-like substance) is introduced into an extrusion machine, where it is heated to a molten state and then forced through a sizing apparatus to produce the pipe. The newly extruded pipe is pulled through a series of water-cooling tanks, marked to identify the type of pipe and cut to finished lengths. Together our Plastic segment businesses have the current capacity to produce approximately 300 million pounds of PVC pipe annually. 

PVC pipe products are marketed through a combination of independent sales representatives, company salespersons and customer service representatives. Customers for our PVC pipe products consist primarily of wholesalers and distributors, and the principal method for distribution of our products is by common carrier ground transportation. No single customer of the PVC pipe companies accounted for 10% or more of our consolidated operating revenues in 2020.2023. However, two customers, both of which are distributors of PVC pipe, combined to account for 45%36% of our 2020 Plastics segment operating revenue.revenues for the year ended December 31, 2023 and 46% for the year ended December 31, 2022.

The plastic pipe industry is fragmented and competitive due to the number of producers, the small number of raw material suppliers and the fungible nature of the product. Due to shipping costs, competition is usually regional instead of national in scope. The principal factors of competition are price, customer service and product performance. We compete not only against other plastic pipe manufacturers, but also ductile iron, high-density polyethylene, steel and concrete pipe producers. Pricing pressure will continue to affect our operating margins in the future.

We will continue to compete based on our high-quality products, cost-effective production techniques and close customer relations and support.support, including our responsiveness and reliability.

PVC resins are acquired in bulk and shipped to our facilities by rail. There are four vendors from which we can source our PVC resin requirements. Two vendors provided over 99%In 2023 we sourced all of totalour PVC resin from three vendors. Our contractual arrangements to acquire resin generally include estimated annual order quantities with no required minimum purchases, in 2020.and include variable pricing based on market prices for resin. The supply of PVC resin may also be limited primarily due to manufacturing capacity and the limited availability of raw material components. Most U.S. resin production plants are located in the Gulf Coast region. These plants are subject to the risk of damage and production shutdowns because of exposure to hurricanes or other extreme weather events that occur in this part of the United States. The loss of a key vendor, or any interruption or delay in the supply of PVC resin could disrupt the ability of theour Plastics segment businesses to manufacture products, cause customers to cancel orders or result in increased expenses for obtaining PVC resin from alternative sources, if such sources were available. We believe we have good relationships with our key raw material vendors.

Due to the commodity nature of PVC resin and PVC pipe and the dynamic supply and demand factors worldwide, historically the markets for both PVC resin and PVC pipe have been very cyclical with significant fluctuations in prices and gross margins.

Our businesses are subject to various risks and uncertainties. Any of the risks described below or elsewhere in this report on Form 10-K or in our other SEC filings could materially adversely affect our business, operating results, financial condition operating results and cash flows.liquidity. Additional risks and uncertainties we are not presently aware of or that we currently consider immaterial may also affect our business, operating results, financial condition operating results and cash flows.

Our business strategy includes major capital investments at our existingoperating companies. Our capital investment program planned for the next five years includes investments in renewable generation, transmission asset additions and upgrades, and technology and infrastructure projects. These capital projects are planned years in advance of their in-service dates and are subject to various risks including: obtaining necessary permits, licenses and approvals in a timely manner; adverse changes in regulatory treatment or public policy; changes in commodity pricing equipment andor construction costs; technology changes; delivery delays of critical materialsmaterials; obtaining necessary permits and components; delays caused by construction accidents, injuries or public health crises; adverse weather conditions; unforeseen product defects; limited access to capital;licenses; and other adverse conditions. Capital investments in our Electric segment are subject torequire regulatory approval and are at risksubject to the risks of not being granted timely approval or full recoveryallowed to be fully recovered. In addition, our ability to construct and own utility assets may be impacted by regulatory requirements to competitively bid such investments, which could impact the amount and timing of our capital investments. TheA lack of direct ownership, or the inability to complete capital projects on budget and in a timely manner could adversely impact our financial condition and operating results.

Our Electric segment business is seasonal and weather patterns can have a materialhad an impact on our financial performance.performance in the past and may again in the future. Demand for electricity is normally greater in the winter and summer months. Unusually mild summers and winters could have an adverse effect on our financial condition and results of operations. In addition, ourOur Plastics segment businesses arecan be affected by weather’sseasonal weather prohibiting or delaying construction projects at any time of the year in any geography, but specifically times of the year when frozen ground and cold temperatures in many parts of the country can delay construction projects, all of which can result in reduced customer demand and could have an adverse effect on our financial condition, operating results and liquidity.

