What changed in this filing

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Item 1A. Risk Factors

2022-02-23 compared with 2021-02-19 · 92 added, 69 removed, 263 unchanged (38% of the section changed)

6 unchanged sentences

Statutory and regulatory requirements also may limit another party's ability to acquire the Company or impose conditions on an acquisition of or by the Company.

The Company's electric and natural gas transmission and distribution businesses are subject to comprehensive regulation by federal, state and local regulatory agencies with respect to, among other things, allowed rates of return and recovery of investments and costs, financing, rate structures, customer service, health care coverage and costs, taxes, franchises;

rate structures;

customer service;

health care coverage and costs;

recovery of purchased power and purchased natural gas costs;

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The approval process could be lengthy and the outcome uncertain, which may deter potential acquirers from approaching the Company or impact the Company's ability to pursue acquisitions.

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Economic volatility affects the Company's operations, as well as the demand for its products and services.

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Further, any material decreases in customers' energy demand, for economic or other reasons, could have an adverse impact on the Company's earnings and results of operations.

MDU Resources Group, Inc.

The Company's operations involve risks that may result from catastrophic events.

The Company's operations, particularly those related to natural gas and electric transmission and distribution, include a variety of inherent hazards and operating risks, such as product leaks;

The Company's operations, particularly those related to electric and natural gas transmission and distribution, include a variety of inherent hazards and operating risks, such as product leaks;

mechanical failures;

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and acts of war.

These hazards and operating risks could result in loss of human life;

These hazards and operating risks have occurred and may recur in the future which could result in loss of human life;

personal injury;

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Financial market changes could impact the Company’s pension and postretirement benefit plans and obligations.

The Company has pension and postretirement defined benefit plans for some of its employees and former employees.

The Company has pension and postretirement defined benefit plans for some of its current and former employees.

Assumptions regarding future costs, returns on investments, interest rates and other actuarial assumptions have a significant impact on the funding requirements and expense recorded relating to these plans.

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The Company has benefited from associated natural gas production in the Bakken, which has provided opportunities for organic growth projects.

MDU Resources Group, Inc.

Depressed oil and natural gas prices, however, place pressure on the ability of oil exploration and production companies to meet credit requirements and will continue to be a challenge if prices remain depressed long-term.

Depressed oil and natural gas prices, however, place pressure on the ability of oil exploration and production companies to meet credit requirements and can be a challenge if prices remain depressed long-term.

Prolonged depressed prices for oil and natural gas could negatively affect the growth, results of operations, cash flows and asset values of the Company's electric, natural gas and pipeline businesses.

If oil and natural gas prices increase significantly, customer demand could decline for utility, pipeline and construction materials, which could impact the Company's results of operations and cash flows.

If oil and natural gas prices increase significantly, customer demand could decline for utility, pipeline and construction products and services, which could impact the Company's results of operations and cash flows.

While the Company has fuel clause recovery mechanisms for its utility operations in all of the states where it operates, higher utility fuel costs could also significantly impact results of operations if such costs are not recovered.

Delays in the collection of utility fuel cost recoveries, as compared to expenditures for fuel purchases, could also negatively impact the Company's cash flows.

High oil prices also affect the cost and demand for asphalt products and related contracting services.

High oil prices also affect the margins realized and demand for construction materials and related contracting services.

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COVID-19 may have a negative impact on the Company's business operations, revenues, results of operations, liquidity and cash flows.

To the extent the COVID-19 pandemic adversely affects the Company's business, operations, revenues, liquidity or cash flows, it may also have the effect of heightening many of the other risks described in this section.

The degree to which COVID-19 will impact the Company depends on future developments, including severity and duration of the outbreak, actions taken by governmental authorities, timing and effectiveness of vaccines being administered, and timing of when relatively normal economic and operating conditions resume.

The Company's operations have experienced some disruptions due to its employees or third-party employees being diagnosed with COVID-19 or other illnesses and required quarantine periods for those in close contact to COVID-19.

Self-quarantine or actual viral health issues may have a negative impact on the Company's employees and the ability to continue its work activities under a normal course of business.

Moreover, the diagnosis of COVID-19 or other illnesses could require the Company or its business partners to suspend projects, quarantine employees or institute more aggressive preventive measures including closure of job sites.

