UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒ Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended September 30, ~~2022~~2023 or

☐ Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Commission File Number 0-53713

OTTER TAIL CORPORATION

(Exact name of registrant as specified in its charter)


Minnesota (State or other jurisdiction of incorporation or organization)			27-0383995 (I.R.S. Employer Identification No.)

215 South Cascade Street, Box 496, Fergus Falls, Minnesota (Address of principal executive offices)			56538-0496 (Zip Code)

Registrant's telephone number, including area code: 866-410-8780

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Shares, par value $5.00 per share	OTTR	The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

Large Accelerated Filer ☑

Accelerated Filer ☐

Non-Accelerated Filer ☐

Smaller Reporting Company ☐

Emerging Growth Company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑

Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of the latest practicable date:

~~41,630,952~~41,710,521 Common Shares ($5 par value) as of October ~~25, 2022.~~27, 2023.

Table of Contents


TABLE OF CONTENTS

Table of Contents


DEFINITIONS

The following abbreviations or acronyms are used in the text.

~~AGI~~

~~Advanced Grid Infrastructure Rider~~

~~OTC~~

~~Otter Tail Corporation~~

ARP

Alternative Revenue Program

~~OTP~~MISO

~~Otter Tail Power Company~~Midcontinent Independent System Operator, Inc.

BTD

BTD Manufacturing, Inc.

MPUC

Minnesota Public Utilities Commission

CCS

Carbon Capture and Sequestration

NDDEQ

North Dakota Department of Environmental Quality

CIP

Conservation Improvement Program

NDPSC

North Dakota Public Service Commission

EGU

Electric Generating Units

OTC

Otter Tail Corporation

EITE

Energy Intensive, Trade Exposed Rider

OTP

Otter Tail Power Company

EPA

Environmental Protection Agency

PIR

Phase-In Rider

~~EAR~~ESSRP

~~Energy Adjustment Rider~~Executive Survivor and Supplemental Retirement Plan

PSLRA

Private Securities Litigation Reform Act of 1995

~~EPA~~EUIC

~~Environmental Protection Agency~~Electric Utility Infrastructure Cost Recovery Rider

PTC

Production Tax Credits

~~ESSRP~~

~~Executive Survivor and Supplemental Retirement Plan~~

~~PVC~~

~~Polyvinyl chloride~~

FERC

Federal Energy Regulatory Commission

~~RHR~~PVC

~~Regional Haze Rule~~Polyvinyl chloride

GCR

Generation Cost Recovery Rider

RHR

Regional Haze Rule

GHG

Greenhouse Gas

ROE

Return on equity

ISO

Independent System Operator

RRR

Renewable Resource Rider

~~IRP~~kwh

~~Integrated Resource Plan~~kilowatt-hour

SEC

Securities and Exchange Commission

~~kwh~~MDT

~~kilowatt-hour~~Meter and Distribution Technology

~~SOFR~~T.O. Plastics

~~Secured Overnight Funds Rate~~T.O. Plastics, Inc.

Merricourt

Merricourt Wind Energy Center

~~T.O. Plastics~~

~~T.O. Plastics, Inc.~~

~~MISO~~

~~Midcontinent Independent System Operator, Inc.~~

TCR

Transmission Cost Recovery Rider

~~MPUC~~

~~Minnesota Public Utilities Commission~~


FORWARD-LOOKING INFORMATION

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 (the "PSLRA"). When used in this Form 10-Q and in future filings by Otter Tail Corporation (the "Company") with the Securities and Exchange Commission (SEC), in the Company’s press releases and in oral statements, words such as “anticipate,” “believe,” “could,” “estimate,” “expect,” "future," "goal," “intend,” "likely," “may,” “outlook,” “plan,” “possible,” “potential,” "probable," "projected," “should,” "target," “will,” “would” or similar expressions are intended to identify forward-looking statements within the meaning of the PSLRA. Such statements are based on current expectations and assumptions and entail various risks and uncertainties that could cause actual results to differ materially from those expressed in such forward-looking statements. The Company’s risks and uncertainties include, among other things, uncertainty of ~~the impact and duration of the COVID-19 pandemic, uncertainty of~~ future investments and capital expenditures, rate base levels and rate base growth, long-term investment risk, seasonal weather patterns and extreme weather events, counterparty credit risk, future business volumes with key customers, reductions in our credit ratings, our ability to access capital markets on favorable terms, assumptions and costs relating to funding our employee benefit plans, our subsidiaries’ ability to make dividend payments, cyber security threats or data breaches, the impact of government legislation and regulation including foreign trade policy and environmental, health and safety laws and regulations, the impact of climate change including compliance with legislative and regulatory changes to address climate change, operational and economic risks associated with our electric generating and manufacturing facilities, risks associated with energy markets, the availability and pricing of resource materials, inflation ~~rates,~~cost pressures, attracting and maintaining a qualified and stable workforce, expectations regarding regulatory proceedings, and changing macroeconomic and industry conditions. These and other risks and uncertainties are more fully described in our filings with the SEC, including our most recently filed Annual Report on Form 10-K. Forward-looking statements speak only as of the date they are made, and we expressly disclaim any obligation to update any forward-looking information.

PART I. FINANCIAL INFORMATION


ITEM 1.			FINANCIAL STATEMENTS

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OTTER TAIL CORPORATION

CONSOLIDATED BALANCE SHEETS (unaudited)


(in thousands, except share data)	(in thousands, except share data)	September 30, 2022		December 31, 2021		(in thousands, except share data)	September 30, 2023		December 31, 2022

Assets	Assets					Assets
Current Assets	Current Assets					Current Assets
Cash and Cash Equivalents	Cash and Cash Equivalents	$	72,987	$	1,537	Cash and Cash Equivalents	$	189,214	$	118,996
Receivables, net of allowance for credit losses	Receivables, net of allowance for credit losses	193,797		174,953		Receivables, net of allowance for credit losses	193,175		144,393
Inventories	Inventories	146,376		148,490		Inventories	142,007		145,952
Regulatory Assets	Regulatory Assets	29,921		27,342		Regulatory Assets	17,041		24,999
Other Current Assets	Other Current Assets	17,412		17,032		Other Current Assets	15,313		18,412
Total Current Assets	Total Current Assets	460,493		369,354		Total Current Assets	556,750		452,752
Noncurrent Assets	Noncurrent Assets					Noncurrent Assets
Investments	Investments	52,966		56,690		Investments	59,322		54,845
Property, Plant and Equipment, net of accumulated depreciation	Property, Plant and Equipment, net of accumulated depreciation	2,186,643		2,124,605		Property, Plant and Equipment, net of accumulated depreciation	2,387,260		2,212,717
Regulatory Assets	Regulatory Assets	116,593		125,508		Regulatory Assets	89,491		94,655
Intangible Assets, net of accumulated amortization	Intangible Assets, net of accumulated amortization	8,218		9,044		Intangible Assets, net of accumulated amortization	7,118		7,943
Goodwill	Goodwill	37,572		37,572		Goodwill	37,572		37,572
Other Noncurrent Assets	Other Noncurrent Assets	35,419		32,057		Other Noncurrent Assets	49,956		41,177
Total Noncurrent Assets	Total Noncurrent Assets	2,437,411		2,385,476		Total Noncurrent Assets	2,630,719		2,448,909
Total Assets	Total Assets	$	2,897,904	$	2,754,830	Total Assets	$	3,187,469	$	2,901,661

Liabilities and Shareholders' Equity	Liabilities and Shareholders' Equity					Liabilities and Shareholders' Equity
Current Liabilities	Current Liabilities					Current Liabilities
Short-Term Debt	Short-Term Debt	$	—	$	91,163	Short-Term Debt	$	51,495	$	8,204
Current Maturities of Long-Term Debt		—		29,983

Accounts Payable	Accounts Payable	121,995		135,089		Accounts Payable	103,118		104,400
Accrued Salaries and Wages	Accrued Salaries and Wages	27,454		31,704		Accrued Salaries and Wages	32,227		32,327
Accrued Taxes	Accrued Taxes	25,635		19,245		Accrued Taxes	50,495		19,340
Regulatory Liabilities	Regulatory Liabilities	21,114		24,844		Regulatory Liabilities	32,285		17,300
Other Current Liabilities	Other Current Liabilities	45,655		55,671		Other Current Liabilities	40,413		56,065
Total Current Liabilities	Total Current Liabilities	241,853		387,699		Total Current Liabilities	310,033		237,636
Noncurrent Liabilities	Noncurrent Liabilities					Noncurrent Liabilities
Pension Benefit Liability	Pension Benefit Liability	50,489		73,973		Pension Benefit Liability	33,083		33,210
Other Postretirement Benefits Liability	Other Postretirement Benefits Liability	67,352		66,481		Other Postretirement Benefits Liability	26,101		46,977
Regulatory Liabilities	Regulatory Liabilities	240,545		234,430		Regulatory Liabilities	275,809		244,497
Deferred Income Taxes	Deferred Income Taxes	212,838		188,268		Deferred Income Taxes	234,787		221,302
Deferred Tax Credits	Deferred Tax Credits	16,102		16,661		Deferred Tax Credits	15,358		15,916
Other Noncurrent Liabilities	Other Noncurrent Liabilities	60,942		62,527		Other Noncurrent Liabilities	65,371		60,985
Total Noncurrent Liabilities	Total Noncurrent Liabilities	648,268		642,340		Total Noncurrent Liabilities	650,509		622,887
Commitments and Contingencies (Note 9)	Commitments and Contingencies (Note 9)					Commitments and Contingencies (Note 9)
Capitalization	Capitalization					Capitalization
Long-Term Debt, net of current maturities		823,760		734,014
Long-Term Debt						Long-Term Debt	823,998		823,821
Shareholders' Equity	Shareholders' Equity					Shareholders' Equity
Common Shares: 50,000,000 shares authorized, $5 par value; 41,630,952 and 41,551,524 outstanding at September 30, 2022 and December 31, 2021		208,155		207,758
Common Shares: 50,000,000 shares authorized, $5 par value; 41,710,521 and 41,631,113 outstanding at September 30, 2023 and December 31, 2022						Common Shares: 50,000,000 shares authorized, $5 par value; 41,710,521 and 41,631,113 outstanding at September 30, 2023 and December 31, 2022	208,553		208,156
Additional Paid-In Capital	Additional Paid-In Capital	422,448		419,760		Additional Paid-In Capital	426,358		423,034
Retained Earnings	Retained Earnings	560,398		369,783		Retained Earnings	766,844		585,212
Accumulated Other Comprehensive Loss		(6,978)		(6,524)
Accumulated Other Comprehensive Income						Accumulated Other Comprehensive Income	1,174		915
Total Shareholders' Equity	Total Shareholders' Equity	1,184,023		990,777		Total Shareholders' Equity	1,402,929		1,217,317
Total Capitalization	Total Capitalization	2,007,783		1,724,791		Total Capitalization	2,226,927		2,041,138
Total Liabilities and Shareholders' Equity	Total Liabilities and Shareholders' Equity	$	2,897,904	$	2,754,830	Total Liabilities and Shareholders' Equity	$	3,187,469	$	2,901,661

See accompanying notes to consolidated financial statements.

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OTTER TAIL CORPORATION

CONSOLIDATED STATEMENTS OF INCOME (unaudited)


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands, except per-share amounts)	(in thousands, except per-share amounts)	2022		2021		2022		2021		(in thousands, except per-share amounts)	2023		2022		2023		2022

Operating Revenues	Operating Revenues									Operating Revenues
Electric	Electric	$	142,747	$	118,775	$	404,112	$	348,629	Electric	$	130,326	$	142,747	$	395,997	$	404,112
Product Sales	Product Sales	241,109		197,519		754,688		514,983		Product Sales	227,730		241,109		638,856		754,688
Total Operating Revenues	Total Operating Revenues	383,856		316,294		1,158,800		863,612		Total Operating Revenues	358,056		383,856		1,034,853		1,158,800
Operating Expenses	Operating Expenses									Operating Expenses
Electric Production Fuel	Electric Production Fuel	24,972		17,698		54,538		44,576		Electric Production Fuel	19,603		24,972		45,928		54,538
Electric Purchased Power	Electric Purchased Power	19,913		9,878		64,604		40,273		Electric Purchased Power	10,895		19,913		57,932		64,604
Electric Operating and Maintenance Expenses	Electric Operating and Maintenance Expenses	39,799		36,465		126,460		114,615		Electric Operating and Maintenance Expenses	43,534		39,799		134,604		126,460
Cost of Products Sold (excluding depreciation)	Cost of Products Sold (excluding depreciation)	139,361		134,212		443,586		358,767		Cost of Products Sold (excluding depreciation)	118,303		139,361		351,330		443,586
Other Nonelectric Expenses	Other Nonelectric Expenses	16,524		16,224		50,981		45,587		Other Nonelectric Expenses	15,863		16,524		51,433		50,981
Depreciation and Amortization	Depreciation and Amortization	22,716		22,815		69,829		68,109		Depreciation and Amortization	24,548		22,716		72,636		69,829
Electric Property Taxes	Electric Property Taxes	4,438		4,474		13,304		13,136		Electric Property Taxes	4,194		4,438		13,151		13,304
Total Operating Expenses	Total Operating Expenses	267,723		241,766		823,302		685,063		Total Operating Expenses	236,940		267,723		727,014		823,302
Operating Income	Operating Income	116,133		74,528		335,498		178,549		Operating Income	121,116		116,133		307,839		335,498
Other Income and Expense
Interest Charges		9,259		9,648		27,198		28,601
Nonservice Cost Components of Postretirement Benefits		(52)		505		(824)		1,511
Other Income and (Expense)										Other Income and (Expense)
Interest Expense										Interest Expense	(9,175)		(9,259)		(28,285)		(27,198)
Nonservice Components of Postretirement Benefits										Nonservice Components of Postretirement Benefits	2,289		52		7,122		824
Other Income (Expense), net	Other Income (Expense), net	(174)		203		(802)		2,095		Other Income (Expense), net	2,471		(174)		7,841		(802)
Income Before Income Taxes	Income Before Income Taxes	106,752		64,578		308,322		150,532		Income Before Income Taxes	116,701		106,752		294,517		308,322
Income Tax Expense	Income Tax Expense	22,513		11,824		66,143		25,380		Income Tax Expense	24,727		22,513		58,093		66,143
Net Income	Net Income	$	84,239	$	52,754	$	242,179	$	125,152	Net Income	$	91,974	$	84,239	$	236,424	$	242,179

Weighted-Average Common Shares Outstanding:	Weighted-Average Common Shares Outstanding:									Weighted-Average Common Shares Outstanding:
Basic	Basic	41,600		41,504		41,582		41,487		Basic	41,680		41,600		41,663		41,582
Diluted	Diluted	41,974		41,869		41,930		41,795		Diluted	42,058		41,974		42,028		41,930
Earnings Per Share:	Earnings Per Share:									Earnings Per Share:
Basic	Basic	$	2.02	$	1.27	$	5.82	$	3.02	Basic	$	2.21	$	2.02	$	5.67	$	5.82
Diluted	Diluted	$	2.01	$	1.26	$	5.78	$	2.99	Diluted	$	2.19	$	2.01	$	5.63	$	5.78

See accompanying notes to consolidated financial statements.

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OTTER TAIL CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (unaudited)


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands)	(in thousands)	2022		2021		2022		2021		(in thousands)	2023		2022		2023		2022

Net Income	Net Income	$	84,239	$	52,754	$	242,179	$	125,152	Net Income	$	91,974	$	84,239	$	236,424	$	242,179
Other Comprehensive Income (Loss):	Other Comprehensive Income (Loss):									Other Comprehensive Income (Loss):
Unrealized Loss on Available-for-Sale Securities, net of tax benefit of $46, $7, $127, and $27		(171)		(26)		(476)		(101)
Pension and Other Postretirement Benefits, net of tax expense of $(37), $(51), $(8), and $(154)		106		146		22		437
Unrealized Gain (Loss) on Available-for-Sale Securities, net of tax (expense) benefit of $4, $46, $(1) and $127										Unrealized Gain (Loss) on Available-for-Sale Securities, net of tax (expense) benefit of $4, $46, $(1) and $127	(17)		(171)		2		(476)
Pension and Other Postretirement Benefits, net of tax expense of $108, $37, $90 and $8										Pension and Other Postretirement Benefits, net of tax expense of $108, $37, $90 and $8	310		106		257		22
Total Other Comprehensive Income (Loss)	Total Other Comprehensive Income (Loss)	(65)		120		(454)		336		Total Other Comprehensive Income (Loss)	293		(65)		259		(454)
Total Comprehensive Income	Total Comprehensive Income	$	84,174	$	52,874	$	241,725	$	125,488	Total Comprehensive Income	$92,267		$84,174		$236,683		$241,725

See accompanying notes to consolidated financial statements.

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OTTER TAIL CORPORATION

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (unaudited)


(in thousands, except common shares outstanding)	(in thousands, except common shares outstanding)	Common Shares Outstanding	Par Value, Common Shares		Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Total Shareholders' Equity		(in thousands, except common shares outstanding)	Common Shares Outstanding	Par Value, Common Shares		Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Total Shareholders' Equity

Balance, June 30, 2023													Balance, June 30, 2023	41,710,521	$	208,553	$	425,867	$	693,138	$	881	$	1,328,439

Net Income													Net Income	—	—		—		91,974		—		91,974
Other Comprehensive Income													Other Comprehensive Income	—	—		—		—		293		293
Stock Compensation Expense													Stock Compensation Expense	—	—		491		—		—		491
Common Dividends ($0.4375 per share)													Common Dividends ($0.4375 per share)	—	—		—		(18,268)		—		(18,268)
Balance, September 30, 2023													Balance, September 30, 2023	41,710,521	$	208,553	$	426,358	$	766,844	$	1,174	$	1,402,929

Balance, June 30, 2022	Balance, June 30, 2022	41,630,799	$	208,154	$	421,951	$	493,351	$	(6,913)	$	1,116,543	Balance, June 30, 2022	41,630,799	$	208,154	$	421,951	$	493,351	$	(6,913)	$	1,116,543

Stock Issued Under Share-Based Compensation Plans, net of shares withheld for employee taxes	Stock Issued Under Share-Based Compensation Plans, net of shares withheld for employee taxes	153	1		(1)		—		—		—		Stock Issued Under Share-Based Compensation Plans, net of shares withheld for employee taxes	153	1		(1)		—		—		—
Stock Issued Under Dividend Reinvestment and Stock Purchase Plans, net of expenses and repurchased shares		—	—		(132)		—		—		(132)
Stock Issued Under Stock Purchase Plan, net of expenses													Stock Issued Under Stock Purchase Plan, net of expenses	—	—		(132)		—		—		(132)
Net Income	Net Income	—	—		—		84,239		—		84,239		Net Income	—	—		—		84,239		—		84,239
Other Comprehensive Loss	Other Comprehensive Loss	—	—		—		—		(65)		(65)		Other Comprehensive Loss	—	—		—		—		(65)		(65)
Stock Compensation Expense	Stock Compensation Expense	—	—		630		—		—		630		Stock Compensation Expense	—	—		630		—		—		630
Common Dividends ($0.4125 per share)	Common Dividends ($0.4125 per share)	—	—		—		(17,192)		—		(17,192)		Common Dividends ($0.4125 per share)	—	—		—		(17,192)		—		(17,192)
Balance, September 30, 2022	Balance, September 30, 2022	41,630,952	$	208,155	$	422,448	$	560,398	$	(6,978)	$	1,184,023	Balance, September 30, 2022	41,630,952	$	208,155	$	422,448	$	560,398	$	(6,978)	$	1,184,023

Balance, June 30, 2021		41,538,709	$	207,694	$	417,870	$	297,850	$	(8,291)	$	915,123
Balance, December 31, 2022													Balance, December 31, 2022	41,631,113	$	208,156	$	423,034	$	585,212	$	915	$	1,217,317

Stock Issued Under Share-Based Compensation Plans, net of shares withheld for employee taxes	Stock Issued Under Share-Based Compensation Plans, net of shares withheld for employee taxes	1,275	6		(132)		—		—		(126)		Stock Issued Under Share-Based Compensation Plans, net of shares withheld for employee taxes	79,408	397		(3,485)		—		—		(3,088)

Stock Issued Under Stock Purchase Plan, net of expenses													Stock Issued Under Stock Purchase Plan, net of expenses	—	—		(166)		—		—		(166)
Net Income	Net Income	—	—		—		52,754		—		52,754		Net Income	—	—		—		236,424		—		236,424
Other Comprehensive Income	Other Comprehensive Income	—	—		—		—		120		120		Other Comprehensive Income	—	—		—		—		259		259
Stock Compensation Expense	Stock Compensation Expense	—	—		830		—		—		830		Stock Compensation Expense	—	—		6,975		—		—		6,975
Common Dividends ($0.39 per share)		—	—		—		(16,219)		—		(16,219)
Balance, September 30, 2021		41,539,984	$	207,700	$	418,568	$	334,385	$	(8,171)	$	952,482
Common Dividends ($1.3125 per share)													Common Dividends ($1.3125 per share)	—	—		—		(54,792)		—		(54,792)
Balance, September 30, 2023													Balance, September 30, 2023	41,710,521	$	208,553	$	426,358	$	766,844	$	1,174	$	1,402,929

Balance, December 31, 2021	Balance, December 31, 2021	41,551,524	$	207,758	$	419,760	$	369,783	$	(6,524)	$	990,777	Balance, December 31, 2021	41,551,524	$	207,758	$	419,760	$	369,783	$	(6,524)	$	990,777

Stock Issued Under Share-Based Compensation Plans, net of shares withheld for employee taxes	Stock Issued Under Share-Based Compensation Plans, net of shares withheld for employee taxes	79,428	397		(3,321)		—		—		(2,924)		Stock Issued Under Share-Based Compensation Plans, net of shares withheld for employee taxes	79,428	397		(3,321)		—		—		(2,924)
Stock Issued Under Dividend Reinvestment and Stock Purchase Plans, net of expenses and repurchased shares		—	—		(132)		—		—		(132)
Stock Issued Under Stock Purchase Plan, net of expenses													Stock Issued Under Stock Purchase Plan, net of expenses	—	—		(132)		—		—		(132)
Net Income	Net Income	—	—		—		242,179		—		242,179		Net Income	—	—		—		242,179		—		242,179
Other Comprehensive Loss	Other Comprehensive Loss	—	—		—		—		(454)		(454)		Other Comprehensive Loss	—	—		—		—		(454)		(454)
Stock Compensation Expense	Stock Compensation Expense	—	—		6,141		—		—		6,141		Stock Compensation Expense	—	—		6,141		—		—		6,141
Common Dividends ($1.2375 per share)	Common Dividends ($1.2375 per share)	—	—		—		(51,564)		—		(51,564)		Common Dividends ($1.2375 per share)	—	—		—		(51,564)		—		(51,564)
Balance, September 30, 2022	Balance, September 30, 2022	41,630,952	$	208,155	$	422,448	$	560,398	$	(6,978)	$	1,184,023	Balance, September 30, 2022	41,630,952	$	208,155	$	422,448	$	560,398	$	(6,978)	$	1,184,023

Balance, December 31, 2020		41,469,879	$	207,349	$	414,246	$	257,878	$	(8,507)	$	870,966

Stock Issued Under Share-Based Compensation Plans, net of shares withheld for employee taxes		70,105	351		(1,965)		—		—		(1,614)
Stock Issued Under Dividend Reinvestment and Stock Purchase Plans, net of expenses and repurchased shares		—	—		(67)		—		—		(67)
Net Income		—	—		—		125,152		—		125,152
Other Comprehensive Income		—	—		—		—		336		336
Stock Compensation Expense		—	—		6,354		—		—		6,354
Common Dividends ($1.17 per share)		—	—		—		(48,645)		—		(48,645)
Balance, September 30, 2021		41,539,984	$	207,700	$	418,568	$	334,385	$	(8,171)	$	952,482

See accompanying notes to consolidated financial statements.