Longer term shifts in climate patterns may impact on contractors whose work can be delayedour customers' demand for electricity, interrupt our business operations and thereforedamage our facilities; reduce the need for PVC pipe during winteravailability of natural resources, such as water; and cause disruptions in our supply chains.

Climate change may increase the frequency and severity of extreme weather andevents, such as prolonged periods of extreme wet conditions.

In additionthe past, severe weather events in the Gulf Coast region of the U.S. have disrupted the supply of PVC resin, the primary material input of our Plastics segment businesses. As most U.S. PVC resin production plants are located in the Gulf Coast region, an area prone to variations in seasonal weather patterns, more widespread climate change may also create physicalhurricane activity and financial risk to our businesses. Physical risks of climate change, such as more frequent or moreother extreme weather events, changesour access to PVC resin may be impacted by the volume and magnitude of hurricane and storm activity in temperature and precipitation patterns, changes to ground and surface water availability, and other phenomena,this region, which could affect some or allimpact our Plastics segment businesses.

Increased risk of our operations. Severe weather or other natural disasters, relatedsuch as wildfires, could have financial consequences, including limiting our ability to secure sufficient insurance coverage, or lead to increased insurance cost. While we carry liability insurance, given an extreme event, if we were found to be liable for damages, amounts that exceed our coverage limit could negatively impact our financial condition, operating results and liquidity.

These risks may also negatively impact our credit ratings, which may limit our access to capital markets and increase our borrowing costs. In addition, to the extent investors view climate change, fossil fuel combustion and GHG emissions as a financial risk, our stock price or our ability to access capital markets on favorable terms and conditions could be destructiveadversely impacted.

We may experience transition risks in moving towards low carbon generation and result in increased costsmanufacturing. For example, we may face challenges with the adoption of new technologies, meeting changing customer expectations and disruptions in our operations. Extreme weather conditions, suchcommitting to voluntary GHG emissions reduction goals, as uncommonly long periods of highwell as complying with evolving local, state or low ambient temperature, in general require more utility system backup, addingfederal regulatory requirements intended to costs and contributing to increased system stress on our utility infrastructure, which could cause service interruptions.reduce GHG emissions.

While no single customer providesprovided more than 10% of our consolidated operating revenue,revenues, each of our segments have customers which accountaccounted for over 10% of the segment’s operating revenues. In 2020, one customer2023, two customers accounted for 11%21% of Electric segment revenue, threerevenues, two customers combined to account for 46%30% of Manufacturing segment operating revenuerevenues and two customers combined to account for 45%36% of Plastics segment operating revenue.revenues. The loss of any one of these customers or a significant decline in sales to these customers, would have a significant negative impact on the segment's financial positioncondition and operating results, and could have a significant negative impact on the Company’s consolidated financial positioncondition, operating results and operating results.liquidity.

We extend credit to our customers in the ordinary course of business in each of our operating segments. Our customers' ability to pay depends on a variety of factors including macroeconomic conditions, local economic conditions including unemployment rates, and industry conditions in which our commercial and industrial customers operate. Increased customer delinquencies and bad debts could adversely impact our operating results and liquidity.

The operation of our business is dependent on the secure functionfunctioning of our computer hardware and software systems. Furthermore, all our businesses require us to collect and maintain sensitive customer data,systems, as well as confidential employeethat of third-party service providers and shareholder information, which is subject to electronic theft or loss. We alsovendors we use third-party vendors to electronically process certain of our business transactions. Information systems, both ours and those of third parties, are vulnerable to security breaches by computer hackers and cyber terrorists, and the negligent or intentional breach of established controls and procedures, or mismanagement of confidential information by employees. WeCyber-attacks or other security breaches may also be impacted by attacks and data security breachesperpetrated through the use of financial institutions, merchantsartificial intelligence, which could introduce additional complexity to such an attack or third-party processors.breach. While we employ a defense-in-depth strategy and regularly conduct cybersecurity assessments, we cannot be certain our information security systems and protocols and those of our vendors and other third parties are sufficient to withstand a cyber-attack or other security breach.

A major cyber incident could result in significant expenses to investigate and repair security breaches or system damage, and could lead to litigation, fines, other remedial action, heightened regulatory scrutiny and damage to our reputation. For example, we may be subject to liability under various federal, state and international disclosure laws and data protection laws. These laws are subject to change and expansion and may require additional operational changes and costs to comply. 