Mandated healthcare protocols could lead to a shortage of employees or altered operations.

If a significant percentage of the Company's workforce are unable to work because of illness, quarantine or government restrictions in connection with the COVID-19 pandemic, the Company's operations may be negatively impacted, potentially adversely affecting its business, operations, revenues, liquidity and cash flows.

A portion of the Company's workforce has been working remotely and the Company has delayed return to work processes for certain office employees due to the rise in local COVID-19 cases in some operating regions.

To date, the Company has not experienced any significant delays or information technology disruptions.

An increased amount of social engineering and attacks by bad actors taking advantage of the pandemic could affect the Company's ability to maintain secure operations, communications and productivity in the future.

The regulated businesses have been deemed essential service providers and have seen some impacts on their businesses;

however, the Company could be materially affected if its businesses were no longer deemed essential service providers.

Future actions of its regulatory commissions on accounting for the impacts of the COVID-19 pandemic may also affect the Company's future operating results and cash flows.

The Company has experienced some impacts to its commercial and industrial electric and natural gas loads associated with reduced demand from those customers due to the COVID-19 pandemic.

The construction businesses have generally been deemed essential service providers and have experienced some inefficiencies and interruptions on its businesses from the pandemic;

however, the Company could be materially impacted if its businesses were no longer deemed essential service providers.

These businesses could be further impacted in the future by site closures, government shut-down measures, additional inefficiencies due to compliance with safety and social distancing measures, public and private sector budget changes and constraints, and the impact of overall macro and local economic conditions on future construction projects.

Other factors associated with the COVID-19 pandemic that could impact the Company's businesses and future operating results, revenues and liquidity include impacts related to the health, safety, and availability of its employees and contractors;

continued flexible payment plans;

The ongoing COVID-19 pandemic has disrupted national, state and local economies.

To the extent the COVID-19 pandemic adversely impacts the Company's businesses, operations, revenues, liquidity or cash flows, it could also have a heightened effect on other risks described in this section.

The degree to which COVID-19 will impact the Company depends on future developments, including the resurgence of COVID-19 and its variants, federal and state mandates, actions taken by governmental authorities, effectiveness of vaccines being administered, and the pace and extent to which the economy recovers and remains under relatively normal operating conditions.

The Company's operations have experienced minor disruptions due to shortages of employees or third-party contractors and altered work operations.

Government and customer vaccine mandates could leave the Company with a shortage of vaccinated employees or reduce workforce capacity to bid on new projects, which may further exacerbate the already tight labor markets for skilled employees or cause additional wage inflation.

The Company could also be impacted by additional costs and lost productivity associated with COVID-19 testing and tracking of employee vaccination records.

If a significant percentage of the Company's workforce are unable to work because of illness, quarantine, vaccination requirements or government restrictions in connection with the COVID-19 pandemic, the Company's operations may be negatively impacted, potentially adversely affecting its business, operations, revenues, liquidity and cash flows.

In response to the COVID-19 pandemic, the Company implemented a remote work environment for certain employees of the Company's workforce.

As of July 2021, many of these employees returned to their office;

however, some employees have transitioned to a permanent remote work environment.

The increase in remote work and longevity of the pandemic may create increased vulnerability to cybersecurity incidents affecting the Company’s ability to maintain secure operations.

extended rise in unemployment;

public and private sector budget changes and constraints;

continued flexible payment plans for utility customers;

counterparty credit;

4 unchanged sentences

travel restrictions;

and legal and regulatory matters, including the potential for delayed regulatory filings and recovery of invested capital.

and legal and regulatory matters, including the potential for delayed regulatory filings, accounting for the impacts of the COVID-19 pandemic and recovery of invested capital.

The economic and market disruptions resulting from COVID-19 could also lead to greater than normal uncertainty with respect to the realization of estimated amounts, including estimates for backlog, revenue recognition, intangible assets, other investments and provisions for credit losses.

Reductions in the Company's credit ratings could increase financing costs.

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Legislation related to health care could also change the Company's benefit program and costs.

22 MDU Resources Group, Inc.

The Company is exposed to risk of loss resulting from the nonpayment and/or nonperformance by the Company's customers and counterparties .

If the Company's customers or counterparties experience financial difficulties, the Company could experience difficulty in collecting receivables.