Table of Contents

OTTER TAIL CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)


		Nine Months Ended September 30,					Nine Months Ended September 30,
(in thousands)	(in thousands)	2022		2021		(in thousands)	2023		2022

Operating Activities	Operating Activities					Operating Activities
Net Income	Net Income	$	242,179	$	125,152	Net Income	$	236,424	$	242,179
Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities:	Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities:					Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities:
Depreciation and Amortization	Depreciation and Amortization	69,829		68,109		Depreciation and Amortization	72,636		69,829
Deferred Tax Credits	Deferred Tax Credits	(558)		(558)		Deferred Tax Credits	(558)		(558)
Deferred Income Taxes	Deferred Income Taxes	23,648		18,835		Deferred Income Taxes	10,800		23,648
Discretionary Contribution to Pension Plan	Discretionary Contribution to Pension Plan	(20,000)		(10,000)		Discretionary Contribution to Pension Plan	—		(20,000)
Allowance for Equity Funds Used During Construction		(938)		(427)
Investment (Gains) Losses						Investment (Gains) Losses	(3,734)		5,406
Stock Compensation Expense	Stock Compensation Expense	6,141		6,354		Stock Compensation Expense	6,975		6,141
Other, Net	Other, Net	5,477		(2,747)		Other, Net	(164)		(867)
Changes in Operating Assets and Liabilities:	Changes in Operating Assets and Liabilities:					Changes in Operating Assets and Liabilities:
Receivables	Receivables	(18,845)		(64,800)		Receivables	(48,782)		(18,845)
Inventories	Inventories	3,632		(22,450)		Inventories	4,873		3,632
Regulatory Assets	Regulatory Assets	170		5,301		Regulatory Assets	8,387		170
Other Assets	Other Assets	1,789		(18,708)		Other Assets	3,899		1,789
Accounts Payable	Accounts Payable	(10,681)		30,921		Accounts Payable	(511)		(10,681)
Accrued and Other Liabilities	Accrued and Other Liabilities	(13,970)		12,027		Accrued and Other Liabilities	13,858		(13,970)
Regulatory Liabilities	Regulatory Liabilities	(1,208)		2,350		Regulatory Liabilities	21,601		(1,208)
Pension and Other Postretirement Benefits	Pension and Other Postretirement Benefits	1,308		5,393		Pension and Other Postretirement Benefits	(7,209)		1,308
Net Cash Provided by Operating Activities	Net Cash Provided by Operating Activities	287,973		154,752		Net Cash Provided by Operating Activities	318,495		287,973
Investing Activities	Investing Activities					Investing Activities
Capital Expenditures	Capital Expenditures	(123,227)		(117,312)		Capital Expenditures	(229,849)		(123,227)
Proceeds from Disposal of Noncurrent Assets	Proceeds from Disposal of Noncurrent Assets	3,803		5,819		Proceeds from Disposal of Noncurrent Assets	4,746		3,803
Cash Used for Investments and Other Assets	Cash Used for Investments and Other Assets	(8,132)		(5,591)		Cash Used for Investments and Other Assets	(6,915)		(8,132)
Net Cash Used in Investing Activities	Net Cash Used in Investing Activities	(127,556)		(117,084)		Net Cash Used in Investing Activities	(232,018)		(127,556)
Financing Activities	Financing Activities					Financing Activities
Net Borrowings (Repayments) on Short-Term Debt		(91,163)		16,860
Net Borrowings (Repayments) of Short-Term Debt						Net Borrowings (Repayments) of Short-Term Debt	43,292		(91,163)

Proceeds from Issuance of Long-Term Debt	Proceeds from Issuance of Long-Term Debt	90,000		—		Proceeds from Issuance of Long-Term Debt	—		90,000
Payments for Retirement of Long-Term Debt	Payments for Retirement of Long-Term Debt	(30,000)		(169)		Payments for Retirement of Long-Term Debt	—		(30,000)
Dividends Paid	Dividends Paid	(51,564)		(48,645)		Dividends Paid	(54,792)		(51,564)
Payments for Shares Withheld for Employee Tax Obligations	Payments for Shares Withheld for Employee Tax Obligations	(2,942)		(1,633)		Payments for Shares Withheld for Employee Tax Obligations	(3,088)		(2,942)
Other, net	Other, net	(3,298)		(3,972)		Other, net	(1,671)		(3,298)
Net Cash Used in Financing Activities	Net Cash Used in Financing Activities	(88,967)		(37,559)		Net Cash Used in Financing Activities	(16,259)		(88,967)
Net Change in Cash and Cash Equivalents	Net Change in Cash and Cash Equivalents	71,450		109		Net Change in Cash and Cash Equivalents	70,218		71,450
Cash and Cash Equivalents at Beginning of Period	Cash and Cash Equivalents at Beginning of Period	1,537		1,163		Cash and Cash Equivalents at Beginning of Period	118,996		1,537
Cash and Cash Equivalents at End of Period	Cash and Cash Equivalents at End of Period	$	72,987	$	1,272	Cash and Cash Equivalents at End of Period	$	189,214	$	72,987

Supplemental Disclosure of Noncash Investing Activities	Supplemental Disclosure of Noncash Investing Activities					Supplemental Disclosure of Noncash Investing Activities
Accrued Property, Plant and Equipment Additions	Accrued Property, Plant and Equipment Additions	$	12,438	$	14,358	Accrued Property, Plant and Equipment Additions	$	13,154	$	12,438

See accompanying notes to consolidated financial statements

Table of Contents

OTTER TAIL CORPORATION

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

1. Summary of Significant Accounting Policies

Overview

Otter Tail Corporation (OTC) and its subsidiaries (collectively, the "Company", "us", "our" or "we") form a diverse, multi-platform business consisting of a vertically integrated, regulated utility with generation, transmission and distribution facilities complemented by manufacturing businesses providing metal fabrication for custom machine parts and metal components, manufacturing of extruded and thermoformed plastic products, and manufacturing of polyvinyl chloride (PVC) pipe products. We classify our business into three segments: Electric, Manufacturing and Plastics.

Basis of Presentation

The unaudited consolidated financial statements included herein have been prepared pursuant to the rules and regulations of the SEC for interim reporting. Accordingly, they do not include all the information and footnotes required by generally accepted accounting principles. In the opinion of management, we have included all adjustments, including normal recurring accruals, necessary for a fair presentation of the consolidated financial statements for the periods presented. The consolidated financial statements and condensed notes thereto should be read in conjunction with the consolidated financial statements and notes included in our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2021.~~2022.

Because of the seasonality of our businesses and other factors, the earnings for the three and nine months ended September 30, ~~2022~~2023 should not be taken as an indication of earnings for all or any part of the balance of the current year or as an indication of earnings for future years.

Use of Estimates

We use estimates based on the best information available in recording transactions and balances resulting from business operations. As better information becomes available or actual amounts are known, the recorded estimates are revised. Consequently, operating results can be affected by revisions to prior accounting estimates.

Reclassifications

Certain reclassifications of amounts previously reported have been made to the accompanying consolidated statements of ~~shareholders' equity and consolidated statements of~~ cash flows to maintain consistency and comparability between periods presented. Other, net operating cash flows previously reported for the nine months ended September 30, 2022, included $5.4 million of investment losses, which are presented separately in the current period, and excluded $0.9 million of allowance for equity funds used during construction, which were previously presented separately. The reclassifications had no impact on previously reported ~~shareholders' equity,~~ net cash provided by operating activities, net cash used in investing activities, net cash used in financing activities, or cash and cash equivalents.

Concentration of Deposits and Investments

The Company has financial instruments that potentially subject us to a concentration risk, including cash and cash equivalents held in deposit and money market accounts with various financial institutions. These deposits are guaranteed by the Federal Deposit Insurance Corporation up to an insurance limit of $250,000. Currently, our cash and cash equivalents significantly exceed federally insured levels.

2. Segment Information

~~We classify~~The classification of our business into three segments, Electric, Manufacturing, and Plastics is consistent with our business strategy, organizational structure and our internal reporting and review processes used by our chief operating decision maker to make decisions regarding allocation of resources, to assess operating performance and to make strategic decisions.

Certain assets and costs are not allocated to our operating segments. Corporate operating costs include items such as corporate staff and overhead costs, the results of our captive insurance company and other items excluded from the measurement of operating segment performance. Corporate assets consist primarily of cash and cash equivalents, prepaid expenses, investments and fixed assets. Corporate is not an operating segment, rather it is added to operating segment totals to reconcile to consolidated amounts.

Table of Contents

Information for each segment and our unallocated corporate costs for the three and nine months ended September 30, ~~2022~~2023 and ~~2021~~2022 are as follows:

Three Months Ended September 30, Nine Months Ended September 30,
(in thousands) 2022 2021 2022 2021
Operating Revenue
Electric $ 142,747 $ 118,775 $ 404,112 $ 348,629
Manufacturing 98,767 89,977 306,921 250,085
Plastics 142,342 107,542 447,767 264,898
Total $ 383,856 $ 316,294 $ 1,158,800 $ 863,612
Net Income (Loss)
Electric $ 24,847 $ 22,528 $ 62,938 $ 55,547
Manufacturing 6,219 4,200 17,858 15,290
Plastics 55,982 28,410 170,788 60,102
Corporate (2,809) (2,384) (9,405) (5,787)
Total $ 84,239 $ 52,754 $ 242,179 $ 125,152

~~Table of~~ ~~Contents~~


	Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands)	2023		2022		2023		2022

Operating Revenue
Electric	$	130,326	$	142,747	$	395,997	$	404,112
Manufacturing	100,678		98,767		309,936		306,921
Plastics	127,052		142,342		328,920		447,767
Total	$	358,056	$	383,856	$	1,034,853	$	1,158,800
Net Income (Loss)
Electric	$	24,565	$	24,847	$	67,420	$	62,938
Manufacturing	7,446		6,219		20,276		17,858
Plastics	59,162		55,982		148,240		170,788
Corporate	801		(2,809)		488		(9,405)
Total	$	91,974	$	84,239	$	236,424	$	242,179

The following provides the identifiable assets by segment and corporate assets as of September 30, ~~2022~~2023 and December 31, ~~2021:~~2022:


(in thousands)	(in thousands)	September 30, 2022		December 31, 2021		(in thousands)	September 30, 2023		December 31, 2022

Identifiable Assets	Identifiable Assets					Identifiable Assets
Electric	Electric	$	2,347,461	$	2,283,776	Electric	$	2,489,682	$	2,351,961
Manufacturing	Manufacturing	253,819		251,044		Manufacturing	261,044		245,869
Plastics	Plastics	179,925		162,565		Plastics	186,833		126,318
Corporate	Corporate	116,699		57,445		Corporate	249,910		177,513
Total	Total	$	2,897,904	$	2,754,830	Total	$	3,187,469	$	2,901,661

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3. Revenue

Presented below are our operating revenues tofrom external customers, in total and by amounts arising from contracts with customers and alternative revenue program (ARP) arrangements, disaggregated by revenue source and segment for the three and nine months ended September 30, ~~2022~~2023 and ~~2021:~~2022:


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands)	(in thousands)	2022		2021		2022		2021		(in thousands)	2023		2022		2023		2022

Operating Revenues	Operating Revenues									Operating Revenues
Electric Segment	Electric Segment									Electric Segment
Retail: Residential	Retail: Residential	$	35,122	$	33,902	$	108,883	$	100,067	Retail: Residential	$	33,483	$	35,122	$	104,433	$	108,883
Retail: Commercial and Industrial	Retail: Commercial and Industrial	83,022		60,557		232,532		185,376		Retail: Commercial and Industrial	75,044		83,022		230,517		232,532
Retail: Other	Retail: Other	2,033		1,979		6,004		5,687		Retail: Other	1,972		2,033		5,717		6,004
Total Retail	Total Retail	120,177		96,438		347,419		291,130		Total Retail	110,499		120,177		340,667		347,419
Transmission	Transmission	13,156		13,300		37,409		37,085		Transmission	13,670		13,156		40,606		37,409
Wholesale	Wholesale	7,196		6,944		13,196		14,711		Wholesale	4,752		7,196		9,260		13,196
Other	Other	2,218		2,093		6,088		5,703		Other	1,405		2,218		5,464		6,088
Total Electric Segment	Total Electric Segment	142,747		118,775		404,112		348,629		Total Electric Segment	130,326		142,747		395,997		404,112
Manufacturing Segment	Manufacturing Segment									Manufacturing Segment
Metal Parts and Tooling	Metal Parts and Tooling	84,054		76,455		261,923		210,141		Metal Parts and Tooling	89,518		84,054		268,981		261,923
Plastic Products and Tooling	Plastic Products and Tooling	12,723		10,198		36,584		30,624		Plastic Products and Tooling	8,847		12,723		33,059		36,584
Scrap Metal Sales		1,990		3,324		8,414		9,320
Scrap Metal										Scrap Metal	2,313		1,990		7,896		8,414
Total Manufacturing Segment	Total Manufacturing Segment	98,767		89,977		306,921		250,085		Total Manufacturing Segment	100,678		98,767		309,936		306,921
Plastics Segment	Plastics Segment									Plastics Segment
PVC Pipe	PVC Pipe	142,342		107,542		447,767		264,898		PVC Pipe	127,052		142,342		328,920		447,767
Total Operating Revenue	Total Operating Revenue	383,856		316,294		1,158,800		863,612		Total Operating Revenue	358,056		383,856		1,034,853		1,158,800
Less: Non-contract Revenues Included Above	Less: Non-contract Revenues Included Above									Less: Non-contract Revenues Included Above
Electric Segment - ARP Revenues	Electric Segment - ARP Revenues	(548)		(33)		(7,937)		(2,790)		Electric Segment - ARP Revenues	(744)		(548)		(2,289)		(7,937)
Total Operating Revenues from Contracts with Customers	Total Operating Revenues from Contracts with Customers	$	384,404	$	316,327	$	1,166,737	$	866,402	Total Operating Revenues from Contracts with Customers	$	358,800	$	384,404	$	1,037,142	$	1,166,737

4. Select Balance Sheet Information

Receivables and Allowance for Credit Losses

Receivables as of September 30, ~~2022~~2023 and December 31, ~~2021~~2022 are as follows:

(in thousands) September 30,
2022 December 31,
2021
Receivables
Trade $ 167,480 $ 142,297
Other 9,052 10,591
Unbilled Receivables 18,813 23,901
Total Receivables 195,345 176,789
Less: Allowance for Credit Losses (1,548) (1,836)
Receivables, net of allowance for credit losses $ 193,797 $ 174,953

~~Table of~~ ~~Contents~~


(in thousands)	September 30, 2023		December 31, 2022

Receivables
Trade	$	171,745	$	112,126
Other	7,738		9,983
Unbilled Receivables	15,679		23,932
Total Receivables	195,162		146,041
Less: Allowance for Credit Losses	1,987		1,648
Receivables, net of allowance for credit losses	$	193,175	$	144,393

The following is a summary of activity in the allowance for credit losses for the nine months ended September 30, ~~2022~~2023 and ~~2021:~~2022:


(in thousands)	(in thousands)	2022		2021		(in thousands)	2023		2022

Beginning Balance, January 1	Beginning Balance, January 1	$	1,836	$	3,215	Beginning Balance, January 1	$	1,648	$	1,836
Additions Charged to Expense	Additions Charged to Expense	518		177		Additions Charged to Expense	1,176		518
Reductions for Amounts Written Off, Net of Recoveries	Reductions for Amounts Written Off, Net of Recoveries	(806)		(1,060)		Reductions for Amounts Written Off, Net of Recoveries	(837)		(806)
Ending Balance, September 30	Ending Balance, September 30	$	1,548	$	2,332	Ending Balance, September 30	$	1,987	$	1,548

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Inventories

Inventories consist of the following as of September 30, ~~2022~~2023 and December 31, ~~2021:~~2022:


(in thousands)	(in thousands)	September 30, 2022		December 31, 2021		(in thousands)	September 30, 2023		December 31, 2022

Raw Material, Fuel and Supplies	Raw Material, Fuel and Supplies	$	74,249	$	72,882	Raw Material, Fuel and Supplies	$	72,657	$	70,374
Work in Process	Work in Process	33,765		35,705		Work in Process	30,267		31,766
Finished Goods	Finished Goods	38,362		39,903		Finished Goods	39,083		43,812
Total Inventories	Total Inventories	$	146,376	$	148,490	Total Inventories	$	142,007	$	145,952

Investments

The following is a summary of our investments as of September 30, ~~2022~~2023 and December 31, ~~2021:~~2022:


(in thousands)	(in thousands)	September 30, 2022		December 31, 2021		(in thousands)	September 30, 2023		December 31, 2022

Corporate-Owned Life Insurance Policies	Corporate-Owned Life Insurance Policies	$	37,288	$	41,078	Corporate-Owned Life Insurance Policies	$	39,794	$	38,991
Debt Securities		8,710		9,202
Corporate and Government Debt Securities						Corporate and Government Debt Securities	8,986		8,761
Money Market Funds	Money Market Funds	1,854		949		Money Market Funds	3,223		1,560
Mutual Funds	Mutual Funds	5,084		5,432		Mutual Funds	7,289		5,503
Other Investments	Other Investments	30		29		Other Investments	30		30
Total Investments	Total Investments	$	52,966	$	56,690	Total Investments	$	59,322	$	54,845

The amount of unrealized gains and losses on debt securities as of September 30, ~~2022~~2023 and December 31, ~~2021~~2022 was not material and no unrealized losses were deemed to be other-than-temporary. In addition, the amount of unrealized gains and losses on marketable equity securities still held as of September 30, ~~2022~~2023 and December 31, ~~2021~~2022 was not material.