The misappropriation, corruption or loss of personally identifiable information and other confidential data could lead to significant monetary damages, regulatory enforcement actions and breach notification and mitigation expenses, such as credit monitoring, and result in reputational damage affecting relations with shareholders, customers, regulators and regulators.others. In addition to property and casualty insurance, which may cover restoration of data, certain physical damage or third-party injuries, we have cybersecurity insurance related to a breach event. However, damage and claims arising from such incidents may not be covered or may exceed the amount of any available insurance.

The success of our business is heavily dependsdependent on the leadership of our executive officers and key employees to implementfor implementation of our strategy. In addition, all of our businesses rely on a qualified workforce, including technical employees who possess certain specialized knowledge.knowledge and skills. The inability to attract and maintainretain a skilled and stable workforce at necessary staffing levels, whether due to decreases in hiring rates, increases in employee retirements, increases in terminations, or any combination thereof, may negatively affect our ability to service our customers, manufacture products or successfully manage our business and achieve our objectives. Competition for skilled workers

As part of our business strategy, we continually assess our mix of businesses and potential strategic acquisitions or divestitures. This investment strategy is high and can leadsubject to increased labor expenses, decreased productivity and potentially lost business opportunities. Our ability to maintain productivity, relationships with customers, competitive costs, and quality services is limited byvarious risks, including the ability to employidentify appropriate acquisition candidates, or successfully negotiate and finance any acquisitions. In addition, difficulties in integrating the necessary skilledoperations, services, products and personnel of the acquired business, and the potential loss of key employees, customers and suppliers of the acquired business could negatively affectadversely impact our financial condition and operating results, financial position and cash flows.results.

We rely on access to debt and equity capital markets as a source of liquidity to fund our investment initiatives, including rate base growth investments in our Electric segment and opportunities for investment, including acquisitions, in our Manufacturing and Plastics segments. Capital markets are impacted by global and domestic economic conditions, monetary policy, commodity prices, geopolitical events and other factors. If we are unable to access capital on acceptable terms and at reasonable costs, our ability to implement our business plans may be adversely affected. In addition, higher market interest rates on outstanding variable-rate, short-term indebtedness could also impact our operating results. In 2023, rising market interest rates caused the applicable rate of interest on our short-term indebtedness to increase significantly. However, the impact to our operating results was not significant due to our low level of outstanding borrowings on our short-term indebtedness. Our operating results could be

We rely on our investment grade credit ratings to provide acceptable costs for accessing the capital markets. A downgrade of our credit ratings could result in higher borrowing costs thereby negatively impacting our operating results and limiting our ability to access capital markets, which may negatively impact our ability to implement our business plans. In addition, OTP is a party to contracts that require the posting of collateral or settlement of applicable contracts if credit ratings fall below certain levels.

The financial obligations and related costs of our pension and other postretirement benefit plans are affected by numerous factors. Assumptions related to future costs, investment returns, actuarial estimates and interest rates have a significant effect on our funding obligations and the cost recognized forrelated to these plans. If our pension plan assets do not achieve our estimated long-term rate of return or if our other estimates prove to be inaccurate, our financial position, operating results, financial condition and cash flowsliquidity may be adversely impacted. In addition, our funding requirements could be impacted by changes to the Pension Protection Act.

Otter Tail Corporation is a holding company with no significant operations of its own. The primary source of funds for payment of our financial obligations and dividends to our shareholders is from cash provided by our subsidiary companies. Our ability to meet our financial obligations and pay dividends on our common stock principally depends on the earnings, cash flows, capital requirements and general financial positionpositions of our subsidiary companies. In addition, OTP is subject to federal and state regulations which may restrict its ability to pay dividends. Finally, we are also reliant on our subsidiary companies to maintain compliance with financial covenants under our various shortshort- and long-term debt agreements. Our debt agreements include restrictions on the payment of cash dividends upon an event of default. 

Our provision for income taxes and tax obligations are impacted by various tax laws and regulations, including the availability of various tax credits, IRS tax policies such as tax normalization and, at times, the ability to carryforward net operating losses.losses and tax credits. Changes in tax laws, regulations and interpretations could have an adverse effect on our financial condition and operating results. Tax law changes that reduce or eliminate production or investment tax credits (ITCs), or the ability to transfer or sell these credits, may impact the economics of constructing certain electric generation resources, which may adversely impact our planned investments.

