What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2023-02-24 compared with 2022-02-23 · 427 added, 296 removed, 1833 unchanged (28% of the section changed)

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and subsidiaries (the "Company") as of December 31, 2022 and 2021, the related consolidated statements of income, comprehensive income, equity, and cash flows for each of the three years in the period ended December 31, 2022, and the related notes and the schedules listed in the Index at Item 15 (collectively referred to as the "financial statements").

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of America.

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022 and December 31, 2021, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 24, 2023, expressed an unqualified opinion on the Company's internal control over financial reporting.

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Critical Audit Matter Description

The Company recognizes construction contract revenue over time using an input method based on the cost-to-cost measure of progress as it best depicts the transfer of assets to the customer.

Under this method of measuring progress, costs incurred are compared with total estimated costs of the performance obligation and revenues are recorded proportionately to the costs incurred.

Ordinarily the Company’s contracts represent a single distinct performance obligation due to the highly interdependent and interrelated nature of the underlying goods or services.

The Company recognizes construction contract revenue over time using an input method based on the cost-to-cost measure of progress for contracts because it best depicts the transfer of assets to the customer, which occurs as the Company incurs costs on the contract.

Under the cost-to-cost measure of progress, the costs incurred are compared with total estimated costs of a performance obligation.

Revenues are recorded proportionately to the costs incurred.

This method depends largely on the ability to make reasonably dependable estimates related to the extent of progress toward completion of the contract, contract revenues, contract costs, and contract profits.

The accounting for these contracts involves judgment, particularly as it relates to the process of estimating total costs and profit for the performance obligation.

For the year ended December 31, 2022, the Company recognized $3.8 billion of construction contract revenue.

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How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to management’s estimates of total costs and profit for the performance obligations used to recognize revenue for certain construction contracts included the following, among others:

Our audit procedures related to management’s estimates of total costs and profit for the performance obligations used to recognize revenue for construction contracts included the following, among others:

• We tested the design and operating effectiveness of management's controls over construction contract revenue, including those over management’s estimation of total costs and profit for the performance obligations.

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• Evaluated whether the contracts were properly included in management’s calculation of construction contract revenue based on the terms and conditions of each contract, including whether continuous transfer of control to the customer occurred as progress was made toward fulfilling the performance obligation.

• Compared the transaction prices to the consideration expected to be received based on current rights and obligations under the contracts and any modifications that were agreed upon with the customers.

• Evaluated management’s identification of distinct performance obligations by evaluating whether the underlying goods, services, or both were highly interdependent and interrelated.

• Observed the work sites and inspecting the progress to completion for certain construction contracts.

• Compared the transaction prices, including estimated variable consideration, to the consideration expected to be received based on current rights and obligations under the contracts and any modifications that were agreed upon with the customers.

• Evaluated management’s identification of distinct performance obligations by evaluating whether the underlying goods and services were highly interdependent and interrelated.

• Tested the accuracy and completeness of the costs incurred to date for the performance obligation.

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and the monitoring and evaluation of regulatory developments that may affect the likelihood of recovering costs in future rates or of a future reduction in rates.

• We evaluated the Company’s disclosures related to the impacts of rate regulation, including the balances recorded and regulatory developments.

MDU Resources Group, Inc.

• We evaluated the Company’s disclosures related to the impacts of rate regulation, including the balances recorded and regulatory developments.

• We read relevant regulatory orders issued by the Commissions for the Company and other public utilities in the Company’s significant jurisdictions, procedural memorandums, filings made by the Company or interveners, and other publicly available information to assess the likelihood of recovery in future rates or of a future reduction in rates based on precedents of the treatment of similar costs under similar circumstances.

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We also inquired of management regarding current year rate filings and new regulatory assets or liabilities.

Goodwill – Natural Gas Distribution Reporting Unit – Refer to Notes 2 and 7 to the financial statements

Critical Audit Matter Description

The Company’s evaluation of goodwill for impairment involves the comparison of the fair value of the reporting unit to its carrying value.

The Company determines the fair value of its reporting units using the discounted cash flow model and the market approach.

The determination of the fair value requires management to make significant estimates and assumptions related to forecasts of future cash flows, earnings before interest, taxes, depreciation, and amortization (EBITDA), long-term growth rates, and discount rates.

Changes in these assumptions could have a significant impact on either the fair value or the amount of any goodwill impairment charge.

The goodwill balance was $764 million as of December 31, 2022, of which $346 million was allocated to the Natural Gas Distribution Reporting Unit (“Natural Gas Distribution”).

The fair value of Natural Gas Distribution exceeded its carrying value as of the measurement date and, therefore, no impairment was recognized.

We identified goodwill for Natural Gas Distribution as a critical audit matter because of the significant judgments made by management to estimate the fair value and the difference between its fair value and carrying value.

This required a high degree of auditor judgment and an increased extent of effort, including the need to involve our fair value specialists, when performing audit procedures to evaluate the reasonableness of management’s estimates and assumptions related to forecasts of future cash flows, EBITDA and selection of the discount rate and long-term growth rate.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the forecasts of future cash flows, EBITDA, the discount rate, and the long-term growth rate, used by management to estimate the fair value of Natural Gas Distribution included the following, among others:

• We tested the effectiveness of controls over management’s goodwill impairment evaluation, including those over the determination of the fair value of Natural Gas Distribution, such as controls related to management’s forecasts of future cash flows, EBITDA and selection of the discount rate and long-term growth rate.

• We evaluated management’s ability to accurately forecast by comparing actual results to management’s historical forecasts.

• We evaluated the reasonableness of management’s forecasts by comparing the forecasts to (1) historical results, (2) internal communications to management and the Board of Directors, and (3) forecasted information included in the Company press releases as well as in analyst and industry reports of the Company and companies in its peer group.

• We evaluated the impact of changes in management’s forecasts from the October 31, 2022, annual measurement date to December 31, 2022.

• With the assistance of our fair value specialists, we evaluated the reasonableness of the valuation methodology, discount rate, and long-term growth rate, including testing the underlying source information and the mathematical accuracy of the calculations, and developing a range of independent estimates and comparing those to the discount rate and long-term growth rate selected by management.

• With the assistance of our fair value specialists, we evaluated the EBITDA multiples, including testing the underlying source information and mathematical accuracy of the calculations, and comparing the multiples selected by management to its guideline companies.

/s/ Deloitte & Touche LLP

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Income from continuing operations 367,276 377,731 390,527

Income (loss) from discontinued operations, net of tax 400 ( 322 ) 287

Discontinued operations, net of tax 213 400 ( 322 )

Net income $ 367,489 $ 378,131 $ 390,205

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12,007 4,876 ( 8,395 )

Amortization of postretirement liability losses included in net periodic benefit cost, net of tax of $ 615 , $ 630 and $ 476 in 2021, 2020 and 2019, respectively

Amortization of postretirement liability losses included in net periodic benefit credit, net of tax of $ 597 , $ 615 and $ 630 in 2022, 2021 and 2020, respectively

1,819 1,870 1,922

Reclassification of postretirement liability adjustment from regulatory asset, net of tax of $( 1,086 ), $ — and $ — in 2022, 2021 and 2020, respectively

( 3,265 ) — —

Postretirement liability adjustment 10,561 6,746 ( 6,473 )

Net unrealized gain (loss) on available-for-sale investments:

Net unrealized gain (loss) on available-for-sale investments arising during the period, net of tax of $( 67 ), $ 0 and $ 35 in 2021, 2020 and 2019, respectively

Net unrealized (loss) gain on available-for-sale investments:

Net unrealized loss on available-for-sale investments arising during the period, net of tax of $( 177 ), $( 67 ) and $ 0 in 2022, 2021 and 2020, respectively

( 667 ) ( 252 ) ( 1 )

Reclassification adjustment for loss on available-for-sale investments included in net income, net of tax of $ 31 , $ 36 and $ 14 in 2022, 2021 and 2020, respectively

Net unrealized gain (loss) on available-for-sale investments ( 118 ) 51 174

Net unrealized (loss) gain on available-for-sale investments ( 553 ) ( 118 ) 51

Other comprehensive income (loss) 10,421 7,074 ( 5,976 )

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Net Income — — — 378,131 — — — 378,131

Other comprehensive loss — — — — ( 5,976 ) — — ( 5,976 )

Other comprehensive income — — — — 7,074 — — 7,074

Dividends declared on common stock — — — ( 174,084 ) — — — ( 174,084 )

Employee stock-based compensation — — 14,709 — — — — 14,709

Repurchase of common stock — — — — — ( 392,294 ) ( 6,701 ) ( 6,701 )

Issuance of common stock upon vesting of stock-based compensation, net of shares used for tax withholdings — — ( 10,828 ) — — 392,294 6,701 ( 4,127 )

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Employee stock-based compensation costs 10,254 14,709 13,096

Pension & postretirement benefit plan net periodic benefit cost (credit) ( 4,900 ) ( 3,001 ) 703

Unrealized gains on investments ( 7,728 ) ( 14,563 ) ( 11,445 )

Pension and postretirement benefit plan net periodic benefit credit ( 6,018 ) ( 4,900 ) ( 3,001 )

Unrealized losses (gains) on investments 12,732 ( 7,728 ) ( 14,563 )

Gains on sales of assets ( 20,723 ) ( 13,056 ) ( 15,350 )

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Other current liabilities 27,011 ( 17,650 ) 35,591

Pension & postretirement benefit plan contributions ( 476 ) ( 434 ) ( 25,613 )

Pension and postretirement benefit plan contributions ( 507 ) ( 476 ) ( 434 )

Other noncurrent changes ( 5,944 ) ( 55,367 ) 30,291

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For further descriptions of the Company's businesses, see Note 17.

Beginning in March 2020, governmental restrictions and guidelines implemented to control the spread of COVID-19 reduced commercial and interpersonal activity throughout the Company's areas of operation.

Most of the Company's products and services are considered essential to America and its communities and, as a result, operations have generally continued through the COVID-19 pandemic and reopening of the country's economy.

The Company has assessed the impacts of the COVID-19 pandemic on its results of operations for the years ended December 31, 2021 and 2020, and determined there were no material adverse impacts.

The assets and liabilities of the Company's discontinued operations have been classified as held for sale and are included in prepayments and other current assets, noncurrent assets - other and other accrued liabilities on the Consolidated Balance Sheets and are not material to the financial statements for any period presented.

On August 4, 2022, the Company announced its board of directors unanimously approved a plan to pursue the separation of Knife River from the Company.

The separation is planned as a tax-free spinoff transaction to the Company’s stockholders for U.S.

federal income tax purposes.

As the next step of the Company’s strategic planning, on November 3, 2022, the Company announced its intention to create two pure-play publicly traded companies, one focused on regulated energy delivery and the other on construction materials, and to achieve this future structure, the board authorized management to commence a strategic review process of MDU Construction Services.

Discontinued operations include the supporting activities of Fidelity and the assets and liabilities of the Company's discontinued operations have been classified as held for sale and are included in prepayments and other current assets, noncurrent assets - other and other accrued liabilities on the Consolidated Balance Sheets and are not material to the financial statements for any period presented.

The results and supporting activities are shown in income (loss) from discontinued operations on the Consolidated Statements of Income.

Unless otherwise indicated, the amounts presented in the accompanying notes to the consolidated financial statements relate to the Company's continuing operations.

In 2021, the Company made changes to the presentation of the Consolidated Statements of Cash Flows to provide further clarity on the sources and uses of net cash provided by operating activities and net cash provided by (used in) financing activities.

Certain prior year amounts have been reclassified to conform to the current year presentation.

These reclassifications did not impact total net cash provided by operating activities or net cash provided by (used in) financing activities for the years ended December 31, 2020 and 2019.

Management has also evaluated the impact of events occurring after December 31, 2022, up to the date of issuance of these consolidated financial statements on February 24, 2023, that would require recognition or disclosure in the financial statements.

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Recently adopted accounting standards

ASU 2018-14 - Changes to the Disclosure Requirements for Defined Benefit Plans In August 2018, the FASB issued guidance on modifying the disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans as part of the disclosure framework project.

The guidance removed disclosures that are no longer considered cost beneficial, clarifies the specific requirements of disclosures and added disclosure requirements identified as relevant.

The guidance added, among other things, the requirement to include an explanation for significant gains and losses related to changes in benefit obligations for the period.

The guidance removed, among other things, the disclosure requirement to disclose the amount of net periodic benefit costs to be amortized over the next fiscal year from accumulated other comprehensive income (loss) and the effects a one percentage point change in assumed health care cost trend rates will have on certain benefit components.

January 1, 2021 The Company determined the guidance did not materially impact its consolidated financial statement disclosures.

ASU 2019-12 - Simplifying the Accounting for Income Taxes In December 2019, the FASB issued guidance on simplifying the accounting for income taxes by removing certain exceptions in ASC 740 and providing simplification amendments.

The guidance removed exceptions on intraperiod tax allocations and reporting and provided simplification on accounting for franchise taxes, tax basis goodwill and tax law changes.

January 1, 2021 The Company determined the guidance did not materially impact its results of operations, financial position, cash flows or disclosures.

Recently issued accounting standards not yet adopted

ASU 2021-10 - Government Assistance In November 2021, the FASB issued guidance on modifying the disclosure requirements to increase the transparency of government assistance including disclosure of the types of assistance, an entity's accounting for the assistance and the effect of the assistance on an entity's financial statements.