Property, Plant and Equipment

Major classes of property, plant and equipment as of September 30, ~~2022~~2023 and December 31, ~~2021~~2022 include:


(in thousands)	(in thousands)	September 30, 2022		December 31, 2021		(in thousands)	September 30, 2023		December 31, 2022

Electric Plant	Electric Plant					Electric Plant
Electric Plant in Service	Electric Plant in Service	$	2,795,649	$	2,758,445	Electric Plant in Service	$	3,009,031	$	2,844,379
Construction Work in Progress	Construction Work in Progress	130,486		74,926		Construction Work in Progress	129,810		113,932
Total Gross Electric Plant	Total Gross Electric Plant	2,926,135		2,833,371		Total Gross Electric Plant	3,138,841		2,958,311
Less Accumulated Depreciation and Amortization	Less Accumulated Depreciation and Amortization	850,741		817,302		Less Accumulated Depreciation and Amortization	889,136		859,988
Net Electric Plant	Net Electric Plant	2,075,394		2,016,069		Net Electric Plant	2,249,705		2,098,323
Nonelectric Property, Plant and Equipment	Nonelectric Property, Plant and Equipment					Nonelectric Property, Plant and Equipment
Nonelectric Property, Plant and Equipment in Service	Nonelectric Property, Plant and Equipment in Service	281,584		273,950		Nonelectric Property, Plant and Equipment in Service	303,641		293,928
Construction Work in Progress	Construction Work in Progress	20,746		16,611		Construction Work in Progress	39,885		15,170
Total Gross Nonelectric Property, Plant and Equipment	Total Gross Nonelectric Property, Plant and Equipment	302,330		290,561		Total Gross Nonelectric Property, Plant and Equipment	343,526		309,098
Less Accumulated Depreciation and Amortization	Less Accumulated Depreciation and Amortization	191,081		182,025		Less Accumulated Depreciation and Amortization	205,971		194,704
Net Nonelectric Property, Plant and Equipment	Net Nonelectric Property, Plant and Equipment	111,249		108,536		Net Nonelectric Property, Plant and Equipment	137,555		114,394
Net Property, Plant and Equipment	Net Property, Plant and Equipment	$	2,186,643	$	2,124,605	Net Property, Plant and Equipment	$	2,387,260	$	2,212,717

On January 3, 2023, we purchased the Ashtabula III wind farm, located in eastern North Dakota, which consists of 39 wind turbines and the related infrastructure, adding 62.4 megawatts of nameplate capacity to our owned generation assets. The total purchase price of the acquisition was $50.6 million.

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5. Regulatory Matters

Regulatory Assets and Liabilities

The following presents our current and long-term regulatory assets and liabilities as of September 30, ~~2022~~2023 and December 31, ~~2021~~2022 and the period we expect to recover or refund such amounts:

Period of September 30, 2022 December 31, 2021
(in thousands) Recovery/Refund Current Long-Term Current Long Term
Regulatory Assets
Pension and Other Postretirement Benefit Plans1
Various $ 7,791 $ 110,183 $ 7,791 $ 114,961
Alternative Revenue Program Riders2
Up to 2 years 7,528 1,988 11,889 5,564
Asset Retirement Obligations1
Asset lives — 1,323 — 742
ISO Cost Recovery Trackers1
Up to 2 years 660 740 — 1,342
Unrecovered Project Costs1
Up to 5 years 320 1,063 2,136 1,455
Deferred Rate Case Expenses1
Various 412 848 607 1,131
Debt Reacquisition Premiums1
10 years 25 222 100 240
Fuel Clause Adjustments1
Up to 1 year 13,185 — 4,819 —
Other1
Various — 226 — 73
Total Regulatory Assets $ 29,921 $ 116,593 $ 27,342 $ 125,508
Regulatory Liabilities
Deferred Income Taxes Asset lives $ — $ 128,397 $ — $ 129,437
Plant Removal Obligations Asset lives 8,526 106,008 8,306 101,595
Fuel Clause Adjustments Up to 1 year — — 1,554 —
Alternative Revenue Program Riders Various 4,178 6,048 5,772 3,336
Pension and Other Postretirement Benefit Plans Up to 1 year 2,603 — 2,603 —
Derivative Instruments Various 5,532 — 6,214 —
Other Various 275 92 395 62
Total Regulatory Liabilities $ 21,114 $ 240,545 $ 24,844 $ 234,430
1Costs subject to recovery without a rate of return.
2Amount eligible for recovery includes an incentive or rate of return.

~~Minnesota Rate Case~~

On November 2, 2020, Otter Tail Power Company (OTP) filed an initial request with the Minnesota Public Utilities Commission (MPUC) for an increase in revenue recoverable through base rates in Minnesota, and on December 3, 2020, the MPUC approved an interim annual rate increase of $6.9 million, or 3.2%, effective January 1, 2021.

On February 1, 2022, the MPUC issued its written order on final rates. The key provisions of the order included a revenue requirement of $209.0 million, based on a return on rate base of 7.18% and an allowed return on equity of 9.48% on an equity ratio of 52.5%. The order also authorized recovery of our remaining Hoot Lake Plant net asset over a five-year period and approved the requested decoupling mechanism for most residential and commercial customer rate groups with a cap of 4% of annual base revenues.

On May 12, 2022, OTP's final rate case compliance filing was approved by the MPUC. The filing included final revenue calculations, rate design and resulting tariff revisions, along with a determination of the interim rate refund, which resulted in an increase in revenues during the second quarter of 2022 of $4.1 million. Final rates took effect on July 1, 2022, and interim rate refunds of $15.3 million were applied to customer accounts in the third quarter of 2022.


	Period of	September 30, 2023				December 31, 2022
(in thousands)	Recovery/Refund	Current		Long-Term		Current		Long-Term

Regulatory Assets
Pension and Other Postretirement Benefit Plans1	Various	$	—	$	86,286	$	—	$	88,354
Alternative Revenue Program Riders2	Up to 2 years	5,780		118		5,679		2,508
Asset Retirement Obligations1	Asset lives	—		—		—		1,467
Deferred Income Taxes	Asset lives	—		931		—		—
ISO Cost Recovery Trackers1	Up to 2 years	144		260		575		314
Unrecovered Project Costs1	Up to 4 years	349		962		320		990
Deferred Rate Case Expenses1	Up to 3 years	377		471		377		754
Fuel Clause Adjustments1	Up to 1 year	9,141		—		10,893		—
Derivative Instruments1	Up to 2 years	1,225		228		7,130		—
Other1	Various	25		235		25		268
Total Regulatory Assets		$	17,041	$	89,491	$	24,999	$	94,655
Regulatory Liabilities
Deferred Income Taxes	Asset lives	$	—	$	128,886	$	—	$	131,480
Plant Removal Obligations	Asset lives	8,456		117,359		8,509		105,733
Fuel Clause Adjustments	Up to 1 year	12,217		—		365		—
Alternative Revenue Program Riders	Up to 1 year	8,426		—		2,504		—
North Dakota PTC Refunds	Asset lives	—		10,281		—		7,136
Pension and Other Postretirement Benefit Plans	Various	2,279		19,026		5,589		—



Other	Various	907		257		333		148
Total Regulatory Liabilities		$	32,285	$	275,809	$	17,300	$	244,497

1Costs subject to recovery without a rate of return.
2Amount eligible for recovery includes an incentive or rate of return.

6. Short-Term and Long-Term Borrowings

The following is a summary of our outstanding short- and long-term borrowings by borrower, OTC or ~~OTP,~~Otter Tail Power Company (OTP), as of September 30, ~~2022~~2023 and December 31, ~~2021:~~

~~Table of~~ ~~Contents~~

2022:

Short-Term Debt

The following is a summary of our lines of credit as of September 30, ~~2022~~2023 and December 31, ~~2021:~~2022:


				September 30, 2022						December 31, 2021					September 30, 2023						December 31, 2022
(in thousands)	(in thousands)	Borrowing Limit		Amount Outstanding		Letters of Credit		Amount Available		Amount Available		(in thousands)	Borrowing Limit		Amount Outstanding		Letters of Credit		Amount Available		Amount Available

OTC Credit Agreement	OTC Credit Agreement	$	170,000	$	—	$	—	$	170,000	$	147,363	OTC Credit Agreement	$	170,000	$	—	$	—	$	170,000	$	170,000
OTP Credit Agreement	OTP Credit Agreement	170,000		—		9,919		160,081		88,315		OTP Credit Agreement	170,000		51,495		9,573		108,932		152,223
Total	Total	$	340,000	$	—	$	9,919	$	330,081	$	235,678	Total	$	340,000	$	51,495	$	9,573	$	278,932	$	322,223

Table of each credit facility from September 30, 2026 to October 29, 2027, and to replace LIBOR as a benchmark interest rate with the Secured Overnight Finance Rate (SOFR). The adoption of SOFR as a benchmark interest rate is in advance of the scheduled elimination of LIBOR as a benchmark interest rate on June 30, 2023. No other significant terms or conditions, including borrowing capacity, credit spreads or financial covenants, were modified under these amendments and restatements.Contents

Long-Term Debt

The following is a summary of outstanding long-term debt by borrower as of September 30, ~~2022~~2023 and December 31, ~~2021:~~2022:

(in thousands)
Borrower Debt Instrument Rate Maturity September 30,
2022 December 31,
2021
OTC Guaranteed Senior Notes 3.55% 12/15/26 $ 80,000 $ 80,000
OTP Series 2007B Senior Unsecured Notes 6.15% 08/20/22 — 30,000
OTP Series 2007C Senior Unsecured Notes 6.37% 08/02/27 42,000 42,000
OTP Series 2013A Senior Unsecured Notes 4.68% 02/27/29 60,000 60,000
OTP Series 2019A Senior Unsecured Notes 3.07% 10/10/29 10,000 10,000
OTP Series 2020A Senior Unsecured Notes 3.22% 02/25/30 10,000 10,000
OTP Series 2020B Senior Unsecured Notes 3.22% 08/20/30 40,000 40,000
OTP Series 2021A Senior Unsecured Notes 2.74% 11/29/31 40,000 40,000
OTP Series 2007D Senior Unsecured Notes 6.47% 08/20/37 50,000 50,000
OTP Series 2019B Senior Unsecured Notes 3.52% 10/10/39 26,000 26,000
OTP Series 2020C Senior Unsecured Notes 3.62% 02/25/40 10,000 10,000
OTP Series 2013B Senior Unsecured Notes 5.47% 02/27/44 90,000 90,000
OTP Series 2018A Senior Unsecured Notes 4.07% 02/07/48 100,000 100,000
OTP Series 2019C Senior Unsecured Notes 3.82% 10/10/49 64,000 64,000
OTP Series 2020D Senior Unsecured Notes 3.92% 02/25/50 15,000 15,000
OTP Series 2021B Senior Unsecured Notes 3.69% 11/29/51 100,000 100,000
OTP Series 2022A Senior Unsecured Notes 3.77% 05/20/52 90,000 —
Total $ 827,000 $ 767,000
Less: Current Maturities, Net of Unamortized Debt Issuance Costs — 29,983
Unamortized Long-Term Debt Issuance Costs 3,240 3,003
Total Long-Term Debt, Net of Unamortized Debt Issuance Costs $ 823,760 $ 734,014

On June 10, 2021, OTP entered into a Note Purchase Agreement pursuant to which OTP agreed to issue, in a private placement transaction, $230.0 million of senior unsecured notes consisting of (a) $40.0 million of 2.74% Series 2021A Senior Unsecured Notes due November 29, 2031, (b) $100.0 million of 3.69% Series 2021B Senior Unsecured Notes due November 29, 2051 and (c) $90.0 million of 3.77% Series 2022A Senior Unsecured Notes due May 20, 2052. In November 2021, OTP issued its Series 2021A and Series 2021B Notes for aggregate proceeds of $140.0 million, which were used to repay the Series 2011A Notes in full. In May 2022, OTP issued its Series 2022A Notes for proceeds of $90.0 million, which were used to repay the Series 2007B Senior Unsecured Notes at their maturity in August 2022, to repay short-term borrowings, to fund capital expenditures, and for other general corporate purposes.


					(in thousands)
Borrower		Debt Instrument	Rate	Maturity	September 30, 2023		December 31, 2022

OTC		Guaranteed Senior Notes	3.55%	12/15/26	$	80,000	$	80,000
OTP		Series 2007C Senior Unsecured Notes	6.37%	08/02/27	42,000		42,000
OTP		Series 2013A Senior Unsecured Notes	4.68%	02/27/29	60,000		60,000
OTP		Series 2019A Senior Unsecured Notes	3.07%	10/10/29	10,000		10,000
OTP		Series 2020A Senior Unsecured Notes	3.22%	02/25/30	10,000		10,000
OTP		Series 2020B Senior Unsecured Notes	3.22%	08/20/30	40,000		40,000
OTP		Series 2021A Senior Unsecured Notes	2.74%	11/29/31	40,000		40,000
OTP		Series 2007D Senior Unsecured Notes	6.47%	08/20/37	50,000		50,000
OTP		Series 2019B Senior Unsecured Notes	3.52%	10/10/39	26,000		26,000
OTP		Series 2020C Senior Unsecured Notes	3.62%	02/25/40	10,000		10,000
OTP		Series 2013B Senior Unsecured Notes	5.47%	02/27/44	90,000		90,000
OTP		Series 2018A Senior Unsecured Notes	4.07%	02/07/48	100,000		100,000
OTP		Series 2019C Senior Unsecured Notes	3.82%	10/10/49	64,000		64,000
OTP		Series 2020D Senior Unsecured Notes	3.92%	02/25/50	15,000		15,000
OTP		Series 2021B Senior Unsecured Notes	3.69%	11/29/51	100,000		100,000
OTP		Series 2022A Senior Unsecured Notes	3.77%	05/20/52	90,000		90,000
Total					$	827,000	$	827,000

Less:	Unamortized Long-Term Debt Issuance Costs				3,002		3,179
Total Long-Term Debt, Net of Unamortized Debt Issuance Costs					$	823,998	$	823,821

Financial Covenants

Certain of OTC's and OTP's short- and long-term debt agreements require the borrower, whether OTC or OTP, to maintain certain financial covenants, including a maximum debt to total capitalization ratio of 0.60 to 1.00, a minimum interest and dividend coverage ratio of 1.50 to 1.00, and a maximum level of priority indebtedness. As of September 30, ~~2022,~~2023, OTC and OTP were in compliance with these financial covenants.

~~Table of~~ ~~Contents~~

7. Employee Postretirement Benefits

Pension Plan and Other Postretirement Benefits

The Company sponsors a noncontributory funded pension plan (the "Pension Plan"), an unfunded, nonqualified Executive Survivor and Supplemental Retirement Plan (the "ESSRP"), both accounted for as defined benefit pension plans, and a postretirement healthcare plan accounted for as an other postretirement benefit plan.

Table of Contents

The following ~~tables include~~table includes the components of net periodic benefit cost of(income) related to our defined benefit pension plans and other postretirement benefits for the three and nine months ended September 30, ~~2022~~2023 and ~~2021:~~2022:


		Three Months Ended September 30,													Three Months Ended September 30,
		Pension Benefits (Pension Plan)				Pension Benefits (ESSRP)				Postretirement Benefits					Pension Benefits (Pension Plan)				Pension Benefits (ESSRP)				Postretirement Benefits
(in thousands)	(in thousands)	2022		2021		2022		2021		2022		2021		(in thousands)	2023		2022		2023		2022		2023		2022

Service Cost	Service Cost	$	1,644	$	1,866	$	48	$	47	$	335	$	430	Service Cost	$	925	$	1,644	$	18	$	48	$	152	$	335
Interest Cost	Interest Cost	3,086		2,915		335		307		510		472		Interest Cost	4,109		3,086		472		335		668		510
Expected Return on Assets	Expected Return on Assets	(5,921)		(5,590)		—		—		—		—		Expected Return on Assets	(6,479)		(5,921)		—		—		—		—
Amortization of Prior Service Cost	Amortization of Prior Service Cost	—		—		—		—		(1,433)		(1,432)		Amortization of Prior Service Cost	—		—		—		—		(1,433)		(1,433)
Amortization of Net Actuarial Loss	Amortization of Net Actuarial Loss	1,966		2,728		141		154		765		943		Amortization of Net Actuarial Loss	—		1,966		—		141		—		765
Net Periodic Benefit Cost		$	775	$	1,919	$	524	$	508	$	177	$	413
Net Periodic Benefit Cost (Income)														Net Periodic Benefit Cost (Income)	$	(1,445)	$	775	$	490	$	524	$	(613)	$	177

		Nine Months Ended September 30,													Nine Months Ended September 30,
		Pension Benefits (Pension Plan)				Pension Benefits (ESSRP)				Postretirement Benefits					Pension Benefits (Pension Plan)				Pension Benefits (ESSRP)				Postretirement Benefits
(in thousands)	(in thousands)	2022		2021		2022		2021		2022		2021		(in thousands)	2023		2022		2023		2022		2023		2022

Service Cost	Service Cost	$	4,932	$	5,597	$	146	$	140	$	1,004	$	1,291	Service Cost	$	2,774	$	4,932	$	54	$	146	$	458	$	1,004
Interest Cost	Interest Cost	9,258		8,745		1,006		921		1,531		1,418		Interest Cost	12,327		9,258		1,417		1,006		2,006		1,531
Expected Return on Assets	Expected Return on Assets	(17,763)		(16,769)		—		—		—		—		Expected Return on Assets	(19,436)		(17,763)		—		—		—		—
Amortization of Prior Service Cost	Amortization of Prior Service Cost	—		—		—		—		(4,300)		(4,299)		Amortization of Prior Service Cost	—		—		—		—		(4,300)		(4,300)
Amortization of Net Actuarial Loss	Amortization of Net Actuarial Loss	5,899		8,185		425		465		2,297		2,830		Amortization of Net Actuarial Loss	—		5,899		—		425		—		2,297
Net Periodic Benefit Cost		$	2,326	$	5,758	$	1,577	$	1,526	$	532	$	1,240
Net Periodic Benefit Cost (Income)														Net Periodic Benefit Cost (Income)	$	(4,335)	$	2,326	$	1,471	$	1,577	$	(1,836)	$	532

The following table includes the impact of regulation on the recognition of periodic benefit cost (income) arising from pension and other postretirement benefits for the three and nine months ended September 30, ~~2022~~2023 and ~~2021:~~2022:

Three Months Ended September 30, Nine Months Ended September 30,
(in thousands) 2022 2021 2022 2021
Net Periodic Benefit Cost $ 1,476 $ 2,840 $ 4,435 $ 8,524
Net Amount Amortized (Deferred) Due to the Effect of Regulation 499 8 823 15
Net Periodic Benefit Cost Recognized $ 1,975 $ 2,848 $ 5,258 $ 8,539


	Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands)	2023		2022		2023		2022

Net Periodic Benefit Cost (Income)	$	(1,568)	$	1,476	$	(4,700)	$	4,435
Net Amount Amortized Due to the Effect of Regulation	374		499		864		823
Net Periodic Benefit Cost (Income) Recognized	$	(1,194)	$	1,975	$	(3,836)	$	5,258

We had no minimum funding requirements for our Pension Plan or any other postretirement benefit plans as of December 31, ~~2021, but~~2022. We did not make any contributions to our Pension Plan during the nine months ended September 30, 2023. We made a discretionary contribution ~~of $20.0 million~~ to our Pension Plan ~~in February~~of $20.0 million during the nine months ended September 30, 2022.

In the third quarter of 2023, the Company amended its postretirement healthcare plan to eliminate, for Medicare-eligible participants, the employer-sponsored group waiver medical plan and instead allow participants to select an individual medical plan through a private marketplace exchange. The Company will provide these plan participants with an annual reimbursement to subsidize their medical premiums. The effect of the plan amendment reduced the Company’s projected benefit obligation by $20.1 million as of September 30, 2023. The reduced benefit obligation included a $2.6 million reduction attributable to an increase in the discount rate used to measure the plan liability, which was 6.06%, compared to 5.52% at December 31, 2022. Beginning in October 2023, the $17.5 million of savings attributable to the plan change will be recognized as a reduction to expense over 4.8 years, the expected remaining service period to retirement-age eligibility for active participants.

Table of Contents

8. Income Taxes

The reconciliation of the statutory federal income tax rate to our effective tax rate for each of the three and nine months ended September 30, ~~2022~~2023 and ~~2021~~2022 is as follows:


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended September 30,								Nine Months Ended September 30,
		2022		2021		2022		2021			2023				2022				2023				2022

Federal Statutory Rate		21.0	%	21.0	%	21.0	%	21.0	%
Income Taxes at Federal Statutory Rate										Income Taxes at Federal Statutory Rate	$	24,508	21.0	%	$	22,418	21.0	%	$	61,849	21.0	%	$	64,748	21.0	%
Increases (Decreases) in Tax from:	Increases (Decreases) in Tax from:									Increases (Decreases) in Tax from:
State Taxes on Income, Net of Federal Tax	State Taxes on Income, Net of Federal Tax	5.0		5.0		5.0		5.0		State Taxes on Income, Net of Federal Tax	5,832		5.0		5,338		5.0		14,725		5.0		15,416		5.0
Production Tax Credits (PTCs)	Production Tax Credits (PTCs)	(3.6)		(5.0)		(4.1)		(6.0)		Production Tax Credits (PTCs)	(5,192)		(4.4)		(3,828)		(3.6)		(14,421)		(4.9)		(12,514)		(4.1)
Amortization of Excess Deferred Income Taxes	Amortization of Excess Deferred Income Taxes	(0.9)		(1.6)		(0.7)		(2.0)		Amortization of Excess Deferred Income Taxes	(741)		(0.6)		(955)		(0.9)		(2,161)		(0.7)		(2,033)		(0.7)

North Dakota Wind Tax Credit Amortization, Net of Federal Tax	North Dakota Wind Tax Credit Amortization, Net of Federal Tax	(0.1)		(0.2)		(0.2)		(0.3)		North Dakota Wind Tax Credit Amortization, Net of Federal Tax	(220)		(0.2)		(150)		(0.1)		(530)		(0.2)		(505)		(0.2)
Corporate-Owned Life Insurance	Corporate-Owned Life Insurance	0.2		(0.3)		0.4		(0.6)		Corporate-Owned Life Insurance	(120)		(0.1)		241		0.2		(998)		(0.3)		1,383		0.4

Other, Net	Other, Net	(0.5)		(0.6)		0.1		(0.2)		Other, Net	660		0.5		(551)		(0.5)		(371)		(0.2)		(352)		0.1
Effective Tax Rate		21.1	%	18.3	%	21.5	%	16.9	%
Income Tax Expense / Effective Tax Rate										Income Tax Expense / Effective Tax Rate	$	24,727	21.2	%	$	22,513	21.1	%	$	58,093	19.7	%	$	66,143	21.5	%

9. Commitments and Contingencies

Commitments

~~Ashtabula III Purchase.~~Land Easements. ~~On June 23, 2022, OTP exercised its option to acquire the Ashtabula III wind farm, a 62.4 megawatt wind farm located in eastern North Dakota, for $49.7 million, subject to certain closing adjustments.~~ Since 2013, OTP ~~has~~had purchased the wind-generated electricity from the Ashtabula III wind farm pursuant to a power purchase ~~power agreement, and that~~agreement. That agreement granted ~~OTP~~us the option to purchase the wind ~~farm. The~~farm and on January 3, 2023, we completed the purchase ~~has received regulatory approval. We anticipate~~for $50.6 million. In connection with the ~~transaction will close, subject~~purchase, we assumed 51 land easements, not classified as leases, which require annual payments. As of September 30, 2023, the remaining payments to ~~certain customary closing conditions, in January 2023.~~be made under the easements total $4.0 million and the commitment to make payments extends into 2034.