Several factors, many of which are beyond our control, may contribute to reduced demand for energy from our customers or increase the cost of providing energy to our customers. These risks include economic growth or decline in our service areas, demographic changes in our customer base and changes in customer demand or load growth due to, among other items, proliferation of distributed generation, energy efficiency initiatives and technological advancements. In addition, customer demand could be impacted by increased competition in our service territories or the loss of a service territory or franchise. Other risks include increased transmission or interconnection costs, generation curtailment and changes in the manner in which wholesale power is purchased and sold. A decrease in revenues or an increase in expenses related to our electric operations could negatively impact our financial condition, operating results and liquidity.

We areOTP is subject to federal and state legislation government regulations and comprehensive regulation by federal and state regulatory actions that may have a negative impact on ouragencies, including the public utility commissions in each of the three states in which OTP operates, and by the FERC. State utility commissions regulate, among other matters, the establishment of assigned service areas, the siting and construction of major facilities, the capital structure of the utility business, and resultsthe allowed rates to charge customers for providing energy and utility service. Each state utility commission operates independent of operations. The electric ratesone another; therefore, OTP is allowedsubject to charge for itsand must adhere to the decisions of each independent state commission. The FERC regulates, among other matters, wholesale energy transactions, hydroelectric licensing, transmission and sale of electric services are oneenergy in interstate commerce, and the interconnection of the most important items influencing ourelectric facilities.

Our financial position,condition, operating results and liquidity. The rates OTP charges its electric customersliquidity are subject to reviewsignificantly impacted by, and determination by state and federal regulators. Ourdependent upon, our ability to obtain rate adjustments to maintain reasonable rates of return depends on regulatory action under applicable statutesrecover the costs associated with providing utility service and regulations and we cannot provide assurance that rate adjustments will be obtained or reasonable rates ofearn a return on our utility capital will be authorized.investments. There is no assurance the applicable regulatory authoritythat each state utility commission will judge all our utility costs to have been prudently incurred or that rates will produce full recovery of such costs. In addition, there could be changes in the federal or state regulatory environment that wouldframework could impair theour ability of OTP to recover utility costs historically collected from theirour customers. OTPDiverging public policy priorities across the jurisdictions we serve, and a lack of inter-jurisdictional consensus, may impact our ability to recover the cost of, and return on, our capital investments and our operating costs; it may impact our future capital investment opportunities; and may result in inefficiencies which could negatively impact our financial position, operating results and liquidity.

In addition to the recovery of our utility costs, our profitability is impacted by our authorized ROE, which can be impacted by macroeconomic factors such as interest rates. There can be no assurance that each state utility commission or the FERC will fileauthorize a rate cases with, or seek cost recovery authorization from, federal and state regulatory authorities.of return which allows us to achieve our financial goals. An adverse decision by one or more regulatory authorities concerning the level or method of determining electric utility rates, the authorized returns on equity, recoverability of fuel, purchase power and other costs, approval of depreciation rates, implementation of enforceable federal reliability standards or other regulatory matters, permitted business activities (such as ownership or operation of nonelectric businesses) or any prolonged delay in rendering a decision in a rate or other proceeding (including with respect to the recovery of capital expenditures in rates) could adversely impact our financial condition, operating results.results and liquidity.

We are subject to federal, state and local environmental laws and regulations relating to air quality, water quality, waste management, natural resources and health safety. These laws and regulations regulate the modification and operation of existing facilities, the construction and operation of new facilities and the proper storage, handling, cleanup and disposal of hazardous waste and toxic substances. Compliance with these legal requirements requiresmay require us to commit significant resources and funds toward environmental monitoring, installation and operation of pollution control equipment, payment of emission fees and securing environmental permits. Obtaining environmental permits can entail significant expense and cause substantial construction delays. Failure to comply with environmental laws and regulations, even if caused by factors beyond our control, may result in civil or criminal liabilities, penalties and fines.

Existing environmental laws or regulations may be revised and new laws or regulations may be adopted or become applicable to us. The multiple jurisdictions that govern our electric utility business may not agree as to the appropriate resource mix, which may lead to costs incurred to comply with one jurisdiction that are not recoverable across all jurisdictions served by the same assets. Revised or additional regulations which result in increased compliance costs or additional operating restrictions, particularly if those costs are not fully recoverable from customers, could have a material effect on our financial condition, operating results and make itliquidity, making the operation of some of our facilities no longer economically viable to operate some of our facilities.viable.