Nonpayment and/or nonperformance by the Company's customers and counterparties, particularly customers and counterparties of the Company’s construction materials and contracting and construction services businesses for large construction projects, could have a negative impact on the Company's results of operations and cash flows.

Nonpayment and/or nonperformance by the Company's customers and counterparties, particularly customers and counterparties of the Company’s pipeline, construction materials and contracting and construction services businesses for large construction projects, could have a negative impact on the Company's results of operations and cash flows.

The Company could also have indirect credit risk from participating in energy markets such as MISO in which credit losses are socialized to all participants.

8 unchanged sentences

Prolonged lead times on the delivery of raw materials and further tariff increases on raw materials and finished products could adversely affect the Company's business, financial condition and results of operations.

MDU Resources Group, Inc.

Operational Risks

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The aging infrastructure may require significant additional maintenance or replacement that could adversely affect the Company’s results of operations.

The Company’s energy delivery infrastructure is aging, which increases certain risks, including breakdown or failure of equipment, pipeline leaks and fires developing from power lines.

The Company’s energy delivery infrastructure is aging, which increases certain risks, including breakdown or failure of equipment, pipeline leaks and fires developing from power lines, all of which have occurred and may recur in the future resulting in material costs.

Aging infrastructure is more prone to failure which increases maintenance costs, unplanned outages and the need to replace facilities.

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Such unanticipated events could negatively impact the Company's business, its results of operations and cash flows.

MDU Resources Group, Inc.

Operating or other costs required to comply with current or potential pipeline safety regulations and potential new regulations under various agencies could be significant.

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Contracts are subject to delay, default or cancellation, and contracts in the Company's backlog are subject to changes in the scope of services to be provided, as well as adjustments to the costs relating to the applicable contracts.

Backlog may also be affected by project delays or cancellations resulting from weather conditions, external market factors and economic factors beyond the Company's control.

Backlog may also be affected by project delays or cancellations resulting from weather conditions, external market factors and economic factors beyond the Company's control, among other things.

Accordingly, there is no assurance that backlog will be realized.

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Also, the backlog as of the end of the year may not be indicative of the revenue and net income expected to be earned in the following year and should not be relied upon as a stand-alone indicator of future revenues or net income.

The Company's participation in joint venture contracts may have a negative impact on its reputation, business operations, revenues, results of operations, liquidity and cash flows.

The Company enters into certain joint venture arrangements typically to bid and execute particular projects.

Generally, these agreements are directly with a third-party client;

however, services may be performed by the venture, the joint venture partners or a combination thereof.

Engaging in joint venture contracts exposes the Company to risks and uncertainties, some of which are outside the Company's control.

26 MDU Resources Group, Inc.

The Company is reliant on joint venture partners to satisfy their contractual obligations, including obligations to commit working capital and equity, and to perform the work as outlined in the agreement.

Failure to do so could result in the Company providing additional investments or services to address such performance issues.

If the Company is unable to satisfactorily resolve any partner performance issues, the customer could terminate the contract opening the Company to legal liability which could negatively impact the Company's reputation, revenues, results of operations, liquidity and cash flows.

Supply chain disruptions may adversely affect Company operations.

The Company relies on third-party vendors and manufacturers to supply many of the materials necessary for its operations.

Disruptions or delays in receiving materials;

price increases from suppliers or manufacturers;

or inability to source needed materials could adversely affect the Company’s results of operations, financial condition and cash flows.

Environmental and Regulatory Risks

The Company's operations could be adversely impacted by climate change.

Severe weather events, such as tornadoes, hurricanes, rain, ice and snowstorms and high and low temperature extremes, occur in regions in which the Company operates and maintains infrastructure.

Severe weather events, such as tornadoes, hurricanes, rain, drought, ice and snowstorms, and high and low temperature extremes, occur in regions in which the Company operates and maintains infrastructure.

Climate change could change the frequency and severity of these weather events, which may create physical and financial risks to the Company.

Such risks could have an adverse effect on the Company's financial condition, results of operations and cash flows.

Severe weather events may damage or disrupt the Company's electric and natural gas transmission and distribution facilities, which could result in disruption of service and ability to meet customer demand, increased maintenance or capital costs to repair facilities and restore customer service.