January 1, 2022 The Company determined the guidance did not have a material impact on its disclosures for the year ended December 31, 2022.

ASU 2020-04 - Reference Rate Reform In March 2020, the FASB issued optional guidance to ease the facilitation of the effects of reference rate reform on financial reporting.

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Existing contracts referencing LIBOR or other reference rates expected to be discontinued must identify a replacement rate by June 30, 2023.

Effective as of March 12, 2020 and will continue through December 31, 2022 The Company has updated its credit agreements to include language regarding the successor or alternate rate to LIBOR, and a review of other contracts and agreements is on-going.

Effective as of March 12, 2020 through December 31, 2022 For more information, see ASU 2022-06 - Reference Rate Reform:

Deferral of Sunset Date in recently issued accounting standards not yet adopted.

Recently issued accounting standards not yet adopted

ASU 2022-06 - Reference Rate Reform:

Deferral of Sunset Date In December 2022, the FASB included a sunset provision within ASC 848 based on expectations of when LIBOR would cease being published.

At the time ASU 2020-04 was issued, the UK Financial Conduct Authority had established its intent to cease overnight tenors of LIBOR after December 31, 2021.

In March 2021, the UK Financial Conduct Authority announced that the intended cessation date of the overnight tenors of LIBOR would be June 30, 2023 which is beyond the current sunset date of ASC 848.

The amendments in this Update defer the sunset date of ASC 848 from December 31, 2022 to December 31, 2024, after which entities will no longer be permitted to apply the relief in ASC 848.

December 31, 2024 The Company has updated its credit agreements to include language regarding the successor or alternate rate to LIBOR, and a review of other contracts and agreements is on-going.

The Company does not expect the guidance to have a material impact on its results of operations, financial position, cash flows or disclosures.

January 1, 2022 The Company is currently evaluating the impact the guidance will have on its disclosures for the year ended December 31, 2022.

Cash and cash equivalents

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The electric and natural gas distribution segments generate revenue from the sales of electric and natural gas products and services, which includes retail and transportation services.

These segments establish a customer's retail or transportation service account based on the customer's application/

74 MDU Resources Group, Inc.

contract for service, which indicates approval of a contract for service.

These segments establish a customer's retail or transportation service account based on the customer's application/contract for service, which indicates approval of a contract for service.

The contract identifies an obligation to provide service in exchange for delivering or standing ready to deliver the identified commodity;

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The method of measuring progress toward the completion of the single performance obligation is on a per-unit output method basis, with revenue recognized based on the direct measurement of the value to the customer of the goods or services transferred to date.

For contracts governed by the Company’s utility tariffs, amounts are billed monthly with the amount due between 15 and 22 days of receipt of the invoice depending on the applicable state’s tariff.

For contracts governed by the Company’s utility tariffs, amounts are billed monthly with the amount due between 15 and 22 days of receipt of the

78 MDU Resources Group, Inc.

invoice depending on the applicable state’s tariff.

For other contracts not governed by tariff, payment terms are net 30 days.

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This segment provides contracting services to a customer when a contract has been signed by both the customer and a representative of the segment obligating a service to be provided in exchange for the consideration identified in the contract.

The nature of the services this segment provides generally includes integrating a set of services and related construction materials into a single project to create a distinct bundle of goods and services, which the Company evaluates to determine whether a separate performance obligation exists.

The transaction price is the original contract price plus any subsequent change orders and variable consideration.

Examples of variable consideration that exist in this segment's contracts include liquidated damages;

The nature of the services this segment provides generally include integrating a set of services and related construction materials into a single project to create a distinct bundle of goods and services, which the Company has determined are single performance obligations.

The transaction price includes the fixed consideration required pursuant to the original contract price together with any additional consideration, to which the Company expects to be entitled to, associated with executed change orders plus the estimate of variable consideration to which the Company expects to be entitled, subject to the following constraint.

The nature of this segment's contracts gives rise to several types of variable consideration.

Examples of variable consideration include:

liquidated damages;

performance bonuses or incentives and penalties;

unapproved/unpriced change orders;

unpriced change orders;

and index pricing.

The variable amounts usually arise upon achievement of certain performance metrics or change in project scope.

The Company estimates the amount of revenue to be recognized on variable consideration using estimation methods that best predict the most likely amount of consideration the Company expects to be entitled to or expects to incur.

The Company includes variable consideration in the estimated transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur or when the uncertainty associated with the variable consideration is resolved.

The Company estimates the amount of revenue to be recognized on variable consideration using one of the two prescribed estimation methods, the expected value method or the most likely amount method, depending on which method best predicts the most likely amount of consideration the Company expects to be entitled to or expects to incur.

Assumptions as to the occurrence of future events and the likelihood and amount of variable consideration are made during the contract performance period.

Estimates of variable consideration and determination of whether to include estimated amounts in the transaction price are based largely on the assessment of anticipated performance and all information (historical, current and forecasted) that is reasonably available to management.

The Company only includes variable consideration in the estimated transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur or when the uncertainty associated with the variable consideration is resolved.

Changes in circumstances could impact management's estimates made in determining the value of variable consideration recorded.

When determining if the variable consideration is constrained, the Company considers if factors exist that could increase the likelihood or the magnitude of a potential reversal of revenue.

The Company updates its estimate of the transaction price each reporting period and the effect of variable consideration on the transaction price is recognized as an adjustment to revenue on a cumulative catch-up basis.

Revenue is recognized over time using an input method based on the cost-to-cost measure of progress on a project.

Contract revenue is recognized over time using an input method based on the cost-to-cost measure of progress on a project.

This is the preferred method of measuring revenue because the costs incurred have been determined to represent the best indication of the overall progress toward the transfer of such goods or services promised to a customer.

Under the cost-to-cost measure of progress, the costs incurred are compared with total estimated costs of a performance obligation.

Revenues are recorded proportionately to the costs incurred.

The percentage of completion is determined on a performance obligation basis.

This segment also sells construction materials to third parties and internal customers.

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This segment provides specialty contracting services to a customer when a contract has been signed by both the customer and a representative of the segment obligating a service to be provided in exchange for the consideration identified in the contract.

The nature of the services this segment provides generally includes multiple promised goods and services in a single project to create a distinct bundle of goods and services, which the Company evaluates to determine whether a separate performance obligation exists.

The transaction price is the original contract price plus any subsequent change orders and variable consideration.

Examples of variable consideration that exist in this segment's contracts include claims, unapproved/unpriced change orders, bonuses, incentives, penalties and liquidated damages.

The nature of the segment's contracts gives rise to several types of variable consideration.

Examples of variable consideration include:

liquidated damages;

performance bonuses or incentives and penalties;

unpriced change orders;

and index pricing.

The variable amounts usually arise upon achievement of certain performance metrics or change in project scope.

Changes in circumstances could impact management's estimates made in determining the value of variable consideration recorded.

The Company updates its

Assumptions as to

MDU Resources Group, Inc.

estimate of the transaction price each reporting period and the effect of variable consideration on the transaction price is recognized as an adjustment to revenue on a cumulative catch-up basis.

Revenue is recognized over time using the input method based on the measurement of progress on a project.

The input method is the preferred method of measuring revenue because the costs incurred have been determined to represent the best indication of the overall progress toward the transfer of such goods or services promised to a customer.

the occurrence of future events and the likelihood and amount of variable consideration are made during the contract performance period.

Estimates of variable consideration and determination of whether to include estimated amounts in the transaction price are based largely on the assessment of anticipated performance and all information (historical, current, and forecasted) that is reasonably available to management.

Changes in circumstances could impact management's estimates made in determining the value of variable consideration recorded.

When determining if the variable consideration is constrained, the Company considers if factors exist that could increase the likelihood or the magnitude of a potential reversal of revenue.

Contract revenue is recognized over time using the input method based on the measurement of progress on a project.

Under the cost-to-cost measure of progress, the costs incurred are compared with total estimated costs of a performance obligation.

Revenues are recorded proportionately to the costs incurred.

This segment also sells construction equipment and other supplies to third parties and internal customers.

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Fair values for some of the assets were determined based on Level 3 inputs including estimated future cash flows, discount rates, growth rates, sales projections, retention rates and terminal values, all of which require significant management judgment and are susceptible to change.

The discount rate used in calculating the fair value of common stock issued in a business combination is determined by using a Black-Scholes-Merton model.

The model uses Level 2 inputs including risk-free interest rate, volatility range and dividend yield.

The final fair value of the net assets acquired may result in adjustments to the assets and liabilities, including goodwill, and will be made as soon as practical, but no later than 12 months from the respective acquisition dates.

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Receivables and allowance for expected credit losses

Receivables consist primarily of trade receivables from the sale of goods and services, which are recorded at the invoiced amount, and contract assets, net of expected credit losses.

For more information on contract assets, see Note 3.

Receivables consist primarily of trade and contracting services receivables from the sale of goods and services net of expected credit losses.

The Company's trade receivables are all due in 12 months or less.

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Specific account balances are written off when management determines the amounts to be uncollectible.

The Company conducted additional analysis of its receivables and allowance for expected credit losses due to the impacts of COVID-19.

As more customer balances entered arrears, further analysis supported increasing the uncollectible factors used in determining the expected credit losses of certain segments during 2020.

During 2021, certain segments continued to experience balances in arrears higher than historical levels, which supported the continued use of increased uncollectible factors, while other segments experienced balances in arrears returning to historical levels alleviating the need for certain associated credit loss estimates.

Management has reviewed the balance reserved through the allowance for expected credit losses and believes it is reasonable.

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(In thousands)

At January 1, 2020

At December 31, 2020

$ 899 $ 2,571 $ 2 $ 6,164 $ 5,722 $ 15,358

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Long-term retainage**

19,511 10,742

Total retainage $ 139,844 $ 81,342

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The majority of all other inventories are valued at the lower of cost or net realizable value using the average cost method.

Inventories include production costs incurred as part of the Company's aggregate mining activities.

These inventoriable production costs include all mining and processing costs associated with the production of aggregates.

Stripping costs incurred during the production phase, which represent costs of removing overburden and waste materials to access mineral deposits, are a component of inventoriable production costs.

The portion of the cost of natural gas in storage expected to be used within 12 months was included in inventories.

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Total $ 387,525 $ 335,609

The remainder of natural gas in storage, which largely represents the cost of gas required to maintain pressure levels for normal operating purposes, was included in noncurrent assets - other and was $ 47.5 million at December 31, 2021 and 2020.

MDU Resources Group, Inc.

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Additions to property, plant and equipment are recorded at cost.

Aggregate mining development costs are capitalized and classified as land improvements and depreciated over the lower of the estimated life of the reserves or the life of the associated improvement.

The Company begins capitalizing development costs at a point when reserves are determined to be proven or probable and economically mineable.

Capitalization of these costs cease when production commences.

The cost of acquiring reserves in connection with a business combination are valued at fair value.

When regulated assets are retired, or otherwise disposed of in the ordinary course of business, the original cost of the asset is charged to accumulated depreciation.

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The Company is permitted to capitalize AFUDC on regulated construction projects and to include such amounts in rate base when the related facilities are placed in service.

In addition, the Company capitalizes interest, when applicable, on certain construction projects associated with its other operations.

In addition, the Company capitalizes interest, when applicable, on certain contracting services projects associated with its other operations.

The amount of AFUDC for the years ended December 31 was as follows:

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Generally, property, plant and equipment are depreciated on a straight-line basis over the average useful lives of the assets, except for depletable aggregate reserves, which are depleted based on the units-of-production method.

The Company uses proven and probable aggregate reserves as the denominator in its units-of production calculation.

Exploration costs are expensed as incurred in operation and maintenance expense and production costs are either expensed or capitalized to inventory.

The Company collects removal costs for certain plant assets in regulated utility rates.

These amounts are recorded as regulatory liabilities on the Consolidated Balance Sheets.

Impairment of long-lived assets

The Company reviews the carrying values of its long-lived assets, excluding goodwill, whenever events or changes in circumstances indicate that such carrying values may not be recoverable.

Impairment of long-lived assets, excluding goodwill

The Company reviews the carrying values of its long-lived assets, including mining and related assets, whenever events or changes in circumstances indicate that such carrying values may not be recoverable.

The Company tests long-lived assets for impairment at a level significantly lower than that of goodwill impairment testing.

Long-lived assets or groups of assets that are evaluated for impairment at the lowest level of largely independent identifiable cash flows at an individual operation or group of operations collectively serving a local market.

The determination of whether an impairment has occurred is based on an estimate of undiscounted future cash flows attributable to the assets, compared to the carrying value of the assets.

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The impairments are recorded in operation and maintenance expense on the Consolidated Statements of Income.

No significant impairment losses were recorded in 2021, 2020 or 2019.

No impairment losses were recorded in 2022, 2021 or 2020.

Unforeseen events and changes in circumstances could require the recognition of impairment losses at some future date.

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Such orders generally provide that these amounts are recoverable or refundable through rate adjustments .

Natural gas costs refundable through rate adjustments were $ 6.7 million and $ 18.6 million at December 31, 2021 and 2020, respectively, which was included in regulatory liabilities due within one year on the Consolidated Balance Sheets.

Natural gas costs recoverable through rate adjustments were $ 91.6 million and $ 64.0 million at December 31, 2021 and 2020, respectively, which was included in current regulatory assets and noncurrent assets - regulatory assets on the Consolidated Balance Sheets.