In 2021, the Biden administration's priorities and objectives, which may include more stringent requirements forAdministration introduced new targets aimed at reducing economy-wide net GHG emissions and other air pollutantsby 50% to 52% from 2005 levels by 2030. In addition, the Administration set a goal to reach 100% carbon pollution-free electricity by 2035. As a part of achieving these targets, the EPA proposed new regulations in May 2023 under Section 111 of the Clean Air Act to regulate GHG emissions from existing and new fossil fuel-firedfuel-based EGUs. As detailed above, this proposal would require states to implement stringent emissions standards for most coal-fired steam generating units and certain larger natural gas combustion plants. Until the EPA takes final action on this rulemaking, we are unable to evaluate the precise impacts; however, the proposed rule has the potential to impact the emissions controls needed at OTP’s coal-fired power plants, and other objectives that maywhich could have an impact on our operating results, financial position or cash flows.condition and liquidity. The EPA may implement additional new regulations targeting power plants to

State implementation plans for compliance with the second implementation period of the RHR are due in mid-2021. Coyote Station, OTP's jointly-owned coal-fired power plant, is subject to assessment under the RHR as part of the state of North Dakota's state implementation plan. We cannot predict thesupport its aforementioned economy-wide GHG reduction goals, which could impose substantial costs on and impact the state implementation plan have on us until the plan is finalized and adopted. However, significant emission control investments could be required, or in light of the costs for such emission control equipment, there are scenarios where it may not be economically feasible to invest in such equipment and an early retirement of, or the saleoperations of our interest in, Coyote Station would be necessary. The costs of such a retirement or sale would be material, a significant asset impairment charge could be required and OTP would be subject to state commission approval to recover such costs from customers. In addition, it may be necessary to pursue replacement electric generation facilities as an alternative,utility business, which may require incurring significant investment in new facilities that would be subject to regulatory permitsmaterially impact our financial condition, operating results and approvals.liquidity.

In addition to complying with legislation and regulation, we could be subject to litigation related to climate change. CostsIn recent years, there has been an increase in litigation against electric utilities and fossil fuel producers. If OTP were subjected to such litigation, the costs of such litigation could be significant and an adverse outcome could require substantial capital expenditures, changes in operations and possible payment of penalties or damages which could affect our financial condition, operating results and cash flowsliquidity if the costs are not recoverable in rates or covered by insurance.

We are subject to an extensive legal and regulatory framework imposed under federal and state laws and regulatory agencies, including the FERC and the NERC.North American Electric Reliability Corporation (NERC). We could be subject to potential financial penalties for compliance violations. Our transmission systems and electric generation facilities are subject to the NERC mandatory reliability standards, including cybersecurity standards. If a serious reliability incident didwere to occur, it could have a material effect on our operations or financial results. Some states have the authority to impose substantial penalties in the event of non-compliance. We attempt to mitigate the risk of regulatory penalties through formal training. However, there is no guarantee our compliance program will be sufficient to ensure against violations.

In addition, energy policy initiatives at the state or federal level could increase incentives for distributed generation, or authorize municipal utility formation or acquisition of service territory, or local initiatives could introduce generation or distribution requirements that could change the current integrated utility model.

These laws and regulations significantly influence our operations and may affect our ability to recover costs from our customers. We are required to have numerous permits, licenses, approvals and certificates from the agencies and other organizations that regulate our business. We believe we have obtained the necessary approvals for our existing operations and that our business is conducted in accordance with applicable laws and regulatory requirements; however, we are unable to predict the impact on our operating results from the future regulatory activities of any of these agencies and other organizations. Changes in regulations or the imposition of additional regulations could have a material adverse impact on our financial condition, operating results of operations.and liquidity.

OTP owns electric transmission and generation facilities subject to mandatory and enforceable standards advanced by the NERC. These bulk electric system facilities provide the framework for the electrical infrastructure of OTP’s service territory and interconnected systems, the operation of which is dependent on information technology systems. Further, the information systems that operate OTP’s electric system are interconnected to external networks. Parties that wish to disrupt the U.S. bulk power system or OTP’s operations could view OTP’s computer systems, software or networks as attractive targets for cyber-attack.

In addition, OTP’s generation and transmission facilities are spread throughout a large service territory. These facilities could be subject to physical attack or vandalism that could disrupt OTP’s operations or conceivably the regional or U.S. bulk power system.