The cost of providing service could increase to the extent the frequency of severe weather events increases because of climate change or otherwise.

Severe weather events may damage or disrupt the Company's electric and natural gas transmission and distribution facilities, which could result in disruption of service and ability to meet customer demand and increase maintenance or capital costs to repair facilities and restore customer service.

The cost of providing service could increase if the frequency of severe weather events increases because of climate change or otherwise.

The Company may not recover all costs related to mitigating these physical risks.

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Increases in severe weather events or significant changes in temperature and precipitation patterns could adversely affect the agriculture industry and, correspondingly, the economies of the states and communities affected by that industry.

The insurance industry may be adversely affected by severe weather events which may impact the availability of insurance coverage, insurance premiums and insurance policy terms.

The insurance industry may be adversely affected by severe weather events which may impact availability of insurance coverage, insurance premiums and insurance policy terms.

The Company may be subject to litigation related to climate change.

1 unchanged sentence

The price of energy also has an impact on the economic health of communities.

The cost of additional regulatory requirements to combat climate change, such as regulation of carbon dioxide emissions under the Clean Air Act, requirements to replace fossil-fuels with renewable energy or credits, or other environmental regulation or taxes could impact the availability of goods and the prices charged by suppliers, which would normally be borne by consumers through higher prices for energy and purchased goods, and could adversely impact economic conditions of areas served by the

The cost of additional regulatory requirements to combat climate change, such as regulation of carbon dioxide emissions under the federal Clean Air Act, requirements to replace fossil fuels with renewable energy or credits, or other environmental regulation or taxes could impact the availability of goods and the prices charged by suppliers, which would normally be borne by consumers through higher prices for energy and purchased goods, and could adversely impact economic conditions of areas served by the Company.

To the extent financial markets view climate change and emissions of GHGs as a financial risk, this could negatively affect the Company's ability to access capital markets or result in less competitive terms and conditions.

MDU Resources Group, Inc.

To the extent financial markets view climate change and emissions of GHGs as a financial risk, this could negatively affect the Company's ability to access capital markets or cause less than ideal terms and conditions.

The Company's operations are subject to environmental laws and regulations that may increase costs of operations, impact or limit business plans, or expose the Company to environmental liabilities.

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or forego or limit the development of resources.

Revised or new laws and regulations that increase compliance costs or restrict operations, particularly if costs are not fully recoverable from customers, could adversely affect the Company's results of operations and cash flows.

Revised or new laws and regulations that increase compliance and disclosure costs and or restrict operations, particularly if costs are not fully recoverable from customers, could adversely affect the Company's results of operations and cash flows.

Initiatives related to global climate change and to reduce GHG emissions could adversely impact the Company's operation, costs of or access to capital and impact or limit business plans.

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Approximately 42 percent of Montana-Dakota's owned generating capacity and approximately 69 percent of the electricity it generated in 2021 was from coal-fired facilities.

Treaties, legislation or regulations to reduce GHG emissions in response to climate change may be adopted that affect the Company's utility operations by requiring additional energy conservation efforts or renewable energy sources, limiting emissions, imposing carbon taxes or other compliance costs;

Treaties, legislation or regulations to reduce GHG emissions in response to climate change may be adopted that affect the Company's utility and pipeline operations by requiring additional energy conservation efforts or renewable energy sources, limiting emissions, imposing carbon taxes or other compliance costs;

as well as other mandates that could significantly increase capital expenditures and operating costs or reduce demand for the Company's utility services.

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Although the Company has not experienced difficulties in accessing the capital markets or insurance;

such efforts, if successfully directed at the Company, could increase the costs of or access to capital and interfere with business operations and ability to make capital expenditures.

The Company's various businesses are seasonal and subject to weather conditions that can adversely affect the Company's operations, revenues and cash flows.

The Company's results of operations can be affected by changes in the weather.

such efforts, if successfully directed at the Company, could increase the costs of or access to capital or insurance and interfere with business operations and ability to make capital expenditures.

The Company's various businesses are seasonal and subject to weather conditions that could adversely affect the Company's operations, revenues and cash flows.

The Company's results of operations could be affected by changes in the weather.

Weather conditions influence the demand for electricity and natural gas and affect the price of energy commodities.