Natural gas costs refundable through rate adjustments were $ 1.0 million and $ 6.7 million at December 31, 2022 and 2021, respectively, which were included in regulatory liabilities due within one year on the Consolidated Balance Sheets.

Natural gas costs recoverable through rate adjustments were $ 141.3 million and $ 91.6 million at December 31, 2022 and 2021, respectively, which were included in current regulatory assets and noncurrent assets - regulatory assets on the Consolidated Balance Sheets.

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Goodwill represents the excess of the purchase price over the fair value of identifiable net tangible and intangible assets acquired in a business combination.

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For the years ended December 31, 2022, 2021 and 2020, there were no impairment losses recorded.

The Company performed its annual goodwill impairment test in the fourth quarter of 2021 and determined the fair value substantially exceeded the carrying value at all reporting units at October 31, 2021.

78 MDU Resources Group, Inc.

The Company's investments include the cash surrender value of life insurance policies, an insurance contract, mortgage-backed securities and U.S.

The Company's investments include the cash surrender value of life insurance policies, insurance contracts, mortgage-backed securities and U.S.

Treasury securities.

The Company measures its investment in the insurance contract at fair value with any unrealized gains and losses recorded on the Consolidated Statements of Income.

The Company measures its investment in the insurance contracts at fair value with any unrealized gains and losses recorded on the Consolidated Statements of Income.

The Company has not elected the fair value option for its mortgage-backed securities and U.S.

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For more information, see Notes 8 and 18 .

Government Assistance

The Company accounts for government assistance received for capital projects by reducing the cost of the project by the amount of assistance received.

The Company records government assistance received as taxable income and writes-up the tax basis of the asset to include the amount of the assistance received.

Government assistance received for the years ended December 31, 2022, 2021 and 2020, was immaterial .

Variable interest entities

The Company evaluates its arrangements and contracts with other entities to determine if they are VIEs and if so, if the Company is the primary beneficiary.

GAAP provides a framework for identifying VIEs and determining when a company should include the assets, liabilities, noncontrolling interest and results of activities of a VIE in its consolidated financial statements.

A VIE should be consolidated if a party with an ownership, contractual or other financial interest in the VIE (a variable interest holder) has the power to direct the VIE's most significant activities and the obligation to absorb losses or right to receive benefits of the VIE that could be significant to the VIE.

A variable interest holder that consolidates the VIE is called the primary beneficiary.

Upon consolidation, the primary beneficiary generally must initially record all of the VIE's assets, liabilities and noncontrolling interests at fair value and subsequently account for the VIE as if it were consolidated.

The Company's evaluation of whether it qualifies as the primary beneficiary of a VIE involves significant judgments, estimates and assumptions and includes a qualitative analysis of the activities that most significantly impact the VIE's economic performance and whether the Company has the power to direct those activities, the design of the entity, the rights of the parties and the purpose of the arrangement.

Joint ventures

3 unchanged sentences

For those joint ventures accounted for under proportionate consolidation, only the Company’s pro rata share of assets, liabilities, revenues and expenses are included in the Company’s balance sheet and results of operations.

For those joint ventures accounted for using proportionate consolidation, the Company recorded in its Consolidated Statements of Income $ 14.7 million and $ 69.7 million of revenue for the years ended December 31, 2021 and 2020, respectively, and $ 4.7 million and $ 20.6 million of operating income for the years ended December 31, 2021 and 2020, respectively.

At December 31, 2021 and 2020, the Company had receivables from these joint ventures of $ 1.2 million and $ 1.8 million, respectively.

For those joint ventures accounted for using proportionate consolidation, the Company recorded in its Consolidated Statements of Income $ 14.8 million, $ 14.7 million, and $ 69.7 million of revenue for the years ended December 31, 2022, 2021 and 2020, respectively, and $ 3.0 million, $ 4.7 million and $ 20.6 million of operating income for the years ended December 31, 2022, 2021 and 2020, respectively.

At December 31, 2022 and 2021, the Company had interest in assets from these joint ventures of $ 2.4 million and $ 14.3 million, respectively.

For those joint ventures accounted for under the equity method, the Company's investment balances for the joint venture is included in Investments in the Consolidated Balance Sheets and the Company’s pro rata share of net income is included in Other income in the Consolidated Statements of Income.

The Company’s investments in equity method joint ventures at December 31, 2021 and 2020, were a net asset of $ 1.3 million and $ 425,000 , respectively.

In 2021 and 2020, the Company recognized income (loss) from equity method joint ventures of $ 892,000 and $( 32,000 ), respectively.

The Company’s investments in equity method joint ventures were a net asset of $ 1.3 million for both December 31, 2022 and 2021, respectively.

In 2022, 2021 and 2020, the Company recognized income (loss) from equity method joint ventures of $ 5.4 million, $ 892,000 and $( 32,000 ), respectively.

MDU Resources Group, Inc.

Derivative instruments

3 unchanged sentences

The Company does not enter into any derivatives for trading or other speculative purposes.

During 2021 and 2020, the Company entered into commodity price derivative contracts securing the purchase of 450,000 MMBtu and 1.4 million MMBtu of natural gas, respectively.

During 2022, the Company did no t enter into any commodity price derivative contracts.

During 2021, the Company entered into commodity price derivative contracts securing the purchase of 450,000 MMBtu of natural gas.

Lease liabilities and their corresponding right-of-use assets are recorded based on the present value of lease payments over the expected lease term.

16 unchanged sentences

The Company uses the straight-line amortization method to recognize compensation expense related to restricted stock, which only has a service condition.

This method recognizes stock compensation expense on a straight-line basis over the

MDU Resources Group, Inc.

requisite service period for the entire award.

This method recognizes stock compensation expense on a straight-line basis over the requisite service period for the entire award.

The Company recognizes compensation expense related to performance awards that vest based on performance metrics and service conditions on a straight-line basis over the service period.

17 unchanged sentences

Shares excluded from the calculation of diluted earnings per share 14 — 164

84 MDU Resources Group, Inc.

The Company provides deferred federal and state income taxes on all temporary differences between the book and tax basis of the Company's assets and liabilities by using enacted tax rates in effect for the year in which the differences are expected to reverse.

The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date.

Excess deferred income tax balances associated with the Company's rate-regulated activities have been recorded as a regulatory liability and are included in other liabilities.

Excess deferred income tax balances associated with the Company's rate-regulated activities have been recorded as regulatory liabilities.

These regulatory liabilities are expected to be reflected as a reduction in future rates charged to customers in accordance with applicable regulatory procedures.

3 unchanged sentences

The Company recognizes interest and penalties accrued related to unrecognized tax benefits in income taxes.

Variable interest entities

The Company evaluates its arrangements and contracts with other entities to determine if they are VIEs and if so, if the Company is the primary beneficiary.

A variable interest holder that consolidates the VIE is called the primary beneficiary.

80 MDU Resources Group, Inc.

Note 3 - Revenue from Contracts with Customers

20 unchanged sentences

Construction materials — — — 1,940,890 — — 1,940,890

Intrasegment eliminations — — — ( 501,044 ) — — ( 501,044 )

Internal sales — — — ( 593,882 ) — — ( 593,882 )

Electrical & mechanical specialty contracting — — — — 1,988,729 — 1,988,729

3 unchanged sentences

Revenues from contracts with customers 381,293 1,275,651 96,311 2,533,713 2,646,376 — 6,933,344

Revenues out of scope ( 6,525 ) 8,995 188 — 49,587 — 52,245

Other revenues ( 4,714 ) ( 2,402 ) 256 — 47,380 — 40,520

Total external operating revenues $ 376,579 $ 1,273,249 $ 96,567 $ 2,533,713 $ 2,693,756 $ — $ 6,973,864

MDU Resources Group, Inc.

Year ended December 31, 2021 Electric Natural gas distribution Pipeline Construction materials and contracting Construction services Other Total

5 unchanged sentences

Natural gas transportation — 48,408 114,001 — — — 162,409

Natural gas gathering — — 4,865 — — — 4,865

Natural gas storage — — 14,680 — — — 14,680

1 unchanged sentence

Construction materials — — — 1,712,503 — — 1,712,503

Intrasegment eliminations — — — ( 550,815 ) — — ( 550,815 )

Internal sales — — — ( 501,044 ) — — ( 501,044 )

Electrical & mechanical specialty contracting — — — — 1,324,419 — 1,324,419

3 unchanged sentences

Revenues from contracts with customers 355,564 962,369 82,670 2,228,306 1,999,495 84 5,628,488

Revenues out of scope 2,059 11,382 192 — 47,572 — 61,205

Other revenues ( 6,525 ) 8,995 188 — 49,587 — 52,245

Total external operating revenues $ 349,039 $ 971,364 $ 82,858 $ 2,228,306 $ 2,049,082 $ 84 $ 5,680,733

MDU Resources Group, Inc.

Year ended December 31, 2020 Electric Natural gas distribution Pipeline Construction materials and contracting Construction services Other Total

9 unchanged sentences

Construction materials — — — 1,659,152 — — 1,659,152

Intrasegment eliminations — — — ( 525,749 ) — — ( 525,749 )

Internal sales — — — ( 550,815 ) — — ( 550,815 )

Electrical & mechanical specialty contracting — — — — 1,397,124 — 1,397,124

3 unchanged sentences

Revenues from contracts with customers 329,479 836,269 85,154 2,177,585 2,043,113 ( 55 ) 5,471,545

Revenues out of scope 4,013 ( 135 ) 220 — 51,057 — 55,155

Other revenues 2,059 11,382 192 — 47,572 — 61,205

Total external operating revenues $ 331,538 $ 847,651 $ 85,346 $ 2,177,585 $ 2,090,685 $ ( 55 ) $ 5,532,750

Presented in the previous tables are intrasegment revenues within the construction materials and contracting segment to highlight the focus on vertical integration as this segment sells materials to both third parties and internal customers.

Due to consolidation requirements, these revenues must be eliminated against construction materials to arrive at the external operating revenue total for the segment.

Presented in the previous tables are sales of materials to both third parties and internal customers within the construction materials and contracting segment to highlight the focus on vertical integration as this segment sells materials to both third parties and internal customers.

Due to consolidation requirements, the internal sales revenues must be eliminated against the construction materials product used in the contracting services to arrive at the external operating revenue total for the segment.

Contract balances

8 unchanged sentences

Contract liabilities decrease as revenue is recognized from the satisfaction of the related performance obligation.

86 MDU Resources Group, Inc.

The changes in contract assets and liabilities were as follows:

14 unchanged sentences

The Company recognized $ 173.8 million and $ 155.0 million in revenue for the years ended December 31, 2022 and 2021, respectively, which was previously included in contract liabilities at December 31, 2021 and 2020, respectively.

82 MDU Resources Group, Inc.

The Company recognized a net increase in revenues of $ 57.9 million and $ 66.3 million for the years ended December 31, 2022 and 2021, respectively, from performance obligations satisfied in prior periods.

7 unchanged sentences

The Company has applied the practical expedient that does not require additional disclosures for contracts with an original duration of less than 12 months to certain firm transportation and non-regulated contracts.

The Company's firm transportation and firm storage contracts included in the remaining performance obligations have weighted average remaining durations of less than five and one years, respectively.

The Company's firm transportation contracts included in the remaining performance obligations have weighted average remaining durations of less than five years.

At December 31, 2022, the Company's remaining performance obligations were $ 3.5 billion.

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In 2022 and 2021, the construction materials and contracting segment's acquisitions included:

• Baker Rock Resources and Oregon Mainline Paving, two premier construction materials companies located around the Portland, Oregon metro area, acquired in November 2021.

• Allied Concrete and Supply Co., a producer of ready-mixed concrete in California, acquired in December 2022.

At December 31, 2022, the purchase price allocation was preliminary and will be finalized within 12 months of the acquisition date.

• Baker Rock Resources and Oregon Mainline Paving, two construction materials companies located around the Portland, Oregon metro area, acquired in November 2021.

As of September 30, 2022, the purchase price allocation was settled with no material adjustments to the provisional accounting.

MDU Resources Group, Inc.

Hood Rock, a construction aggregates business in Oregon, acquired in April 2021.

At December 31, 2021, the purchase price allocation was preliminary and will be finalized within 12 months of the acquisition date.

• The assets of McMurry Ready-Mix Co., an aggregates and concrete supplier in Wyoming, acquired in December 2020.

In the third quarter of 2021, the Company finalized the provisional accounting and recorded an immaterial measurement period adjustment.

• The assets of Oldcastle Infrastructure Spokane, a prestressed-concrete business in Washington, acquired in February 2020.

As of December 31, 2020, the purchase price adjustments had been settled with no material adjustments to the provisional accounting.

In February 2020, the construction services segment acquired PerLectric, Inc., an electrical construction company in Virginia.

As of March 31, 2021, the purchase price adjustments had been settled with no material adjustments to the provisional accounting.

The total purchase price for acquisitions that occurred in 2021 was $ 236.1 million, subject to certain adjustments, with cash acquired totaling $ 900,000 .

The purchase price includes consideration paid of $ 235.2 million.

As of March 31, 2022, the purchase price allocation was settled with no material adjustments to the provisional accounting.

The total purchase price for acquisitions that occurred in 2022 was $ 8.9 million, subject to certain adjustments, with cash acquired totaling $ 2.8 million.

The purchase price includes consideration paid of $ 1.5 million, a $ 70,000 holdback liability, and 273,153 shares of common stock with a market value of $ 8.4 million as of the respective acquisition date.

Due to the holding period restriction on the common stock, the share consideration has been discounted to a fair value of approximately $ 7.3 million.

The amounts allocated to the aggregated assets acquired and liabilities assumed during 2022 were as follows:

1 unchanged sentence

$ 5.9 million to property, plant and equipment;

$ 50.6 million to goodwill;

$ 2.2 million to other intangible assets;

$ 8.7 million to current liabilities;

$ 2.5 million to noncurrent liabilities - other and $ 3.2 million to deferred tax liabilities.

The Company issued debt to finance these acquisitions.

The total purchase price for acquisitions that occurred in 2020 was $ 110.2 million, subject to certain adjustments, with cash acquired totaling $ 1.7 million.

The purchase price includes consideration paid of $ 106.0 million and $ 2.5 million of indemnity holdback liabilities.

$ 200,000 to goodwill;

$ 100,000 to current liabilities;

$ 500,000 to noncurrent liabilities - other and $ 1.2 million to deferred tax liabilities.

The total purchase price for acquisitions that occurred in 2021 was $ 236.1 million, subject to certain adjustments, with cash acquired totaling $ 900,000 .

The purchase price includes consideration paid of $ 235.2 million.

The amounts allocated to the aggregated assets acquired and liabilities assumed during 2021 were as follows:

4 unchanged sentences

$ 8.7 million to current liabilities;

$ 300,000 to noncurrent liabilities - other and $ 1.4 million to asset retirement obligations.

The $ 2.5 million indemnity holdback liability related to 2020 acquisitions was paid in 2021.

$ 2.5 million to noncurrent liabilities - other;

and $ 3.2 million to deferred tax liabilities.

The intangible assets include non-compete agreements, customer relationships, and trade names.

The intangible assets fair value is based on various income approach methods, including, multi-period excess earnings, relief-from-royalty and the with and without method.

The amortizable intangible assets are being amortized using a straight-line method over a weighted average period of 5.5 years.

During the first quarter of 2022, measurement period adjustments were made to the previously reported provisional amounts, which decreased goodwill and increased property, plant and equipment by $ 2.1 million.

The Company issued debt to finance these acquisitions.

Costs incurred for acquisitions are included in operation and maintenance expense on the Consolidated Statements of Income and were not material for the years ended December 31, 2021, 2020 and 2019.

Costs incurred for acquisitions are included in operation and maintenance expense on the Consolidated Statements of Income and were immaterial for the years ended December 31, 2022, 2021 and 2020.

88 MDU Resources Group, Inc.

38 unchanged sentences

Net property, plant and equipment $ 6,091,545 $ 5,756,388

* Depleted on the units-of-production method based on recoverable aggregate reserves.

* Depleted on the units-of-production method based on proven and probable aggregate reserves.

MDU Resources Group, Inc.

5 unchanged sentences

Natural gas costs recoverable through rate adjustments Up to 1 year $ 141,306 $ 86,371

Decoupling Up to 1 year 9,131 703

Conservation programs Up to 1 year 8,544 8,225

Cost recovery mechanisms Up to 1 year 4,019 4,536

Decoupling Up to 1 year 1,801 9,131

Other Up to 1 year 9,422 10,428

1 unchanged sentence

Pension and postretirement benefits ** 143,349 142,681

Plant costs/asset retirement obligations Over plant lives 63,116 71,740

Plant to be retired - 50,070 65,919

Cost recovery mechanisms Up to 10 years 67,171 44,870

Plant costs/asset retirement obligations Over plant lives 44,462 63,116

Manufactured gas plant sites remediation - 26,624 26,053

Plant to be retired - 21,525 50,070

Taxes recoverable from customers Over plant lives 12,330 12,339

Natural gas costs recoverable through rate adjustments Up to 2 years 5,186 21,539

Long-term debt refinancing costs Up to 38 years 3,188 3,794

Natural gas costs recoverable through rate adjustments Up to 2 years — 5,186

Other Up to 16 years 11,010 9,742

2 unchanged sentences

Regulatory liabilities:

Natural gas costs refundable through rate adjustments Up to 1 year $ 6,700 $ 18,565

Taxes refundable to customers Up to 1 year 3,841 3,557

Electric fuel and purchased power deferral Up to 1 year $ 4,929 $ —

Conservation programs Up to 1 year 4,126 12

Taxes refundable to customers Up to 1 year 3,937 3,841

Refundable fuel & electric costs Up to 1 year 3,253 713

Natural gas costs refundable through rate adjustments Up to 1 year 955 6,700

Other Up to 1 year 9,240 5,037

26,440 16,303

Taxes refundable to customers Over plant lives 215,421 227,850

Plant removal and decommissioning costs Over plant lives 208,650 168,152

Taxes refundable to customers Over plant lives 203,222 215,421

Cost recovery mechanisms Up to 19 years 14,025 2,919

Accumulated deferred investment tax credit Up to 19 years 13,594 12,696

Pension and postretirement benefits ** 7,376 20,434

7 unchanged sentences

These assets are largely comprised of the unfunded portion of pension and postretirement benefits, asset retirement obligations, accelerated depreciation on plant retirement and the estimated future cost of manufactured gas plant site remediation.

In February 2021, a prolonged period of unseasonably cold temperatures in the central United States significantly increased the demand for electric and natural gas services and contributed to increased market prices.

Overall, Montana-Dakota and Great Plains incurred approximately $ 44.0 million in increased natural gas costs in order to maintain services for its customers.

These extraordinary natural gas costs were recorded as regulatory assets as they are expected to be recovered from customers.

Montana-Dakota and Great Plains have received approval for the recovery of purchased gas adjustments related to the cold-weather event in all jurisdictions impacted, including out-of-cycle purchased gas adjustment requests in most jurisdictions.

For a discussion of the Company's most recent cases by jurisdiction, see Note 20.

In the last half of 2021 and in 2022, the Company has experienced higher natural gas costs due to increase in demand outpacing the supply along with the impact of global events.

This increase in natural gas costs experienced in certain jurisdictions has been partially offset by the recovery of prior period natural gas costs being recovered over a period longer than the normal one-year period.

90 MDU Resources Group, Inc.

In 2019, the Company experienced increased natural gas costs in Washington from the rupture of the Enbridge pipeline in Canada in late 2018.

As a result, the Company requested, and the WUTC approved, recovery of the balance of natural gas costs recoverable related to this period of time over three years rather than its normal one-year recovery period.

In February 2019, the Company announced the retirement of three aging coal-fired electric generating units.

The Company accelerated the depreciation related to these facilities in property, plant and equipment and recorded the difference between the accelerated depreciation, in accordance with GAAP, and the depreciation approved for rate-making purposes as regulatory assets.

The first unit ceased operations on March 31, 2021, and the Company subsequently began amortizing plant retirement and closure costs related to this facility.

During 2021, the Company received approval from the NDPSC and the SDPUC to offset the savings associated with the cessation of operations of this unit with the amortization of the deferred regulatory assets and moved the costs being recovered for this facility from plant retirement to cost recovery mechanisms in the previous table.

The two remaining units are being retired during the first quarter of 2022.

Requests were filed with the NDPSC and SDPUC, and subsequently approved, to offset the savings associated with the cessation of operations of these units with the amortization of the deferred regulatory assets.

The Company ceased operations of Lewis & Clark Station in March 2021 and Units 1 and 2 at Heskett Station in February 2022.

The Company subsequently reclassified the costs being recovered for these facilities from plant retirement to cost recovery mechanisms in the previous table and began amortizing the associated plant retirement and closure costs in the jurisdictions where requests were filed, as previously discussed.

The Company expects to recover the regulatory assets related to the plant retirements in future rates.

36 unchanged sentences

Amortization expense $ 4,591 $ 4,249 $ 2,200 $ 1,782 $ 1,759 $ 2,951

At October 31, 2022, the fair value substantially exceeded the carrying value at the Company's reporting units with goodwill, with the exception of the natural gas distribution reporting unit.

The Company's annual impairment testing indicated the natural gas distribution reporting units fair value is not substantially in excess of its carrying value ("cushion").

Based on the Company's assessment, the estimated fair value of the natural gas distribution reporting unit exceeded its carrying value, which includes $ 345.7 million of goodwill, by approximately 8 percent as of October 31, 2022.

The decrease in the natural gas distribution reporting unit's cushion from the prior year was primarily attributable to the risk adjusted cost of capital increasing from 5.0 percent in 2021 to 6.4 percent 2022, which directly correlates with the treasury rates at the date of the test.

The natural gas distribution reporting unit is at risk of future impairment if projected operating results are not met or other inputs into the fair value measurement model change.

Note 8 - Fair Value Measurements

3 unchanged sentences

The Company measures its investments in certain fixed-income and equity securities at fair value with changes in fair value recognized in income.

The Company anticipates using these investments, which consist of insurance contracts, to satisfy its obligations under its unfunded, nonqualified defined benefit plans for executive officers and certain key management employees, and invests in these fixed-income and equity securities for the purpose of earning investment returns and capital appreciation.

The Company anticipates using these investments, which consist of insurance contracts, to satisfy its obligations under its unfunded, nonqualified defined benefit and defined contribution plans for the Company's executive officers and certain key management employees, and invests in these fixed-income and equity securities for the purpose of earning investment returns and capital appreciation.

These investments, which totaled $ 98.0 million and $ 109.6 million at December 31, 2022 and 2021, respectively, are classified as investments on the Consolidated Balance Sheets.

The net unrealized gains on these investments for the years ended December 31, 2021, 2020 and 2019, were $ 7.2 million, $ 13.1 million and $ 13.2 million, respectively.

The net unrealized losses on these investments for the year ended December 31, 2022, were $ 14.1 million.

The net unrealized gains on these investments for the years ended December 31, 2021 and 2020, were $ 7.2 million and $ 13.1 million, respectively.

The change in fair value, which is considered part of the cost of the plan, is classified in other income on the Consolidated Statements of Income.

16 unchanged sentences

Total $ 11,109 $ 51 $ 58 $ 11,102

92 MDU Resources Group, Inc.

The Company's assets measured at fair value on a recurring basis were as follows:

Fair Value Measurements

at December 31, 2021, Using

Fair Value Measurements at December 31, 2022, Using

Quoted Prices

4 unchanged sentences

Money market funds $ — $ 7,361 $ — $ 7,361

Insurance contract* — 109,603 — 109,603

Insurance contracts* — 98,041 — 98,041

Available-for-sale securities:

2 unchanged sentences

Total assets measured at fair value $ — $ 116,232 $ — $ 116,232

* The insurance contract invests approximately 61 percent in fixed-income investments, 17 percent in common stock of large-cap companies, 8 percent in common stock of mid-cap companies, 7 percent in common stock of small-cap companies, 5 percent in target date investments and 2 percent in cash equivalents.

MDU Resources Group, Inc.

Fair Value Measurements

at December 31, 2020, Using

* The insurance contracts invest approximately 63 percent in fixed-income investments, 15 percent in common stock of large-cap companies, 8 percent in common stock of mid-cap companies, 6 percent in common stock of small-cap companies, 6 percent in target date investments and 2 percent in cash equivalents.

Fair Value Measurements at December 31, 2021, Using

Quoted Prices

4 unchanged sentences

Money market funds $ — $ 10,190 $ — $ 10,190

Insurance contract* — 100,104 — 100,104

Insurance contracts* — 109,603 — 109,603

Available-for-sale securities:

2 unchanged sentences

Total assets measured at fair value $ — $ 130,895 $ — $ 130,895

* The insurance contract invests approximately 57 percent in fixed-income investments, 18 percent in common stock of large-cap companies, 9 percent in common stock of mid-cap companies, 9 percent in common stock of small-cap companies, 5 percent in target date investments and 2 percent in cash equivalents.

* The insurance contracts invest approximately 61 percent in fixed-income investments, 17 percent in common stock of large-cap companies, 8 percent in common stock of mid-cap companies, 7 percent in common stock of small-cap companies, 5 percent in target date investments and 2 percent in cash equivalents.

The Company's money market funds are valued at the net asset value of shares held at the end of the period, based on published market quotations on active markets, or using other known sources including pricing from outside sources.

1 unchanged sentence

Treasury securities are based on comparable market transactions, other observable inputs or other sources, including pricing from outside sources.

The estimated fair value of the Company's insurance contract is based on contractual cash surrender values that are determined primarily by investments in managed separate accounts of the insurer.

The estimated fair value of the Company's insurance contracts is based on contractual cash surrender values that are determined primarily by investments in managed separate accounts of the insurer.

These amounts approximate fair value.

6 unchanged sentences

For more information on these Level 2 and Level 3 fair value measurements, see Notes 2 and 4.

MDU Resources Group, Inc.

The Company's long-term debt is not measured at fair value on the Consolidated Balance Sheets and the fair value is being provided for disclosure purposes only.

5 unchanged sentences

The carrying amounts of the Company's remaining financial instruments included in current assets and current liabilities approximate their fair values.

88 MDU Resources Group, Inc.

Note 9 - Debt

Certain debt instruments of the Company's subsidiaries, including those discussed later, contain restrictive and financial covenants and cross-default provisions.

In order to borrow under the debt agreements, the subsidiary companies must be in compliance with the applicable covenants and certain other conditions, all of which the subsidiaries, as applicable, were in compliance with at December 31, 2021.

Certain debt instruments of the Company's subsidiaries contain restrictive and financial covenants and cross-default provisions.

In order to borrow under the respective debt instruments, the subsidiary companies must be in compliance with the applicable covenants and certain other conditions, all of which the subsidiaries, as applicable, were in compliance with at December 31, 2022.

In the event the subsidiaries do not comply with the applicable covenants and other conditions, alternative sources of funding may need to be pursued.

16 unchanged sentences

(a) The commercial paper program is supported by a revolving credit agreement with various banks (provisions allow for increased borrowings, at the option of Montana-Dakota on stated conditions, up to a maximum of $ 225.0 million).

There were no amounts outstanding under the revolving credit agreement.

At December 31, 2022 and 2021, there were no amounts outstanding under the revolving credit agreement.

(b) Certain provisions allow for increased borrowings, up to a maximum of $ 125.0 million.

2 unchanged sentences

(e) The commercial paper program is supported by a revolving credit agreement with various banks (provisions allow for increased borrowings, at the option of Centennial on stated conditions, up to a maximum of $ 700.0 million).

There were no amounts outstanding under the revolving credit agreement.

At December 31, 2022 and 2021, there were no amounts outstanding under the revolving credit agreement.

The respective commercial paper programs are supported by revolving credit agreements.

2 unchanged sentences

Short-term debt

Montana-Dakota On March 8, 2021, Montana-Dakota entered into a $ 50.0 million term loan agreement with a LIBOR-based variable interest rate and a maturity date of March 7, 2022.

At December 31, 2021, Montana-Dakota had no amount outstanding under the agreement.

The agreement contains customary covenants and provisions, including a covenant of Montana-Dakota not to permit, at any time, the ratio of total debt to total capitalization to be greater than 65 percent.

MDU Energy Capital On October 21, 2022, MDU Energy Capital entered into a $ 11.5 million term loan agreement with a SOFR-based variable interest rate and a maturity date of July 21, 2023.

The agreement contains customary covenants and provisions, including a covenant of MDU Energy Capital not to permit, at any time, the ratio of total debt to total capitalization to be greater than 70 percent.

The covenants also include certain restrictions on the sale of certain assets, loans and investments.

Centennial On March 18, 2022, Centennial entered into a $ 100.0 million term loan agreement with a SOFR-based variable interest rate and a maturity date of March 17, 2023.

The agreement contains customary covenants and provisions, including a covenant of Centennial not to permit, at any time, the ratio of total debt to total capitalization to be greater than 65 percent.

The covenants also include certain restrictions on the sale of certain assets, loans and investments.

On December 19, 2022, Centennial entered into a $ 135.0 million term loan agreement with a SOFR-based variable interest rate and a maturity date of December 18, 2023.

The covenants also include certain restrictions on the sale of certain assets, loans and investments.

94 MDU Resources Group, Inc.

Long-term debt

2 unchanged sentences

(In thousands)

Senior Notes due on dates ranging from October 22, 2022 to September 15, 2061

Senior Notes due on dates ranging from May 15, 2023 to June 15, 2062

4.32 % $ 2,258,500 $ 2,125,000

1 unchanged sentence

5.13 % 415,500 450,300

Credit agreements due on June 7, 2024

Credit agreements due on October 13, 2027 and November 30, 2027

6.31 % 130,000 127,500

3 unchanged sentences

3.64 % 7,000 7,700

Other notes due on dates ranging from January 2, 2022 to January 1, 2061

Other notes due on dates ranging from March 1, 2024 to January 1, 2061

1.00 % 2,253 2,564

8 unchanged sentences

Other covenants include limitations on the sale of certain assets and on the making of certain loans and investments.

MDU Resources Group, Inc.

On September 15, 2021, Montana-Dakota entered into a $ 125.0 million note purchase agreement with maturity dates ranging from September 15, 2051 to September 15, 2061, at a weighted average interest rate of 3.23 percent.

On September 15, 2021 and December 15, 2021, Montana-Dakota issued $ 75.0 million and $ 50.0 million, respectively, in senior notes under the note purchase agreement.

Montana-Dakota's ratio of total debt to total capitalization at December 31, 2022, was 51 percent.

Cascade Any borrowings under the revolving credit agreement are classified as long-term debt as they are intended to be refinanced on a long-term basis through continued borrowings.

Cascade On November 30, 2022, Cascade amended and restated its revolving credit agreement to extend the maturity date to November 30, 2027.

Any borrowings under the revolving credit agreement are classified as long-term debt as they are intended to be refinanced on a long-term basis through continued borrowings.

The credit agreement contains customary covenants and provisions, including a covenant of Cascade not to permit, at any time, the ratio of total debt to total capitalization to be greater than 65 percent.

Other covenants include restrictions on the sale of certain assets, limitations on indebtedness and the making of certain investments.

On June 15, 2022, Cascade issued $ 50.0 million of senior notes under a note purchase agreement with maturity dates ranging from June 15, 2032 to June 15, 2052, at a weighted average interest rate of 4.50 percent.

The agreement contains customary covenants and provisions, including a covenant of Cascade not to permit, at any time, the ratio of debt to total capitalization to be greater than 65 percent.

Other covenants include restrictions on the sale of certain assets, limitations on indebtedness and the making of certain investments.

Cascade's ratio of total debt to total capitalization at December 31, 2022, was 50 percent.

Intermountain Any borrowings under the revolving credit agreement are classified as long-term debt as they are intended to be refinanced on a long-term basis through continued borrowings.

Intermountain On October 13, 2022, Intermountain amended and restated its revolving credit agreement to increase the borrowing capacity to $ 100.0 million and extend the maturity date to October 13, 2027.

Any borrowings under the revolving credit agreement are classified as long-term debt as they are intended to be refinanced on a long-term basis through continued borrowings.

The credit agreement contains customary covenants and provisions, including a covenant of Intermountain not to permit, at any time, the ratio of total debt to total capitalization to be greater than 65 percent.

Other covenants include restrictions on the sale of certain assets, limitations on indebtedness and the making of certain investments.

On June 15, 2022, Intermountain issued $ 40.0 million of senior notes under a note purchase agreement with maturity dates ranging from June 15, 2052 to June 15, 2062, at a weighted average interest rate of 4.68 percent.

The agreement contains customary covenants and provisions, including a covenant of Intermountain not to permit, at any time, the ratio of debt to total capitalization to be greater than 65 percent.

Other covenants include restrictions on the sale of certain assets, limitations on indebtedness and the making of certain investments.

Intermountain's ratio of total debt to total capitalization at December 31, 2022, was 57 percent.

MDU Resources Group, Inc.

Centennial Centennial's revolving credit agreement supports its commercial paper program.

2 unchanged sentences

Other covenants include restricted payments, restrictions on the sale of certain assets, limitations on subsidiary indebtedness, minimum consolidated net worth, limitations on priority debt and the making of certain loans and investments.

On March 23, 2022, Centennial issued $ 150.0 million of senior notes under a note purchase agreement with maturity dates ranging from March 23, 2032 to March 23, 2034, at a weighted average interest rate of 3.71 percent.

The agreement contains customary covenants and provisions, including a covenant of Centennial not to permit, at any time, the ratio of debt to total capitalization to be greater than 60 percent.

Other covenants include restrictions on the sale of certain assets, limitations on indebtedness and the making of certain investments.

Centennial's ratio of total debt to total capitalization, as defined by its debt covenants, at December 31, 2022, was 46 percent.

1 unchanged sentence

These provisions state that if Centennial or any subsidiary of Centennial fails to make any payment with respect to any indebtedness or contingent obligation, in excess of a specified amount, under any agreement that causes such indebtedness to be due prior to its stated maturity or the contingent obligation to become payable, the applicable agreements will be in default.

WBI Energy Transmission WBI Energy Transmission has a $ 300.0 million uncommitted note purchase and private shelf agreement with an expiration date of May 16, 2022.

WBI Energy Transmission On December 22, 2022, WBI Energy Transmission amended its uncommitted note purchase and private shelf agreement to increase capacity to $ 350.0 million with an expiration date of December 22, 2025.

On December 22, 2022, WBI Energy Transmission issued $ 40.0 million in senior notes under the private shelf agreement with a maturity date of December 22, 2030, at an interest rate of 6.67 percent.

WBI Energy Transmission had $ 235.0 million of notes outstanding at December 31, 2022, which reduced the remaining capacity under this uncommitted private shelf agreement to $ 115.0 million.

This agreement contains customary covenants and provisions, including a covenant of WBI Energy Transmission not to permit, as of the end of any fiscal quarter, the ratio of total debt to total capitalization to be greater than 55 percent.

Other covenants include a limitation on priority debt and restrictions on the sale of certain assets and the making of certain investments.

On December 23, 2021, WBI Energy Transmission entered into a $ 50.0 million note purchase agreement with a maturity date of December 23, 2041, at an interest rate of 3.67 percent.

The agreement contains customary covenants and provisions, including a covenant of WBI Energy Transmission not to permit, at any time, the ratio of total debt to total capitalization to be greater than 55 percent.

Other covenants include a limitation on priority debt, restrictions on the sale of certain assets and the making of certain investments.

WBI Energy Transmission's ratio of total debt to total capitalization at December 31, 2022, was 40 percent.

3 unchanged sentences

Long-term debt maturities $ 78,031 $ 476,923 $ 177,802 $ 140,802 $ 230,802 $ 1,743,893

90 MDU Resources Group, Inc.

Note 10 - Leases

5 unchanged sentences

Lessee accounting

The leases the Company has entered into as part of its ongoing operations are considered operating leases and are recognized on the Consolidated Balance Sheets as operating lease right-of-use assets, operating lease liabilities due within one year and, if applicable, noncurrent liabilities - operating lease liabilities.

The leases the Company has entered into as part of its ongoing operations are considered operating leases and are recognized on the Consolidated Balance Sheets as operating lease right-of-use assets, current operating lease liabilities and noncurrent liabilities - operating lease liabilities.

The corresponding lease costs are included in operation and maintenance expense on the Consolidated Statements of Income.

1 unchanged sentence

To date, the Company does not have any residual value guarantee amounts probable of being owed to a lessor, financing leases or material agreements with related parties.

96 MDU Resources Group, Inc.

The following tables provide information on the Company's operating leases at and for the years ended December 31:

2022 2021 2020

(In thousands)

3 unchanged sentences

$ 207,013 $ 180,587 $ 182,014

2022 2021 2020

(Dollars in thousands)

Weighted average remaining lease term 2.67 years 2.73 years

Weighted average remaining lease term 2.83 years 2.67 years 2.73 years

Weighted average discount rate 4.05 % 3.54 % 4.03 %

10 unchanged sentences

The Company leases certain equipment to third parties through its utility and construction services segments, which are considered short-term operating leases with terms of less than 12 months.

The Company recognized revenue from operating leases of $ 50.1 million and $ 48.0 million for the years ended December 31, 2021 and 2020, respectively.

The Company recognized revenue from operating leases of $ 47.9 million , $ 50.1 million and $48.0 million for the years ended December 31, 2022, 2021and 2020, respectively.

At December 31, 2022, the Company had $ 9.7 million of lease receivables with a majority due within 12 months or less.

MDU Resources Group, Inc.

Note 11 - Asset Retirement Obligations

The Company records obligations related to retirement costs of natural gas distribution mains and lines, natural gas transmission lines, natural gas storage wells, decommissioning of certain electric generating facilities, reclamation of certain aggregate properties, special handling and disposal of hazardous materials at certain electric generating facilities, natural gas distribution facilities and buildings, and certain other obligations as asset retirement obligations.

The Company records obligations related to retirement costs of natural gas distribution lines, natural gas transmission lines, natural gas storage wells, decommissioning of certain electric generating facilities, reclamation of certain aggregate properties, special handling and disposal of hazardous materials at certain electric generating facilities, natural gas distribution facilities and buildings, and certain other obligations as asset retirement obligations.

A reconciliation of the Company's liability, which the current portion is included in other accrued liabilities on the Consolidated Balance Sheets, for the years ended December 31 was as follows:

8 unchanged sentences

* Includes $ 21.8 million and $ 19.6 million in 2022 and 2021, respectively, recorded to regulatory assets.

MDU Resources Group, Inc.

The 2022 revisions in estimates consist principally of updated asset retirement obligation costs associated with natural gas distribution and transmission lines at the natural gas distribution segment.

The Company believes that largely all expenses related to asset retirement obligations at the Company's regulated operations will be recovered in rates over time and, accordingly, defers such expenses as regulatory assets.

21 unchanged sentences

As of December 31, 2022, the Company had capacity to issue up to 3.6 million additional shares of common stock under the "at-the-market" offering program.

92 MDU Resources Group, Inc.

Details of the Company's "at-the-market" offering activity for the years ended December 31 was as follows:

2 unchanged sentences

Net proceeds * $ ( 0.1 ) $ 88.8 **

Issuance costs $ 1.2 $ —

* Net proceeds include issuance costs of $ 149,000 and $ 1.2 million for

the years ended December 31, 2022 and 2021, respectively.

** Net proceeds were used for capital expenditures.

8 unchanged sentences

The Company either purchases shares on the open market or issues new shares of common stock to satisfy the vesting of stock-based awards.

98 MDU Resources Group, Inc.

Total stock-based compensation expense (after tax) was $ 8.7 million, $ 12.0 million and $ 10.8 million in 2022, 2021 and 2020, respectively.

The Company uses the straight-line amortization method to recognize compensation expense related to restricted stock, which only has a service condition.

The Company recognizes compensation expense related to performance awards with market-based performance metrics on a straight-line basis over the requisite service period.

As of December 31, 2022, total remaining unrecognized compensation expense related to stock-based compensation was approximately $ 12.5 million (before income taxes) which will be amortized over a weighted average period of 1.6 years.

2 unchanged sentences

Restricted stock awards

In February 2021, key employees were granted restricted stock awards under the long-term performance-based incentive plan.

In February 2022 and 2021, key employees were granted restricted stock awards under the long-term performance-based incentive plan.

The shares vest over three years, contingent on continued employment.

2 unchanged sentences

Performance share awards

Since 2003, key employees of the Company have been granted performance share awards each year under the long-term performance-based incentive plan.

Entitlement to performance shares is established by either the market condition or the performance metrics and service condition relative to the designated award.

Since 2003, key employees of the Company have been granted performance share awards each year under the long-term performance-based incentive plan authorized by the Company's compensation committee.

The compensation committee has the authority to select the recipients of awards, determine the type and size of awards, and establish certain terms and conditions of award grants.

Share awards are generally earned over a three-year vesting period and tied to financial metrics.

Upon vesting, participants receive dividends that accumulate during the vesting period.

Target grants of performance shares outstanding at December 31, 2022, were as follows:

3 unchanged sentences

February 2022 2022-2024 284,416

MDU Resources Group, Inc.

Under the market condition for these performance share awards, participants may earn from zero to 200 percent of the apportioned target grant of shares based on the Company's total shareholder return relative to that of the selected peer group.

Under the market condition for these performance share awards, participants may earn from zero to 200 percent of the apportioned target grant of shares based on the Company's total stockholder return relative to that of the selected peer group.

Compensation expense is based on the grant-date fair value as determined by Monte Carlo simulation.

16 unchanged sentences

The fair value of the performance shares that vested during the years ended December 31, 2022, 2021 and 2020, was $ 7.6 million, $ 13.7 million and $ 9.7 million, respectively.

MDU Resources Group, Inc.

A summary of the status of the performance share awards for the year ended December 31, 2022, was as follows:

2 unchanged sentences

Granted 284,416 31.99

Additional performance shares earned 116,467 22.68

Performance shares earned/unearned ( 22,750 ) 31.63

Vested 251,168 36.60

Forfeited 15,037 35.49

Nonvested at end of period 565,545 $ 32.32

9 unchanged sentences

At December 31, 2020 $ ( 984 ) $ ( 47,207 ) $ 113 $ ( 48,078 )

Other comprehensive loss before reclassifications — ( 8,395 ) ( 1 ) ( 8,396 )

Other comprehensive income (loss) before reclassifications — 4,876 ( 252 ) 4,624

Amounts reclassified from accumulated other comprehensive loss 446 1,870 134 2,450

2 unchanged sentences

Other comprehensive income (loss) before reclassifications — 12,007 ( 667 ) 11,340

Amounts reclassified to accumulated other comprehensive loss from a regulatory asset — ( 3,265 ) — ( 3,265 )

Amounts reclassified from accumulated other comprehensive loss 413 1,819 114 2,346

1 unchanged sentence

At December 31, 2022 $ ( 125 ) $ ( 29,900 ) $ ( 558 ) $ ( 30,583 )

94 MDU Resources Group, Inc.

The following amounts were reclassified out of accumulated other comprehensive loss into net income.

The amounts presented in parenthesis indicate a decrease to net income on the Consolidated Statements of Income.

The amounts presented in parentheses indicate a decrease to net income on the Consolidated Statements of Income.

The reclassifications for the years ended December 31 were as follows:

5 unchanged sentences

( 413 ) ( 446 )

Amortization of postretirement liability losses included in net periodic benefit cost ( 2,485 ) ( 2,552 ) Other income

Amortization of postretirement liability losses included in net periodic benefit credit ( 2,416 ) ( 2,485 ) Other income

597 615 Income taxes

( 1,819 ) ( 1,870 )

Reclassification adjustment for loss on available-for-sale investments included in net income ( 170 ) ( 66 ) Other income

Reclassification adjustment on available-for-sale investments included in net income ( 145 ) ( 170 ) Other income

31 36 Income taxes

1 unchanged sentence

Total reclassifications $ ( 2,346 ) $ ( 2,450 )

100 MDU Resources Group, Inc.

Note 15 - Income Taxes

18 unchanged sentences

Total income tax expense $ 94,783 $ 88,920 $ 84,590

MDU Resources Group, Inc.

Components of deferred tax assets and deferred tax liabilities at December 31 were as follows:

13 unchanged sentences

Postretirement 47,340 48,302

Purchased gas adjustment 33,567 21,136

Operating lease right-of-use-assets 25,472 26,570

8 unchanged sentences

Changes in tax regulations or assumptions regarding current and future taxable income could require additional valuation allowances in the future.

MDU Resources Group, Inc.

Form 10-K 101

The following table reconciles the change in the net deferred income tax liability from December 31, 2021, to December 31, 2022, to deferred income tax expense:

18 unchanged sentences

1,080 .2 ( 477 ) ( .1 ) ( 3,543 ) ( .7 )

Nonqualified benefit plans 2,827 .6 ( 1,881 ) ( .4 ) ( 2,443 ) ( .5 )

Excess deferred income tax amortization ( 9,008 ) ( 1.9 ) ( 10,295 ) ( 2.2 ) ( 12,517 ) ( 2.6 )

1 unchanged sentence

Total income tax expense $ 94,783 20.5 $ 88,920 19.1 $ 84,590 17.8

96 MDU Resources Group, Inc.

The Company and its subsidiaries file income tax returns in the U.S.

12 unchanged sentences

$ 83,118 $ 91,165 $ 88,681

Income taxes paid (refunded), net** $ 71,079 $ 65,536 $ ( 8,475 )

Income taxes paid, net** $ 26,503 $ 71,079 $ 65,536

* AFUDC - borrowed was $ 2.2 million, $ 2.8 million and $ 2.6 million for the years ended December 31, 2022, 2021 and 2020, respectively.

** Income taxes paid (refunded), including discontinued operations, were $ 70.9 million, $ 59.4 million and $( 9.4 ) million for the years ended December 31, 2021, 2020 and 2019, respectively.

** Income taxes paid, including discontinued operations, were $ 26.4 million, $ 70.9 million and $ 59.4 million for the years ended December 31, 2022, 2021 and 2020, respectively.

Noncash investing and financing transactions at December 31 were as follows:

5 unchanged sentences

Accrual for holdback payment related to a business combination $ 70 $ — $ 2,500

Stock issued in connection with a business combination $ 7,304 $ — $ —

102 MDU Resources Group, Inc.

Note 17 - Business Segment Data

6 unchanged sentences

The pipeline segment provides natural gas transportation and underground storage services through a regulated pipeline system primarily in the Rocky Mountain and northern Great Plains regions of the United States.

This segment also provides non-regulated cathodic protection and other energy-related services.

The construction materials and contracting segment mines, processes and sells construction aggregates (crushed stone, sand and gravel);

produces and sells asphalt mix;

This segment also provides non-regulated cathodic protection services.

The construction materials and contracting segment mines, processes and sells construction aggregates (crushed stone and sand and gravel);

produces and sells asphalt;

and supplies ready-mix concrete.

This segment focuses on vertical integration of its contracting services with its construction materials to support the aggregate-based product lines including aggregate placement, asphalt and concrete paving, and site development and grading.

Although not common to all locations, other products include the sale of cement, asphalt oil for various commercial and roadway applications, various finished concrete products and other building materials and related contracting services.

This segment's aggregate reserves provide the foundation for the vertical integration of its contracting services with its construction materials to support its aggregate-based product lines including heavy-civil construction, asphalt paving, concrete construction and site development and grading.

Although not common to all locations, the segment also includes the sale of cement, liquid asphalt modification and distribution, various finished concrete products, merchandise and other building materials and related contracting services.

This segment operates in the central, southern and western United States, including Alaska and Hawaii.

The construction services segment provides a full spectrum of construction services through its electrical and mechanical and transmission and distribution specialty contracting services across the country.

These specialty contracting services are provided to utilities and manufacturing, transportation, commercial, industrial, institutional, renewable and governmental customers.

These specialty contracting services are provided to utilities, manufacturing, transportation, commercial, industrial, institutional, renewable and governmental customers.

Its electrical and mechanical contracting services include construction and maintenance of electrical and communication wiring and infrastructure, fire suppression systems, and mechanical piping and services.

3 unchanged sentences

Centennial Capital also owns certain real and personal property.

In addition, the Other category includes certain assets, liabilities and tax adjustments of the holding company primarily associated

MDU Resources Group, Inc.

with corporate functions and certain general and administrative costs (reflected in operation and maintenance expense) and interest expense, which were previously allocated to the refining business and Fidelity and do not meet the criteria for income (loss) from discontinued operations.

In addition, the Other category includes certain assets, liabilities and tax adjustments of the holding company primarily associated with corporate functions, as well as costs associated with the announced strategic initiatives.

Also included are certain general and administrative costs (reflected in operation and maintenance expense) and interest expense, which were previously allocated to the refining business and Fidelity and do not meet the criteria for income (loss) from discontinued operations.

Discontinued operations include the supporting activities of Fidelity other than certain general and administrative costs and interest expense as described above.

16 unchanged sentences

Total external operating revenues $ 6,973,864 $ 5,680,733 $ 5,532,750

MDU Resources Group, Inc.

Form 10-K 103

2022 2021 2020

(In thousands)

Intersegment operating revenues:

10 unchanged sentences

24,759 17,498 17,967

Intersegment eliminations ( 77,606 ) ( 76,969 ) ( 77,149 )

Total Intersegment operating revenues $ 84,176 $ 77,606 $ 76,969

15 unchanged sentences

Total operating income $ 573,953 $ 534,219 $ 544,925

98 MDU Resources Group, Inc.

2021 2020 2019

(In thousands)

Interest expense:

15 unchanged sentences

Total income tax expense $ 94,783 $ 88,920 $ 84,590

104 MDU Resources Group, Inc.

2022 2021 2020

(In thousands)

Net income (loss):

11 unchanged sentences

Income from continuing operations 367,276 377,731 390,527

Income (loss) from discontinued operations, net of tax 400 ( 322 ) 287

Discontinued operations, net of tax 213 400 ( 322 )

Net income $ 367,489 $ 378,131 $ 390,205

7 unchanged sentences

Total capital expenditures (a) $ 656,559 $ 935,806 $ 648,279

MDU Resources Group, Inc.

2021 2020 2019

(In thousands)

Electric (b) $ 1,856,258 $ 1,810,695 $ 2,123,693

4 unchanged sentences

Other (c) 232,885 249,361 306,377

Assets held for sale 872 1,220 1,851

Total assets $ 9,660,781 $ 8,910,435 $ 8,053,372

8 unchanged sentences

Net property, plant and equipment $ 6,091,545 $ 5,756,388 $ 5,166,939

(a) Capital expenditures for 2021, 2020 and 2019 include noncash transactions such as capital expenditure-related accounts payable, AFUDC and accrual of holdback payments in connection with acquisitions totaling $ 38.7 million, $( 15.7 ) million and $ 4.8 million, respectively.

(a) Capital expenditures for 2022, 2021 and 2020 include noncash transactions such as capital expenditure-related accounts payable, the issuance of the Company's equity securities in connection with an acquisition, AFUDC and accrual of holdback payments in connection with acquisitions totaling $ 1.7 million, $ 38.7 million and $( 15.7 ) million, respectively.

(b) Includes allocations of common utility property.

1 unchanged sentence

cash and cash equivalents, certain accounts receivable, certain investments and other miscellaneous current and deferred assets).

MDU Resources Group, Inc.

Form 10-K 105

A reconciliation of reportable segment operating revenues and assets to consolidated operating revenues and assets is as follows:

2022 2021 2020

(In thousands)

Operating revenues reconciliation:

Total reportable segment operating revenues $ 7,040,435 $ 5,744,625 $ 5,597,816

Other revenue 17,605 13,714 11,903

Elimination of intersegment operating revenues ( 84,176 ) ( 77,606 ) ( 76,969 )

Total consolidated operating revenues $ 6,973,864 $ 5,680,733 $ 5,532,750

Asset reconciliation:

Total reportable segment assets $ 9,491,679 $ 8,717,563 $ 7,816,848

Other assets 1,353,614 1,184,956 947,740

Elimination of intersegment receivables ( 1,184,512 ) ( 992,084 ) ( 711,216 )

Total consolidated assets $ 9,660,781 $ 8,910,435 $ 8,053,372

Note 18 - Employee Benefit Plans

9 unchanged sentences

In 2012, the Company modified health care coverage for certain retirees.

Effective January 1, 2013, post-65 coverage was replaced by a fixed-dollar subsidy for retirees and spouses to be used to purchase individual insurance through an exchange.

Effective January 1, 2013, post-65 coverage was replaced by a fixed-dollar subsidy for retirees and spouses to be used to purchase individual insurance through a healthcare exchange.

106 MDU Resources Group, Inc.

9 unchanged sentences

Plan participants' contributions — — 569 641

Actuarial (gain) loss ( 12,140 ) 27,737 ( 12,802 ) 2,203

Actuarial gain ( 85,303 ) ( 12,140 ) ( 18,401 ) ( 12,802 )

Benefits paid ( 24,672 ) ( 23,542 ) ( 4,009 ) ( 3,996 )

7 unchanged sentences

Fair value of net plan assets at end of year 270,462 373,109 76,326 100,158

Funded status - over (under) $ ( 38,388 ) $ ( 53,526 ) $ 26,698 $ 15,484

Funded status - (under) over $ ( 41,582 ) $ ( 38,388 ) $ 21,395 $ 26,698

Amounts recognized in the Consolidated Balance Sheets at December 31:

2 unchanged sentences

Noncurrent liabilities - other 41,582 38,388 13,886 18,621

Benefit obligation assets (liabilities) - net amount recognized $ ( 38,388 ) $ ( 53,526 ) $ 26,698 $ 15,484

Benefit obligation (liabilities) assets - net amount recognized $ ( 41,582 ) $ ( 38,388 ) $ 21,395 $ 26,698

Amounts recognized in accumulated other comprehensive loss:

Actuarial loss $ 25,976 $ 27,527 $ 2,367 $ 5,557

Actuarial loss (gain) $ 32,378 $ 25,976 $ ( 2,923 ) $ 2,367

Prior service credit — — ( 289 ) ( 290 )

1 unchanged sentence

Amounts recognized in regulatory assets or liabilities:

Actuarial (gain) loss $ 142,166 $ 154,013 $ ( 14,727 ) $ ( 8,228 )

Actuarial loss (gain) $ 141,207 $ 142,166 $ ( 1,439 ) $ ( 14,727 )

Prior service credit — — ( 3,796 ) ( 5,193 )

3 unchanged sentences

For more information on regulatory assets and liabilities, see Note 6.

In 2021, the actuarial gain recognized in the benefit obligation was primarily the result of an increase in the discount rate.

In 2020, the actuarial loss recognized in the benefit obligation was primarily the result of a decrease in the discount rate.

In 2022 and 2021, the actuarial gain recognized in the benefit obligation was primarily the result of an increase in the discount rate.

For more information on the discount rates, see the table below.

Unrecognized pension actuarial losses in excess of 10 percent of the greater of the projected benefit obligation or the market-related value of assets are amortized over the average life expectancy of plan participants for frozen plans.

Unrecognized pension actuarial gains and losses in excess of 10 percent of the greater of the projected benefit obligation or the market-related value of assets are amortized over the average life expectancy of plan participants for frozen plans.

The market-related value of assets is determined using a five-year average of assets.

13 unchanged sentences

2022 2021 2020 2022 2021 2020

Components of net periodic benefit cost (credit):

Components of net periodic benefit credit:

(In thousands)

4 unchanged sentences

— — — ( 1,398 ) ( 1,398 ) ( 1,398 )

Recognized net actuarial loss 8,017 7,172 5,548 24 287 353

Net periodic benefit cost (credit), including amount capitalized

( 1,740 ) ( 684 ) 2,537 ( 3,010 ) ( 2,161 ) ( 1,721 )

Recognized net actuarial loss (gain) 6,683 8,017 7,172 ( 219 ) 24 287

Net periodic benefit credit, including amount capitalized ( 2,250 ) ( 1,740 ) ( 684 ) ( 3,593 ) ( 3,010 ) ( 2,161 )

Less amount capitalized — — — 175 150 156

4 unchanged sentences

Amortization of prior service credit — — — 125 100 101

Reclassification of postretirement liability adjustment from regulatory asset 5,343 — — ( 992 ) — —

Total recognized in accumulated other comprehensive loss

5 unchanged sentences

— — — 1,273 1,298 1,297

Reclassification of postretirement liability adjustment from regulatory asset ( 5,343 ) — — 992 — —

Total recognized in regulatory assets or liabilities

( 959 ) ( 11,847 ) ( 1,471 ) 14,685 ( 4,884 ) ( 2,477 )

Total recognized in net periodic benefit cost (credit), accumulated other comprehensive loss and regulatory assets or liabilities

$ ( 15,138 ) $ ( 2,376 ) $ ( 2,966 ) $ ( 10,890 ) $ ( 5,258 ) $ ( 9,084 )

Total recognized in net periodic benefit credit, accumulated other comprehensive loss and regulatory assets or liabilities $ 3,193 $ ( 15,138 ) $ ( 2,376 ) $ 5,628 $ ( 10,890 ) $ ( 5,258 )

Weighted average assumptions used to determine benefit obligations at December 31 were as follows:

14 unchanged sentences

As of December 31, 2022, the expected rate of return on pension plan assets is based on the targeted asset allocation range of 40 percent to 50 percent equity securities and 50 percent to 60 percent fixed-income securities and the expected rate of return from these asset categories.

The expected rate of return on other postretirement plan assets is based on the targeted asset allocation range of 10 percent equity securities and 90 percent fixed-income securities and the expected rate of return from these asset categories.

The expected rate of return on other postretirement plan assets is based on the targeted asset allocation range of 10 percent to 20 percent equity securities and 80 percent to 90 percent fixed-income securities and the expected rate of return from these asset categories.

The expected return on plan assets for other postretirement benefits reflects insurance-related investment costs.

66 unchanged sentences

Total assets measured at fair value $ 131,504 $ 133,396 $ — $ 270,462

(a) Collective and mutual funds invest approximately 37 percent in corporate bonds, 19 percent in common stock of international companies, 16 percent in common stock of large-cap U.S.

companies, 9 percent in U.S.

(a) Collective and mutual funds invest approximately 29 percent in corporate bonds, 24 percent in common stock of large-cap U.S.

companies, 16 percent in common stock of international companies, 7 percent cash and cash equivalents, 7 percent in U.S.

Government securities and 17 percent in other investments.

(b) Pooled separate accounts are invested 100 percent in cash and cash equivalents.

(c) In accordance with ASC 820 - Fair Value, certain investments that were measured at net asset value per share (or its equivalent) have not been classified in the fair value hierarchy.

The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the line items presented in the statement of financial condition.

(c) In accordance with ASC 820 - Fair Value Measurements, certain investments that were measured at net asset value per share (or its equivalent) have not been classified in the fair value hierarchy.

The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the line items presented in the Consolidated Balance Sheets.

Fair Value Measurements

13 unchanged sentences

Government securities 7,113 1,902 — 9,015

Investments measured at net asset value (b) — — — 11,430

Pooled separate accounts (b) — 3,088 — 3,088

Investments measured at net asset value (c) — — — 6,457

Total assets measured at fair value $ 181,689 $ 184,963 $ — $ 373,109

(a) Collective and mutual funds invest approximately 37 percent in corporate bonds, 19 percent in common stock of international companies, 16 percent in common stock of large-cap U.S.

companies, 8 percent in cash equivalents, 5 percent in U.S.

companies, 9 percent in U.S.

Government securities and 19 percent in other investments.

(b) In accordance with ASC 820 - Fair Value, certain investments that were measured at net asset value per share (or its equivalent) have not been classified in the fair value hierarchy.

The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the line items presented in the statement of financial condition.

The estimated fair values of the Company's other postretirement benefit plans' assets are determined using the market approach.

(b) Pooled separate accounts are invested 100 percent in cash and cash equivalents.

(c) In accordance with ASC 820 - Fair Value Measurements, certain investments that were measured at net asset value per share (or its equivalent) have not been classified in the fair value hierarchy.

The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the line items presented in the Consolidated Balance Sheets.

110 MDU Resources Group, Inc.

The estimated fair values of the Company's other postretirement benefit plans' assets are determined using the market approach.

The estimated fair value of the other postretirement benefit plans' Level 2 cash equivalents is valued at the net asset value of shares held at year end, based on published market quotations on active markets, or using other known sources including pricing from outside sources.

15 unchanged sentences

companies 2,572 — — 2,572

International companies — 1 — 1

Collective and mutual funds (a) 5 5 — 10

Insurance contract (b) — 69,548 — 69,548

Investments measured at net asset value (c) — — — 3

Total assets measured at fair value $ 2,577 $ 73,749 $ — $ 76,326

(a) Collective and mutual funds invest approximately 37 percent in corporate bonds, 19 percent in common stock of international companies, 16 percent in common stock of large-cap U.S.

companies, 9 percent in U.S.

(a) Collective and mutual funds invest approximately 29 percent in corporate bonds, 24 percent in common stock of large-cap U.S.

companies, 16 percent in common stock of international companies, 7 percent in cash and cash equivalents, 7 percent in U.S.

Government securities and 17 percent in other investments.

1 unchanged sentence

Government securities, 14 percent in common stock of large-cap U.S.

companies, 5 percent in common stock of small-cap U.S.

companies and 11 percent in other investments.

(c) In accordance with ASC 820 - Fair Value , certain investments that were measured at net asset value per share (or its equivalent) have not been classified in the fair value hierarchy.

The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the line items presented in the statement of financial condition.

companies and 4 percent in common stock of small-cap U.S.

Fair Value Measurements

14 unchanged sentences

(a) Collective and mutual funds invest approximately 37 percent in corporate bonds, 19 percent in common stock of international companies, 16 percent in common stock of large-cap U.S.

companies, 8 percent in cash equivalents, 5 percent in U.S.

companies, 9 percent in U.S.

Government securities and 19 percent in other investments.

2 unchanged sentences

Government securities, 5 percent in common stock of small-cap U.S.

companies, 1 percent in cash equivalents and 6 percent in other investments.

(c) In accordance with ASC 820 - Fair Value, certain investments that were measured at net asset value per share (or its equivalent) have not been classified in the fair value hierarchy.

The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the line items presented in the statement of financial condition.

companies and 11 percent in other investments.

(c) In accordance with ASC 820 - Fair Value Measurements, certain investments that were measured at net asset value per share (or its equivalent) have not been classified in the fair value hierarchy.

The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the line items presented in the Consolidated Balance Sheets.

MDU Resources Group, Inc.

33 unchanged sentences

(In thousands)

Insurance contract* $ 109,603 $ 100,104

Insurance contracts* $ 98,041 $ 109,603

Life insurance** 38,448 38,356

1 unchanged sentence

Total investments $ 143,850 $ 158,149

* For more information on the insurance contract, see Note 8.

* For more information on the insurance contracts, see Note 8.

** Investments of life insurance are carried on plan participants (payable upon the employee's death).

1 unchanged sentence

Defined contribution plans

The Company sponsors various defined contribution plans for eligible employees and the costs incurred under these plans were $ 45.4 million in 2021, $ 50.1 million in 2020 and $ 51.8 million in 2019.

The Company sponsors a defined contribution plan for eligible employees and the costs incurred under this plan were $ 46.4 million in 2022, $ 45.4 million in 2021 and $ 50.1 million in 2020.

Multiemployer plans

24 unchanged sentences

No 1,854 1,353 1,373 No 12/3/2023

IBEW Local 648 Pension Plan 316134845 - 001

Yellow as of 2/28/2022

Yellow as of 02/28/2021

Implemented 915 706 526 No 9/1/2024

IBEW Local 683 Pension Fund Pension Plan 341442087 - 001

Green Green No 3,362 1,238 1,240 No 5/26/2024

Idaho Plumbers and Pipefitters Pension Plan 826010346 - 001

5 unchanged sentences

Pension and Retirement Plan of Plumbers and Pipefitters Local 525 886003864 - 001

Green Green No 4,345 6,266 4,747 No 9/30/2024

Green as of 6/30/2022

Green as of 6/30/2021

No 6,304 4,345 6,266 No 9/30/2024

Pension Trust Fund for Operating Engineers 946090764 - 001

1 unchanged sentence

Sheet Metal Workers Pension Plan of Southern CA, AZ, and NV 956052257 - 001

Yellow Yellow Implemented 2,615 3,255 2,119 No 6/30/2024

Southern California IBEW-NECA Pension Trust Fund 956392774 - 001

Yellow as of 6/30/2021

Yellow as of 6/30/2020

Implemented 2,746 1,714 1,477 No 6/30/2022 - 5/31/2026

Green Yellow Implemented 3,400 2,615 3,255 No 6/30/2024

Western Conference of Teamsters Pension Plan 916145047 - 001

15 unchanged sentences

IBEW Local 683 Pension Fund Pension Plan 2021 and 2020

IBEW Local Union No 226 Open End Pension Fund 2020 and 2019

IBEW Local Union No 226 Open End Pension Fund 2020

Idaho Plumbers and Pipefitters Pension Plan 2021 and 2020

44 unchanged sentences

The Company is unable to predict the ultimate outcome of these matters, the timing of final decisions of the various regulators and courts, or the effect on the Company's results of operations, financial position or cash flows.

Intermountain filed a request with the IPUC for a natural gas general rate increase on December 1, 2022.

The request is for an increase of $ 11.3 million annually or 3.2 percent above current rates.

The requested increase is primarily to recover investments made since the last rate case in 2016 and the depreciation, operation and maintenance expenses and taxes associated with the increased investments.

The IPUC has up to seven months to issue a decision on the request, which is currently pending.

Intermountain defers the difference between the actual cost of gas spent to serve customers and the amount approved to be recovered from customers and annually prepares a true-up pursuant to the purchased gas adjustment tariff.

On December 27, 2022, Intermountain filed an application with the IPUC for an out-of-cycle cost of gas adjustment requesting an increase in rates of approximately $ 56.5 million annually or approximately 17.1 percent above current rates.

The primary reason for the requested increase was to mitigate the under-collection balance due to the significant increase in the commodity price for natural gas.

On January 30, 2023, the request was approved with rates effective February 1, 2023.

MDU Resources Group, Inc.

Form 10-K 115

Great Plains defers the difference between the actual cost of gas spent to serve customers and that recovered from customers on a monthly basis.

1 unchanged sentence

On August 30, 2021, the MNPUC issued an order to allow Great Plains recovery of an out-of-cycle cost of gas adjustment of $ 8.8 million over a period of 27 months.

The order was effective September 1, 2021, and is subject to a prudence review by the MNPUC.

The order was effective September 1, 2021, and was subject to a prudence review by the MNPUC.

The requested increase was for the February 2021 extreme cold weather, primarily in the central United States, and market conditions surrounding the natural gas commodity market.

The MNPUC prudence review is pending with an order to be issued on or before August 29, 2022.

On October 19, 2022, the MNPUC issued a final order disallowing $ 845,000 of the gas costs.

These costs, which were deferred as a regulatory asset in natural gas costs recoverable through rate adjustments, were then recorded to expense as they were no longer recoverable from customers.

On November 8, 2022, Great Plains filed a request for reconsideration, which was denied by the MNPUC on January 6, 2023.

On June 1, 2022, Great Plains filed an application with the MNPUC for a decrease in its depreciation and amortization rates of approximately $ 1.2 million annually or a decrease from a combined rate of 4.5 percent to 2.8 percent.

Great Plains requested the rates be retroactive to January 1, 2022.

On November 8, 2022, the MNPUC approved a decrease of $ 1.0 million annually with rates retroactive to January 1, 2022.

On November 4, 2022, Montana-Dakota filed an application with the MTPSC for an electric general rate increase of approximately $ 10.5 million annually or 15.2 percent above current rates.

The requested increase is primarily to recover investments made since the last rate case, including the Heskett 4 gas turbine, increases in operation and maintenance expenses, and increases in property taxes.

On January 24, 2023, the MTPSC approved Montana-Dakota's request for an interim increase of approximately $ 1.7 million or 2.7 percent above current rates, subject to refund, effective February 1, 2023.

The MTPSC has 9 months to render a final decision on the rate case.

The matter is pending before the MTPSC with a hearing scheduled for June 20, 2023.

On May 16, 2022, Montana-Dakota filed an application with the NDPSC for an electric general rate increase of approximately $ 25.4 million annually or 12.3 percent above current rates.

The requested increase is primarily to recover investments in production, transmission and distribution facilities and the associated depreciation, operation and maintenance expenses and taxes associated with the increased investment.

On July 14, 2022, the NDPSC approved an interim rate increase of approximately $ 10.9 million annually or 5.3 percent above current rates, subject to refund, for service rendered on and after July 15, 2022.

The lower interim rate increase is largely due to excluding the recovery of Heskett Unit 4, which is expected to be in service in the summer of 2023.

The matter is pending before the NDPSC with a hearing scheduled for May 1, 2023.

Montana-Dakota has a renewable resource cost adjustment rate tariff that allows for annual adjustments for recent projected capital costs and related expenses for projects determined to be recoverable under the tariff.

On November 1, 2021, Montana-Dakota filed an annual update to its renewable resource cost adjustment requesting to recover a revised revenue requirement of approximately $ 12.4 million annually, not including the prior period true-up adjustment.

On November 1, 2022, Montana-Dakota filed an annual update to its renewable resource cost adjustment requesting to recover a revenue requirement of approximately $ 17.9 million annually, which was revised to $ 17.0 million annually on January 31, 2023.

The update reflects a decrease of approximately $ 1.0 million from the revenues currently included in rates.

On January 26, 2022, the NDPSC approved the decrease with rates effective February 1, 2022.

On February 22, 2023, this matter was approved by the NDPSC with rates effective March 1, 2023.

On March 24, 2022, Cascade filed a request for tariff revision with the WUTC to rectify an inadvertent IRS normalization violation resulting from its tariff established in 2018 that passes back to customers the reversal of plant-related excess deferred income taxes through an annual rate adjustment.

This request was made in response to the issuances of an IRS private letter ruling to another Washington utility with the same annual rate adjustment tariff, which addressed its normalization violations.

The private letter ruling concluded the tariff to refund excess deferred income taxes without corresponding adjustments for other components of rate base or changes in depreciation or income tax expense, is an impermissible methodology under the IRS normalization and consistency rules.

Cascade's request proposes a similar remedy through the tariff to recover the excess amounts refunded to customers while this tariff has been in place, and revises the method going forward to reflect excess deferred income taxes in rates in the same manner as other components of rate base from its most recent general rate case.

Cascade requested recovery of the excess refunded to customers of approximately $ 3.3 million and elimination of the currently deferred but not yet refunded balance.

A multi-party settlement was filed with the WUTC on October 21, 2022.

On January 23, 2023, the WUTC denied recovery of the excess refunded to customers, but approved the tariff revision going forward to rectify the inadvertent normalization violation.

On February 1, 2023, Cascade filed a motion for clarification with the WUTC on the currently deferred but not yet refunded balance.

On September 1, 2022, Montana-Dakota filed an update to its transmission formula rate under the MISO tariff for its multi-value project and network upgrade charges for $ 15.4 million, which was effective January 1, 2023.

On January 27, 2023, WBI Energy Transmission filed a general rate case with the FERC for increases in its transportation and storage services rates that also includes a Greenhouse Gas Cost Recovery Mechanism for anticipated future costs.

New rates will be in effect no later than August 1, 2023.

116 MDU Resources Group, Inc.

Form 10-K 109

On March 11, 2021, Montana-Dakota filed an informational update to the infrastructure rider rate tariff with the SDPUC related to the retirement of Unit 1 at Lewis & Clark Station.

The filing includes the annual revenue requirement offset by the related amortization of the accelerated depreciation on the plant, net of excess deferred income taxes, and the decommissioning costs projected to be incurred in 2021 resulting in no impact to customers.

On November 15, 2021, the SDPUC approved the request.

On September 30, 2021, Cascade filed an application with the WUTC for a natural gas rate increase of approximately $ 13.7 million annually or approximately 5.1 percent above current rates.

The requested increase was primarily to recover investments made in infrastructure upgrades, as well as to recover 2021 wage increases.

The WUTC has 11 months to render a final decision on the rate case.

This matter is pending before the WUTC.

On September 1, 2021, Montana-Dakota filed an update to its transmission formula rate under the MISO tariff for its multi-value project for $ 13.4 million, which was effective January 1, 2022.

Note 21 - Commitments and Contingencies

6 unchanged sentences

(1) the damages are unsubstantiated or indeterminate, (2) the proceedings are in the early stages, (3) numerous parties are involved, or (4) the matter involves novel or unsettled legal theories.

At December 31, 2021 and 2020, the Company accrued liabilities which have not been discounted, including liabilities held for sale, of $ 37.0 million and $ 41.5 million, respectively.

At December 31, 2022 and 2021, the Company accrued liabilities which have not been discounted of $ 32.9 million and $ 37.0 million, respectively.

At December 31, 2022 and 2021, the Company also recorded corresponding insurance receivables of $ 10.4 million and $ 14.1 million, respectively, and regulatory assets of $ 20.9 million and $ 21.2 million, respectively, related to the accrued liabilities.

The accruals are for contingencies resulting from litigation, production taxes, royalty claims and environmental matters.

The accruals are for contingencies resulting from litigation and environmental matters.

This includes amounts that have been accrued for matters discussed in Environmental matters within this note.

19 unchanged sentences

It is not possible to estimate the costs of natural resource damages until an assessment is completed and allocations are undertaken.

110 MDU Resources Group, Inc.

At this time, Knife River - Northwest does not believe it is a responsible party and has notified Georgia-Pacific West, Inc., that it intends to seek indemnity for liabilities incurred in relation to the above matters pursuant to the terms of their sale agreement.

9 unchanged sentences

However, the recommended remediation would not address any potential contamination to adjacent parcels that may be impacted from historic operations of the manufactured gas plant.

An environmental assessment was started in 2020, which is estimated to cost approximately $ 823,000 .

The environmental assessment report is expected to be submitted to the MTDEQ in 2022.

An environmental assessment was started in 2020, which is estimated to cost approximately $ 1.8 million.

The environmental assessment report is expected to be submitted to the

MDU Resources Group, Inc.

Form 10-K 117

MTDEQ in 2024.

Montana-Dakota and another party agreed to voluntarily investigate and remediate the site and that Montana-Dakota will pay two-thirds of the costs for further investigation and remediation of the site.

2 unchanged sentences

On December 9, 2021, Montana Dakota filed an application with the MTPSC for deferred accounting treatment for costs associated with the investigation and remediation of the site.

This matter is pending before the MTPSC.

The MTPSC approved the application for deferred accounting treatment as requested on July 26, 2022.

A claim was made against Cascade for contamination at the Bremerton Gasworks Superfund Site in Bremerton, Washington, which was received in 1997.

17 unchanged sentences

The other PRPs developed a cleanup action plan and completed public review in 2020.

Development of design documents is anticipated to be completed by the end of 2022 with the remedy construction expected to occur in 2023.

The development of the remediation design is underway, with the Draft Pre-Remedial Design Investigation Data Report submitted to Washington Ecology in early 2023.

The remedy construction is expected to occur following the approval of the final design.

Cascade believes its proportional share of any liability will be relatively small in comparison to other PRPs.

5 unchanged sentences

To the extent these claims are not covered by insurance, the Company intends to seek recovery of remediation costs through its natural gas rates charged to customers.

MDU Resources Group, Inc.

Form 10-K 111

Purchase commitments

2 unchanged sentences

natural gas transportation and storage;

asphalt oil supply;

information technology;

7 unchanged sentences

These commitments were not reflected in the Company's consolidated financial statements.

Amounts purchased under various commitments for the years ended December 31, 2021, 2020 and 2019, were $ 849.3 million, $ 666.0 million and $ 686.5 million, respectively.

Amounts purchased under various commitments for the years ended December 31, 2022, 2021 and 2020, were $ 1.0 billion, $ 849.3 million and $ 666.0 million, respectively.

Certain subsidiaries of the Company have outstanding guarantees to third parties that guarantee the performance of other subsidiaries of the Company.

5 unchanged sentences

$ 126.8 million in 2025;

$ 800,000 in 2025;

$ 1.3 million in 2026;

$ 800,000 in 2027;

$ 200,000 thereafter;

$ 1.7 million thereafter;

and $ 11.5 million, which has no scheduled maturity date.

There were no amounts outstanding under the previously mentioned guarantees at December 31, 2021.

There were no amounts outstanding under the previously mentioned guarantees

118 MDU Resources Group, Inc.

at December 31, 2022.

In the event of default under these guarantee obligations, the subsidiary issuing the guarantee for that particular obligation would be required to make payments under its guarantee.

12 unchanged sentences

however, Centennial will likely continue to enter into surety bonds for its subsidiaries in the future.

At December 31, 2021, approximately $ 934.4 million of surety bonds were outstanding, which were not reflected on the Consolidated Balance Sheet.

At December 31, 2022, approximately $ 1.3 billion of surety bonds were outstanding, which were not reflected on the Consolidated Balance Sheet.

Variable interest entities

7 unchanged sentences

At December 31, 2022, the Company's exposure to loss as a result of the Company's involvement with the VIE, based on the Company's ownership percentage, was $ 29.5 million.

Note 22 - Subsequent Events

On January 20, 2023, Cascade entered into a $ 150.0 million term loan agreement with a SOFR-based variable interest rate and a maturity date of January 19, 2024.

The agreement contains customary covenants and provisions, including a covenant of Cascade not to permit, at any time, the ratio of total debt to total capitalization to be greater than 65 percent.

The covenants also include certain restrictions on the sale of certain assets, loans and investments.

On January 20, 2023, Intermountain entered into a $ 125.0 million term loan agreement with a SOFR-based variable interest rate and a maturity date of January 19, 2024.

The agreement contains customary covenants and provisions, including a covenant of Intermountain not to permit, at any time, the ratio of total debt to total capitalization to be greater than 65 percent.

The covenants also include certain restrictions on the sale of certain assets, loans and investments.

MDU Resources Group, Inc.

Form 10-K 119

The following abbreviations and acronyms used in Notes to Consolidated Financial Statements are defined below:

9 unchanged sentences

Centennial Capital Centennial Holdings Capital LLC, a direct wholly owned subsidiary of Centennial

Centennial's Consolidated EBITDA Centennial's consolidated net income from continuing operations plus the related interest expense, taxes, depreciation, depletion, amortization of intangibles and any non-cash charge relating to asset impairment for the preceding 12-month period

Company MDU Resources Group, Inc.

COVID-19 Coronavirus disease 2019

Coyote Creek Coyote Creek Mining Company, LLC, a subsidiary of The North American Coal Corporation

11 unchanged sentences

Intermountain Intermountain Gas Company, an indirect wholly owned subsidiary of MDU Energy Capital

IPUC Idaho Public Utilities Commission

IRS Internal Revenue Service

Knife River Knife River Corporation, a direct wholly owned subsidiary of Centennial

17 unchanged sentences

SEC United States Securities and Exchange Commission

MDU Resources Group, Inc.

Form 10-K 113

Securities Act Securities Act of 1933, as amended

120 MDU Resources Group, Inc.

SOFR Secured Overnight Financing Rate

6 unchanged sentences

MDU Resources Group, Inc.

Form 10-K 121

Changes in and Disagreements With Accountants on Accounting and Financial Disclosure

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 8. Financial Statements and Supplementary Data