OTP is subject to mandatory cybersecurity and physical security regulatory requirements. OTP implements the NERC standards for operating its transmission and generation assets and staysremains abreast of best practices within the business and the utility industry to protect its computers and computer-controlled systems from outside attack. We rely on industry acceptedindustry-accepted security measures and technology to securely maintain confidential and proprietary information necessary for the operation of our systems. In an effort to reduce the likelihood and severity of cyber intrusions, we have cybersecurity processes and controls and disaster recovery plans designed to protect and preserve the confidentiality, integrity and availability of data and systems. We also take prudent and reasonable steps to protect the physical security of our generation and transmission facilities. However, all these measures and technology may not adequately prevent security breaches, ransomware attacks or other cyber-attacks, or enable us to recover effectively from such a breach or attack. Any significant interruption or failure of our information systems or any significant breach of security due to cyber-attacks, hacking or internal security breaches or physical attack of our generation or transmission facilities could adversely affect our business and our financial condition, operating results of operations.and liquidity.

The operation of electric generatingour generation, transmission, and distribution facilities involves many risks including facility shutdowns due to equipment or process failures; labor disputes;failures, accidents and workforce safety matters, environmental damage, property damage, operator error;error, and the occurrence of catastrophic events such as fires, explosions and floods;floods. Diminished availability or performance of those facilities could result in facility shutdowns, reduced customer satisfaction, reputational harm, and regulatory inquiries and fines.

Accidents, fires, explosions, catastrophic failures, general system damage or dysfunction, intentional acts of destruction, and other unplanned events related to our infrastructure would increase repair costs and may expose us to liability for personal injury, loss of life, and property damage. Fires alleged to have been caused by our transmission, distribution, or generation infrastructure, or that allegedly result from our contractors’ operating or maintenance practices, could also expose us to claims for fire suppression and clean-up costs, evacuation costs, fines and penalties, and liability for economic damages, personal injury, loss of life, property damage, and environmental pollution, whether based on claims of negligence, trespass, or otherwise. We maintain insurance coverage for such operating and event risks, but insurance coverage is subject to the dependence on a specific fuel source;terms and limitations of the riskavailable policies and may not be sufficient in amount to cover our ultimate liability. We may be unable to fully recover costs in excess of performance below expected levelsinsurance through customer rates or regulatory mechanisms. If the amount of outputinsurance is insufficient or efficiency. Weotherwise unavailable, and if we are unable to fully recover in rates the costs of uninsured losses, our financial condition, operating results and liquidity could be materially affected.

We rely on a limited number of suppliers to provide coal and a limited number of service providers to transport coal transportationand natural gas to our facilities. A counterparty's failure to perform by any of these counterpartiestheir obligations may arise due to liquidity challenges or insolvency, operational deficiencies or other circumstances such as severe weather or natural disasters, which could impact our ability to provide service to our customers or require us to seek alternative sources for these products and services, if available, whichavailable. A prolonged failure to perform by one or more of our current suppliers or service providers could lead to increased costs adversely impacting our operating results.

Our electric business is subject to the risks associated with energy markets, including market supply and changing energy prices. If we are faced with shortages in market supply, we may be unable to fulfill our contractual obligations to our retail, wholesale and other customers at previously anticipated costs. This could force us to obtain alternative energy or fuel supplies at higher costs, or suffer increased liabilityliabilities for unfulfilled contractual obligations. Any significantly higher than expected energy or fuel costs wouldcould negatively affect our financial performance.condition, operating results and liquidity.

Our manufacturing businesses are subject to intense risks associated with competition from foreign and domestic manufacturers, many of whom have broader product lines, greater distribution capabilities, greater capital resources, larger marketing, research and development personnel and facilities and other capabilities that may place downward pressure on margins and profitability. The companies in our Manufacturing segment use a variety of raw materials in the products they manufacture including, among others, steel, aluminum, and polystyrene and other plastics resins. Costs for these itemsThe price and availability of the raw materials used in our manufacturing processes are based on global supply and demand conditions, which can fluctuate significantly.create volatile pricing and supply disruptions as conditions change. Federal trade policies, including imposed and proposed tariffs, could significantly increase thecan also impact prices and delivery offor these raw materials such as steel and aluminum thatmaterials. If we are criticalunable to pass cost increases through to our manufacturing businesses. Ifcustomers or are unable to procure adequate or timely raw material inputs for use in our manufacturing businesses are not able to pass on cost increases to their customers, itprocesses, our financial condition, operating results and liquidity could have a negative effect on profit margins in our Manufacturing segment. be negatively impacted.