Contingencies

FERC ~~ROE.~~Return on Equity (ROE). In November 2013 and February 2015, customers filed complaints with the Federal Energy Regulatory Commission (FERC) seeking to reduce the return on equity ~~(ROE)~~ component of the transmission rates that Midcontinent Independent System Operator, Inc. (MISO) transmission owners, including OTP, may collect under the MISO tariff rate. FERC's most recent order, issued on November 19, 2020, adopted a revised ROE methodology and set the base ROE at 10.02% (10.52% with an adder) effective for the fifteen-month period from November 2013 to February 2015 and on a prospective basis beginning in September 2016. The order also dismissed any complaints covering the period from February 2015 to May 2016. On August 9, 2022, the U.S. Court of Appeals for the District of Columbia Circuit vacated the FERC order citing a lack of reasoned explanation by FERC in its adoption of its revised ROE methodology as outlined in its November 2020 order. The U.S. Court of Appeals remanded the matter to FERC to reopen the proceedings.

Significant uncertainty exists as to how FERC will proceed upon remand and there is no prescribed timeline under which FERC must act. We have deferred recognition and recorded a refund liability of ~~$2.5~~$2.7 million as of September 30, ~~2022.~~2023. This refund liability reflects our best estimate of amounts previously collected from customers under the MISO tariff rate that may be required to be refunded to customers once all regulatory and judicial proceedings are complete and a final ROE is established for the periods outlined above.

Regional Haze Rule (RHR). The RHR was adopted in an effort to improve visibility in national parks and wilderness areas. The RHR requires states, in coordination with the Environmental Protection Agency (EPA) and other governmental agencies, to develop and implement plans to achieve natural visibility conditions. The second RHR implementation period covers the years 2018-2028. States are required to submit a state implementation plan to assess reasonable progress with the RHR and determine what additional emission reductions are appropriate, if any.

Coyote Station, OTP's jointly owned coal-fired power plant in North Dakota, is subject to assessment in the second implementation period under the North Dakota state implementation plan. The North Dakota Department of Environmental Quality (NDDEQ) submitted its state implementation plan 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 has previously expressed disagreement with the NDDEQ's recommendation to forgo additional emission controls and has indicated that such a plan is not likely to be accepted.

We cannot predict with certainty the impact the state implementation plan may have on our business until the ~~state implementation~~ plan has been approved or otherwise acted on by the EPA. However, significant emission control investments could be required and the recovery of such costs from customers would require regulatory approval. Alternatively, investments in emission control equipment may prove to be uneconomic and result in the early retirement of or the sale of our interest in Coyote Station, subject to regulatory approval. We cannot estimate the ultimate financial effects such a retirement or sale may have on our consolidated operating results, financial position or cash flows, but such amounts could be material and the recovery of such costs in rates would be subject to regulatory approval.

Table of Contents

Self-Funding of Transmission Upgrades. The FERChas granted transmission owners within MISO the unilateral authority to determine the funding mechanism for interconnection transmission upgrades that are necessary to accommodate new generation facilities connecting to the electrical grid. Under existing FERC orders, transmission owners can unilaterally determine whether the generator pays the transmission owner in advance for the transmission upgrade or, alternatively, the transmission owner can elect to fund the upgrade and recover over time from the generator the cost of and a return on the upgrade investment (a self-funding). FERC’s orders granting transmission owners this unilateral funding authority have been judicially contested on the basis that transmission owners may be motivated to discriminate among generators in making funding determinations. In the most recent judicial proceedings, the petitioners argued to the U.S. Court of Appeals for the District of Columbia that FERC did not comply with a previous judicial order to fully develop a record regarding the risk of discrimination and the financial risk absorbed by transmission owners for generator-funded upgrades. On December 2, 2022, the Court of Appeals ruled in favor of the petitioners remanding the matter to FERC, instructing the agency to adequately explain the basis of its orders. The Court of Appeals decision did not vacate transmission owners’ unilateral funding authority.

OTP, as a transmission owner in MISO, has exercised its authority and elected to self-fund previous transmission upgrades necessary to accommodate new system generation. Under such an election, OTP is recovering the cost of the transmission upgrade and a return on that investment from the generator over a contractual period of time. Should FERC, on remand from the Court of Appeals, eliminate transmission owners’ unilateral funding authority on either a prospective or retrospective basis, our financial results would be impacted. We cannot at this time reasonably predict the outcome of this matter given the uncertainty as to how and when FERC may respond to the judicial remand.

Other Contingencies. We are party to litigation and regulatory matters arising in the normal course of business. We regularly analyze relevant information and, as necessary, estimate and record accrued liabilities for legal, regulatory enforcement and other matters in which a loss is probable of occurring and can be reasonably estimated. We believe the effect on our consolidated operating results, financial position and cash flows, if any, for the disposition of all matters pending as of September 30, ~~2022,~~2023, other than those discussed above, will not be material.

~~Table of~~ ~~Contents~~

10. Stockholders' Equity

Registration Statements

On May 3, 2021, we filed a shelf registration statement with the SEC under which we may offer for sale, from time to time, either separately or together in any combination, equity, debt or other securities described in the shelf registration statement. No new debt or equity has been issued pursuant to the registration statement. The registration statement expires in May 2024.

On May 3, 2021, we filed a second registration statement with the SEC for the issuance of up to 1,500,000 common shares under an Automatic Dividend Reinvestment and a Share Purchase Plan, which provides shareholders, retail customers of OTP and other interested investors methods of purchasing our common shares by reinvesting their dividends or making optional cash investments. Shares purchased under the plan may be newly issued common shares or common shares purchased on the open market. During the nine months ended September 30, ~~2022,~~2023, we issued ~~97,046~~81,374 shares under this plan. We repurchased a sufficient number of shares on the open market to satisfy issuance under the plan; accordingly, no proceeds from the issuance were received. As of September 30, ~~2022,~~2023, there were ~~1,287,774~~1,169,619 shares available for purchase or issuance under the plan. The registration statement expires in May 2024.

Dividend Restrictions

OTC is a holding company with no significant operations of its own. The primary source of funds for payments of dividends to OTC's shareholders is from dividends paid or distributions made by OTC's subsidiaries. As a result of certain statutory limitations or regulatory or financing agreements, the amount of distributions allowed to be made by OTC's subsidiaries or the amount of dividends paid by OTC could be restricted. Both the OTC Credit Agreement and the OTP Credit Agreement contain restrictions on the payment of cash dividends upon a default or event of default, including failure to maintain certain financial covenants. As of September 30, ~~2022,~~2023, we were in compliance with these financial covenants.

Under the Federal Power Act, a public utility may not pay dividends from any funds properly included in a capital account. What constitutes “funds properly included in a capital account” is undefined in the Federal Power Act or the related regulations; however, the FERC has consistently interpreted the provision to allow dividends to be paid as long as i) the source of the dividends is clearly disclosed, ii) the dividend is not excessive and iii) there is no self-dealing on the part of corporate officials.

The ~~MPUC~~Minnesota Public Utilities Commission (MPUC) indirectly limits the amount of dividends OTP can pay to OTC by requiring an equity-to-total-capitalization ratio between ~~48.0%~~48.3% and ~~58.7%~~59.1% based on OTP’s capital structure petition effective by order of the MPUC on ~~January 26, 2022.~~August 29, 2023. As of September 30, ~~2022,~~2023, OTP’s equity-to-total-capitalization ratio, including short-term debt, was ~~54.9%~~55.0% and its net assets restricted from distribution totaled approximately ~~$686.6~~$743.5 million. Under the MPUC order, total capitalization for OTP cannot exceed ~~$1.7~~$2.0 billion.

1516

Table of Contents

11. Accumulated Other Comprehensive Income (Loss)

The following ~~shows~~presents the changes in accumulated other comprehensive ~~loss~~income (loss) for the three and nine months ended September 30, ~~2022~~2023 and ~~2021:~~2022:


		Three Months Ended September 30,																	Three Months Ended September 30,
		2022								2021									2023								2022
(in thousands)	(in thousands)	Pension and Other Postretirement Benefits			Net Unrealized Gains (Losses) on Available-for-Sale Securities			Total		Pension and Other Postretirement Benefits			Net Unrealized Gains (Losses) on Available-for-Sale Securities			Total		(in thousands)	Pension and Other Postretirement Benefits			Net Unrealized Gains (Losses) on Available-for-Sale Securities			Total		Pension and Other Postretirement Benefits			Net Unrealized Gains (Losses) on Available-for-Sale Securities			Total
Balance, Beginning of Period	Balance, Beginning of Period	$	(6,621)		$	(292)		$	(6,913)	$	(8,425)		$	134		$	(8,291)	Balance, Beginning of Period	$	1,281		$	(400)		$	881	$	(6,621)		$	(292)		$	(6,913)
Other Comprehensive Loss Before Reclassifications, net of tax	Other Comprehensive Loss Before Reclassifications, net of tax	—			(172)			(172)		—			(26)			(26)		Other Comprehensive Loss Before Reclassifications, net of tax	(275)			(17)			(292)		—			(172)			(172)
Amounts Reclassified from Accumulated Other Comprehensive Income (Loss)	Amounts Reclassified from Accumulated Other Comprehensive Income (Loss)	106		(1)	1		(2)	107		146		(1)	—		(2)	146		Amounts Reclassified from Accumulated Other Comprehensive Income (Loss)	585		(1)	—		(2)	585		106		(1)	1		(2)	107
Total Other Comprehensive Income (Loss)	Total Other Comprehensive Income (Loss)	106			(171)			(65)		146			(26)			120		Total Other Comprehensive Income (Loss)	310			(17)			293		106			(171)			(65)
Balance, End of Period	Balance, End of Period	$	(6,515)		$	(463)		$	(6,978)	$	(8,279)		$	108		$	(8,171)	Balance, End of Period	$	1,591		$	(417)		$	1,174	$	(6,515)		$	(463)		$	(6,978)

		Nine Months Ended September 30,																	Nine Months Ended September 30,
		2022								2021									2023								2022
(in thousands)	(in thousands)	Pension and Other Postretirement Benefits			Net Unrealized Gains (Losses) on Available-for-Sale Securities			Total		Pension and Other Postretirement Benefits			Net Unrealized Gains (Losses) on Available-for-Sale Securities			Total		(in thousands)	Pension and Other Postretirement Benefits			Net Unrealized Gains (Losses) on Available-for-Sale Securities			Total		Pension and Other Postretirement Benefits			Net Unrealized Gains (Losses) on Available-for-Sale Securities			Total
Balance, Beginning of Period	Balance, Beginning of Period	$	(6,537)		$	13		$	(6,524)	$	(8,716)		$	209		$	(8,507)	Balance, Beginning of Period	$	1,334		$	(419)		$	915	$	(6,537)		$	13		$	(6,524)
Other Comprehensive Loss Before Reclassifications, net of tax		—			(477)			(477)		—			(58)			(58)
Other Comprehensive Income (Loss) Before Reclassifications, net of tax																		Other Comprehensive Income (Loss) Before Reclassifications, net of tax	(275)			1			(274)		—			(477)			(477)
Amounts Reclassified from Accumulated Other Comprehensive Income (Loss)	Amounts Reclassified from Accumulated Other Comprehensive Income (Loss)	22		(1)	1		(2)	23		437		(1)	(43)		(2)	394		Amounts Reclassified from Accumulated Other Comprehensive Income (Loss)	532		(1)	1		(2)	533		22		(1)	1		(2)	23
Total Other Comprehensive Income (Loss)	Total Other Comprehensive Income (Loss)	22			(476)			(454)		437			(101)			336		Total Other Comprehensive Income (Loss)	257			2			259		22			(476)			(454)
Balance, End of Period	Balance, End of Period	$	(6,515)		$	(463)		$	(6,978)	$	(8,279)		$	108		$	(8,171)	Balance, End of Period	$	1,591		$	(417)		$	1,174	$	(6,515)		$	(463)		$	(6,978)
(1) Included in the computation of net periodic pension and other postretirement benefit costs. See Note 7.	(1) Included in the computation of net periodic pension and other postretirement benefit costs. See Note 7.																	(1) Included in the computation of net periodic pension and other postretirement benefit costs. See Note 7.
(2) Included in other income (expense), net on the accompanying consolidated statements of income.	(2) Included in other income (expense), net on the accompanying consolidated statements of income.																	(2) Included in other income (expense), net on the accompanying consolidated statements of income.

12. Share-Based Payments

Stock Compensation Expense

Stock-based compensation expense arising from our employee stock purchase plan and share-based compensation plans recognized within operating expenses in the consolidated statements of income amounted to ~~$0.6~~$0.5 million and ~~$0.8~~$0.6 million for the three months ended September 30, 2023 and 2022, and ~~2021, respectively,~~$7.0 million and $6.1 ~~million and $6.4~~ million for the nine months ended September 30, ~~2022~~2023 and ~~2021, respectively.~~2022.

Restricted Stock Awards. We grant restricted stock awards to members of our Board of Directors and restricted stock units to executive officers and other certain key employees. The awards vest, depending on award type and recipient, either ratably over periods of three or four years or cliff vest after four years. Vesting is accelerated in certain circumstances, including on retirement.

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The following is a summary of stock award activity for the nine months ended September 30, ~~2022:~~2023:


		Shares	Weighted Average Grant-Date Fair Value			Shares	Weighted-Average Grant-Date Fair Value

Nonvested, January 1, 2022		138,093	$	44.48
Nonvested, January 1, 2023					Nonvested, January 1, 2023	141,551	$	49.83
Granted	Granted	51,439	59.96		Granted	55,205	68.03
Vested	Vested	(47,981)	45.30		Vested	(45,493)	50.02
Forfeited	Forfeited	—	—		Forfeited	(2,350)	52.02
Nonvested, September 30, 2022		141,551	$	49.83
Nonvested, September 30, 2023					Nonvested, September 30, 2023	148,913	$	56.48

The fair value of vested awards was ~~$3.0~~$3.1 million and ~~$2.1~~$3.0 million during the nine months ended September 30, ~~2022~~2023 and ~~2021, respectively.~~

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2022.

Stock Performance Awards. Stock performance awards are granted to executive officers and certain other key employees. The awards vest at the end of a three-year performance period. The number of common shares awarded, if any, at the end of the performance period ranges from zero to 150% of the target amount based on two performance measures: i) total shareholder return relative to a peer group and ii) return on equity. Vesting of the awards is accelerated in certain circumstances, including on retirement. The ~~amount~~number of common shares awarded on an accelerated vesting is based either on actual performance at the end of the performance period or the ~~amount~~number of common shares earned at target.

The grant date fair value of stock performance awards granted during the nine months ended September 30, ~~2022~~2023 and ~~2021~~2022 was determined using a Monte Carlo fair value simulation model incorporating the following assumptions:


		2022		2021			2023		2022

Risk-free interest rate	Risk-free interest rate	1.52	%	0.18	%	Risk-free interest rate	4.15	%	1.52	%
Expected term (in years)	Expected term (in years)	3.00		3.00		Expected term (in years)	3		3
Expected volatility	Expected volatility	32.00	%	32.00	%	Expected volatility	34.00	%	32.00	%
Dividend yield	Dividend yield	2.90	%	3.60	%	Dividend yield	2.50	%	2.90	%

The risk-free interest rate was derived from yields on U.S. government bonds of a similar term. The expected term of the award is equal to the three-year performance period. Expected volatility was estimated based on actual historical volatility of our common stock. Dividend yield was estimated based on ~~historic~~historical and future yield estimates.

The following is a summary of stock performance award activity for the nine months ended September 30, ~~2022~~2023 (share amounts reflect awards at target):


		Shares	Weighted Average Grant-Date Fair Value			Shares	Weighted-Average Grant-Date Fair Value

Nonvested, January 1, 2022		189,600	$	42.54
Nonvested, January 1, 2023					Nonvested, January 1, 2023	189,800	$	45.95
Granted	Granted	55,800	54.91		Granted	59,400	61.97
Vested	Vested	(55,600)	43.30		Vested	(55,000)	47.79
Forfeited	Forfeited	—	—		Forfeited	—	—
Nonvested, September 30, 2022		189,800	$	45.95
Nonvested, September 30, 2023					Nonvested, September 30, 2023	194,200	$	50.33

The fair value of vested awards was ~~$5.1~~$5.3 million and ~~$2.5~~$5.1 million during the nine months ended September 30, ~~2022~~2023 and ~~2021,~~2022, respectively.

13. Earnings Per Share

The numerator used in the calculation of both basic and diluted earnings per common share is net income. The denominator used in the calculation of basic earnings per common share is the ~~weighted average~~weighted-average number of common shares outstanding during the period. The denominator used in the calculation of diluted earnings per common share is derived by adjusting basic shares outstanding for the dilutive effect of potential common shares outstanding, which consist of ~~time~~time- and ~~performance based~~performance-based stock awards and employee stock purchase plan shares.

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The following includes the computation of the denominator for basic and diluted weighted-average shares outstanding for the three and nine months ended September 30, ~~2022~~2023 and ~~2021:~~2022:


		Three Months Ended September 30,		Nine Months Ended September 30,		Three Months Ended September 30,			Nine Months Ended September 30,
(in thousands)	(in thousands)	2022	2021	2022	2021		(in thousands)	2023	2022	2023	2022

Weighted Average Common Shares Outstanding – Basic		41,600	41,504	41,582	41,487
Weighted-Average Common Shares Outstanding – Basic							Weighted-Average Common Shares Outstanding – Basic	41,680	41,600	41,663	41,582
Effect of Dilutive Securities:	Effect of Dilutive Securities:						Effect of Dilutive Securities:
Stock Performance Awards	Stock Performance Awards	276	262	251	209		Stock Performance Awards	277	276	266	251
Restricted Stock Awards	Restricted Stock Awards	97	88	96	82		Restricted Stock Awards	100	97	97	96
Employee Stock Purchase Plan Shares and Other		1	15	1	17
Employee Stock Purchase Plan Shares							Employee Stock Purchase Plan Shares	1	1	2	1
Dilutive Effect of Potential Common Shares	Dilutive Effect of Potential Common Shares	374	365	348	308		Dilutive Effect of Potential Common Shares	378	374	365	348
Weighted Average Common Shares Outstanding – Diluted		41,974	41,869	41,930	41,795
Weighted-Average Common Shares Outstanding – Diluted							Weighted-Average Common Shares Outstanding – Diluted	42,058	41,974	42,028	41,930

The ~~amount~~number of shares excluded from diluted weighted-average common shares outstanding because such shares were anti-dilutive was not material for the three and nine months ended September 30, ~~2022~~2023 and ~~2021.~~2022.

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14. Derivative Instruments

OTP enters into derivative instruments to manage its exposure to future market energy price variability and reduce volatility in prices for our retail customers. These derivative instruments are not designated as qualifying hedging transactions but provide for an economic hedge against future market energy price variability. The instruments are recorded at fair value on the consolidated balance sheets. In accordance with rate-making and cost recovery processes, we recognize a regulatory asset or liability to defer losses or gains from derivative activity until settlement of the associated derivative instrument.

As of September 30, ~~2022,~~2023, OTP had multiple outstanding pay-fixed, receive-variable swap agreements with an aggregate notional amount of ~~156,800~~195,400 megawatt-hours of electricity, ~~which will be settled periodically throughout 2022 and 2023.~~with various settlement dates extending to December 31, 2024. As of September 30, ~~2022,~~2023, the fair value of these derivative instruments was ~~$5.4~~$1.5 million, of which ~~$5.5~~$1.2 million is included in other current ~~assets~~liabilities and ~~$0.1~~$0.3 million ~~which~~ is included in other noncurrent liabilities on the consolidated balance sheets. As of December 31, ~~2021,~~2022, the fair value of these types of derivative contracts was ~~$6.2~~$7.1 million, which is included in other current ~~assets. No~~liabilities. There were no contracts ~~settled~~which matured during the three months ended September 30, 2023 or 2022. During the nine months ended September 30, 2023 and 2022, contracts matured and were settled in an aggregate amount of a $16.0 million loss and a $2.8 ~~million. There were no contracts settled during~~million gain, respectively. Gains and losses recognized on the ~~three~~settlement of derivative instruments are recorded in electric purchased power in the consolidated statements of income. Such settlement gains and losses are returned to or ~~nine months ended September 30, 2021.~~recovered from our electric customers through fuel recovery mechanisms in each state.

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15. Fair Value Measurements

The following tables present our assets and liabilities measured at fair value on a recurring basis as of September 30, ~~2022~~2023 and December 31, ~~2021~~2022 classified by the input method used to measure fair value:


(in thousands)	(in thousands)	Level 1		Level 2		Level 3		(in thousands)	Level 1		Level 2		Level 3

September 30, 2022
September 30, 2023								September 30, 2023
Assets:	Assets:							Assets:
Investments:	Investments:							Investments:
Money Market Funds	Money Market Funds	$	1,854	$	—	$	—	Money Market Funds	$	3,223	$	—	$	—
Mutual Funds	Mutual Funds	5,084		—		—		Mutual Funds	7,289		—		—
Corporate Debt Securities	Corporate Debt Securities	—		1,424		—		Corporate Debt Securities	—		1,498		—
Government-Backed and Government-Sponsored Enterprises’ Debt Securities	Government-Backed and Government-Sponsored Enterprises’ Debt Securities	—		7,286		—		Government-Backed and Government-Sponsored Enterprises’ Debt Securities	—		7,488		—
Derivative Instruments		—		5,532		—

Total Assets	Total Assets	$	6,938	$	14,242	$	—	Total Assets	$	10,512	$	8,986	$	—
Liabilities:	Liabilities:							Liabilities:
Derivative Instruments	Derivative Instruments	$	—	$	169	$	—	Derivative Instruments	$	—	$	1,452	$	—
Total Liabilities	Total Liabilities	$	—	$	169	$	—	Total Liabilities	$	—	$	1,452	$	—

December 31, 2021
December 31, 2022								December 31, 2022
Assets:	Assets:							Assets:
Investments:	Investments:							Investments:
Money Market Funds	Money Market Funds	$	949	$	—	$	—	Money Market Funds	$	1,560	$	—	$	—
Mutual Funds	Mutual Funds	5,432		—		—		Mutual Funds	5,503		—		—
Corporate Debt Securities	Corporate Debt Securities	—		1,333		—		Corporate Debt Securities	—		1,434		—
Government-Backed and Government-Sponsored Enterprises’ Debt Securities	Government-Backed and Government-Sponsored Enterprises’ Debt Securities	—		7,869		—		Government-Backed and Government-Sponsored Enterprises’ Debt Securities	—		7,327		—

Total Assets								Total Assets	$	7,063	$	8,761	$	—
Liabilities:								Liabilities:
Derivative Instruments	Derivative Instruments	—		6,214		—		Derivative Instruments	—		7,130		—
Total Assets		$	6,381	$	15,416	$	—
Total Liabilities								Total Liabilities	$	—	$	7,130	$	—

Level 1 fair value measurements are based on quoted prices (unadjusted) in active markets for identical assets or liabilities that we have the ability to access at the measurement date.

The level 2 fair value measurements for government-backed and government-sponsored enterprises and corporate debt securities are determined based on ~~the basis of~~ valuations provided by a third-party pricing service which utilizes industry accepted valuation models and observable market inputs to determine valuation. Some valuations or model inputs used by the pricing service may be based on broker quotes.

The level 2 fair value measurements for derivative instruments are determined by using inputs such as forward electric commodity prices, adjusted for location differences. These inputs are observable in the marketplace throughout the full term of the instrument, can be derived from observable data, or are supported by observable levels at which transactions are executed in the marketplace.

In addition to assets recorded at fair value on a recurring basis, we also hold financial instruments that are not recorded at fair value in the consolidated balance sheets but for which disclosure of the fair value of these financial instruments is provided.

~~Table of~~ ~~Contents~~

The following reflects the carrying value and estimated fair value of these assets and liabilities as of September 30, ~~2022~~2023 and December 31, ~~2021:~~2022:


		September 30, 2022				December 31, 2021					September 30, 2023				December 31, 2022
(in thousands)	(in thousands)	Carrying Amount		Fair Value		Carrying Amount		Fair Value		(in thousands)	Carrying Amount		Fair Value		Carrying Amount		Fair Value

Assets:	Assets:									Assets:
Cash and Cash Equivalents	Cash and Cash Equivalents	$	72,987	$	72,987	$	1,537	$	1,537	Cash and Cash Equivalents	$	189,214	$	189,214	$	118,996	$	118,996
Total	Total	72,987		72,987		1,537		1,537		Total	189,214		189,214		118,996		118,996
Liabilities:	Liabilities:									Liabilities:
Short-Term Debt	Short-Term Debt	—		—		91,163		91,163		Short-Term Debt	51,495		51,495		8,204		8,204
Long-Term Debt	Long-Term Debt	823,760		679,360		763,997		878,272		Long-Term Debt	823,998		661,986		823,821		681,615
Total	Total	$	823,760	$	679,360	$	855,160	$	969,435	Total	$	875,493	$	713,481	$	832,025	$	689,819

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The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate that value:

Cash Equivalents: The carrying amount approximates fair value because of the short-term maturity of those instruments.

Short-Term Debt: The carrying amount approximates fair value because the debt obligations are short-term and the balances outstanding are subject to variable rates of interest which reset frequently, a Level 2 fair value input.

Long-Term Debt: The fair value of long-term debt is estimated based on current market indications for borrowings of similar maturities, a Level 2 fair value input.

1921

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ITEM 2.			MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion and analysis of our financial condition and results of operations together with our interim financial statements and the related notes appearing under Item 1 of this Quarterly Report on Form 10-Q, and our annual financial statements and the related notes along with the discussion and analysis of our financial condition and results of operations contained in our Annual Report on Form 10-K for the year ended December 31, ~~2021.~~2022.

Otter Tail Corporation and its subsidiaries form a diverse group of businesses with operations classified into three segments: Electric, Manufacturing and Plastics. Our Electric segment business is a vertically integrated, regulated utility with generation, transmission and distribution facilities to serve our customers in western Minnesota, eastern North Dakota and northeastern South Dakota. Our Manufacturing segment provides metal fabrication for custom machine parts and metal components and manufactures extruded and thermoformed plastic products. Our Plastics segment manufactures PVC pipe for use in, among other applications, municipal and rural water, wastewater and water reclamation projects.

~~STEEL AVAILABILITY AND PRICING~~

Steel is a key material input to BTD Manufacturing, Inc. (BTD), our metal fabrication business within our Manufacturing segment. Steel prices increased rapidly throughout 2021, peaking in the fourth quarter at historically high levels. Steel prices have been highly volatile in 2022, but began to steadily decline at the end of the second quarter and continued to decline throughout the third quarter. The increase in steel prices in the first half of 2022 led to increased sale prices for our products at BTD as we passed along material cost increases to our customers. Consistent with steel prices, scrap metal prices also increased throughout 2021 and remained elevated in the first half of 2022, positively impacting our financial results during this period, but began to decline at the end of the second quarter and declined sharply in the third quarter of 2022. We expect steel and scrap metal prices to decline modestly in the fourth quarter of 2022 and be near historical levels by the end of the year.

PVC PIPE SUPPLY AND DEMAND CONDITIONS

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. Periodic disruptions in the supply of resin, is the primary material input of the PVC pipe manufactured by our Plastics segment businesses. Resin supply disruptions throughout 2021, along with robust domestic and global demand for PVC resin, led to significantly increased resin prices. Supply disruptions for resin and other additives and ingredients used in the manufacturing ~~process also resulted~~of PVC pipe, coupled with robust demand for resin, led to a significant increase in ~~reduced manufacturing~~the cost of resin during the 2021-2022 timeframe. Low industry volumes of PVC pipe and ~~low pipe inventories across the industry. This combination of disrupted raw material supply and the resulting low PVC pipe inventories along with~~ robust end market demand for ~~PVC pipe~~the product led to ~~rapidly increasing sale~~a rapid and significant increase in sales prices for PVC pipe, ~~throughout 2021 and the first half of 2022. The increase in sale prices has outpaced~~significantly outpacing the increase in ~~PVC~~ resin input costs, leading to ~~expanding gross profit margins. Beginning in the third quarter of 2022, demand~~increased operating margins within our Plastics segment.

Demand for PVC pipe began to ~~decline~~soften in the second half of 2022, as ~~multiple, larger than anticipated, resin price reductions caused PVC pipe~~ distributors and contractors ~~to reduce~~reduced purchase volumes in ~~an effort~~response to ~~reduce inventory levels.~~uncertain and competitive market conditions. Softening demand continued into 2023 but began to stabilize in the third quarter. Resin prices have declined from the previous year and although sales prices for PVC pipe have also declined, they have declined at a slower pace than resin prices, continuing to produce expanded operating margins from those experienced in years prior to 2021.

The unique market dynamics ~~experienced by~~impacting our Plastics segment ~~businesses in 2021 and thus far in 2022 have~~ resulted in a significant increase in earnings in the last two years compared to ~~prior periods.~~historical levels. We currently expect earnings of our Plastics segment to remain elevated ~~relative to historical levels through~~for the ~~end~~remainder of ~~2022~~2023 and into ~~2023, but as the industry supply and demand conditions normalize we expect segment earnings~~2024 compared to ~~normalize beginning in 2024.~~

pre-2021 levels. The marketplace dynamics impacting ~~both~~ our ~~Manufacturing and~~ Plastics segments are fluid and subject to change ~~which~~and may impact our operating results prospectively.


RESULTS OF OPERATIONS – QUARTER TO DATE

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. 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.

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CONSOLIDATED RESULTS

The following table summarizes consolidated operating results for the three months ended September 30, ~~2022~~2023 and ~~2021:~~2022:


(in thousands)	(in thousands)	2022		2021		$ change		% change		(in thousands)	2023		2022		$ change		% change

Operating Revenues	Operating Revenues	$	383,856	$	316,294	$	67,562	21.4	%	Operating Revenues	$	358,056	$	383,856	$	(25,800)	(6.7)	%
Operating Expenses	Operating Expenses	267,723		241,766		25,957		10.7		Operating Expenses	236,940		267,723		(30,783)		(11.5)
Operating Income	Operating Income	116,133		74,528		41,605		55.8		Operating Income	121,116		116,133		4,983		4.3
Interest Charges		9,259		9,648		(389)		(4.0)
Nonservice Cost Components of Postretirement Benefits		(52)		505		(557)		(110.3)
Other Income (Expense)		(174)		203		(377)		(185.7)
Interest Expense										Interest Expense	(9,175)		(9,259)		84		(0.9)
Nonservice Components of Postretirement Benefits										Nonservice Components of Postretirement Benefits	2,289		52		2,237		n/m
Other Income (Expense), net										Other Income (Expense), net	2,471		(174)		2,645		n/m
Income Before Income Taxes	Income Before Income Taxes	106,752		64,578		42,174		65.3		Income Before Income Taxes	116,701		106,752		9,949		9.3
Income Tax Expense	Income Tax Expense	22,513		11,824		10,689		90.4		Income Tax Expense	24,727		22,513		2,214		9.8
Net Income	Net Income	$	84,239	$	52,754	$	31,485	59.7	%	Net Income	$	91,974	$	84,239	$	7,735	9.2	%

Operating Revenues ~~increased $67.6~~decreased $25.8 million primarily due to ~~increases~~decreased sales prices in ~~PVC pipe sale prices within~~ our Plastics segment, ~~and increased retail~~decreased fuel recovery revenues ~~within~~in our Electric segment, and decreased steel prices in our Manufacturing segment. ~~PVC pipe sale~~In our Plastics segment, sales prices ~~increased due~~declined as competitive pressures began to ~~the unique industry supply and demand dynamics described above.~~erode pricing from historic highs. In our Electric segment, ~~increased~~decreased fuel recovery revenues were driven by ~~higher fuel and~~lower purchased power and fuel costs arising from decreased market energy costs and natural gas prices. These decreases were partially offset by increased renewable rider revenue and higher commercial and industrial sales volumes ~~contributed to higher operating revenues. In addition,~~in our Electric segment and increased sales volumes ~~resulted in increased operating revenues~~ in our Manufacturing segment. See our segment disclosures below for additional discussion of items impacting operating revenues.

Operating Expenses ~~increased $26.0~~decreased $30.8 million primarily due to ~~increased~~lower PVC resin costs in our Plastics segment, lower purchased power and fuel costs in our Electric ~~segment. Operating expenses~~segment and lower material costs in our Manufacturing segment, ~~increased primarily due to increased sales volumes. These increases were partially offset by a decrease in operating expenses in our Plastics segment, due to lower sales volumes.~~as discussed above. See our segment disclosures below for additional discussion of items impacting operating expenses.

~~Interest Charges~~ ~~decreased $0.4 million due to a decrease in the interest rate on our $140.0 million~~Table of ~~fixed-rate long-term debt that was refinanced in December 2021, and a lower level of average short-term borrowings outstanding in 2022 compared to 2021.~~Contents

Nonservice ~~Cost~~ Components of Postretirement Benefits ~~decreased $0.6~~improved by $2.2 million, having a positive impact on net income, primarily due to ~~the amortization of~~a change in actuarial ~~gains resulting from the increase in the discount rates~~assumptions used to measure our pension benefit and postretirement benefit ~~liabilities as of December 31, 2021.~~obligations, including an increase in the discount rate applied and an increase in the expected return on assets assumption.

Other Income (Expense) ~~decreased $0.4~~increased $2.6 million, having a positive impact on net income, primarily due to additional investment ~~losses~~income earned on our ~~corporate-owned life insurance policies and other investments during the third quarter of 2022 compared to investment gains in the same period of the previous year.~~short-term cash equivalent investments.

Income Tax Expense increased ~~$10.7~~$2.2 million primarily due to increased income before income taxes. Our effective tax rate was 21.2% in the third quarter of 2023 and 21.1% in the third quarter of 2022 and 18.3% in the third quarter of 2021. The increase in our effective tax rate was driven by an increase in our income before income taxes without a corresponding increase in tax credits and other permanent differences that impact our effective tax rate.2022. See Note 8 to our consolidated financial statements included in this Quarterly Report on Form 10-Q for additional information regarding factors impacting our effective tax rate in ~~2022~~2023 and ~~2021.~~2022.

~~Table of~~ ~~Contents~~

ELECTRIC SEGMENT RESULTS

The following table summarizes Electric segment operating results for the three months ended September 30, ~~2022~~2023 and ~~2021:~~2022:


(in thousands)	(in thousands)	2022		2021		$ change		% change		(in thousands)	2023		2022		$ change		% change

Retail Revenues	Retail Revenues	$	120,177	$	96,438	$	23,739	24.6	%	Retail Revenues	$	110,499	$	120,177	$	(9,678)	(8.1)	%
Transmission Services Revenues	Transmission Services Revenues	13,156		13,300		(144)		(1.1)		Transmission Services Revenues	13,670		13,156		514		3.9
Wholesale Revenues	Wholesale Revenues	7,196		6,944		252		3.6		Wholesale Revenues	4,752		7,196		(2,444)		(34.0)
Other Electric Revenues	Other Electric Revenues	2,218		2,093		125		6.0		Other Electric Revenues	1,405		2,218		(813)		(36.7)
Total Operating Revenues	Total Operating Revenues	142,747		118,775		23,972		20.2		Total Operating Revenues	130,326		142,747		(12,421)		(8.7)
Production Fuel	Production Fuel	24,972		17,698		7,274		41.1		Production Fuel	19,603		24,972		(5,369)		(21.5)
Purchased Power	Purchased Power	19,913		9,878		10,035		101.6		Purchased Power	10,895		19,913		(9,018)		(45.3)
Operating and Maintenance Expenses	Operating and Maintenance Expenses	39,799		36,465		3,334		9.1		Operating and Maintenance Expenses	43,534		39,799		3,735		9.4
Depreciation and Amortization	Depreciation and Amortization	17,669		17,874		(205)		(1.1)		Depreciation and Amortization	18,958		17,669		1,289		7.3
Property Taxes	Property Taxes	4,438		4,474		(36)		(0.8)		Property Taxes	4,194		4,438		(244)		(5.5)
Operating Income	Operating Income	$	35,956	$	32,386	$	3,570	11.0	%	Operating Income	$	33,142	$	35,956	$	(2,814)	(7.8)	%

		2022		2021		change		% change			2023		2022		change		% change

Electric kilowatt-hour (kwh) Sales (in thousands)	Electric kilowatt-hour (kwh) Sales (in thousands)									Electric kilowatt-hour (kwh) Sales (in thousands)
Retail kwh Sales	Retail kwh Sales	1,275,051		1,076,580		198,471		18.4	%	Retail kwh Sales	1,300,324		1,275,051		25,273		2.0	%
Wholesale kwh Sales – Company Generation	Wholesale kwh Sales – Company Generation	99,890		174,187		(74,297)		(42.7)		Wholesale kwh Sales – Company Generation	119,515		99,890		19,625		19.6
Heating Degree Days	Heating Degree Days	22		3		19		633.3		Heating Degree Days	3		22		(19)		(86.4)
Cooling Degree Days	Cooling Degree Days	376		463		(87)		(18.8)		Cooling Degree Days	317		376		(59)		(15.7)

The operating results of our Electric segment are impacted by fluctuations in weather conditions and the resulting demand for electricity for heating and cooling. The following table shows heating degree days and cooling degree days as a percent of normal for the three months ended September 30, ~~2022~~2023 and ~~2021.~~2022.


		2022		2021			2023		2022

Heating Degree Days	Heating Degree Days	43.1	%	5.8	%	Heating Degree Days	6.3	%	43.1	%
Cooling Degree Days	Cooling Degree Days	108.4	%	132.7	%	Cooling Degree Days	92.2	%	108.4	%

The following table summarizes the estimated effect on diluted earnings per share of the difference in retail kwh sales under actual weather conditions and expected retail kwh sales under normal weather conditions in ~~2022~~2023 and ~~2021,~~2022, and between years.

2022 vs
Normal
2022 vs
2021
2021 vs
Normal
Effect on Diluted Earnings Per Share $ 0.01 $ (0.02) $ 0.03


	2023 vs Normal		2023 vs 2022		2022 vs Normal

Effect on Diluted Earnings Per Share	$	(0.01)	$	(0.02)	$	0.01

Retail Revenues ~~increased $23.7~~decreased $9.7 million primarily due to the following:

•A ~~$16.0~~$13.2 million ~~increase~~decrease in fuel recovery revenues, primarily due to ~~increased production fuel and~~lower purchased power and fuel costs ~~as described below.~~arising from decreased market energy costs and natural gas prices.

•A ~~$4.3~~$1.1 million decrease in revenues from the unfavorable impact of weather compared to last year.

These decreases were partially offset by a $2.7 million increase in ~~retail~~rider revenues, ~~from~~including recovery of costs related to our Hoot Lake Solar project and the Ashtabula III wind farm, and a $0.8 million increase in revenue due to increased sales volumes ~~from~~to commercial and industrial ~~customers, including the impact of~~customers.

Wholesale Revenues decreased $2.4 million primarily due to a ~~new commercial customer load in North Dakota.~~

•~~A $1.2 million~~45% decrease in ~~consumption from the impact of unfavorable weather in the third quarter of 2022 compared to the same period last year.~~

~~Retail revenues in the third quarter of 2021 were negatively impacted~~wholesale electric prices driven by ~~adjustments to our estimated interim rate refund.~~decreased fuel costs.

Production Fuel costs ~~increased $7.3~~decreased $5.4 million primarily asdue to a ~~result of a 28% increase~~23% decrease in fuel cost per ~~kwh. Increased generation~~kwh resulting from ~~our fuel-burning plants~~decreases in ~~the third quarter~~natural gas prices.

Table of ~~2022, as compared to the same period last year, also contributed to the increase in production fuel costs.~~Contents

Purchased Power costs to serve retail customers ~~increased $10.0~~decreased $9.0 million due to a ~~45% increase~~46% decrease in the price of purchased power per kwh, ~~resulting from increased natural gas and~~primarily due to decreased market energy ~~prices, and a 39% increase~~costs, as well as the acquisition of the Ashtabula III wind farm in the ~~volume~~current year. Prior to the acquisition of Ashtabula III, OTP purchased the wind-generated electricity from the facility under the terms of a power ~~due to increased customer demand.~~purchase agreement.

Operating and Maintenance ~~Expense~~Expenses increased ~~$3.3~~$3.7 million ~~primarily due to~~driven by strategic spending initiatives and higher labor costs, partially driven by additional employees and wage inflation, as well as an increase in ~~maintenance activities, including our planned outage at Coyote Station, maintenance at our wind farm facilities, and vegetation management, as well as increased transmission tariff~~insurance expenses.

~~Table of~~ ~~Contents~~

MANUFACTURING SEGMENT RESULTS

The following table summarizes Manufacturing segment operating results for the three months ended September 30, ~~2022~~2023 and ~~2021:~~2022:


(in thousands)	(in thousands)	2022		2021		$ change		% change		(in thousands)	2023		2022		$ change		% change

Operating Revenues	Operating Revenues	$	98,767	$	89,977	$	8,790	9.8	%	Operating Revenues	$	100,678	$	98,767	$	1,911	1.9	%
Cost of Products Sold (excluding depreciation)	Cost of Products Sold (excluding depreciation)	77,764		70,148		7,616		10.9		Cost of Products Sold (excluding depreciation)	76,288		77,764		(1,476)		(1.9)
Other Operating Expenses	Other Operating Expenses	8,627		10,161		(1,534)		(15.1)		Other Operating Expenses	11,010		8,627		2,383		27.6
Depreciation and Amortization	Depreciation and Amortization	3,996		3,794		202		5.3		Depreciation and Amortization	4,551		3,996		555		13.9
Operating Income	Operating Income	$	8,380	$	5,874	$	2,506	42.7	%	Operating Income	$	8,829	$	8,380	$	449	5.4	%

Operating Revenues increased ~~$8.8~~$1.9 million primarily due to ~~a 17%~~an 8% increase in sales volumes at BTD Manufacturing driven by end market demand in the construction, recreational vehicle and power generation segments and incremental volumes from additional work with existing customers. Operating revenues also benefited from sales price increases implemented in response to labor and non-steel material cost inflation. Sales price increases and sales volume growth were partially offset by ~~lower~~decreased steel prices, ~~which resulted~~resulting in a ~~$5.4 million~~4% decrease in material costs, ~~that~~which are passed through to customers. Declines in scrap metal prices resulted in a $1.3 million decrease in scrap revenue. End market demand remains strong, however, supply chain disruptions experienced by our customers have continued to cause unpredictable shipments of our products to our customers. Increases in sales prices and volumesOperating revenues at T.O. Plastics decreased primarily due to ~~continued strong customer demand, also contributed~~decreased sales volumes of horticulture products, as order and delivery lead times have normalized, and customers are working to ~~the segment increase in operating revenues.~~reduce their inventory levels and return to more normal seasonal fluctuations.

Cost of Products Sold increased $7.6 million primarily due to higher sales volumes, as described above, as well as increased labor costs, partially offset by favorable cost absorption and decreased material costs related to lower steel prices.

~~Other Operating Expenses~~ decreased $1.5 million primarily due to decreased ~~incentive compensation~~steel prices and decreased sales volumes at T.O. Plastics, as described above. These decreases were partially offset by increased sales volumes at BTD.

Other Operating Expenses increased $2.4 million due to variable costs ~~based on current year~~associated with increased business activity and financial performance ~~relative to established targets.~~during the period.

PLASTICS SEGMENT RESULTS

The following table summarizes Plastics segment operating results for the three months ended September 30, ~~2022~~2023 and ~~2021:~~2022:


(in thousands)	(in thousands)	2022		2021		$ change		% change		(in thousands)	2023		2022		$ change		% change

Operating Revenues	Operating Revenues	$	142,342	$	107,542	$	34,800	32.4	%	Operating Revenues	$	127,052	$	142,342	$	(15,290)	(10.7)	%
Cost of Products Sold (excluding depreciation)	Cost of Products Sold (excluding depreciation)	61,597		64,064		(2,467)		(3.9)		Cost of Products Sold (excluding depreciation)	42,015		61,597		(19,582)		(31.8)
Other Operating Expenses	Other Operating Expenses	3,921		3,832		89		2.3		Other Operating Expenses	3,906		3,921		(15)		(0.4)
Depreciation and Amortization	Depreciation and Amortization	1,023		1,099		(76)		(6.9)		Depreciation and Amortization	1,012		1,023		(11)		(1.1)
Operating Income	Operating Income	$	75,801	$	38,547	$	37,254	96.6	%	Operating Income	$	80,119	$	75,801	$	4,318	5.7	%

Operating Revenues ~~increased $34.8~~decreased $15.3 million primarily due to ~~a 57% increase~~an 11% decrease in sales prices compared to the same period last year. Sales prices have continued to decrease in the ~~price per pound of PVC pipe sold, as sales prices~~current year; however, they continue to remain ~~high due~~elevated compared to ~~extraordinary market conditions. Demand for PVC pipe began to soften during~~pre-2021 levels. Sales volumes in the third quarter ~~as customers started to consume high priced inventory instead~~ of ~~buying additional PVC pipe. Sales~~2023 were consistent with sales volumes ~~for~~during the ~~quarter decreased 15% due to softening customer demand.~~same period last year.

Cost of Products Sold decreased ~~$2.5~~$19.6 million primarily due to decreased ~~sales volumes, as described above, partially offset by increased~~PVC resin costs. PVC resin and other input material costs ~~which increased 14.5% due to the market conditions described above. Resin prices in the third quarter of 2022 increased~~decreased 39% compared to the same period in the previous year ~~but decreased compared to~~as the ~~second quarter of 2022.~~unique supply and demand conditions, which caused significant increases in resin costs, have subsided and resin costs have stabilized.

CORPORATE COSTS

The following table summarizes Corporate operating results for the three months ended September 30, ~~2022~~2023 and ~~2021:~~2022:


(in thousands)	(in thousands)	2022		2021		$ change		% change		(in thousands)	2023		2022		$ change		% change

Other Operating Expenses	Other Operating Expenses	$	3,976	$	2,231	$	1,745	78.2	%	Other Operating Expenses	$	947	$	3,976	$	(3,029)	(76.2)	%
Depreciation and Amortization	Depreciation and Amortization	28		48		(20)		(41.7)		Depreciation and Amortization	27		28		(1)		(3.6)
Operating Loss	Operating Loss	$	4,004	$	2,279	$	1,725	75.7	%	Operating Loss	$	974	$	4,004	$	(3,030)	(75.7)	%

Other Operating Expenses ~~increased $1.7~~decreased $3.0 million primarily due to ~~increased~~decreased employee benefit expenses, including decreases in our employee health ~~care costs and increased professional service~~insurance claims costs.

2324

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RESULTS OF OPERATIONS – YEAR TO DATE

CONSOLIDATED RESULTS

The following table summarizes consolidated operating results for the nine months ended September 30, ~~2022~~2023 and ~~2021:~~2022:


(in thousands)	(in thousands)	2022		2021		$ change		% change		(in thousands)	2023		2022		$ change		% change

Operating Revenues	Operating Revenues	$	1,158,800	$	863,612	$	295,188	34.2	%	Operating Revenues	$	1,034,853	$	1,158,800	$	(123,947)	(10.7)	%
Operating Expenses	Operating Expenses	823,302		685,063		138,239		20.2		Operating Expenses	727,014		823,302		(96,288)		(11.7)
Operating Income	Operating Income	335,498		178,549		156,949		87.9		Operating Income	307,839		335,498		(27,659)		(8.2)
Interest Charges		27,198		28,601		(1,403)		(4.9)
Nonservice Cost Components of Postretirement Benefits		(824)		1,511		(2,335)		(154.5)
Other Income		(802)		2,095		(2,897)		(138.3)
Interest Expense										Interest Expense	(28,285)		(27,198)		(1,087)		4.0
Nonservice Components of Postretirement Benefits										Nonservice Components of Postretirement Benefits	7,122		824		6,298		n/m
Other Income (Expense), net										Other Income (Expense), net	7,841		(802)		8,643		n/m
Income Before Income Taxes	Income Before Income Taxes	308,322		150,532		157,790		104.8		Income Before Income Taxes	294,517		308,322		(13,805)		(4.5)
Income Tax Expense	Income Tax Expense	66,143		25,380		40,763		160.6		Income Tax Expense	58,093		66,143		(8,050)		(12.2)
Net Income	Net Income	$	242,179	$	125,152	$	117,027	93.5	%	Net Income	$	236,424	$	242,179	$	(5,755)	(2.4)	%

Operating Revenues ~~increased $295.2~~decreased $123.9 million primarily due to ~~higher PVC pipe prices~~lower sales volumes within our Plastics segment, ~~and increased sales volumes and material costs, which resulted in higher sales~~decreased steel prices in our Manufacturing segment, and decreased fuel recovery revenues in our Electric segment. ~~Increased retail revenues within~~In our Plastics segment, the decline in sales volumes is attributable to distributor customer inventory management as distributors have closely managed their inventory levels during the year and made strategic purchasing decisions amid uncertain and competitive market conditions. In our Electric segment, ~~due to increased~~decreased fuel recovery revenues were driven by lower purchased power and fuel costs arising from decreased market energy costs and natural gas prices. These decreases were partially offset by increased sales volumes ~~from~~in our Manufacturing segment and increased renewable rider revenue and higher commercial and industrial ~~customers, and favorable weather impacts also contributed to the higher operating revenues~~sales volumes in ~~2022.~~our Electric segment. See our segment disclosures below for additional discussion of items impacting operating revenues.

Operating ~~Expense~~Expenses~~s increased $138.2~~ decreased $96.3 million primarily due to ~~increased~~lower sales volumes within our Plastics segment, as discussed above. In addition to lower sales volumes, operating expenses ~~across all three of~~in our Plastics segment also decreased due to decreased PVC resin and other input costs. Decreased operating ~~segments.~~expenses in our Manufacturing segment primarily due to lower material costs at BTD, driven by lower steel prices, were largely offset by higher sales volumes and increases in other operating expenses. Operating expenses in our Electric segment increased primarily from higher purchased power costs due to an increase in the volume and cost of purchased power, increased production fuel costs, and higher operating and maintenance expenses, due to increased planned outage maintenance costs, increased labor costs related to various maintenance activities, and increased transmission tariff expenses. Operating expenses in our Manufacturing segment increased primarily due to higher ~~material~~labor costs, ~~largely driven by higher steel prices~~maintenance expenses related to an outage at Big Stone Plant, increased maintenance expenses associated with our wind generation assets, increased vegetative management expenses, and ~~higher sales volumes at BTD. Operating expenses in our Plastics segment~~ increased ~~primarily due to increased PVC resin and other input costs, partially offset by decreased sales volumes.~~insurance expenses. See our segment disclosures below for additional discussion of items impacting operating expenses.

Interest ~~Charges~~Expense ~~decreased $1.4~~increased $1.1 million primarily due to ~~a lowering of our average~~increased interest ~~rate~~rates on our ~~long-term~~short-term variable rate debt ~~as a result of refinancing activity in 2021 and 2022, and a decrease in our average short-term borrowings compared to the previous year.~~outstanding at OTP.

Nonservice ~~Cost~~ Components of Postretirement Benefits ~~decreased $2.3~~improved by $6.3 million, having a positive impact on net income, primarily due to ~~the amortization of~~a change in actuarial ~~gains resulting from the increase in the discount rates~~assumptions used to measure our pension benefit and postretirement benefit ~~liabilities as of December 31, 2021.~~obligations, including an increase in the discount rate applied and an increase in the expected return on assets assumption.

Other Income (Expense) ~~decreased $2.9~~increased $8.6 million, having a positive impact on net income, primarily due to ~~investment losses~~gains on our corporate-owned life insurance policies ~~and other investments~~ during ~~the nine months ended September 30, 2022~~2023 compared to investment ~~gains~~losses in the ~~same period last year.~~previous year, and an increase in investment income earned on our short-term cash equivalent investments.

Income Tax Expense ~~increased $40.8~~decreased $8.1 million primarily due to ~~increased~~decreased income before income taxes. Our effective tax rate was ~~21.5%~~19.7% for the nine months ended September 30, ~~2022~~2023 and ~~16.9%~~21.5% for the same period in the previous year. The ~~increase~~decrease in our effective tax rate was driven by non-taxable gains on our corporate-owned life insurance policy investments and an increase in ~~our income before income taxes without a corresponding increase in~~production tax credits ~~and other permanent differences that impact~~from our ~~effective tax rate.~~wind generation assets in the current period. See Note 8 to our consolidated financial statements included in the report on Form 10-Q for additional information regarding factors impacting our effective tax rate.

2425

Table of Contents

ELECTRIC SEGMENT RESULTS

The following table summarizes Electric segment operating results for the nine months ended September 30, ~~2022~~2023 and ~~2021:~~2022:


(in thousands)	(in thousands)	2022		2021		$ change		% change		(in thousands)	2023		2022		$ change		% change

Retail Revenues	Retail Revenues	$	347,419	$	291,130	$	56,289	19.3	%	Retail Revenues	$	340,667	$	347,419	$	(6,752)	(1.9)	%
Transmission Services Revenues	Transmission Services Revenues	37,409		37,085		324		0.9		Transmission Services Revenues	40,606		37,409		3,197		8.5
Wholesale Revenues	Wholesale Revenues	13,196		14,711		(1,515)		(10.3)		Wholesale Revenues	9,260		13,196		(3,936)		(29.8)
Other Electric Revenues	Other Electric Revenues	6,088		5,703		385		6.8		Other Electric Revenues	5,464		6,088		(624)		(10.2)
Total Operating Revenues	Total Operating Revenues	404,112		348,629		55,483		15.9		Total Operating Revenues	395,997		404,112		(8,115)		(2.0)
Production Fuel	Production Fuel	54,538		44,576		9,962		22.3		Production Fuel	45,928		54,538		(8,610)		(15.8)
Purchased Power	Purchased Power	64,604		40,273		24,331		60.4		Purchased Power	57,932		64,604		(6,672)		(10.3)
Operating and Maintenance Expenses	Operating and Maintenance Expenses	126,460		114,615		11,845		10.3		Operating and Maintenance Expenses	134,604		126,460		8,144		6.4
Depreciation and Amortization	Depreciation and Amortization	54,441		53,335		1,106		2.1		Depreciation and Amortization	55,955		54,441		1,514		2.8
Property Taxes	Property Taxes	13,304		13,136		168		1.3		Property Taxes	13,151		13,304		(153)		(1.2)
Operating Income	Operating Income	$	90,765	$	82,694	$	8,071	9.8	%	Operating Income	$	88,427	$	90,765	$	(2,338)	(2.6)	%

		2022		2021		change		% change			2023		2022		change		% change

Electric kilowatt-hour (kwh) Sales (in thousands)	Electric kilowatt-hour (kwh) Sales (in thousands)									Electric kilowatt-hour (kwh) Sales (in thousands)
Retail kwh Sales	Retail kwh Sales	4,076,769		3,511,730		565,039		16.1	%	Retail kwh Sales	4,281,400		4,076,769		204,631		5.0	%
Wholesale kwh Sales – Company Generation	Wholesale kwh Sales – Company Generation	222,591		358,761		(136,170)		(38.0)		Wholesale kwh Sales – Company Generation	268,401		222,591		45,810		20.6
Heating Degree Days	Heating Degree Days	4,559		3,614		945		26.1		Heating Degree Days	4,374		4,559		(185)		(4.1)
Cooling Degree Days	Cooling Degree Days	530		700		(170)		(24.3)		Cooling Degree Days	571		530		41		7.7

The operating results of our Electric segment are impacted by fluctuations in weather conditions and the resulting demand for electricity for heating and cooling. The following table shows heating and cooling degree days as a percent of normal for the nine months ended September 30, ~~2022~~2023 and ~~2021.~~2022.


		2022		2021			2023		2022

Heating Degree Days	Heating Degree Days	114.0	%	89.9	%	Heating Degree Days	108.6	%	114.0	%
Cooling Degree Days	Cooling Degree Days	113.7	%	150.9	%	Cooling Degree Days	123.6	%	113.7	%

2022 vs
Normal
2022 vs
2021
2021 vs
Normal
Effect on Diluted Earnings Per Share $ 0.08 $ 0.06 $ 0.02


	2023 vs Normal		2023 vs 2022		2022 vs Normal

Effect on Diluted Earnings Per Share	$	0.06	$	(0.02)	$	0.08

Retail Revenues ~~increased $56.3~~decreased $6.8 million primarily due to the following:

•A ~~$35.0~~$15.9 million ~~increase~~decrease in fuel recovery revenues, primarily due to ~~increased~~lower purchased power and ~~production~~ fuel costs ~~as described below, and a decrease in credits provided to retail customers~~arising from decreased ~~margins recognized on wholesale sales.~~

•~~A $11.5 million increase in retail revenues from increased sales volumes from commercial~~market energy costs and ~~industrial customers, including the impact of a new commercial customer load in North Dakota.~~natural gas prices.

•A $4.1 million ~~increase~~decrease in revenues related to the impact of final interim rate ~~revenue due to~~refunds in the ~~finalization~~prior year. Our Minnesota rate case was finalized in May 2022, which included a determination of the final interim rate refund ~~as approved by the MPUC~~and resulted in ~~the second quarter of~~additional retail revenue in 2022.

•A ~~$3.0~~$0.8 million ~~increase~~decrease in revenues from the ~~favorable~~unfavorable impact of weather ~~in the first nine months of 2022~~ compared to ~~the same period~~ last year.

~~Retail revenues also benefited from increased transmission, renewable and phase-in rider revenue in the first nine months of 2022.~~ These ~~increases~~decreases were partially offset by a $6.6 million increase in rider revenues, including recovery of costs related to our Hoot Lake Solar project and the Ashtabula III wind farm, a $5.2 million increase in revenue due to increased sales volumes to commercial and industrial customers, and the impact of decoupling and other factors.

Transmission Services Revenues increased $3.2 million primarily due to increased recovery of higher transmission costs and increased transmission investments.

Wholesale Revenues decreased $3.9 million primarily due to a 42% decrease in ~~conservation improvement program (CIP) revenue as a result of~~wholesale electric prices driven by decreased ~~CIP spending and related cost recovery. Retail revenues in 2021 were negatively impacted by adjustments to our estimated interim rate refund.~~fuel costs.

Production Fuel costs ~~increased $10.0~~decreased $8.6 million primarily due to a ~~32% increase~~16% decrease in fuel cost per kwh ~~which was partially offset by a decrease~~resulting from decreases in ~~kwhs generated from our fuel-burning plants due to our planned outage at Coyote Station in 2022 and the retirement of Hoot Lake Plant in May 2021.~~natural gas prices.

Purchased Power costs to serve retail customers ~~increased $24.3~~decreased $6.7 million due to a ~~44% increase in the volume of purchased power, resulting from the planned outage at Coyote Station, the retirement of Hoot Lake Plant and increased customer demand, and an 11% increase~~19% decrease in the price of purchased power per kwh, ~~resulting from increased natural gas and~~primarily due to decreased market energy ~~prices.~~costs, as well as the acquisition of the Ashtabula III wind farm in the current year. Prior to the acquisition of

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Ashtabula III, OTP purchased the wind generated electricity from the facility under the terms of a power purchase agreement. These decreases were partially offset by an 11% increase in the volume of purchased power due to increased customer demand and favorable market energy prices.

Operating and Maintenance Expense increased ~~$11.8~~$8.1 million, primarily due to increased labor costs, maintenance expenses related to an outage at Big Stone Plant, increased maintenance and transmission service expenses, including the ~~following:~~

•~~Higher~~incremental costs associated with the Ashtabula III facility that was purchased during the year, increased vegetative management expenses, higher insurance expenses, and increased MISO tariff expenses. These increases were partially offset by decreased maintenance and other expenses related to Coyote Station, as the comparable period in the prior year included costs ~~primarily arising from our~~associated with a planned outage at ~~Coyote Station and increased maintenance costs at our wind generation assets.~~

•~~Increased transmission tariff expenses.~~

•~~Higher labor costs associated with increased maintenance activities, including vegetative management and other activities.~~

•~~Increased travel costs driven by higher fuel costs for our vehicle fleet and increased travel activities.~~

~~Partially offsetting these increases were lower CIP expenses compared to~~ the ~~previous year and a decrease in expenses from our Minnesota rate case compared to 2021.~~facility.

MANUFACTURING SEGMENT RESULTS

The following table summarizes Manufacturing segment operating results for the nine months ended September 30, ~~2022~~2023 and ~~2021:~~2022:


(in thousands)	(in thousands)	2022		2021		$ change		% change		(in thousands)	2023		2022		$ change		% change

Operating Revenues	Operating Revenues	$	306,921	$	250,085	$	56,836	22.7	%	Operating Revenues	$	309,936	$	306,921	$	3,015	1.0	%
Cost of Products Sold (excluding depreciation)	Cost of Products Sold (excluding depreciation)	242,440		189,183		53,257		28.2		Cost of Products Sold (excluding depreciation)	237,670		242,440		(4,770)		(2.0)
Other Operating Expenses	Other Operating Expenses	27,363		28,109		(746)		(2.7)		Other Operating Expenses	32,058		27,363		4,695		17.2
Depreciation and Amortization	Depreciation and Amortization	12,101		11,395		706		6.2		Depreciation and Amortization	13,551		12,101		1,450		12.0
Operating Income	Operating Income	$	25,017	$	21,398	$	3,619	16.9	%	Operating Income	$	26,657	$	25,017	$	1,640	6.6	%

Operating Revenues increased ~~$56.8~~$3.0 million primarily due to a ~~$35.6 million~~14% increase in sales volumes at BTD Manufacturing driven by end market demand in the construction, agriculture, recreational vehicle, and power generation segments and incremental volumes from additional work with existing customers. Operating revenues also benefited from sales price increases implemented in response to labor and non-steel material cost inflation. Sales price increases and sales volume growth were partially offset by decreased steel prices, resulting in a 13% decrease in material costs, ~~at BTD,~~ which are passed through to customers, as a result of higher steel prices. Steel prices have been highly volatile in 2022 and were higher on average compared to the previous year, which resulted in increased revenues as we sold through high-priced inventory.customers. Operating revenues ~~also increased due to a 7.6% increase in sales volumes and price increases related to inflationary costs being experienced across the business. Increases in sales prices and volumes~~ at T.O. Plastics decreased primarily due to ~~strong customer demand in the~~decreased sales volumes of horticulture ~~sector, also contributed~~products, as order and delivery lead times have normalized and customers are working to ~~the increase in operating revenues.~~reduce their inventory levels.

Cost of Products Sold ~~increased $53.3~~decreased $4.8 million primarily due to ~~higher material costs~~decreased steel prices and decreased sales volumes at ~~BTD. The increase in material cost was largely driven~~T.O. Plastics, as described above. These decreases were partially offset by increased ~~steel prices as mentioned above. Cost of products sold at BTD was positively impacted by favorable cost absorption in the first nine months of 2022 compared to the prior year. Increased~~ sales volumes at BTD.

Other Operating Expenses increased $4.7 million due to variable costs associated with increased business activity and ~~material costs at T.O. Plastics also contributed to~~financial performance during the ~~increase in cost of products sold.~~period.

PLASTICS SEGMENT RESULTS

The following table summarizes Plastics segment operating results for the nine months ended September 30, ~~2022~~2023 and ~~2021:~~2022:


(in thousands)	(in thousands)	2022		2021		$ change		% change		(in thousands)	2023		2022		$ change		% change

Operating Revenues	Operating Revenues	$	447,767	$	264,898	$	182,869	69.0	%	Operating Revenues	$	328,920	$	447,767	$	(118,847)	(26.5)	%
Cost of Products Sold (excluding depreciation)	Cost of Products Sold (excluding depreciation)	201,146		169,584		31,562		18.6		Cost of Products Sold (excluding depreciation)	113,660		201,146		(87,486)		(43.5)
Other Operating Expenses	Other Operating Expenses	12,225		10,450		1,775		17.0		Other Operating Expenses	11,372		12,225		(853)		(7.0)
Depreciation and Amortization	Depreciation and Amortization	3,173		3,200		(27)		(0.8)		Depreciation and Amortization	3,052		3,173		(121)		(3.8)
Operating Income	Operating Income	$	231,223	$	81,664	$	149,559	183.1	%	Operating Income	$	200,836	$	231,223	$	(30,387)	(13.1)	%

Operating Revenues ~~increased $182.9~~decreased $118.8 million, primarily due to a ~~83% increase~~24% decrease in sales volumes compared to the same period last year, and a 3% decrease in sales price per pound of PVC pipe sold. ~~As discussed above, PVC pipe sale prices increased due to strong demand for PVC pipe products, limited PVC pipe inventories, and increases~~The decrease in sales volumes in the ~~cost~~first nine months of ~~resin. Resin and other material input supply constraints negatively impacted our production volumes, which coupled with low~~the year was the result of customer inventory management as these distributors closely managed their inventory levels ~~impacted sales volumes, which were down 7.5% compared~~and made strategic purchasing decisions amid uncertain and competitive market conditions. However, previous extraordinary market conditions continue to normalize, and the ~~previous year.~~demand volatility experienced early in the year began to stabilize in the third quarter.

Cost of Products Sold ~~increased $31.6~~decreased $87.5 million ~~primarily~~ due to ~~increased~~decreased sales volumes, as discussed above, as well as a 32% decrease in PVC resin and other input costs as the unique supply and demand conditions, which ~~increased 29% due to the market conditions described above, partially offset by decreased sales volumes. Labor~~caused significant increases in resin costs, have subsided and ~~overhead~~resin costs ~~also increased from the previous year.~~

~~Other Operating Expenses~~ increased $1.8 million primarily due to increased incentive compensation costs and sales commissions, which increased as a result of increased operating revenues and earnings compared to the previous year.have stabilized.

CORPORATE COSTS

The following table summarizes Corporate operating results for the nine months ended September 30, ~~2022~~2023 and ~~2021:~~2022:


(in thousands)	(in thousands)	2022		2021		$ change		% change		(in thousands)	2023		2022		$ change		% change

Other Operating Expenses	Other Operating Expenses	$	11,393	$	7,028	$	4,365	62.1	%	Other Operating Expenses	$	8,003	$	11,393	$	(3,390)	(29.8)	%
Depreciation and Amortization	Depreciation and Amortization	114		179		(65)		(36.3)		Depreciation and Amortization	78		114		(36)		(31.6)
Operating Loss	Operating Loss	$	11,507	$	7,207	$	4,300	59.7	%	Operating Loss	$	8,081	$	11,507	$	(3,426)	(29.8)	%

Other Operating Expenses ~~increased $4.4~~decreased $3.4 million primarily due to ~~increased~~decreased employee benefit expenses, including decreases in our employee health ~~care costs, increased professional service costs, increased incentive compensation costs based on the current year financial and operating performance, and increased travel~~insurance claim costs.

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REGULATORY ~~RATE~~ MATTERS

The following provides a summary of ~~general rate case filings,~~ rate rider filings and other regulatory filings that have or are expected to have a material impact on our operating results, financial position or cash flows.

GENERAL RATES

~~Minnesota~~North Dakota Rate Case: On November 2, ~~2020,~~2023, OTP filed ~~an initial~~a request with the ~~MPUC~~North Dakota Public Service Commission (NDPSC) for an increase in revenue recoverable ~~through base~~under general rates in ~~Minnesota, and on December 3, 2020, the MPUC approved an interim~~North Dakota. In its filing, OTP requested a net increase in annual ~~rate increase~~revenue of ~~$6.9~~$17.4 million, or ~~3.2%~~8.4%, ~~effective January 1, 2021.~~

~~On February 1, 2022, the MPUC issued its written order on final rates. The key provisions of the order included a revenue requirement of $209.0 million,~~ based on aan allowed rate of return on rate base of ~~7.18%~~7.85% and an allowed rate of return on equity of ~~9.48%~~10.6% on an equity ratio of ~~52.5%.~~53.5% of total capital. Through this proceeding, OTP has proposed changes to the mechanism of cost and investment recovery, with recovery moving from riders into base rates. The ~~order~~filing also ~~authorized recovery of our remaining Hoot Lake Plant net asset over~~includes a ~~five-year period and approved the requested decoupling~~proposal to implement a sales adjustment mechanism ~~for most residential and commercial customer rate groups with a cap of 4% of annual base revenues.~~

~~On May 12, 2022, OTP's final rate case compliance filing was approved by the MPUC.~~to address potential significant load additions or losses. The filing included ~~final revenue calculations, rate design and resulting tariff revisions, along with a determination of the~~an interim rate ~~refund, which resulted in an~~request of a net increase in ~~revenues during~~annual revenue of $12.4 million, or 6.0%. We anticipate interim rates will commence and rider rates will be adjusted to reflect the ~~second quarter of 2022 of $4.1 million. Final~~movement to interim rates ~~took effect~~ on ~~July~~January 1, ~~2022, and interim rate refunds of $15.3 million were completed in the third quarter of 2022.~~2024.

RATE RIDERS

The following table includes a summary of pending and recently concluded rate rider proceedings:

Recovery

Filing

Amount

Effective

Mechanism

Jurisdiction

Status

Date

(in millions)

Date

~~Notes~~Description

RRR - 2022

Approved

11/01/22

17.5

07/01/23

Recovery of Hoot Lake Solar costs, Ashtabula III costs, and true up for PTCs from Merricourt.

CIP - 2022

Approved

04/01/22

10.8

10/01/22

~~Includes recovery~~Recovery of energy conservation improvement costs as well as a demand side management financial incentive.

CIP - ~~2021~~2023

Approved

04/~~01/21~~03/23

~~9.4~~9.7

~~12/~~10/01/2123

~~Includes recovery~~Recovery of energy conservation improvement costs as well as a demand side management financial incentive.

TCR - 2021

Approved

11/23/21

7.2

08/01/22

~~Includes recovery~~Recovery of ~~two new~~ transmission ~~projects.~~project costs.

RRR - 2021

Approved

12/06/21

7.0

08/01/22

~~Includes return on~~Recovery of Hoot Lake Solar ~~construction costs~~ and ~~costs associated with the acquisition of the~~ Ashtabula III ~~wind farm.~~costs.

EITE - 2023

Approved

04/14/23

2.2

01/01/24

Biennial update to Energy-Intensive, Trade-Exposed rider.

EUIC - 2023

Requested

03/20/23

2.7

01/01/24

Recovery of advanced metering infrastructure, outage management and demand response system projects.

RRR - ~~2021~~2023

Approved

~~03/07/21~~12/30/22

~~11.8~~12.2

~~04/~~05/01/2123

~~Includes recovery~~Recovery of Merricourt, ~~investment~~Ashtabula III and ~~operating~~other costs.

RRR - 2022

Approved

01/05/22

7.8

04/01/22

~~Includes~~Recovery of Merricourt ~~recovery, the proposed purchase of~~costs, Ashtabula III costs, and ~~credits related to~~ deferred taxes and production tax credits.

TCR - 2022

~~Requested~~Approved

09/15/22

7.5

01/01/23

~~Includes recovery of three new transmission projects, one transmission rebuild project and six transmission projects related to extending the useful life~~Recovery of transmission ~~assets.~~project costs.

TCR - 2021

Approved

09/15/21

6.1

01/01/22

~~Includes recovery~~Recovery of ~~three new~~ transmission ~~projects/programs.~~project costs.

TCR - ~~2020~~2024

Requested

11/02/23

~~Approved~~

~~11/18/20~~

~~5.6~~4.5

01/01/2124

~~Includes recovery~~Recovery of ~~eight new~~ transmission ~~projects.~~

~~GCR - 2021~~

~~Approved~~

~~03/01/21~~

~~5.2~~

~~07/01/21~~

~~Includes recovery of Astoria Station, net of anticipated savings associated with the retirement of Hoot Lake Plant.~~project costs.

GCR - 2022

Approved

03/01/22

3.3

07/01/22

Annual update to generation cost recovery rider.

~~AGI~~MDT - 2022

~~Requested~~Approved

07/08/22

3.1

01/01/23

~~Includes recovery~~Recovery of ~~the~~ advanced metering infrastructure, outage management system and demand response projects.

GCR - 2023

Approved

03/03/23

2.2

07/01/23

Recovery of Astoria Station, net of anticipated savings associated with the retirement of Hoot Lake Plant.

RRR - 2024

Requested

11/02/23

1.9

04/01/24

Recovery of wind repowering projects and production tax credits.

MDT - 2024

Requested

11/02/23

1.3

01/01/24

Recovery of advanced metering infrastructure and demand response projects.

PIR - 2022

Approved

06/01/22

3.0

09/01/22

~~Includes recovery~~Recovery of ~~the~~ Ashtabula III, ~~wind farm purchase,~~ Merricourt, Astoria Station, ~~and the~~ Advanced Grid Infrastructure project ~~as well as~~costs, and impact of load growth credits.

TCR - ~~2020~~2022

Approved

11/01/~~29/20~~22

~~2.3~~3.0

03/~~02/20~~01/23

~~Annual update to~~Recovery of transmission ~~cost recovery rider.~~project costs.

TCR - ~~2022~~2023

Requested

11/01/23

2.5

03/01/24

Recovery of transmission projects.

TCR - 2021

Approved

10/29/21

2.2

03/01/22

~~Annual update to~~Recovery of transmission ~~cost recovery rider.~~project costs.

~~TCR~~PIR - ~~2021~~2023

Approved

~~Approved~~06/01/23

~~02/19/21~~

~~2.2~~1.8

~~03/~~09/01/2123

~~Includes recovery~~Recovery of ~~two new transmission projects.~~Ashtabula III, Merricourt, Astoria Station, Advanced Grid Infrastructure project costs, and impact of load growth credits.

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~~Energy Adjustment Rider:~~ On October 20, 2022, OTP filed supplemental comments in the Minnesota 2023 Energy Adjustment Rider (EAR) docket. As part of this filing, OTP proposed to refund the Minnesota portion of capacity auction revenues (see below for further details) through this rider and proposed a mechanism to address load reallocation due to the impact of a recent load addition in North Dakota. The filing proposed an assessment in 2022 and 2023 to determine whether actual, weather normalized earnings, as measured based on ROE, including the crediting of capacity auction revenues, are above or below our authorized ROE in Minnesota (9.48%). Under our proposal, should OTP under or over earn its authorized ROE, an adjustment to recover amounts from, or refund amounts to, Minnesota customers would be effectuated through the EAR. OTP proposed three ROE ranges above or below the allowed ROE for which a surcharge or refund would be calculated, including a 20 basis point range in which no surcharge or refund would be assessed, a 21 to 100 basis point range in which 50% of the over or under earning in this range would be collected from or refunded to customers, and a range above 100 basis points in which 100% of the over or under earning in this range would be collected from or refunded to customers. Our proposal is still pending before the MPUC. Should our proposal be accepted without modification, as of September 30, 2022, we estimated no refund or surcharge would be assessed under the requested mechanism.

~~MISO CAPACITY AUCTION~~

OTP offered 88 megawatts of excess capacity into the annual MISO planning resource auction for the period June 2022 through May 2023. As a result of a capacity shortage in the MISO region, capacity prices cleared the auction at maximum pricing. As a result, the 88 megawatts of auctioned capacity will generate approximately $9.3 million of net capacity auction revenues over the twelve month period beginning in June 2022. Through September 30, 2022, OTP has received approximately $2.9 million of excess capacity auction revenues. We anticipate a portion of the capacity auction revenues will be used to mitigate customer rate increases or returned to customers through various mechanisms in each jurisdiction.

INTEGRATED RESOURCE PLAN

On ~~September 1, 2021,~~March 31, 2023, OTP ~~filed its~~submitted a supplemental resource plan filing to the MPUC, the NDPSC, and the South Dakota Public Utilities Commission. The supplemental filing updated OTP’s original 2022 Integrated Resource Plan (2022 IRP) ~~concurrently with regulators in~~, which was filed on September 1, 2021. In the ~~three states where~~supplemental filing, OTP ~~operates, Minnesota, North Dakota and South Dakota. The 2022 IRP included OTP’s preferred~~outlined its updated plan for meeting customers’ anticipated capacity and energy needs while maintaining system reliability and low electric service ~~rates.~~rates, in light of several changes that have occurred since the original filing, including significant winter and spring reserve planning margins adopted by MISO, tax credits made available for renewable energy projects under the Inflation Reduction Act, the enactment of the Clean Energy Bill in Minnesota, and recent volatility in energy and capacity markets.

The ~~components of~~major requests in OTP's ~~preferred plan~~supplemental filing include:

–•the addition of ~~dual~~on-site liquefied natural gas fuel ~~capability~~storage at our Astoria Station natural gas ~~plant;~~plant in 2026;

–•the addition of ~~150~~approximately 200 megawatts of solar generation in ~~2025;~~2027-2028;

–•undertaking the ~~addition of 100~~initial steps necessary to add approximately 200 megawatts of wind generation in ~~2027;~~2029; and

–•~~the commencement of the process of withdrawing~~a withdrawal from our 35 percent ownership interest in Coyote Station, a jointly owned coal-fired generation plant, ~~by December 31, 2028; and~~in the event we are required to make a major, non-routine capital investment in the plant.

–Consistent with the ~~addition of 50 megawatts of solar generation in 2033.~~

~~Although the~~original 2022 IRP, ~~includes planned actions beyond 2026, regulators will not act on or approve planned actions in periods beyond 2026 as part of our 2022 IRP filing.~~

~~Subject~~the supplemental filing proposes to, subject to regulatory approval, ~~the preferred plan proposes to~~ create a regulatory asset ~~as a vehicle~~ to recover costs related to aany future withdrawal from Coyote ~~Station, including~~Station. Should such a withdrawal occur, we anticipate the regulatory asset would include the net book value of the plant on the withdrawal date, anticipated decommissioning costs, and any ~~required~~ costs incurred ~~as a result of an early termination of~~if the existing lignite sales agreement, under which Coyote Station acquires all of its lignite coal, ~~from a nearby mine.~~must be terminated. As part of an economic analysis included in the filing, OTP developed an estimate of the reasonably foreseeable costs of withdrawing from Coyote Station, which was determined to be $68.5 million, assuming a withdrawal at the end of ~~2028 of $68.5 million.~~2028. These costs may differ from actual results due to the uncertainty and timing of future events ~~associated with the terms and conditions of~~which could result in a ~~withdrawal.~~

On October 14, 2022, OTP submitted a supplemental filing to update its 2022 IRP, requesting the procedural schedule in Minnesota be amended to allow for additional time to update our resource modeling given significant changes in the energy industry since the original 2022 IRP filing, while maintaining the original procedural schedule as it relates to adding dual fuel capability at Astoria Station. Our original filing proposed fuel oil as the secondary on-site fuel at Astoria Station and our supplemental filing reflects revised cost estimates and liquified natural gas as the most cost-effective secondary fuel source. The recent changes which led to our request include FERC’s approval of MISO’s new seasonal resource adequacy construct, MISO’s proposal to significantly increase winter and spring planning reserve margins, and enactment of the Inflation Reduction Act. On November 1, 2022, the MPUC approved OTP's requested changes to the procedural schedule for the 2022 IRP. OTP plans to file an updated resource plan in March 2023, as approved under the amended schedule. In conjunction with the updated resource plan, OTP's preferred plan could change based on the results of the updated resource modeling incorporating the factors listed above, as well as other changes. A change to the preferred plan could ultimately impact the nature, timing and amount of future capital investments, as well as the potential for OTP's withdrawal from Coyote Station. ~~A notice~~

An informal hearing on the IRP before the NDPSC is scheduled to occur in November 2023, and a formal hearing on the IRP before the MPUC is expected to occur in early 2024.

ENVIRONMENTAL REGULATION

Climate Change and Greenhouse Gas Regulation: In May 2023, the EPA proposed new regulations under Section 111 of the ~~request submitted~~Clean Air Act to regulate greenhouse gas (GHG) emissions from existing and new fossil fuel-based electric generating units (EGU). The proposal provides requirements for different types of fossil fuel-based EGUs with various compliance dates.

For existing coal-fired steam generating units that were in operation before January 8, 2014 and that plan to operate past December 31, 2039, the proposal would (subject to certain exceptions) set emissions standards that reflect the use of carbon capture and sequestration (CCS) with 90% capture of carbon dioxide emissions beginning in 2030.

For existing coal-fired steam generating units that are scheduled to be retired between January 1, 2032 and December 31, 2039, the proposed rule would, in general, set emissions standards that reflect the use of co-firing 40% natural gas with coal beginning in 2030.

For existing coal-fired steam generating units that will either (a) retire by January 1, 2032, or (b) retire between 2032 and December 21, 2034 and will operate at a 20% annual capacity factor limit in the meantime, the proposed rule would simply require routine maintenance and no increase in emission rate.

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 the use of CCS or co-firing with low-GHG hydrogen. Under the proposed rule, each state must submit a plan to the ~~MPUC was also provided~~EPA to implement standards that are at least as stringent as the ~~North Dakota Public Service Commission~~EPA’s emission guidelines. The EPA is proposing to require states to submit their plans within 24 months of the effective date of the regulation.

We continue to review and ~~South Dakota Public Utilities Commission.~~evaluate the proposal and its impact, if adopted as proposed, on our EGUs and the potential impact to our operating results, financial condition and liquidity. Coyote Station and Big Stone Plant, our two co-owned coal-fired power plants, would be within the scope of the proposed regulations. We do not believe our combustion turbines would be within the scope of the regulation given their size and operating frequency.


LIQUIDITY

LIQUIDITY OVERVIEW

We believe our financial condition is strong and our cash and cash equivalents, other liquid assets, operating cash flows, existing lines of credit, access to capital markets and borrowing ability, because of investment-grade credit ratings, when taken together, provide us ample liquidity to conduct our business operations, fund our short-term and long-term capital expenditure plans and satisfy our obligations as they become due. Our liquidity, including our operating cash flows and access to capital markets, ~~can~~could be impacted by macroeconomic factors outside of our control, including higher interest rates and debt capital costs and diminished credit availability. In addition, our liquidity could be impacted by non-

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compliance with certain financial covenants under our various debt instruments. As of September 30, ~~2022,~~2023, we were in compliance with all financial covenants (see the Financial Covenants section under Capital Resources below).

The following table presents the status of our lines of credit as of September 30, ~~2022~~2023 and December 31, ~~2021:~~2022:


				2022						2021					2023						2022
(in thousands)	(in thousands)	Borrowing Limit		Amount Outstanding		Letters of Credit		Amount Available		Amount Available		(in thousands)	Borrowing Limit		Amount Outstanding		Letters of Credit		Amount Available		Amount Available

OTC Credit Agreement	OTC Credit Agreement	$	170,000	$	—	$	—	$	170,000	$	147,363	OTC Credit Agreement	$	170,000	$	—	$	—	$	170,000	$	170,000
OTP Credit Agreement	OTP Credit Agreement	170,000		—		9,919		160,081		88,315		OTP Credit Agreement	170,000		51,495		9,573		108,932		152,223
Total	Total	$	340,000	$	—	$	9,919	$	330,081	$	235,678	Total	$	340,000	$	51,495	$	9,573	$	278,932	$	322,223

We have an internal risk tolerance metric to maintain a minimum of $50 million of liquidity under the OTC Credit Agreement. Should additional liquidity be needed, this agreement includes an accordion feature allowing us to increase the amount available to $290 million, subject to certain terms and conditions. The OTP Credit Agreement also includes an accordion feature allowing OTP to increase that facility to $250 million, subject to certain terms and conditions.

CASH FLOWS

The following is a discussion of our cash flows for the nine months ended September 30, ~~2022~~2023 and ~~2021:~~2022:


(in thousands)	(in thousands)	2022		2021		(in thousands)	2023		2022

Net Cash Provided by Operating Activities	Net Cash Provided by Operating Activities	$	287,973	$	154,752	Net Cash Provided by Operating Activities	$	318,495	$	287,973

Net Cash Provided by Operating Activities increased ~~$133.2~~$30.5 million for the nine months ended September 30, ~~2022~~2023 compared to the nine months ended September 30, ~~2021,~~2022, primarily due ~~primarily~~ to the ~~$117.0 million increase~~absence of a pension plan contribution in ~~net income, largely~~2023 due to ~~increased~~the plan's funded status, whereas a $20.0 million discretionary contribution was made in February 2022, and the timing of customer collections of forecasted fuel costs that will be adjusted in future periods. These increases to operating cash flows were partially offset by lower earnings ~~from our Plastics segment,~~ and ~~a lower level of~~higher working ~~capital needs in the first nine months of 2022 compared to the prior year.~~capital.
(in thousands) 2022 2021
Net Cash Used in Investing Activities $ 127,556 $ 117,084


(in thousands)	2023		2022

Net Cash Used in Investing Activities	$	232,018	$	127,556

Net Cash Used in Investing Activities increased ~~$10.5~~$104.5 million for the nine months ended September 30, ~~2022~~2023 compared to the nine months ended September 30, ~~2021.~~2022. The increase in cash used in investing activities was primarily due to a higher amount of Electric segment capital investment compared to last ~~year.~~year, including the purchase of the Ashtabula III wind farm for $50.6 million in January 2023, and investments in our Hoot Lake Solar facility and several wind repowering projects. Capital expenditures in our Manufacturing and Plastics segments increased $20.0 million as a result of investments in additional equipment and a facility expansion project at our Plastics segment facility in Phoenix, Arizona.


(in thousands)	(in thousands)	2022		2021		(in thousands)	2023		2022

Net Cash Used in Financing Activities	Net Cash Used in Financing Activities	$	88,967	$	37,559	Net Cash Used in Financing Activities	$	16,259	$	88,967

Net Cash Used in Financing Activities ~~increased $51.4~~decreased $72.7 million for the nine months ended September 30, ~~2022~~2023 compared to the nine months ended September 30, ~~2021.~~2022. Financing activities for the nine months ended September 30, 2023 included net proceeds from short-term borrowings of $43.3 million under the OTP credit agreement, which were primarily used to fund Electric segment capital investments. Financing activities for the nine months ended September 30, 2023 also included dividend payments of $54.8 million. Financing activities for the nine months ended September 30, 2022 included net repayments of short-term borrowings of $91.2 million, the repayment of $30.0 million of long-term debt, the issuance of $90.0 million of long-term debt, at OTP, which was used to repay $30.0 million of long-term debt that matured in August 2022, to repay short-term borrowings, fund capital expenditures, and for other general corporate purposes. Financing activities for the nine months ended September 30, 2022, also included net repayments of short-term borrowings of $91.2 million and dividend payments of $51.6 ~~million. Financing activities for the nine months ended September 30, 2021 included net proceeds from short-term borrowings of $16.9 million and dividend payments of $48.6~~ million.


CAPITAL REQUIREMENTS

CAPITAL EXPENDITURES

We have a capital expenditure program for expanding, upgrading and improving our plants and operating equipment. Typical uses of cash for capital expenditures are investments in electric generation facilities and environmental upgrades, transmission and distribution lines, manufacturing facilities and upgrades, equipment used in the manufacturing process, and computer hardware and information systems. Our capital expenditure program is subject to review and regulatory approval and is revised in light of changes in demands for energy, technology, environmental laws, tax laws, regulatory changes, business expansion opportunities, the costs of labor, materials and equipment, and our financial condition.

We have updated our capital expenditure plans in our Electric segment in light of recent changes in the energy industry and recent regulatory actions, including FERC’s approval of MISO’s new seasonal resource adequacy construct, MISO’s proposal to significantly increase winter and spring planning reserve margins, MISO's approval of certain projects as part of its long-range transmission plan, and the enactment of the Inflation Reduction Act. The significant changes to our anticipated capital investments over the next five years include additional investment in multiple transmission projects, the modification of investments in wind generation, including the incorporation of wind repowering into our current capital investment plan, and a reduction in planned solar generation. The table below reflects these changes, as well as all other currently anticipated capital investments over the next five years in our Electric, Manufacturing, and Plastics segments.

Table of Contents

The following provides a summary of actual capital expenditures for the year ended December 31, ~~2021,~~2022, anticipated annual capital expenditures for the current year ending December 31, ~~2022,~~2023, and ~~anticipated capital expenditures for~~ the ~~next five~~subsequent four years, along with electric utility average rate base and annual rate base growth:


(in millions)	(in millions)	2021		2022(1)			2023			2024			2025			2026			2027			Total 2023 - 2027		(in millions)	2022			2023(1)			2024			2025			2026			2027			Total 2023 - 2027

Electric Segment:
Electric Segment																								Electric Segment
Renewables and Natural Gas Generation	Renewables and Natural Gas Generation			$	33		$	88		$	119		$	88		$	79		$	10		$	384	Renewables and Natural Gas Generation				$	106		$	119		$	88		$	85		$	49		$	447
Technology and Infrastructure	Technology and Infrastructure			9			33			30			6			5			1			75		Technology and Infrastructure				21			30			6			5			1			63
Distribution Plant Replacements	Distribution Plant Replacements			40			33			37			38			38			43			189		Distribution Plant Replacements				42			37			38			38			43			198
Transmission (includes replacements)	Transmission (includes replacements)			38			34			36			46			87			78			281		Transmission (includes replacements)				52			36			46			87			78			299
Other	Other			30			26			25			30			25			22			128		Other				29			25			30			24			23			131
Total Electric Segment	Total Electric Segment	$	140	$	150		$	214		$	247		$	208		$	234		$	154		$	1,057	Total Electric Segment	$	148		$	250		$	247		$	208		$	239		$	194		$	1,138
Manufacturing and Plastics Segments	Manufacturing and Plastics Segments	32		34			48			53			29			25			24			179		Manufacturing and Plastics Segments	23			50			53			29			25			24			181
Total Capital Expenditures	Total Capital Expenditures	$	172	$	184		$	262		$	300		$	237		$	259		$	178		$	1,236	Total Capital Expenditures	$	171		$	300		$	300		$	237		$	264		$	218		$	1,319

Total Electric Utility Average Rate Base	Total Electric Utility Average Rate Base	$	1,575	$	1,620		$	1,750		$	1,850		$	1,990		$	2,110		$	2,210				Total Electric Utility Average Rate Base	$	1,624		$	1,746		$	1,851		$	1,990		$	2,111		$	2,230
Annual Rate Base Growth	Annual Rate Base Growth			2.9		%	8.0		%	5.7		%	7.6		%	6.0		%	4.7		%			Annual Rate Base Growth	3.1		%	7.5		%	6.0		%	7.5		%	6.1		%	5.6		%

(1) Includes actual results for the nine months ended September 30, 2022, and anticipated capital expenditures for the fourth quarter of 2022.
(1) Includes actual results for the nine months ended September 30, 2023, and anticipated capital expenditures for the remaining three months of 2023.																								(1) Includes actual results for the nine months ended September 30, 2023, and anticipated capital expenditures for the remaining three months of 2023.

CONTRACTUAL OBLIGATIONS

Our contractual obligations primarily include principal and interest payments due under our outstanding debt obligations, commitments to acquire coal, energy and capacity commitments, payments to meet our postretirement benefit obligations, and payment obligations under land easements and leasing arrangements.

On June 23, 2022, OTP exercised its option to acquire the Ashtabula III wind farm, a 62.4 megawatt wind farm located in eastern North Dakota, for $49.7 million, subject to certain closing adjustments. The purchase has received regulatory approval. We anticipate the transaction will close, subject to certain customary closing conditions, in January 2023.

Our contractual obligations as of December 31, ~~2021~~2022 are included in Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations, of our Annual Report on Form 10-K for the year ended December 31, ~~2021.~~2022. Except for the obligations arising from new land easements assumed in connection with the purchase of Ashtabula III, ~~wind farm purchase described above,~~ there were no material changes in our contractual obligations outside of the ordinary course of ~~our~~ business during the nine months ended September 30, ~~2022.~~2023.

~~Off-Balance Sheet Arrangements~~

In connection with the purchase of the Ashtabula III wind farm in January 2023, we assumed 51 land easements not classified as leases, which require annual payments. As of September 30, ~~2022, we have outstanding letters~~2023, the remaining payments to be made under the easements were $4.0 million and the remaining terms of credit totaling $13.0 million, a portion of which reduces our borrowing capacity under our lines of credit. No outstanding letters of credit are reflected in outstanding short-term debt on our consolidated balance sheets. We do not have any other off-balance sheet arrangements or any relationships with unconsolidated entities or financial partnerships that have, or are reasonably likely to have, a material current or future effect on our financial condition. These entities are often referred to as structured finance special purpose entities or variable interest entities, which are established for the purpose of facilitating off-balance sheet arrangements or for other contractually narrow or limited purposes. We are not exposed to any financing, liquidity, market or credit risk that could arise if we had such relationships.agreements extend into 2034.

COMMON STOCK DIVIDENDS

We paid dividends to our common stockholders totaling ~~$51.6~~$54.8 million, or ~~$1.2375~~$1.313 per share, in the first nine months of ~~2022.~~2023. The determination of the amount of future cash dividends to be paid will depend on, among other things, our financial condition, our actual or expected level of earnings and cash flows from operations, the level of our capital expenditures and our future business prospects. As a result of certain statutory limitations or regulatory or financing agreements, the amount of dividends we are allowed to pay could be restricted. See Note 10 to our consolidated financial statements included in this Quarterly Report on Form 10-Q for additional information. The decision to declare ~~a dividend~~dividends is reviewed quarterly by our Board of Directors.


CAPITAL RESOURCES

Financial flexibility is provided by operating cash flows, unused lines of credit and access to capital markets, ~~which~~and is aided by strong financial coverages and investment grade credit ratings. Debt financing will be required in the five-year period from ~~2022~~2023 through ~~2026~~2028 to refinance maturing debt and to finance our capital investments. Our financing plans are subject to change and are impacted by our planned level of capital investments, and decisions to reduce borrowings under our lines of credit, to refund or retire early any of our outstanding debt, to complete acquisitions, or to use capital for other corporate purposes.

~~Table of~~ ~~Contents~~

REGISTRATION STATEMENTS

On May 3, 2021, we filed a second registration statement with the SEC for the issuance of up to 1,500,000 common shares under an Automatic Dividend Reinvestment and Share Purchase Plan, which provides shareholders, retail customers of OTP and other interested investors methods of purchasing our common shares by reinvesting their dividends or making optional cash investments. Shares purchased under the plan may be newly issued common shares or common shares purchased on the open market. As of September 30, ~~2022,~~2023, there were ~~1,287,774~~1,169,619 shares available for purchase or issuance under the plan. The registration statement expires in May 2024.

Table of Contents

SHORT-TERM DEBT

OTC and OTP are each party to a credit agreement (the OTC Credit Agreement and the OTP Credit Agreement, respectively) which each ~~provide~~provides for unsecured revolving lines of credit. The following is a summary of key provisions and borrowing information as of, and for the nine months ended, September 30, ~~2022:~~2023:

(in thousands, except interest rates) OTC Credit Agreement OTP Credit Agreement
Borrowing Limit $ 170,000 $ 170,000
Borrowing Limit if Accordion Exercised1
290,000 250,000
Amount Restricted Due to Outstanding Letters of Credit as of September 30, 2022 — 9,919
Amount Outstanding as of September 30, 2022 — —
Average Amount Outstanding During the Nine Months Ended September 30, 2022 15,625 30,235
Maximum Amount Outstanding During the Nine Months Ended September 30, 2022 58,715 74,519
Interest Rate as of September 30, 2022 4.64 % 4.39 %
Maturity Date September 30, 2026 September 30, 2026
1Each facility includes an accordion featuring allowing the borrower to increase the borrowing limit if certain terms and conditions are met.

On October 31, 2022, OTC entered into a Fifth Amended and Restated Credit Agreement and OTP entered into a Fourth Amended and Restated Credit Agreement, in each case amending and restating the previously existing credit agreements to extend the maturity date of each agreement from September 30, 2026 to October 29, 2027 and to replace LIBOR as a benchmark interest rate with the Secured Overnight Finance Rate (SOFR). The adoption of SOFR as a benchmark interest rate is in advance of the scheduled elimination of LIBOR as a benchmark interest rate on June 30, 2023. We do not expect this change in benchmark interest rates will have a material impact on our operating results or cash flows. No other significant terms or conditions, including borrowing capacity, credit spreads or financial covenants, were modified under these amendments and restatements.


(in thousands, except interest rates)	OTC Credit Agreement			OTP Credit Agreement

Borrowing Limit	$	170,000		$	170,000
Borrowing Limit if Accordion Exercised1	290,000			250,000
Amount Restricted Due to Outstanding Letters of Credit as of September 30, 2023	—			9,573
Amount Outstanding as of September 30, 2023	—			51,495
Average Amount Outstanding During the Nine Months Ended September 30, 2023	—			47,704
Maximum Amount Outstanding During the Nine Months Ended September 30, 2023	—			61,006
Interest Rate as of September 30, 2023	6.82		%	6.53		%
Maturity Date	October 29, 2027			October 29, 2027


1Each facility includes an accordion featuring allowing the borrower to increase the borrowing limit if certain terms and conditions are met.

LONG-TERM DEBT

As of September 30, ~~2022,~~2023, we had $827.0 million of principal outstanding under long-term debt arrangements. These instruments generally provide for unsecured borrowings at fixed rates of interest with maturities ranging from 2026 to 2052. Pursuant to a Note Purchase Agreement executed in June 2021, OTP issued its Series 2022A Notes due May 20, 2052, in May 2022 for aggregate proceeds of $90.0 million, a portion of which was used to repay the $30.0 million Series 2007B Notes at their maturity in August 2022.

Note 6 to our consolidated financial statements included in this Quarterly Report on Form 10-Q includes additional information regarding these short-term and long-term debt instruments.

Financial Covenants

Certain of our short- and long-term debt agreements require OTC and OTP to maintain certain financial covenants. As of September 30, ~~2022,~~2023, we were in compliance with these financial covenants as further described below:

OTC, under its financial covenants, may not permit its ratio of interest-bearing debt to total capitalization to exceed 0.60 to 1.00, may not permit its interest and dividend coverage ratio to be less than 1.50 to 1.00, and may not permit its priority indebtedness to exceed 10 percent of its total capitalization. As of September 30, ~~2022,~~2023, OTC's interest-bearing debt to total capitalization was ~~0.41~~0.38 to 1.00, OTC's interest and dividend coverage ratio was ~~11.37~~10.47 to 1.00, and OTC had no priority indebtedness outstanding.

OTP, under its financial covenants, may not permit its ratio of interest-bearing debt to total capitalization to exceed 0.60 to 1.00, may not permit its interest and dividend coverage ratio to be less than 1.50 to 1.00, and may not permit its priority ~~debt~~indebtedness to exceed 20 percent of its total capitalization. As of September 30, ~~2022,~~2023, OTP's interest-bearing debt to total capitalization was 0.45 to 1.00, OTP's interest and dividend coverage ratio was 3.65 to 1.00, and OTP had no priority indebtedness outstanding.

Credit Ratings

The credit ratings of OTC and OTP as of September 30, 2023 are summarized below:

Otter Tail Corporation

Otter Tail Power Company

Moody's

Fitch

S&P

Moody's

Fitch

S&P

Corporate Credit/Long-Term Issuer Default Rating

Baa2

BBB

BBB+

Senior Unsecured Debt

n/a

BBB

n/a

A-

n/a

Outlook

Stable


CRITICAL ACCOUNTING POLICIES INVOLVING SIGNIFICANT ESTIMATES

The discussion and analysis of our results of operations are based on financial statements prepared in accordance with generally accepted accounting principles in the United States of America. Certain of our accounting policies require management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related ~~disclosure~~disclosures of contingent assets and liabilities in the

~~Table of~~ ~~Contents~~

preparation of our consolidated financial statements. We have disclosed in our Annual Report on Form 10-K for the year ended December 31, ~~2021~~2022 the critical accounting policies that affect our most significant estimates and assumptions used in preparing our consolidated financial statements. There have been no material changes to our critical accounting policies and estimates from those disclosed in the most recent Annual Report on Form ~~10-K.~~10-K.


ITEM 3.			QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There have been no material changes in our market risk from those disclosed in Item 7A, Quantitative and Qualitative Disclosures About Market Risk, in our Annual Report on Form 10-K for the year ended December 31, ~~2021.~~2022.

Table of Contents


ITEM 4.			CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures. Under the supervision and with the participation of the Company’s management, including the Chief Executive Officer and the Chief Financial Officer, we evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 (the Exchange Act)) as of September 30, ~~2022,~~2023, the end of the period covered by this report. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of September 30, ~~2022.~~2023.

Changes in Internal Control over Financial Reporting. There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) under the Exchange Act) during the quarter ended September 30, ~~2022~~2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION


ITEM 1.			LEGAL PROCEEDINGS

We are the subject of various legal and regulatory proceedings in the ordinary course of our business. Such matters are subject to many uncertainties and to outcomes that are not predictable with assurance. We record a liability in our consolidated financial statements for costs related to claims, including future legal costs, settlements and judgments, where we have assessed that a loss is probable, and an amount can be reasonably estimated. Material proceedings are described under Note 9, Commitments and Contingencies, to the consolidated financial statements, and in Management's Discussion and Analysis of Financial Condition and Results of Operations, Regulatory ~~Rate~~ Matters.

ITEM 1A.

RISK FACTORS

There have been no material changes from the risk factors disclosed in Item 1A, Risk Factors, of our Annual Report on Form 10-K for the year ended December 31, ~~2021.~~2022.

ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Purchases of Otter Tail Corporation common shares were made on the open market during the three months ended September 30, 2023, as follows:


Period	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs(2)		Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs(2)

July 2023(1)	13,215	$	79.34	$	—	$	—
August 2023	—	—		—		—
September 2023	—	—		—		—
Total	13,215	$	79.34	$	—	$	—

(1) These purchases were made to satisfy obligations under our Employee Stock Purchase Plan as we elected to acquire shares in the open market to fulfill share issuances to plan participants.
(2) We do not have any publicly announced share repurchase plans or programs.

ITEM 5.

OTHER INFORMATION

Disclosure in Lieu of Current Reporting Furnished under Item 8.01 of Form 8-K. See “North Dakota Rate Case” under Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations in this Quarterly Report on Form 10-Q.

Securities Trading Plans of Directors and Executive Officers. During the three months ended September 30, 2023, none of our directors or executive officers adopted, amended, or terminated any contract, instruction or written plan for the purchase or sale of our securities that was intended to satisfy the affirmative defense conditions of Rule 10b5-1(c). Further, none of them adopted, amended or terminated any non-Rule 10b5-1 trading arrangement.

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Table of Contents

ITEM 6.

EXHIBITS

The following Exhibits are filed as part of, or incorporated by reference into, this report.



No.									Description
~~10.1~~									—Fifth Amended And Restated Credit Agreement, dated as of October 31, 2022, by and between Otter Tail Corporation, as Borrower, and the banks named therein, with U.S. Bank National Association, as Administrative Agent (incorporated by reference to Exhibit 10.1 to the Form 8-K filed by Otter Tail Corporation on November 1, 2022)
~~10.2~~									—Fourth Amended And Restated Credit Agreement, dated as of October 31, 2022, by and between Otter Tail Power Company, as Borrower, and the banks named therein, with U.S. Bank National Association, as Administrative Agent (incorporated by reference to Exhibit 10.2 to the Form 8-K filed by Otter Tail Corporation on November 1, 2022)
31.1									—Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2									—Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1									—Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2									—Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.SCH									—Inline XBRL Taxonomy Extension Schema Document
101.CAL									—Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB									—Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE									—Inline XBRL Taxonomy Extension Presentation Linkbase Document
101.DEF									—Inline XBRL Taxonomy Extension Definition Linkbase Document
104									—Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


			OTTER TAIL CORPORATION

			By:			/s/ Kevin G. Moug
						Kevin G. Moug Chief Financial Officer and Senior Vice President (duly authorized officer and principal financial officer)

						Dated: November ~~2, 2022~~3, 2023

3435


	Description	Page

	Definitions	2
	Forward Looking Information	2
PART I
ITEM 1.	Financial Statements:
	Consolidated Balance Sheets	3
	Consolidated Statements of Income	4
	Consolidated Statements of Comprehensive Income	5
	Consolidated Statements of Shareholders’ Equity	6
	Consolidated Statements of Cash Flows	7
	Condensed Notes to Consolidated Financial Statements	8
ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2022
ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	32
ITEM 4.	Controls and Procedures	3233
PART II
ITEM 1.	Legal Proceedings	3233
ITEM 1A.	Risk Factors	3233

ITEM 5.	Other Information	33
ITEM 6.	Exhibits	3334
Signatures		3435


	2022 vs Normal		2022 vs 2021		2021 vs Normal

Effect on Diluted Earnings Per Share	$	0.01	$	(0.02)	$	0.03