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Where weather normalization mechanisms are in place, there is no assurance the Company will continue to receive such regulatory protection from adverse weather in future rates.

MDU Resources Group, Inc.

Adverse weather conditions, such as heavy or sustained rainfall or snowfall, storms, wind and colder weather may affect the demand for products and the ability to perform services at the construction businesses and affect ongoing operation and maintenance and construction activities for the electric and natural gas transmission and distribution businesses.

In addition, severe weather can be destructive, causing outages and property damage, which could require additional remediation costs.

In addition, severe weather can be destructive, causing outages and property

28 MDU Resources Group, Inc.

damage, which could require additional remediation costs.

The Company could also be impacted by drought conditions, which may restrict the availability of water supplies and inhibit the ability of the construction businesses to conduct operations.

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Construction materials products are marketed under highly competitive conditions and are subject to competitive forces such as price, service, delivery time and proximity to the customer.

The electric utility and natural gas industries also experience competitive pressures as a result of consumer demands, technological advances and other factors.

The electric utility and natural gas businesses also experience competitive pressures as a result of consumer demands, technological advances and other factors.

The pipeline business competes with several pipelines for access to natural gas supplies and for transportation and storage business.

New acquisition opportunities are subject to competitive bidding environments which impact prices the Company must pay to successfully acquire new properties to grow its business.

New acquisition opportunities are subject to competitive bidding environments which impact prices the Company must pay to successfully acquire new properties and acquisition opportunities to grow its business.

The Company's failure to effectively compete could negatively affect the Company's results of operations, financial position and cash flows.

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The Company must attract, develop and retain executive officers and other professional, technical and skilled labor forces with the skills and experience necessary to successfully manage, operate and grow the Company's businesses.

Competition for these employees is high, and in some cases competition for these employees is on a regional or national basis.

Due to the changing workforce demographics and a lack of younger employees who are qualified to replace employees as they retire and remote work opportunities, among other things, competition for these employees is high.

In some cases competition for these employees is on a regional or national basis.

At times of low unemployment or economic downturns, it can be difficult for the Company to attract and retain qualified and affordable personnel.

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The Company is a holding company and relies on cash from its subsidiaries to pay dividends.

The Company is a holding company as a result of the Holding Company Reorganization in 2019.

The Company's investments in its subsidiaries comprise the Company's primary assets.

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Costs related to obligations under MEPPs could have a material negative effect on the Company's results of operations and cash flows.

Various operating subsidiaries of the Company participate in approximately 68 MEPPs for employees represented by certain unions.

Various operating subsidiaries of the Company participate in 69 MEPPs for employees represented by certain unions.

The Company is required to make contributions to these plans in amounts established under numerous collective bargaining agreements between the operating subsidiaries and those unions.

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among others.

The Company could experience increased operating

The Company could experience increased operating expenses as a result of required contributions to MEPPs, which could have an adverse effect on the Company's results of operations, financial position or cash flows.

MDU Resources Group, Inc.

expenses as a result of required contributions to MEPPs, which could have an adverse effect on the Company's results of operations, financial position or cash flows.

In addition, pursuant to ERISA, as amended by MPPAA, the Company could incur a partial or complete withdrawal liability upon withdrawing from a plan, exiting a market in which it does business with a union workforce or upon termination of a plan.

The Company could also incur additional withdrawal liability if its withdrawal from a plan is determined by that plan to be part of a mass withdrawal.

Information technology disruptions or cyber-attacks could adversely impact the Company's operations.

The Company uses technology in substantially all aspects of its business operations and requires uninterrupted operation of information technology systems, including disaster recovery and backup systems and network infrastructure.

While the Company has policies, procedures and processes in place designed to strengthen and protect these systems, they may be vulnerable to failures or unauthorized access, due to hacking, human error, theft, sabotage, malicious software, acts of terrorism, acts of war, acts of nature or other causes.

If these systems fail or become compromised, and they are not recovered in a timely manner, the Company may be unable to fulfill critical business functions.

Technology disruptions or cyberattacks could adversely impact the Company's operations.

The Company uses technology in substantially all aspects of its business operations and requires uninterrupted operation of information technology and operation technology systems, including disaster recovery and backup systems and network infrastructure.