Additionally, a certain amount of residual material (scrap) is a by-product of the manufacturing and production processes used by our manufacturing companies. Declines in commodity prices for these scrap materials due to weakened demand or excess supply can negatively impact the profitability of our manufacturing companies as it reduces their ability to mitigate the cost associated with excess material. Changes in macroeconomic conditions can negatively impact demand in

Our manufacturing businesses willare subject to intense competition from domestic and foreign manufacturers, many of whom have broader product lines, greater distribution capabilities, greater capital resources, larger marketing, research and development personnel and facilities, and other capabilities. Our ability to compete on product performance, competitive pricing, technological innovation and customer service is critical to our ongoing success. If we are unable to compete in these and potentially other areas, our business and financial condition, operating results and liquidity could be successful.adversely impacted.

We expect future sales will continue to depend on the success of our customers. If economic conditions or demand for our customers’ products deteriorate,deteriorates, we may experience a material adverse effect on our business,financial condition, operating results and financial condition.liquidity.

We may not be ableunable to develop the capabilities required by our customers in the future. The emergence of new technologies, industry standards or customer requirements may render our equipment, inventory or processes obsolete or uncompetitive.noncompetitive. We may havebe required to acquire new technologies and equipment to remain competitive. The acquisition and implementation of new technologies and equipment may require us to incur significant expense and capital investment, which could reduce our margins and affect our operating results. When we establish or acquire new facilities, we may not be able to maintain or develop our manufacturing, engineering and technological expertise due to a lack of trained

personnel, effectiveineffective training of new staff or technical difficulties with machinery. Failure to anticipate and adapt to customers’ changing technological needs and requirements to hire and retain a sufficient number of engineers, and to maintain manufacturing, engineering and technological expertise may have a material adverse effecteffects on our businessesfinancial condition, operating results and operating results.

We rely on a limited number of vendors to supply the PVC resin used in our plastics business. Two vendors provided over 99%businesses. In 2023, we sourced all of our total purchases of PVC resin in 2020.needs from three vendors. In addition, the supply of PVC resin may be limited primarily due to manufacturing capacity and the limited availability of raw material components. Most U.S. resin production plants are located in the Gulf Coast region, which mayregion. This could increase the risk of a shortage of resin in the event of a hurricane, orother extreme weather events and other natural disasterdisasters in that region. The loss of a key vendor or any interruption or delay in the availability or supply of PVC resin could disrupt our ability to deliver our plastic products, cause customers to cancel orders or require us to incur additional expenses to obtain PVC resin from alternative sources, if such sources arewere available.

The plastic pipe industry is fragmented and competitive due to the number of producers and the fungible nature of the product. We compete not only against other plastic pipe manufacturers, but also against ductile iron, steel and concrete pipe manufacturers. Due to shipping costs, competition is usually regional instead of national in scope and the principal areas of competition are a combination of price, service, warranty and product performance. Our inability to compete effectively in each of these areas and to distinguish our plastic pipe products from competing products may adversely affect the financial performance of our plastics business.businesses.

Our businesses are affected by local, national and worldwide economic conditions. Tighteningconditions, including the impact of inflation, tightening of credit in financial markets, could adversely affect the ability of customers to finance purchases of our goods and services, resultingeconomic recessions or other changes in decreased orders, cancelled or deferred orders, slower payment cycles, and increased bad debt and customer bankruptcies.economic conditions. Our businesses may also be adversely affected by decreases in the general level of economic activity, such as decreases in business and consumer spending. A decline in the level of economic activity and uncertainty regarding energy and commodity prices could adversely affect our results of operations and our future growth. Inflationary pressures may lead to rising material and commodity costs and increased labor costs. Our operating results and liquidity would be adversely impacted if we were unable to recover these increased costs from our customers. Tightening of credit in financial markets could adversely affect the ability of customers to finance purchases of our goods and services, resulting in decreased orders, cancelled or deferred orders, slower payment cycles, and increased bad debt and customer bankruptcies.

We expect much of our growth in the next few years will come from major capital investmentinvestments at existing companies. To achieve the organic growth we expect, we must have access to the capital markets, be successful with capital expansion programs related to organic growth, develop new products and services, expand our markets and increase efficiencies in our businesses. Competitive and economic factors could adversely

affect our ability to do this. If we are unable to achieve and sustain consistent organic growth, we will be less likely to meet our earnings growth targets, which may adversely affect the market price of our common shares.

We believe the facilities described above, all of which are utilized byalong with the Electric segment, the Company owns and has investments in offices and service buildings utilized by each of its manufacturing and plastic pipe companies. The Company’s subsidiaries own facilities and equipment used in the manufacture of PVC pipe, thermoformed products, heavy metal fabricated products, metal parts stamping, fabricating, painting and contract machining.

The term of office for each of the executive officers is one year and any executive officer elected may be removed by the vote of the board of directors at any time during the term. There are no family relationships between any of the executive officers or directors.

We do not have a publicly announced stock repurchase program and we did not repurchase any equity securities during the yearquarter ended December 31, 2020.2023. 

Our strategy includes investing in rate base growth opportunities in our Electric segment and capitalizing on organic growth opportunities in our Manufacturing and Plastics segments. Investments in our Electric segment willare expected to produce increased earnings and cash flows, lower our overall risk, create a more predictable earnings stream, improve our credit quality and preserve our ability to fund our dividend. Organic growth inOur Electric segment is complemented by our Manufacturing and Plastics segments comes fromsegment businesses, which we expect to contribute to earnings growth by capitalizing

on market expansion new productsopportunities and services, increased efficiencies and targeted capital investments.

In 2023, our diversified business model generated record financial results, producing net income of $294.2 million, or $7.00 per diluted share, an increase of 4% from $284.2 million, or $6.78 per diluted share, in 2022. Our financial results for the next few years will come from utilizing expanded plant capacity from capital investments made in previous years. We will also evaluate opportunities to allocate capital to potential acquisitions across our reporting segments. We are a committed long-term owner and do not acquire companies in pursuit of short-term gains. However, we will divest operating companies that no longer fit into our strategy and risk profile over the long term.

Our net income in 2020 was $95.9 million, or $2.34 per diluted share, an increase of 10.4% from 2019 of $86.8 million, or $2.17 per diluted share. Our financial results were primarily driven by earnings in our Electric segment produced earnings growth of 6% in 2023, from returns on our rate base investments$80.0 million in 2022 to $84.4 million in 2023, primarily due to increased rider revenue, increased commercial and management of ourindustrial sales, and lower pension and other postretirement benefit costs, partially offset by increased operating and maintenance expenses and the impact of unfavorable weather.

Our Manufacturing segment produced earnings growth of 2% in our Plastics segments2023, from $21.0 million in 2022 to $21.5 million in 2023, primarily due to increased sales volumes at our metal fabrication business driven by strong end market demand across several markets we serve, and gross profit margins.incremental volumes from additional work with existing customers. Increased sales volumes at our metal fabrication business were partially offset by increased labor and overhead costs, as well as decreased horticulture product sales volumes at our plastic thermoforming business.

Our earnings mix in 20202023 was 70%29% from our Electric segment and 30%71% from the combination of our Manufacturing and Plastics segments andexcluding unallocated corporate costs. Electric segment earnings as a percentage of our total earnings were less than our long-term estimatetarget of 75%65% due to very strongthe unique market conditions occurring in the plastics industry.

Extraordinary supply and demand conditions in the PVC industry beginning in 2021 have led to a significant expansion in operating margins and elevated earnings in our Plastics segment earningsover the past three years. Periodic disruptions in 2020.

The unique market dynamics impacting our Plastics segment resulted in a significant increase in earnings in the last three years compared to historical levels. We expect these market conditions to gradually normalize over the impactcourse of COVID-19. Sales volumes recovered2024 and gross profit margins increased in the third and fourth quarters due to increasing demand and concerns of supply disruptions.

Otter Tail Power Company (OTP)OTP generally bases its forecasted kilowatt-hour (kwh)kwh sales and rates on expected consumption under a normal level of HDDs and CDDs over a given period of time in its service territory. Increased or decreased levels of consumption for certain customer classifications are attributed to deviation from the norms and are a significant factor influencing consumption of electricity across our service territory. We present HDDs and CDDs to provide an indication of the impact of weather on kwh sales, revenues and earnings relative to forecast, and on period-to-period results.

Provided below is a summary and discussion of our operating results on a consolidated basis followed by a discussion of the operating results of each of our segments, Electric, Manufacturing and Plastics. Intersegment transactions were not material in 2020 or 2019 and amounted to less than $0.1 million of operating revenues and operating expenses for each year. In addition to the segment results, we provide an overview of our Corporate costs. Our Corporate costs do not constitute a reportable segment, but rather consist of unallocated general corporate expenses, such as corporate staff and overhead costs, the results of our captive insurance company and other items excluded from the measurement of segment performance. Corporate costs are added to operating segment totals to reconcile to totals on our consolidated statements of income.