While the Company has policies, procedures and processes in place designed to strengthen and protect these systems, they may be vulnerable to physical and cybersecurity failures or unauthorized access, due to:

• human error,

• malicious software,

• ransomware,

• third-party compromise,

• acts of terrorism,

• acts of war,

• acts of nature or

• other causes.

Although there are manual processes in place, should a compromise or system failure occur, interdependencies to technology may disrupt the Company's ability to fulfill critical business functions.

This may include interruption of electric generation, transmission and distribution facilities, natural gas storage and pipeline facilities and facilities for delivery of construction materials or other products and services, any of which could adversely affect the Company's reputation, business, cash flows and results of operations or subject the Company to legal or regulatory liabilities and increased costs.

Additionally, because electric generation and transmission systems and natural gas pipelines are part of interconnected systems with other operators’ facilities, a cyber-related disruption in another operator’s system could negatively impact the Company's business.

Additionally, the Company's electric generation and transmission systems and natural gas pipelines are part of interconnected systems with other operators’ facilities;

therefore, a cyber-related disruption in another operator’s system could negatively impact the Company's business.

The Company’s accounting systems and its ability to collect information and invoice customers for products and services could be disrupted.

If the Company’s operations are disrupted, it could result in decreased revenues or remediation costs that could adversely affect the Company's results of operations and cash flows.

The Company is subject to cybersecurity and privacy laws and regulations of many government agencies, including FERC and NERC.

If the Company’s operations are disrupted, it could result in decreased revenues and remediation costs that could adversely affect the Company's results of operations and cash flows.

The Company is subject to cybersecurity and privacy laws, regulations and security directives of many government agencies, including TSA, FERC and NERC.

NERC issues comprehensive regulations and standards surrounding the security of bulk power systems and continually updates these requirements, as well as establishing new requirements with which the utility industry must comply.

As these regulations evolve, the Company may experience increased compliance costs and may be at higher risk for violating these standards.

Experiencing a cybersecurity incident could cause the Company to be non-compliant with applicable laws and regulations, causing the Company to incur costs related to legal claims or proceedings and regulatory fines or penalties.

The Company, through the ordinary course of business, requires access to sensitive customer, employee and Company data.

While the Company has implemented extensive security measures, a breach of its systems could compromise sensitive data and could go unnoticed for some time.

The Company, through the ordinary course of business, requires access to sensitive customer, supplier, employee and Company data.

While the Company has implemented extensive security measures, including limiting the amount of sensitive information retained, a breach of its systems could compromise sensitive data and could go unnoticed for some time.

Such an event could result in negative publicity and reputational harm, remediation costs, legal claims and fines that could have an adverse effect on the Company's financial results.

Third-party service providers that perform critical business functions for the Company or have access to sensitive information within the Company also may be vulnerable to security breaches and information technology risks that could adversely affect the Company.

The Company’s information systems experience on-going and often sophisticated cyber-attacks by a variety of sources with the apparent aim to breach the Company's cyber-defenses.

As cyber-attacks continue to increase in frequency and sophistication, the Company may be unable to prevent all such attacks in the future.

The Company’s information systems experience ongoing and often sophisticated cyberattacks by a variety of sources with the apparent aim to breach the Company's cyber-defenses.

Although the incidents the Company has experienced to date have not had a material effect on its business, financial condition or results of operations, such incidents could have a material adverse effect in the future as cyberattacks continue to increase in frequency and sophistication.

The Company is continuously reevaluating the need to upgrade and/or replace systems and network infrastructure.

These upgrades and/or replacements could adversely impact operations by imposing substantial capital expenditures, creating delays or outages, or experiencing difficulties transitioning to new systems.

Systems implementation disruption and any other information technology disruption, if not anticipated and appropriately mitigated, could adversely affect the Company.

System disruptions, if not anticipated and appropriately mitigated, could adversely affect the Company.

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General risk factors that could impact the Company's businesses.

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• Labor negotiations or disputes.

• Inability of the contract counterparties to meet their contractual obligations.

• Succession planning.

• Inability of contract counterparties to meet their contractual obligations.

• The inability to effectively integrate the operations and the internal controls of acquired companies.

1 unchanged sentence

The Company has no unresolved comments with the SEC.

MDU Resources Group, Inc.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors