MDU RESOURCES GROUP INC 10-K

Item 8. Financial Statements and Supplementary Data Management's Report on Internal Control Over Financial Reporting The management of MDU Resources Group, Inc. is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934. The Company's internal control system is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the Company's financial statements for external purposes in accordance with generally accepted accounting principles in the United States of America. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Management assessed the effectiveness of the Company's internal control over financial reporting as of December 31, 2023. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework (2013) . Based on our evaluation under the framework in Internal Control-Integrated Framework (2013) , management concluded that the Company's internal control over financial reporting was effective as of December 31, 2023. The effectiveness of the Company's internal control over financial reporting as of December 31, 2023, has been audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in their report. /s/ Nicole A. Kivisto /s/ Jason L. Vollmer Nicole A. Kivisto Jason L. Vollmer President and Chief Executive Officer Vice President, Chief Financial Officer and Treasurer MDU Resources Group, Inc. Form 10-K 63 Index Part II Report of Independent Registered Public Accounting Firm To the Stockholders and the Board of Directors of MDU Resources Group, Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of MDU Resources Group, Inc. and subsidiaries (the "Company") as of December 31, 2023 and 2022, the related consolidated statements of income, comprehensive income, equity, and cash flows for each of the three years in the period ended December 31, 2023, 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, 2023, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023 and December 31, 2022, 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, 2023, 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 22, 2024, expressed an unqualified opinion on the Company's internal control over financial reporting. Basis for Opinion These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matters The critical audit matters communicated below are matters arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. Revenue from Contracts with Customers-Construction Contract Revenue-Refer to Notes 2 and 4 to the financial statements 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 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 determining the contract revenues and estimating total costs and profit for the performance obligation. Assumptions as to the occurrence of future events and the likelihood and amount of variable consideration, including liquidated damages, performance bonuses or incentives, claims, unpriced change orders and penalties or index pricing are made during the contract performance period. The Company estimates variable consideration at the most likely amount it expects to be entitled to or expects to incur and includes estimated amounts in the transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is resolved. For the year ended December 31, 2023, the Company recognized $2.8 billion of construction contract revenue. Given the judgments necessary to account for the Company’s construction contracts including the use of estimates to determine the transaction price, total costs and profit for the performance obligations which are used to recognize revenue for construction contracts, auditing such estimates required extensive audit effort due to the volume and complexity of construction contracts and a high degree of auditor judgment when performing audit procedures and evaluating the results of those procedures. 64 MDU Resources Group, Inc. Form 10-K Index Part II 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 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. • We developed an expectation of the amount of construction contract revenues for certain performance obligations based on prior year markups, and taking into account current year events, applied to the construction contract costs in the current year and compared our expectation to the amount of construction contract revenues recorded by management. • We selected a sample of construction contracts and performed the following: • 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. • 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. • Compared the total estimated contract revenue, 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. • We evaluated the reasonableness of the estimated variable consideration in the contract revenue by: ◦ Evaluating the information supporting management’s judgement as to the cause and contractual rights on the project ◦ Testing the accuracy of the identification of the underlying costs associated with the variable consideration. • Evaluated the estimates of total cost and profit for the performance obligation by: ◦ Comparing total costs incurred to date to the costs management estimated to be incurred to date and selecting specific cost types to compare costs incurred to date to management's estimated costs at completion. ◦ Evaluating management’s ability to achieve the estimates of total cost and profit by performing corroborating inquiries with the Company’s project managers and engineers, and comparing the estimates to management’s work plans, engineering specifications, and supplier contracts. ◦ Comparing management’s estimates for the selected contracts to costs and profits of similar performance obligations, when applicable. • Tested the mathematical accuracy of management’s calculation of construction contract revenue for the performance obligation. • We evaluated management’s ability to estimate total costs and profits accurately by comparing actual costs and profits to management’s historical estimates for performance obligations that have been fulfilled. Regulatory Matters-Impact of Rate Regulation on the Financial Statements-Refer to Notes 2 and 21 to the financial statements Critical Audit Matter Description Through the Company’s regulated utility businesses, it provides electric and natural gas services to customers, and generates, transmits, and distributes electricity. The Company is subject to rate regulation by federal and state utility regulatory agencies (collectively, the “Commissions”), which have jurisdiction with respect to the rates of electric and natural gas distribution companies in states where the Company operates. The Company’s regulated utility businesses account for certain income and expense items under the provisions of regulatory accounting, which requires these businesses to defer as regulatory assets or liabilities certain items that would have otherwise been reflected as expense or income, respectively, based on the expected regulatory treatment in future rates. The expected recovery, refund or future rate reduction of these deferred items generally is based on specific ratemaking decisions or precedent for each item. Accounting for the economics of rate regulation impacts multiple financial statement line items and disclosures, such as property, plant, and equipment; regulatory assets and liabilities; operating revenues; operation and maintenance expense; depreciation expense; and income taxes. Rates are determined and approved in regulatory proceedings based on an analysis of the Company’s costs to provide utility service and a return on the Company’s investment in the regulated utility businesses. Regulatory decisions can have an impact on the recovery of costs, the rate of return earned on investment, and the timing and amount of assets to be recovered by rates. The regulation of rates is premised on the full recovery of prudently incurred costs and a reasonable rate of return on invested capital. Decisions to be made by the Commissions in the future will impact the accounting for regulated operations. MDU Resources Group, Inc. Form 10-K 65 Index Part II We identified the impact of rate regulation as a critical audit matter due to the significant judgments made by management to support its assertions about impacted account balances and disclosures and the degree of subjectivity involved in assessing the impact of future regulatory orders on the financial statements. Management judgments include assessing the likelihood of (1) recovery in future rates of incurred costs and (2) refunds or future rate reduction to customers. Given management’s accounting judgments are based on assumptions about the outcome of future decisions by the Commissions, auditing these judgments requires specialized knowledge of accounting for rate regulation due to its inherent complexities. How the Critical Audit Matter Was Addressed in the Audit Our audit procedures related to the uncertainty of future decisions by the Commissions included the following, among others: • We tested the design and operating effectiveness of management’s controls over the evaluation of the likelihood of (1) the recovery in future rates of costs incurred as property, plant, and equipment and deferred as regulatory assets; and (2) a refund or a future reduction in rates that should be reported as regulatory liabilities. We tested management’s controls over the initial recognition of amounts as regulatory assets or liabilities; 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. • 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. We evaluated the external information and compared to management’s recorded regulatory asset and liability balances for completeness, and for any evidence that might contradict management’s assertions. • We obtained an analysis from management regarding probability of recovery for regulatory assets or refund or future reduction in rates for regulatory liabilities not yet addressed in a regulatory order to assess management’s assertion that amounts are probable of recovery, or a future reduction in rates. • We inspected minutes of the board of directors to identify any evidence that may contradict management’s assertions regarding probability of recovery or refunds. 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 8 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 using the discounted cash flow model 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. The determination of the fair value using the market approach requires management to make significant assumptions related to EBITDA multiples and rate base transaction multiples. 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 $489 million as of December 31, 2023, 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 estimates and assumptions management makes 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, the long-term growth rate, and EBITDA and rate base transaction multiples. 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, long-term growth rate, EBITDA and the rate base transaction multiples 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 and EBITDA and the selection of the discount rate, long-term growth rate, EBITDA and rate base transaction multiples. • 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, 2023, annual measurement date to December 31, 2023. 66 MDU Resources Group, Inc. Form 10-K Index Part II • 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 transaction multiples, including testing the underlying source information and mathematical accuracy of the calculations, and comparing the multiples selected by management to its guideline companies and transactions. /s/ Deloitte & Touche LLP Minneapolis, Minnesota February 22, 2024 We have served as the Company's auditor since 2002. MDU Resources Group, Inc. Form 10-K 67 Index Part II Report of Independent Registered Public Accounting Firm To the Stockholders and the Board of Directors of MDU Resources Group, Inc. Opinion on Internal Control over Financial Reporting We have audited the internal control over financial reporting of MDU Resources Group, Inc. and subsidiaries (the "Company") as of December 31, 2023, based on criteria established in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control-Integrated Framework (2013) issued by COSO. We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended December 31, 2023, of the Company and our report dated February 22, 2024, expressed an unqualified opinion on those consolidated financial statements. Basis for Opinion The Company's management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company's internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and Limitations of Internal Control over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ Deloitte & Touche LLP Minneapolis, Minnesota February 22, 2024 68 MDU Resources Group, Inc. Form 10-K Index Part II Consolidated Statements of Income Years ended December 31, 2023 2022 2021 (In thousands, except per share amounts) Operating revenues: Electric, natural gas distribution and regulated pipeline $ 1,789,637 $ 1,736,397 $ 1,390,992 Non-regulated pipeline, construction services and other 2,867,703 2,705,387 2,063,444 Total operating revenues 4,657,340 4,441,784 3,454,436 Operating expenses: Operation and maintenance: Electric, natural gas distribution and regulated pipeline 397,037 375,347 367,234 Non-regulated pipeline, construction services and other 2,573,835 2,450,347 1,842,697 Total operation and maintenance 2,970,872 2,825,694 2,209,931 Purchased natural gas sold 742,965 757,883 483,118 Depreciation and amortization 213,598 210,028 198,240 Taxes, other than income 196,046 186,173 157,991 Electric fuel and purchased power 107,881 92,007 74,105 Total operating expenses 4,231,362 4,071,785 3,123,385 Operating income 425,978 369,999 331,051 Realized gain on tax-free exchange of the retained shares in Knife River 186,556 — — Other income 41,672 11,228 25,724 Interest expense 114,308 80,698 70,709 Income before income taxes 539,898 300,529 286,066 Income taxes 59,473 49,761 43,544 Income from continuing operations 480,425 250,768 242,522 Discontinued operations, net of tax ( 65,718 ) 116,721 135,609 Net income $ 414,707 $ 367,489 $ 378,131 Earnings per share - basic: Income from continuing operations $ 2.36 $ 1.23 $ 1.20 Discontinued operations, net of tax ( .32 ) .58 .67 Earnings per share - basic $ 2.04 $ 1.81 $ 1.87 Earnings per share - diluted: Income from continuing operations $ 2.36 $ 1.23 $ 1.20 Discontinued operations, net of tax ( .33 ) .58 .67 Earnings per share - diluted $ 2.03 $ 1.81 $ 1.87 Weighted average common shares outstanding - basic 203,640 203,358 202,076 Weighted average common shares outstanding - diluted 203,938 203,462 202,383 The accompanying notes are an integral part of these consolidated financial statements. MDU Resources Group, Inc. Form 10-K 69 Index Part II Consolidated Statements of Comprehensive Income Years ended December 31, 2023 2022 2021 (In thousands) Net income $ 414,707 $ 367,489 $ 378,131 Other comprehensive income (loss): Reclassification adjustment for loss on derivative instruments included in net income, net of tax of $ 15 , $ 177 and $ 145 in 2023, 2022 and 2021, respectively 81 413 446 Postretirement liability adjustment: Postretirement liability gains (losses) arising during the period, net of tax of $( 201 ), $ 3,965 and $ 1,626 in 2023, 2022 and 2021, respectively ( 646 ) 12,007 4,876 Amortization of postretirement liability losses included in net periodic benefit credit, net of tax of $ 78 , $ 597 and $ 615 in 2023, 2022 and 2021, respectively 242 1,819 1,870 Reclassification of postretirement liability adjustment from regulatory asset, net of tax of $ 0 , $( 1,086 ) and $ 0 in 2023, 2022 and 2021, respectively — ( 3,265 ) — Postretirement liability adjustment ( 404 ) 10,561 6,746 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 $ 46 , $( 177 ) and $( 67 ) in 2023, 2022 and 2021, respectively 173 ( 667 ) ( 252 ) Reclassification adjustment for loss on available-for-sale investments included in net income, net of tax of $ 11 , $ 31 and $ 36 in 2023, 2022 and 2021, respectively 43 114 134 Net unrealized gain (loss) on available-for-sale investments 216 ( 553 ) ( 118 ) Other comprehensive income (loss) ( 107 ) 10,421 7,074 Comprehensive income attributable to common stockholders $ 414,600 $ 377,910 $ 385,205 The accompanying notes are an integral part of these consolidated financial statements. 70 MDU Resources Group, Inc. Form 10-K Index Part II Consolidated Balance Sheets December 31, 2023 2022 Assets (In thousands, except shares and per share amounts) Current assets: Cash, cash equivalents and restricted cash $ 76,975 $ 70,428 Receivables, net 942,782 1,064,340 Inventories 87,392 64,248 Current regulatory assets 172,492 165,092 Prepayments and other current assets 84,082 55,123 Current assets of discontinued operations — 592,517 Total current assets 1,363,723 2,011,748 Noncurrent assets: Property, plant and equipment 7,341,116 6,874,629 Less accumulated depreciation and amortization 2,220,206 2,098,298 Net property, plant and equipment 5,120,910 4,776,331 Goodwill 488,960 488,960 Other intangible assets, net 2,004 4,102 Regulatory assets 447,099 329,659 Investments 124,235 128,827 Operating lease right-of-use assets 74,363 73,502 Other 211,865 161,901 Noncurrent assets of discontinued operations — 1,685,751 Total noncurrent assets 6,469,436 7,649,033 Total assets $ 7,833,159 $ 9,660,781 Liabilities and Stockholders' Equity Current liabilities: Short-term borrowings $ 95,000 $ 38,500 Long-term debt due within one year 61,319 47,819 Accounts payable 475,215 525,560 Taxes payable 58,110 62,308 Dividends payable 25,461 45,245 Accrued compensation 85,512 59,470 Operating lease liabilities due within one year 22,884 21,307 Regulatory liabilities due within one year 70,761 26,440 Other accrued liabilities 181,471 156,031 Current liabilities of discontinued operations — 496,923 Total current liabilities 1,075,733 1,479,603 Noncurrent liabilities: Long-term debt 2,236,904 2,317,848 Deferred income taxes 458,548 455,499 Asset retirement obligations 384,371 372,870 Regulatory liabilities 521,050 448,454 Operating lease liabilities 51,645 52,871 Other 199,675 180,603 Noncurrent liabilities of discontinued operations — 765,904 Total noncurrent liabilities 3,852,193 4,594,049 Commitments and contingencies Stockholders' equity: Common stock Authorized - 500,000,000 shares, $ 1.00 par value Shares issued - 203,689,090 at December 31, 2023 and 204,162,814 at December 31, 2022 203,689 204,163 Other paid-in capital 1,466,235 1,466,037 Retained earnings 1,253,693 1,951,138 Accumulated other comprehensive loss ( 18,384 ) ( 30,583 ) Treasury stock at cost - 538,921 shares at December 31, 2022 — ( 3,626 ) Total stockholders' equity 2,905,233 3,587,129 Total liabilities and stockholders' equity $ 7,833,159 $ 9,660,781 The accompanying notes are an integral part of these consolidated financial statements. MDU Resources Group, Inc. Form 10-K 71 Index Part II Consolidated Statements of Equity Years ended December 31, 2023, 2022 and 2021 Other Paid-in Capital Retained Earnings Accumu-lated Other Compre-hensive Loss Common Stock Treasury Stock Shares Amount Shares Amount Total (In thousands, except shares) At December 31, 2020 201,061,198 $ 201,061 $ 1,371,385 $ 1,558,363 $ ( 48,078 ) ( 538,921 ) $ ( 3,626 ) $ 3,079,105 Net income — — — 378,131 — — — 378,131 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 ) Issuance of common stock 2,828,463 2,828 85,939 — — — — 88,767 At December 31, 2021 203,889,661 203,889 1,461,205 1,762,410 ( 41,004 ) ( 538,921 ) ( 3,626 ) 3,382,874 Net Income — — — 367,489 — — — 367,489 Other comprehensive income — — — — 10,421 — — 10,421 Dividends declared on common stock — — — ( 178,761 ) — — — ( 178,761 ) Employee stock-based compensation — — 10,254 — — — — 10,254 Repurchase of common stock — — — — — ( 266,821 ) ( 7,399 ) ( 7,399 ) Issuance of common stock upon vesting of stock-based compensation, net of shares used for tax withholdings — — ( 12,303 ) — — 266,821 7,399 ( 4,904 ) Issuance of common stock 273,153 274 6,881 — — — — 7,155 At December 31, 2022 204,162,814 204,163 1,466,037 1,951,138 ( 30,583 ) ( 538,921 ) ( 3,626 ) 3,587,129 Net income — — — 414,707 — — — 414,707 Other comprehensive loss — — — — ( 107 ) — — ( 107 ) Dividends declared on common stock — — — ( 142,033 ) — — — ( 142,033 ) Employee stock-based compensation — — 6,781 — — — — 6,781 Repurchase of common stock — — — — — ( 153,622 ) ( 4,811 ) ( 4,811 ) Issuance of common stock upon vesting of stock-based compensation, net of shares used for tax withholdings — — ( 7,851 ) — — 153,622 4,811 ( 3,040 ) Separation of Knife River ( 538,921 ) ( 539 ) — ( 970,119 ) 12,306 538,921 3,626 ( 954,726 ) Issuance of common stock 65,197 65 1,268 — — — — 1,333 At December 31, 2023 203,689,090 $ 203,689 $ 1,466,235 $ 1,253,693 $ ( 18,384 ) — $ — $ 2,905,233 The accompanying notes are an integral part of these consolidated financial statements. 72 MDU Resources Group, Inc. Form 10-K Index Part II Consolidated Statements of Cash Flows Years ended December 31, 2023 2022 2021 (In thousands) Operating activities: Net income $ 414,707 $ 367,489 $ 378,131 Less: income (loss) from discontinued operations, net of tax ( 65,718 ) 116,721 135,609 Income from continuing operations 480,425 250,768 242,522 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 213,598 210,028 198,240 Deferred income taxes ( 4,414 ) 21,248 27,393 Provision for credit losses 13,624 5,595 1,037 Amortization of debt issuance costs 1,207 978 930 Employee stock-based compensation costs 6,309 8,982 12,857 Pension and postretirement benefit plan net periodic benefit credit ( 5,380 ) ( 7,323 ) ( 5,990 ) Unrealized losses (gains) on investments ( 7,493 ) 10,207 ( 6,096 ) Gains on sales of assets ( 8,521 ) ( 6,631 ) ( 6,418 ) Gain on tax-free exchange of the retained shares in Knife River ( 186,556 ) — — Changes in current assets and liabilities, net of acquisitions: Receivables 110,434 ( 330,809 ) ( 75,380 ) Inventories ( 27,594 ) ( 15,555 ) 138 Other current assets ( 52,882 ) ( 9,404 ) ( 67,389 ) Accounts payable ( 76,679 ) 172,664 25,511 Other current liabilities 66,997 7,569 3,462 Pension and postretirement benefit plan contributions ( 7,643 ) ( 82 ) ( 83 ) Other noncurrent changes ( 22,675 ) ( 10,582 ) ( 51,787 ) Net cash provided by continuing operations 492,757 307,653 298,947 Net cash (used in) provided by discontinued operations ( 160,130 ) 202,411 196,830 Net cash provided by operating activities 332,627 510,064 495,777 Investing activities: Capital expenditures ( 519,726 ) ( 478,425 ) ( 485,197 ) Acquisitions, net of cash acquired — — ( 2,500 ) Net proceeds from sale or disposition of property 16,474 11,340 14,585 Cost of removal, net of salvage value 1,170 ( 11,780 ) ( 11,363 ) Investments 16,302 ( 4,138 ) ( 3,136 ) Net cash used in continuing operations ( 485,780 ) ( 483,003 ) ( 487,611 ) Net cash used in discontinued operations ( 55,011 ) ( 155,878 ) ( 398,267 ) Net cash used in investing activities ( 540,791 ) ( 638,881 ) ( 885,878 ) Financing activities: Issuance of short-term borrowings 810,000 38,500 50,000 Repayment of short-term borrowings ( 460,901 ) — ( 100,000 ) Issuance of long-term debt 726,700 373,046 272,043 Repayment of long-term debt ( 792,998 ) ( 65,764 ) ( 24,758 ) Debt issuance costs ( 2,521 ) ( 1,129 ) ( 918 ) Proceeds from issuance of common stock — ( 150 ) 88,767 Dividends paid ( 161,316 ) ( 176,915 ) ( 171,354 ) Repurchase of common stock ( 4,811 ) ( 7,399 ) ( 6,701 ) Tax withholding on stock-based compensation ( 3,040 ) ( 4,904 ) ( 4,126 ) Net cash provided by continuing operations 111,113 155,285 102,953 Net cash provided by (used in) discontinued operations 93,509 ( 112 ) 281,762 Net cash provided by financing activities 204,622 155,173 384,715 Increase (decrease) in cash, cash equivalents and restricted cash ( 3,542 ) 26,356 ( 5,386 ) Cash, cash equivalents and restricted cash - beginning of year 80,517 54,161 59,547 Cash, cash equivalents and restricted cash - end of year * $ 76,975 $ 80,517 $ 54,161 *Includes cash of discontinued operations of $ 10.1 million and $ 10.4 million for the years ended December 31, 2022 and 2021, respectively. The accompanying notes are an integral part of these consolidated financial statements. MDU Resources Group, Inc. Form 10-K 73 Index Part II Notes to Consolidated Financial Statements Note 1 - Basis of Presentation The abbreviations and acronyms used throughout are defined following the Notes to Consolidated Financial Statements. The consolidated financial statements of the Company include the accounts of the following businesses: electric, natural gas distribution, pipeline, construction services and other. The electric and natural gas distribution businesses, as well as a portion of the pipeline business, are regulated. Construction services and other, as well as a portion of the pipeline business, are non-regulated. For further descriptions of the Company's businesses, see Note 18. The Company announced strategic initiatives in 2022 as part of the Company's continuous review of its business. On May 31, 2023, the Company completed the separation of Knife River, formerly the construction materials and contracting segment, which resulted in two independent, publicly traded companies, MDU Resources Group, Inc. and Knife River. The Company's board of directors approved the distribution of approximately 90 percent of the issued and outstanding shares of Knife River to the Company's stockholders. Stockholders of the Company received one share of Knife River common stock for every four shares of the Company's common stock held on May 22, 2023, the record date for the distribution. The Company retained approximately 10 percent or 5.7 million shares of Knife River common stock immediately following the separation, which was disposed of in a tax-free exchange in November 2023. The separation of Knife River was a tax-free spinoff transaction to the Company's stockholders for U.S. federal income tax purposes. The Company's consolidated financial statements and accompanying notes for the current and prior periods have been restated to present the results of operations and the assets and liabilities of Knife River as discontinued operations, other than certain corporate overhead costs of the Company historically allocated to Knife River, which are reflected in Other. Also included in discontinued operations in the Consolidated Statements of Income are the supporting activities of Fidelity and certain interest expense related to financing activity associated with the Knife River separation. The assets and liabilities of the Company's discontinued operations are included in current assets of discontinued operations, noncurrent assets of discontinued operations, current liabilities of discontinued operations and noncurrent liabilities of discontinued operations on the Consolidated Balance Sheets. Unless otherwise indicated, the amounts presented in the accompanying notes to the consolidated financial statements relate to the Company's continuing operations. On November 2, 2023, the Company announced its intent to pursue a tax-free spinoff of its wholly owned construction services business, MDU Construction Services. The Company's board of directors believes a tax-free spinoff of the construction services business supports the Company's goal of enhancing value for stockholders by becoming a pure-play regulated energy delivery company. Management has also evaluated the impact of events occurring after December 31, 2023, up to the date of issuance of these consolidated financial statements on February 22, 2024, that would require recognition or disclosure in the financial statements. Principles of consolidation The consolidated financial statements were prepared in accordance with GAAP and include the accounts of the Company and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation, except for certain transactions related to the Company's regulated operations in accordance with GAAP. For more information on intercompany revenues, see Note 18. The statements also include the Company's ownership interests in the assets, liabilities and expenses of jointly owned electric transmission and generating facilities. See Note 20 for additional information. Use of estimates The preparation of financial statements in conformity with GAAP requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities, at the date of the financial statements, as well as the reported amounts of revenues and expenses during the reporting period. Estimates are used for items such as long-lived assets and goodwill; property depreciable lives; tax provisions; revenue recognized using the cost-to-cost measure of progress for contracts; expected credit losses; environmental and other loss contingencies; regulatory assets expected to be recovered in rates charged to customers; costs on construction contracts; unbilled revenues; actuarially determined benefit costs; asset retirement obligations; lease classification; present value of right-of-use assets and lease liabilities; and the valuation of stock-based compensation. As additional information becomes available, or actual amounts are determinable, the recorded estimates are revised. Consequently, operating results can be affected by revisions to prior accounting estimates. 74 MDU Resources Group, Inc. Form 10-K Index Part II Note 2 - Significant Accounting Policies New accounting standards The following table provides a brief description of the accounting pronouncements applicable to the Company and the potential impact on its financial statements and or disclosures: Standard Description Effective date Impact on financial statements/disclosures Recently adopted accounting standards 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. The guidance applies to certain contract modifications, hedging relationships and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. Beginning January 1, 2022, LIBOR or other discontinued reference rates cannot be applied to new contracts. New contracts will incorporate a new reference rate, which includes SOFR. LIBOR or other discontinued reference rates cannot be applied to contract modifications or hedging relationships entered into or evaluated after December 31, 2022. 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 through December 31, 2022 For more information, see ASU 2022-06 - Reference Rate Reform: Deferral of Sunset Date below. 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. The Company does not expect the guidance to have a material impact on its results of operations, financial position, cash flows or disclosures. Recently issued accounting standards not yet adopted ASU 2023-05 Business Combinations - Joint Venture Formations - Recognition and Initial Measurement In August 2023, the FASB issued guidance on accounting for contributions made to a joint venture, upon formation, in a joint venture's separate financial statement in order to provide decision-useful information to investors and other allocators of capital (collectively investors) in a joint venture's financial statements and reduce diversity in practice. The new basis of accounting will require that a joint venture, upon formation, will recognize and initially measure its assets and liabilities at fair value (with the exceptions to fair value measurement that are consistent with the business combinations guidance). A joint venture that was formed before January 1, 2025 may elect to apply the guidance retrospectively if it has sufficient information. Effective prospectively for all joint venture formations with a formation date on or after January 1, 2025. The Company is currently evaluating the impact the guidance will have on its interim and annual disclosures for the year ended December 31, 2025. ASU 2023-07 Segment Reporting - Improvements to Reportable Segment Disclosures In November 2023, the FASB issued guidance on improving financial reporting by requiring disclosure of incremental segment information, primarily through enhanced disclosures about significant segment expenses, on an annual and interim basis for all public entities to enable investors to develop more decision-useful financial analyses. Effective for fiscal year December 31, 2024 and interim periods beginning January 1, 2025, with prior periods disclosed in the period of adoption. The Company is currently evaluating the impact the guidance will have on its disclosures for the year ended December 31, 2024 and future interim periods. ASU 2023-09 Income Taxes - Improvements to Income Tax Disclosures an Amendment, December 2023 The FASB issued guidance to address investors requests for more transparency about income tax information through improvements to income tax disclosures primarily related to the rate reconciliation and income taxes paid information and effectiveness of income tax disclosures. December 31, 2025 The Company is currently evaluating the impact the guidance will have on its disclosures for the year ended December 31, 2025. MDU Resources Group, Inc. Form 10-K 75 Index Part II Cash, cash equivalents and restricted cash The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. Restricted cash represents deposits held by the Company’s captive insurance company that is required by state insurance regulations to remain in the captive insurance company. The Company had restricted cash of $ 28.1 million and $ 35.6 million at December 31, 2023 and 2022, respectively. Revenue recognition Revenue is recognized when a performance obligation is satisfied by transferring control over a product or service to a customer. Revenue is measured based on consideration specified in a contract with a customer and excludes any sales incentives and amounts collected on behalf of third parties. The Company is considered an agent for certain taxes collected from customers. As such, the Company presents revenues net of these taxes at the time of sale to be remitted to governmental authorities, including sales and use taxes. 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/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; and the customer is obligated to pay for the service as provided in the applicable tariff. The product sales are based on a fixed rate that includes a base and per-unit rate, which are included in approved tariffs as determined by state or federal regulatory agencies. The quantity of the commodity consumed or transported determines the total per-unit revenue. The service provided, along with the product consumed or transported, are a single performance obligation because both are required in combination to successfully transfer the contracted product or service to the customer. Revenues are recognized over time as customers receive and consume the products and services. 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 other contracts not governed by tariff, payment terms are net 30 days. At this time, the segment has no material obligations for returns, refunds or other similar obligations. The pipeline segment generates revenue from providing natural gas transportation and underground storage services, as well as other energy-related services to both third parties and internal customers, largely the natural gas distribution segment. The pipeline segment establishes a contract with a customer based upon the customer’s request for firm or interruptible natural gas transportation or storage service(s). The contract identifies an obligation for the segment to provide the requested service(s) in exchange for consideration from the customer over a specified term. Depending on the type of service(s) requested and contracted, the service provided may include transporting or storing an identified quantity of natural gas and/or standing ready to deliver or store an identified quantity of natural gas. Natural gas transportation and storage revenues are based on fixed rates, which may include reservation fees and/or per-unit commodity rates. The services provided by the segment are generally treated as single performance obligations satisfied over time simultaneous to when the service is provided and revenue is recognized. Rates for the segment’s regulated services are based on its FERC approved tariff or customer negotiated rates, and rates for its non-regulated services are negotiated with its customers and set forth in the contract. For contracts governed by the company’s tariff, amounts are billed on or before the ninth business day of the following month and the amount is due within 12 days of receipt of the invoice. For other contracts not governed by the tariff, payment terms are net 30 days. At this time, the segment has no material obligations for returns, refunds or other similar obligations. The construction services segment generates revenue from specialty contracting services which also includes the sale of construction equipment and other supplies. 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 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 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; claims; 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 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. Contract revenue is recognized over time using the input method based on the measurement of progress on a project. This is the preferred method of measuring revenue because the costs incurred have been determined to 76 MDU Resources Group, Inc. Form 10-K Index Part II 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. This segment also sells construction equipment and other supplies to third parties and internal customers. The contract for these sales is the use of a sales order or invoice, which includes the pricing and payment terms. All such contracts include a single performance obligation for the delivery of a single distinct product or a distinct separately identifiable bundle of products and services. Revenue is recognized at a point in time when the performance obligation has been satisfied with the delivery of the products or services. The warranties associated with the sales are those consistent with a standard warranty that the product meets certain specifications for quality or those required by law. For most contracts, amounts billed to customers are due within 30 days of receipt. There are no material obligations for returns, refunds or other similar obligations. The Company recognizes all other revenues when services are rendered or goods are delivered. Legal costs The Company expenses external legal fees as they are incurred. Receivables and allowance for expected credit losses 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. The total balance of receivables past due 90 days or more was $ 45.7 million and $ 34.3 million at December 31, 2023 and 2022, respectively. The Company's expected credit losses are determined through a review using historical credit loss experience, changes in asset specific characteristics, current conditions and reasonable and supportable future forecasts, among other specific account data, and is performed at least quarterly. The Company develops and documents its methodology to determine its allowance for expected credit losses at each of its reportable business segments. Risk characteristics used by the business segments may include customer mix, knowledge of customers and general economic conditions of the various local economies, among others. Specific account balances are written off when management determines the amounts to be uncollectible. Management has reviewed the balance reserved through the allowance for expected credit losses and believes it is reasonable. Details of the Company's expected credit losses were as follows: Electric Natural gas distribution Pipeline Construction services Total (In thousands) At December 31, 2021 $ 269 $ 1,506 $ 2 $ 2,533 $ 4,310 Current expected credit loss provision 1,325 4,084 — 186 5,595 Less write-offs charged against the allowance 1,625 4,913 — 625 7,163 Credit loss recoveries collected 406 938 — 68 1,412 At December 31, 2022 375 1,615 2 2,162 4,154 Current expected credit loss provision 1,645 5,777 — 6,202 13,624 Less write-offs charged against the allowance 1,994 7,355 2 455 9,806 Credit loss recoveries collected 388 1,152 — 58 1,598 At December 31, 2023 $ 414 $ 1,189 $ — $ 7,967 $ 9,570 Receivables also consist of accrued unbilled revenue representing revenues recognized in excess of amounts billed. Accrued unbilled revenue at MDU Energy Capital was $ 132.0 million and $ 181.8 million at December 31, 2023 and 2022, respectively. Amounts representing balances billed but not paid by customers under retainage provisions in contracts at December 31 were as follows: 2023 2022 (In thousands) Short-term retainage* $ 84,474 $ 91,474 Long-term retainage** 21,355 19,511 Total retainage $ 105,829 $ 110,985 * Expected to be paid within 12 months or less and included in receivables, net. ** Included in noncurrent assets - other. MDU Resources Group, Inc. Form 10-K 77 Index Part II Inventories and natural gas in storage Natural gas in storage for the Company's regulated operations is generally valued at lower of cost or market using the last-in, first-out method or lower of cost or net realizable value using the average cost or first-in, first-out method. The majority of all other inventories are valued at the lower of cost or net realizable value using the average cost method. The portion of the cost of natural gas in storage expected to be used within 12 months was included in inventories. Inventories at December 31 consisted of: 2023 2022 (In thousands) Natural gas in storage (current) $ 39,377 $ 22,533 Merchandise for resale 34,955 27,910 Materials and supplies 5,460 6,846 Other 7,600 6,959 Total $ 87,392 $ 64,248 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 $ 48.5 million and $ 47.5 million at December 31, 2023 and 2022, respectively. Property, plant and equipment Additions to property, plant and equipment are recorded at cost. 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. With respect to the retirement or disposal of all other assets, the resulting gains or losses are recognized as a component of income. 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 contracting services projects associated with its other operations. The amount of AFUDC for the years ended December 31 was as follows: 2023 2022 2021 (In thousands) AFUDC - borrowed $ 10,035 $ 2,236 $ 2,833 AFUDC - equity $ 1,894 $ 2,165 $ 6,961 Generally, property, plant and equipment are depreciated on a straight-line basis over the average useful lives of the assets. 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, excluding goodwill The Company reviews the carrying values of its long-lived 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. If impairment has occurred, the amount of the impairment recognized is determined by estimating the fair value of the assets and recording a loss if the carrying value is greater than the fair value. The impairments are recorded in operation and maintenance expense on the Consolidated Statements of Income. No impairment losses were recorded in 2023, 2022 or 2021. Unforeseen events and changes in circumstances could require the recognition of impairment losses at some future date. Natural gas costs recoverable or refundable through rate adjustments Under the terms of certain orders of the applicable state public service commissions, the Company is deferring natural gas commodity, transportation and storage costs that are greater or less than amounts presently being recovered through its existing rate schedules. Such orders generally provide that these amounts are recoverable or refundable through rate adjustments . Natural gas costs recoverable through rate adjustments were $ 154.3 million and $ 141.3 million at December 31, 2023 and 2022, respectively, which were included in current regulatory assets and noncurrent assets - regulatory assets on the Consolidated Balance Sheets. Natural gas costs refundable through rate adjustments were $ 43.2 million and $ 1.0 million at December 31, 2023 and 2022, respectively, which were included in regulatory liabilities due within one year on the Consolidated Balance Sheets. 78 MDU Resources Group, Inc. Form 10-K Index Part II Electric fuel and purchased power deferral Under the terms of certain orders of the applicable state public service commissions, the Company is deferring electric fuel and purchased power costs that are greater or less than amounts presently being recovered through its existing rate schedules. Such orders generally provide that these amounts are recoverable or refundable through rate adjustments. Electric fuel and purchased power costs recoverable were $ 33.9 million and $ 2.7 million at December 31, 2023 and 2022, respectively, which were included in current regulatory assets on the Consolidated Balance Sheets. Electric fuel and purchased power costs refundable was $ 4.9 million at December 31, 2022, which was included in regulatory liabilities due within one year on the Consolidated Balance Sheets. Regulatory assets and liabilities The Company's regulated businesses are subject to various state and federal agency regulations. The accounting policies followed by these businesses are generally subject to the Uniform System of Accounts of the FERC as well as the provisions of ASC 980 - Regulated Operations . These accounting policies differ in some respects from those used by the Company's non-regulated businesses. The Company's regulated businesses account for certain income and expense items under the provisions of regulatory accounting, which requires these businesses to defer as regulatory assets or liabilities certain items that would have otherwise been reflected as expense or income, respectively. The Company records regulatory assets or liabilities at the time the Company determines the amounts to be recoverable in current or future rates. Regulatory assets and liabilities are being amortized consistently with the regulatory treatment established by the FERC and the applicable state public service commission. See Note 6 for more information regarding the nature and amounts of these regulatory deferrals. Goodwill Goodwill represents the excess of the purchase price over the fair value of identifiable net tangible and intangible assets acquired in a business combination. Goodwill is required to be tested for impairment annually, which the Company completes in the fourth quarter, or more frequently if events or changes in circumstances indicate that goodwill may be impaired. The Company has determined that the reporting units for its goodwill impairment test are its operating segments, or components of an operating segment, that constitute a business for which discrete financial information is available and for which segment management regularly reviews the operating results. For more information on the Company's operating segments, see Note 18. Goodwill impairment, if any, is measured by comparing the fair value of each reporting unit to its carrying value. If the fair value of a reporting unit exceeds its carrying value, the goodwill of the reporting unit is not impaired. If the carrying value of a reporting unit exceeds its fair value, the Company must record an impairment loss for the amount that the carrying value of the reporting unit, including goodwill, exceeds the fair value of the reporting unit. For the years ended December 31, 2023, 2022 and 2021, there were no impairment losses recorded. Investments 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 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. Treasury securities and, as a result, the unrealized gains and losses on these investments are recorded in accumulated other comprehensive loss. For more information, see Notes 9 and 19. 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. MDU Resources Group, Inc. Form 10-K 79 Index Part II Joint ventures The Company accounts for unconsolidated joint ventures using either the equity method or proportionate consolidation. The Company currently holds interests of 50 percent in joint ventures formed primarily for the purpose of pooling resources on construction contracts. Proportionate consolidation is used for joint ventures that include unincorporated legal entities and activities of the joint venture which are construction-related. 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 $ 7.8 million, $ 14.8 million, and $ 14.7 million of revenue for the years ended December 31, 2023, 2022 and 2021, respectively, and $ 2.1 million, $ 3.0 million and $ 4.7 million of operating income for the years ended December 31, 2023, 2022 and 2021, respectively. At December 31, 2023 and 2022, the Company had interest in assets from these joint ventures of $ 1.8 million and $ 2.4 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 were net assets of $ 6.2 million and $ 1.3 million at December 31, 2023 and 2022, respectively. In 2023, 2022 and 2021, the Company recognized income from equity method joint ventures of $ 4.9 million, $ 5.9 million and $ 878,000 , respectively. Derivative instruments The Company enters into commodity price derivative contracts in order to minimize the price volatility associated with customer natural gas costs at its natural gas distribution segment. These derivatives are not designated as hedging instruments and are recorded in the Consolidated Balance Sheets at fair value. Changes in the fair value of these derivatives along with any contract settlements are recorded each period in regulatory assets or liabilities in accordance with regulatory accounting. The Company does not enter into any derivatives for trading or other speculative purposes. The Company did not enter into any commodity price derivative contracts during 2023 or 2022. Leases Lease liabilities and their corresponding right-of-use assets are recorded based on the present value of lease payments over the expected lease term. The Company recognizes leases with an original lease term of 12 months or less in income on a straight-line basis over the term of the lease and does not recognize a corresponding right-of-use asset or lease liability. The Company determines the lease term based on the non-cancelable and cancelable periods in each contract. The non-cancelable period consists of the term of the contract that is legally enforceable and cannot be canceled by either party without incurring a significant penalty. The cancelable period is determined by various factors that are based on who has the right to cancel a contract. If only the lessor has the right to cancel the contract, the Company will assume the contract will continue. If the lessee is the only party that has the right to cancel the contract, the Company looks to asset, entity and market-based factors. If both the lessor and the lessee have the right to cancel the contract, the Company assumes the contract will not continue. The discount rate used to calculate the present value of the lease liabilities is based upon the implied rate within each contract. If the rate is unknown or cannot be determined, the Company uses an incremental borrowing rate, which is determined by the length of the contract, asset class and the Company's borrowing rates, as of the commencement date of the contract. Asset retirement obligations The Company records the fair value of a liability for an asset retirement obligation in the period in which it is incurred. When the liability is initially recorded, the Company capitalizes a cost by increasing the carrying amount of the related long-lived asset. Over time, the liability is accreted to its present value each period and the capitalized cost is depreciated over the useful life of the related asset. Upon settlement of the liability, the Company either settles the obligation for the recorded amount or incurs a gain or loss at its non-regulated operations or incurs a regulatory asset or liability at its regulated operations. 80 MDU Resources Group, Inc. Form 10-K Index Part II Stock-based compensation The Company determines compensation expense for stock-based awards based on the estimated fair values at the grant date and recognizes the related compensation expense over the vesting period. The Company uses the straight-line amortization method to recognize compensation expense related to restricted stock units, which only has a service condition. This method recognizes stock compensation expense on a straight-line basis over the requisite service period for the entire award. The Company recognized compensation expense related to performance awards that vest based on performance metrics and service conditions on a straight-line basis over the service period. Inception-to-date expense was adjusted based upon the determination of the potential achievement of the performance target at each reporting date. The Company recognized compensation expense related to performance awards with market-based performance metrics on a straight-line basis over the requisite service period. Outstanding performance share awards were converted to restricted stock units in connection with the completed separation of Knife River through the spinoff. The Company records the compensation expense for performance share awards using an estimated forfeiture rate. The estimated forfeiture rate is calculated based on an average of actual historical forfeitures. The Company also performs an analysis of any known factors at the time of the calculation to identify any necessary adjustments to the average historical forfeiture rate. At the time actual forfeitures become more than estimated forfeitures, the Company records compensation expense using actual forfeitures. Earnings per share Basic earnings per share is computed by dividing net income by the weighted average number of shares of common stock outstanding during the year. Diluted earnings per share is computed by dividing net income by the total of the weighted average number of shares of common stock outstanding during the year, plus the effect of nonvested performance share awards and restricted stock units. Common stock outstanding includes issued shares less shares held in treasury. As a result of the separation, the Company retained legal ownership of 538,921 shares of the Company's common stock that were historically owned by a subsidiary of Knife River and recorded in Treasury stock at cost. Following the separation, the 538,921 treasury shares were retired. The 538,921 shares of treasury stock did not have an impact on weighted-average shares outstanding, as they were not outstanding prior to being retired. Net income was the same for both the basic and diluted earnings per share calculations. A reconciliation of the weighted average common shares outstanding used in the basic and diluted earnings per share calculations follows: 2023 2022 2021 (In thousands, except per share amounts) Weighted average common shares outstanding - basic 203,640 203,358 202,076 Effect of dilutive performance share awards 298 104 307 Weighted average common shares outstanding - diluted 203,938 203,462 202,383 Earnings per share - basic: Income from continuing operations $ 2.36 $ 1.23 $ 1.20 Discontinued operations, net of tax ( .32 ) .58 .67 Earnings per share - basic $ 2.04 $ 1.81 $ 1.87 Earnings per share - diluted: Income from continuing operations $ 2.36 $ 1.23 $ 1.20 Discontinued operations, net of tax ( .33 ) .58 .67 Earnings per share - diluted $ 2.03 $ 1.81 $ 1.87 Shares excluded from the calculation of diluted earnings per share — 14 — Dividends declared per common share $ .6950 $ .8750 $ .8550 Income taxes 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 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. The Company uses the deferral method of accounting for investment tax credits and amortizes the credits on regulated electric and natural gas distribution plant over various periods that conform to the ratemaking treatment prescribed by the applicable state public service commissions. The Company records uncertain tax positions in accordance with accounting guidance on accounting for income taxes on the basis of a two-step process in which (1) the Company determines whether it is more-likely-than-not that the tax position will be sustained on the basis of the technical merits of the position and (2) for those tax positions that meet the more-likely-than-not recognition threshold, the Company recognizes the largest amount of the tax benefit that is more than 50 percent likely to be realized upon ultimate settlement with the related tax authority. Tax positions that do not meet the more-likely-than-not criteria are reflected as a tax liability. The Company recognizes interest and penalties accrued related to unrecognized tax benefits in income taxes. MDU Resources Group, Inc. Form 10-K 81 Index Part II Note 3 - Discontinued Operations On May 31, 2023, the Company completed the previously announced separation of Knife River, its former construction materials and contracting segment, into a new publicly traded company. The separation was achieved through the Company's pro-rata distribution of approximately 90 percent of the outstanding shares of Knife River to the Company's common stockholders. To effect the separation, the Company distributed to its stockholders one share of Knife River common stock for every four shares of the Company's common stock held on May 22, 2023, the record date for the distribution, with the Company retaining approximately 10 percent, or 5.7 million shares of Knife River common stock immediately following the separation. In the fourth quarter of 2023, the Company completed the tax-free exchange of its retained shares, reversed the associated deferred tax liability and recognized a gain of $ 186.6 million, which was reflected in continuing operations because the Company did not have continuing significant involvement in Knife River. As a result of the separation, the historical assets and liabilities for Knife River have been classified as assets and liabilities of discontinued operations and the historical results of operations are shown in discontinued operations, net of tax, other than allocated general corporate overhead costs of the Company, which do not meet the criteria for income (loss) from discontinued operations. The Company’s consolidated financial statements and accompanying notes for prior periods have been restated. For the comparative periods, Knife River's operations are only reflected through May 2023, whereas 2022 and 2021 include the full twelve months from Knife River's operations. On April 25, 2023, Knife River issued $ 425.0 million of senior notes, pursuant to an indenture, due in 2031 to qualified institutional buyers. Knife River also entered into a new credit agreement which provided a revolving credit facility in an initial amount of up to $ 350.0 million and a senior secured term loan facility in an amount up to $ 275.0 million. The net proceeds from the notes offering, revolving credit facility and the term loan were used to repay $ 825.0 million of Knife River's intercompany obligations owed to Centennial. Centennial used the entirety of these proceeds from Knife River to repay a portion of its existing third-party indebtedness. As a result of the separation, the Company retained legal ownership of 538,921 shares of the Company's common stock that were historically owned by a subsidiary of Knife River and recorded in Treasury stock at cost. Following the separation, the 538,921 treasury shares were retired. The Company will provide to Knife River and Knife River will provide to the Company transition services in accordance with the TSA entered into on May 31, 2023. For the twelve months ended December 31, 2023, the Company received $ 2.9 million; and paid $ 823,000 , for these related activities. The majority of the transition services are expected to be provided for a period of one year, however, no longer than two years after the separation. Separation related costs of $ 47.8 million and $ 9.0 million, net of tax, were incurred during the twelve months ended December 31, 2023 and 2022, respectively. Separation costs incurred are presented in income (loss) from discontinued operations in the Consolidated Statements of Income. These charges primarily relate to transaction and third-party support costs, one-time business separation fees and related tax charges. The Company had no assets or liabilities related to the discontinued operations of Knife River on its balance sheet as of December 31, 2023. The carrying amounts of the major classes of assets and liabilities of discontinued operations included in the Company’s Consolidated Balance Sheet at December 31, 2022 were as follows: 82 MDU Resources Group, Inc. Form 10-K Index Part II December 31, 2022 Assets (In Thousands) Current assets: Cash and cash equivalents $ 10,090 Receivables, net 241,302 Inventories 323,277 Prepayments and other current assets 17,848 Total current assets of discontinued operations 592,517 Noncurrent assets: Net property, plant and equipment 1,315,213 Goodwill 274,540 Other intangible assets, net 13,430 Investments 33,086 Operating lease right-of-use assets 45,872 Other 3,610 Total noncurrent assets of discontinued operations 1,685,751 Total assets of discontinued operations $ 2,278,268 Liabilities Current liabilities: Short-term borrowings $ 208,000 Long-term debt due within one year 30,211 Accounts payable 131,608 Taxes payable 8,502 Accrued compensation 29,192 Operating lease liabilities due within one year 13,210 Other accrued liabilities 76,200 Total current liabilities of discontinued operations 496,923 Noncurrent liabilities: Long-term debt 445,546 Deferred income taxes 175,804 Asset retirement obligations 33,015 Operating lease liabilities 32,663 Other 78,876 Total noncurrent liabilities of discontinued operations 765,904 Total liabilities of discontinued operations $ 1,262,827 The reconciliation of the major classes of income and expense constituting pretax income (loss) from discontinued operations to the after-tax income (loss) from discontinued operations on the Consolidated Statements of Income were as follows: 2023 2022 2021 (In thousands) Operating revenues $ 735,263 $ 2,532,280 $ 2,226,478 Operating expenses 769,440 2,328,051 2,022,976 Operating (loss) income ( 34,177 ) 204,229 203,502 Other income (expense) 2,381 ( 3,849 ) 693 Interest expense 37,545 38,575 23,117 (Loss) income from discontinued operations before income taxes ( 69,341 ) 161,805 181,078 Income taxes ( 3,623 ) 45,084 45,469 Discontinued operations, net of tax $ ( 65,718 ) $ 116,721 $ 135,609 MDU Resources Group, Inc. Form 10-K 83 Index Part II Note 4 - Revenue from Contracts with Customers Revenue is recognized when a performance obligation is satisfied by transferring control over a product or service to a customer. Revenue is measured based on consideration specified in a contract with a customer and excludes any sales incentives and amounts collected on behalf of third parties. The Company is considered an agent for certain taxes collected from customers. As such, the Company presents revenues net of these taxes at the time of sale to be remitted to governmental authorities, including sales and use taxes. As part of the adoption of ASC 606 - Revenue from Contracts with Customers , the Company elected the practical expedient to recognize the incremental costs of obtaining a contract as an expense when incurred if the amortization period of the asset that the Company otherwise would have recognized is 12 months or less. Changes in cost estimates on certain contracts may result in the issuance of change orders, which can be approved or unapproved by the customer, or the assertion of contract claims. The Company recognizes amounts associated with change orders and claims as revenue if it is probable that the contract price will be adjusted and the amount of any such adjustment can be reasonably estimated. Change orders and claims are negotiated in the normal course of business and represent management’s estimates of additional contract revenues that have been earned and are probable of collection. The Company received notification from a customer on a large project with a contract that was billed on a time and materials basis with no stated maximum price, that it is withholding payment of approximately $ 31.0 million on remaining outstanding billings, including retention. The Company believes it has substantial defenses against these claims based upon the terms of the contract and the Company's belief that it has performed under the terms of the contract. The Company believes collection of the remaining outstanding billings, including retention is probable and, as a result, the Company has recognized the revenue from this project in its results. However, there is uncertainty surrounding this matter, including the potential long-term nature of dispute resolution, the Company filing a lien on the property and the broad range of possible consideration amounts as a result of negotiations and potential litigation to resolve the dispute. Disaggregation In the following table, revenue is disaggregated by the type of customer or service provided. The Company believes this level of disaggregation best depicts how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors. The table also includes a reconciliation of the disaggregated revenue by reportable segments. For more information on the Company's business segments, see Note 18. Year ended December 31, 2023 Electric Natural gas distribution Pipeline Construction services Other Total (In thousands) Residential utility sales $ 136,274 $ 724,600 $ — $ — $ — $ 860,874 Commercial utility sales 170,321 442,507 — — — 612,828 Industrial utility sales 43,063 45,205 — — — 88,268 Other utility sales 7,270 — — — — 7,270 Natural gas transportation — 52,465 145,297 — — 197,762 Natural gas storage — — 18,254 — — 18,254 Electrical & mechanical specialty contracting — — — 2,125,536 — 2,125,536 Transmission & distribution specialty contracting — — — 683,342 — 683,342 Other 54,508 15,141 13,874 173 7,941 91,637 Intersegment eliminations ( 274 ) ( 416 ) ( 62,540 ) ( 143 ) ( 7,941 ) ( 71,314 ) Revenues from contracts with customers 411,162 1,279,502 114,885 2,808,908 — 4,614,457 Other revenues ( 10,261 ) 7,619 187 45,338 — 42,883 Total external operating revenues $ 400,901 $ 1,287,121 $ 115,072 $ 2,854,246 $ — $ 4,657,340 84 MDU Resources Group, Inc. Form 10-K Index Part II Year ended December 31, 2022 Electric Natural gas distribution Pipeline Construction services Other Total (In thousands) Residential utility sales $ 138,634 $ 718,191 $ — $ — $ — $ 856,825 Commercial utility sales 146,182 453,802 — — — 599,984 Industrial utility sales 43,766 41,710 — — — 85,476 Other utility sales 7,597 — — — — 7,597 Natural gas transportation — 48,886 129,290 — — 178,176 Natural gas storage — — 14,583 — — 14,583 Electrical & mechanical specialty contracting — — — 1,988,729 — 1,988,729 Transmission & distribution specialty contracting — — — 662,705 — 662,705 Other 45,608 13,617 11,450 436 5,840 76,951 Intersegment eliminations ( 137 ) ( 274 ) ( 58,884 ) ( 4,627 ) ( 5,840 ) ( 69,762 ) Revenues from contracts with customers 381,650 1,275,932 96,439 2,647,243 — 4,401,264 Other revenues ( 4,714 ) ( 2,402 ) 256 47,380 — 40,520 Total external operating revenues $ 376,936 $ 1,273,530 $ 96,695 $ 2,694,623 $ — $ 4,441,784 Year ended December 31, 2021 Electric Natural gas distribution Pipeline Construction services Other Total (In thousands) Residential utility sales $ 126,841 $ 544,721 $ — $ — $ — $ 671,562 Commercial utility sales 137,556 328,285 — — — 465,841 Industrial utility sales 41,757 30,964 — — — 72,721 Other utility sales 7,051 — — — — 7,051 Natural gas transportation — 48,408 114,001 — — 162,409 Natural gas storage — — 14,680 — — 14,680 Electrical & mechanical specialty contracting — — — 1,324,419 — 1,324,419 Transmission & distribution specialty contracting — — — 677,074 — 677,074 Other 42,902 10,567 13,667 557 4,606 72,299 Intersegment eliminations ( 170 ) ( 300 ) ( 59,470 ) ( 1,403 ) ( 4,522 ) ( 65,865 ) Revenues from contracts with customers 355,937 962,645 82,878 2,000,647 84 3,402,191 Other revenues ( 6,525 ) 8,995 188 49,587 — 52,245 Total external operating revenues $ 349,412 $ 971,640 $ 83,066 $ 2,050,234 $ 84 $ 3,454,436 Contract balances The timing of revenue recognition may differ from the timing of invoicing to customers. The timing of invoicing to customers does not necessarily correlate with the timing of revenues being recognized under the cost‐to‐cost method of accounting. Contracts from contracting services are billed as work progresses in accordance with agreed upon contractual terms. Generally, billing to the customer occurs contemporaneous to revenue recognition. A variance in timing of the billings may result in a contract asset or a contract liability. A contract asset occurs when revenues are recognized under the cost-to-cost measure of progress, which exceeds amounts billed on uncompleted contracts. Such amounts will be billed as standard contract terms allow, usually based on various measures of performance or achievement. A contract liability occurs when there are billings in excess of revenues recognized under the cost-to-cost measure of progress on uncompleted contracts. Contract liabilities decrease as revenue is recognized from the satisfaction of the related performance obligation. The changes in contract assets and liabilities were as follows: December 31, 2023 December 31, 2022 Change Location on Consolidated Balance Sheets (In thousands) Contract assets $ 158,861 $ 154,144 $ 4,717 Receivables, net Contract liabilities - current ( 202,144 ) ( 168,361 ) ( 33,783 ) Accounts payable Contract liabilities - noncurrent ( 291 ) ( 6 ) ( 285 ) Noncurrent liabilities - other Net contract liabilities $ ( 43,574 ) $ ( 14,223 ) $ ( 29,351 ) MDU Resources Group, Inc. Form 10-K 85 Index Part II December 31, 2022 December 31, 2021 Change Location on Consolidated Balance Sheets (In thousands) Contract assets $ 154,144 $ 103,737 $ 50,407 Receivables, net Contract liabilities - current ( 168,361 ) ( 146,792 ) ( 21,569 ) Accounts payable Contract liabilities - noncurrent ( 6 ) ( 118 ) 112 Noncurrent liabilities - other Net contract liabilities $ ( 14,223 ) $ ( 43,173 ) $ 28,950 The Company recognized $ 167.7 million and $ 143.6 million in revenue for the years ended December 31, 2023 and 2022, respectively, which was previously included in contract liabilities at December 31, 2022 and 2021, respectively. The Company recognized a net increase in revenues of $ 45.7 million and $ 46.9 million for the years ended December 31, 2023 and 2022, respectively, from performance obligations satisfied in prior periods. Remaining performance obligations The remaining performance obligations, also referred to as backlog, at the construction services segment include unrecognized revenues that the Company reasonably expects to be realized. These unrecognized revenues can include: projects that have a written award, a letter of intent, a notice to proceed, an agreed upon work order to perform work on mutually accepted terms and conditions and change orders or claims to the extent management believes additional contract revenues will be earned and are deemed probable of collection. Excluded from remaining performance obligations are potential orders under master service agreements. The majority of the Company's construction contracts have an original duration of less than two years. The remaining performance obligations at the pipeline segment include firm transportation and storage contracts with fixed pricing and fixed volumes. 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 storage contracts included in the remaining performance obligations have weighted average remaining durations of less than five years and two years , respectively. At December 31, 2023, the Company's remaining performance obligations were $ 2.6 billion. The Company expects to recognize the following revenue amounts in future periods related to these remaining performance obligations: $ 1.6 billion within the next 12 months or less; $ 471.5 million within the next 13 to 24 months; and $ 529.2 million in 25 months or more. 86 MDU Resources Group, Inc. Form 10-K Index Part II Note 5 - Property, Plant and Equipment Property, plant and equipment at December 31 was as follows: 2023 2022 Weighted Average Depreciable Life in Years (Dollars in thousands, where applicable) Regulated: Electric: Generation $ 939,474 $ 938,614 48 Distribution 521,215 489,351 47 Transmission 639,999 616,611 65 Construction in progress 115,103 87,003 0 Other 153,248 145,034 15 Natural gas distribution: Distribution 2,771,540 2,569,921 53 Transmission 115,057 104,769 54 Storage 42,654 42,318 37 General 215,572 204,993 13 Construction in progress 70,373 55,759 0 Other 246,991 230,299 15 Pipeline: Transmission 1,035,995 951,187 46 Storage 57,160 55,383 53 Construction in progress 55,832 34,655 0 Other 63,867 59,917 18 Non-regulated: Pipeline: Construction in progress 1,206 49 0 Other 4,327 6,950 9 Construction services: Land 8,662 8,234 0 Buildings and improvements 52,667 50,776 23 Machinery, vehicles and equipment 191,802 179,459 7 Other 6,718 6,642 4 Other: Land 2,289 2,648 0 Other 29,365 34,057 7 Less accumulated depreciation and amortization 2,220,206 2,098,298 Net property, plant and equipment $ 5,120,910 $ 4,776,331 MDU Resources Group, Inc. Form 10-K 87 Index Part II Note 6 - Regulatory Assets and Liabilities The following table summarizes the individual components of unamortized regulatory assets and liabilities as of December 31: Estimated Recovery or Refund Period * 2023 2022 (In thousands) Regulatory assets: Current: Natural gas costs recoverable through rate adjustments Up to 1 year $ 98,844 $ 141,306 Electric fuel and purchased power deferral Up to 1 year 33,918 2,656 Conservation programs Up to 1 year 14,425 8,544 Cost recovery mechanisms Up to 1 year 9,153 4,019 Environmental compliance programs Up to 1 year 5,525 — Other Up to 1 year 10,627 8,567 172,492 165,092 Noncurrent: Pension and postretirement benefits ** 142,511 143,349 Cost recovery mechanisms Up to 25 years 85,944 67,171 Environmental compliance programs - 66,806 — Natural gas costs recoverable through rate adjustments Up to 2 years 55,493 — Plant costs/asset retirement obligations Over plant lives 46,009 44,462 Manufactured gas plant site remediation - 26,127 26,624 Taxes recoverable from customers Over plant lives 12,249 12,330 Long-term debt refinancing costs Up to 37 years 2,600 3,188 Plant to be retired - 772 21,525 Other Up to 15 years 8,588 11,010 447,099 329,659 Total regulatory assets $ 619,591 $ 494,751 Regulatory liabilities: Current: Natural gas costs refundable through rate adjustments Up to 1 year $ 43,161 $ 955 Provision for rate refund Up to 1 year 6,866 1,147 Cost recovery mechanisms Up to 1 year 6,284 1,977 Margin sharing Up to 1 year 5,243 — Taxes refundable to customers Up to 1 year 2,149 3,937 Conservation programs Up to 1 year 2,130 4,126 Refundable fuel & electric costs Up to 1 year 263 3,253 Electric fuel and purchased power deferral Up to 1 year — 4,929 Other Up to 1 year 4,665 6,116 70,761 26,440 Noncurrent: Plant removal and decommissioning costs Over plant lives 220,147 208,650 Taxes refundable to customers Over plant lives 193,578 203,222 Environmental compliance programs - 61,941 — Cost recovery mechanisms Up to 18 years 21,791 14,025 Accumulated deferred investment tax credit Over plant lives 15,740 13,594 Pension and postretirement benefits ** 6,044 7,376 Other Up to 14 years 1,809 1,587 521,050 448,454 Total regulatory liabilities $ 591,811 $ 474,894 Net regulatory position $ 27,780 $ 19,857 * Estimated recovery or refund period for amounts currently being recovered or refunded in rates to customers. ** Recovered as expense is incurred or cash contributions are made. 88 MDU Resources Group, Inc. Form 10-K Index Part II As of December 31, 2023 and 2022, approximately $ 194.3 million and $ 242.5 million, respectively, of regulatory assets were not earning a rate of return but are expected to be recovered from customers in future rates. These assets are largely comprised of the unfunded portion of pension and postretirement benefits, asset retirement obligations, certain pipeline integrity costs, the estimated future cost of manufactured gas plant site remediation and the costs associated with environmental compliance. The Company is subject to environmental compliance regulations in certain states which require natural gas distribution companies to reduce overall GHG emissions to certain thresholds as established by each applicable state. Compliance with these standards may be achieved through increased energy efficiency and conservation measures, purchased emission allowances and offsets and purchases of low carbon fuels. Emission allowances are allocated by the respective states to the Company at no cost, of which a portion is required to be sold at auction. The Company expects the compliance costs for these regulations and the revenues from the sale of the allocated emissions allowances will be passed through to customers in rates and has, accordingly, deferred the environmental compliance costs as a regulatory asset and proceeds from the sale of allowances as a regulatory liability. In the last half of 2021 through 2022, the Company experienced high natural gas costs due to increase in demand outpacing the supply along with the impact of global events. Additionally, in December 2022 and January 2023, natural gas prices significantly increased across the Pacific Northwest from multiple price-pressuring events including wide-spread below-normal temperatures and higher natural gas consumption; reduced natural gas flows due to pipeline constraints, including maintenance in West Texas; and historically low regional natural gas storage levels. For a discussion of the Company's most recent cases by jurisdiction, see Note 20. 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. Requests were filed with the NDPSC, MTPSC 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. If, for any reason, the Company's regulated businesses cease to meet the criteria for application of regulatory accounting for all or part of their operations, the regulatory assets and liabilities relating to those portions ceasing to meet such criteria would be removed from the balance sheet and included in the statement of income or accumulated other comprehensive loss in the period in which the discontinuance of regulatory accounting occurs. Note 7 - Environmental Allowances and Obligations Beginning in 2023, the Company's natural gas distribution segment acquires environmental allowances as part of its requirement to comply with environmental regulations in certain states. Allowances are allocated by the respective states to the Company at no cost and additional allowances are required to be purchased as needed based on the requirements in the respective states. The segment records purchased and allocated environmental allowances at weighted average cost under the inventory method of accounting. Environmental allowances are included in prepayments and other current assets and noncurrent assets - other on the Consolidated Balance Sheets. At December 31, 2023, the Company had $ 72.7 million of environmental allowances. Environmental compliance obligations, which are based on GHG emissions, are measured at the carrying value of environmental allowances held plus the estimated value of additional allowances necessary to satisfy the compliance obligation. Environmental compliance obligations are included in current liabilities - other accrued liabilities and noncurrent liabilities - other on the Consolidated Balance Sheets. At December 31, 2023, the Company accrued $ 66.8 million in compliance obligations. The Company recognizes revenue from the sale of emissions allowances allocated under the environmental programs when the allowances are sold at auction. The revenues associated with the sale of these allowances are deferred as a component of the respective jurisdiction’s regulatory liability for environmental compliance. At December 31, 2023, the Company received $ 61.9 million for the sale of emissions allowances. As environmental allowances are surrendered, the segment reduces the associated environmental compliance assets and liabilities from the Consolidated Balance Sheets. The expenses and revenues associated with the Company’s environmental allowances and obligations are deferred as regulatory assets and liabilities. For more information on the Company’s regulatory assets and liabilities, see Note 6. MDU Resources Group, Inc. Form 10-K 89 Index Part II Note 8 - Goodwill and Other Intangible Assets The carrying amount of goodwill at the natural gas distribution and construction services segments, which remained unchanged, was $ 345.7 million and $ 143.2 million, respectively, at both December 31, 2023 and 2022. No impairments of goodwill have been recorded in these periods. At October 31, 2023, the fair value substantially exceeded the carrying value at the Company's construction services 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 4 percent as of October 31, 2023. 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 6.4 percent in 2022 to 6.7 percent 2023, 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. Other amortizable intangible assets at December 31 were as follows: 2023 2022 (In thousands) Customer relationships $ 10,450 $ 10,450 Less accumulated amortization 8,446 6,356 2,004 4,094 Noncompete agreements 292 552 Less accumulated amortization 292 544 — 8 Total $ 2,004 $ 4,102 Amortization expense for amortizable intangible assets for the years ended December 31, 2023, 2022 and 2021, was $ 2.1 million, $ 2.2 million and $ 2.5 million, respectively. The amounts of estimated amortization expense for identifiable intangible assets as of December 31, 2023, were: 2024 2025 2026 2027 2028 Thereafter (In thousands) Amortization expense $ 1,888 $ 116 $ — $ — $ — $ — Note 9 - Fair Value Measurements Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the measurement date. The fair value ASC establishes a hierarchy for grouping assets and liabilities, based on the significance of inputs. The estimated fair values of the Company's assets and liabilities measured on a recurring basis are determined using the market approach. 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 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 $ 66.2 million and $ 78.0 million at December 31, 2023 and 2022, respectively, are classified as investments on the Consolidated Balance Sheets. The net unrealized gain on these investments for the year ended December 31, 2023, was $ 7.5 million. The net unrealized loss on these investments for the year ended December 31, 2022 was $ 11.3 million. The net unrealized gain on these investments for the year ended December 31, 2021 was $ 5.8 million. 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. In 2023, the Company withdrew $ 20.0 million of its cost basis, which reduced investments on the Consolidated Balance Sheets at December 31, 2023. The Company did not elect the fair value option, which records gains and losses in income, for its available-for-sale securities, which include mortgage-backed securities and U.S. Treasury securities. These available-for-sale securities are recorded at fair value and are classified as investments on the Consolidated Balance Sheets. Unrealized gains or losses are recorded in accumulated other comprehensive loss. Details of available-for-sale securities were as follows: December 31, 2023 Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value (In thousands) Mortgage-backed securities $ 8,234 $ 17 $ 470 $ 7,781 U.S. Treasury securities 3,521 28 8 3,541 Total $ 11,755 $ 45 $ 478 $ 11,322 90 MDU Resources Group, Inc. Form 10-K Index Part II December 31, 2022 Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value (In thousands) Mortgage-backed securities $ 8,928 $ 2 $ 636 $ 8,294 U.S. Treasury securities 2,608 — 72 2,536 Total $ 11,536 $ 2 $ 708 $ 10,830 The Company's assets measured at fair value on a recurring basis were as follows: Fair Value Measurements at December 31, 2023, Using Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Balance at December 31, 2023 (In thousands) Assets: Money market funds $ — $ 6,409 $ — $ 6,409 Insurance contracts* — 66,283 — 66,283 Available-for-sale securities: Mortgage-backed securities — 7,781 — 7,781 U.S. Treasury securities — 3,541 — 3,541 Total assets measured at fair value $ — $ 84,014 $ — $ 84,014 * The insurance contracts invest approximately 60 percent in fixed-income investments, 15 percent in common stock of large-cap companies, 8 percent in target date investments, 7 percent in common stock of mid-cap companies, 5 percent in common stock of small-cap companies, 3 percent in cash equivalents, 1 percent in high yield investments and 1 percent in international investments. Fair Value Measurements at December 31, 2022, Using Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Balance at December 31, 2022 (In thousands) Assets: Money market funds $ — $ 4,913 $ — $ 4,913 Insurance contracts* — 77,958 — 77,958 Available-for-sale securities: Mortgage-backed securities — 8,294 — 8,294 U.S. Treasury securities — 2,536 — 2,536 Total assets measured at fair value $ — $ 93,701 $ — $ 93,701 * 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. 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. The estimated fair value of the Company's mortgage-backed securities and U.S. 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 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. The managed separate accounts are valued based on other observable inputs or corroborated market data. Though the Company believes the methods used to estimate fair value are consistent with those used by other market participants, the use of other methods or assumptions could result in a different estimate of fair value. MDU Resources Group, Inc. Form 10-K 91 Index Part II The Company applies the provisions of the fair value measurement standard to its nonrecurring, non-financial measurements, including long-lived asset impairments. These assets are not measured at fair value on an ongoing basis but are subject to fair value adjustments only in certain circumstances. The Company reviews the carrying value of its long-lived assets, excluding goodwill, whenever events or changes in circumstances indicate that such carrying amounts may not be recoverable. 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. The fair value was categorized as Level 2 in the fair value hierarchy and was based on discounted future cash flows using current market interest rates. The estimated fair value of the Company's Level 2 long-term debt at December 31 was as follows: 2023 2022 (In thousands) Carrying Amount $ 2,298,223 $ 2,365,667 Fair Value $ 2,046,039 $ 2,053,396 The carrying amounts of the Company's remaining financial instruments included in current assets and current liabilities approximate their fair values. Note 10 - Debt Due to the Knife River separation, Centennial repaid all of its outstanding debt in the second quarter of 2023, which was funded by the Knife River repayment and the Company entering into various new debt instruments. Refer to Note 3 for additional information related to the repayment of debt associated with the Knife River separation. 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, 2023. In the event the subsidiaries do not comply with the applicable covenants and other conditions, alternative sources of funding may need to be pursued. The following table summarizes the outstanding revolving credit facilities of the Company's subsidiaries: Company Facility Facility Limit Amount Outstanding at December 31, 2023 Amount Outstanding at December 31, 2022 Letters of Credit at December 31, 2023 Expiration Date (In millions) Montana-Dakota Utilities Co. Commercial paper/Revolving credit agreement (a) $ 200.0 $ 144.2 $ 117.5 $ — 10/18/28 Cascade Natural Gas Corporation Revolving credit agreement $ 100.0 (b) $ 15.4 $ 44.4 $ 25.0 (c) 11/30/27 Intermountain Gas Company Revolving credit agreement $ 100.0 (d) $ 30.7 $ 85.6 $ — 10/13/27 Centennial Energy Holdings, Inc. Commercial paper/Revolving credit agreement (e) $ — $ — $ 231.6 $ — 12/19/24 MDU Resources Group, Inc. Revolving credit agreement $ 150.0 $ — $ — $ — 5/29/24 MDU Resources Group, Inc. Revolving credit agreement $ 200.0 (f) $ — $ — $ 8.9 5/31/28 (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 $ 250.0 million). At December 31, 2023 and 2022, 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. (c) Outstanding letter(s) of credit reduce the amount available under the credit agreement. (d) Certain provisions allow for increased borrowings, up to a maximum of $ 125.0 million. (e) Centennial repaid all of its outstanding debt in the second quarter of 2023, which was funded by the Knife River repayment and the Company entering into various new debt instruments. The commercial paper program was 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). At December 31, 2022, there was no amount outstanding under the revolving credit agreement. (f) Certain provisions allow for increased borrowings, up to a maximum of $ 250.0 million. Montana-Dakota's commercial paper programs are supported by a revolving credit agreement. While the amount of commercial paper outstanding does not reduce available capacity under the revolving credit agreement, Montana-Dakota does not issue commercial paper in an aggregate amount exceeding the available capacity under their credit agreement. The commercial paper and revolving credit agreement borrowings may vary during the period, largely the result of fluctuations in working capital requirements due to the seasonality of certain operations of Montana-Dakota. 92 MDU Resources Group, Inc. Form 10-K Index Part II Short-term debt Cascade 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. On December 5, 2023, Cascade paid down $ 100.0 million of the outstanding balance. Intermountain 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. In March, April and May 2023, Intermountain paid down $ 20.0 million, $ 30.0 million, and $ 30.0 million, respectively, of the outstanding balance. 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. On March 17, 2023, Centennial amended the agreement to extend the maturity date to September 15, 2023. On May 31, 2023, Centennial repaid the full balance outstanding under the term loan agreement. 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. On May 31, 2023, Centennial repaid the full balance outstanding under the term loan agreement. MDU Resources Group, Inc. On May 1, 2023, the Company entered into a $ 75.0 million term loan agreement with a SOFR-based variable interest rate and a maturity date of November 1, 2023. On May 31, 2023, the Company repaid the full balance outstanding under the term loan agreement. On May 31, 2023, the Company entered into a $ 150.0 million revolving credit agreement with a SOFR-based variable interest rate and a maturity date of May 29, 2024. At December 31, 2023, the Company had no amount outstanding. The agreement contains customary covenants and provisions, including a covenant of the Company 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. As discussed in Note 3, the Company retained 10 percent of the shares of Knife River with the intent to monetize its investment and provide proceeds to the Company. On November 6, 2023, the Company entered into a $ 310.0 million term loan agreement which was used to facilitate the tax-free debt for equity exchange. This term loan was repaid through a noncash exchange of the Company's shares in Knife River for $ 293.2 million and the remaining balance of this term loan was repaid in cash on November 10, 2023. Long-term debt Long-term Debt Outstanding Long-term debt outstanding was as follows: Weighted Average Interest Rate at December 31, 2023 2023 2022 (In thousands) Senior Notes due on dates ranging from July 15, 2024 to June 15, 2062 4.46 % $ 1,882,000 $ 1,848,500 Commercial paper supported by revolving credit agreements 5.94 % 144,200 349,050 Term Loan Agreements due on May 31, 2025 and September 3, 2032 6.51 % 196,300 7,000 Credit agreements due on October 13, 2027 and November 30, 2027 8.50 % 46,100 130,000 Medium-Term Notes due on dates ranging from September 15, 2027 to March 16, 2029 7.32 % 35,000 35,000 Other notes due on dates ranging from May 31, 2028 to November 30, 2038 2.21 % 980 1,614 Less unamortized debt issuance costs 6,357 5,211 Less discount — 286 Total long-term debt 2,298,223 2,365,667 Less current maturities 61,319 47,819 Net long-term debt $ 2,236,904 $ 2,317,848 Montana-Dakota On October 18, 2023, Montana-Dakota amended and restated its revolving credit agreement to increase the borrowing capacity to $ 200.0 million and extend the maturity date to October 18, 2028. Montana-Dakota's revolving credit agreement supports its commercial paper program. Commercial paper borrowings under this agreement are classified as long-term debt as they are intended to be refinanced on a long-term basis through continued commercial paper borrowings. The credit agreement contains customary covenants and provisions, including covenants of Montana-Dakota not to permit, as of the end of any fiscal quarter, the ratio of funded debt to total capitalization (determined on a consolidated basis) to be greater than 65 percent. Other covenants include limitations on the sale of certain assets and on the making of certain loans and investments. Montana-Dakota's ratio of total debt to total capitalization at December 31, 2023, was 51 percent. MDU Resources Group, Inc. Form 10-K 93 Index Part II 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. 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 November 29, 2023, Cascade issued $ 100.0 million of senior notes under a note purchase agreement with a maturity date of November 30, 2033 and an interest rate of 6.39 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, 2023, was 54 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. 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 November 29, 2023, Intermountain issued $ 25.0 million of senior notes under a note purchase agreement with a maturity date of November 30, 2033 and an interest rate of 6.19 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, 2023, was 57 percent. Centennial On June 9, 2023, Centennial repaid the full balances outstanding on all its long-term senior note debt, which aggregated $ 455.0 million. MDU Resources Group, Inc. On May 31, 2023, the Company entered into a $ 200.0 million revolving credit agreement with a SOFR-based variable interest rate and a maturity date of May 31, 2028. 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 the Company 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 May 31, 2023, the Company entered into a $ 375.0 million term loan agreement with a SOFR-based variable interest rate and a maturity date of May 31, 2025. On November 15, 2023, the Company paid down $ 185.0 million of this term loan. The term loan agreement contains customary covenants and provisions, including a covenant of the Company 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, loan and investments. WBI Energy Transmission WBI Energy Transmission has a $ 350.0 million uncommitted note purchase and private shelf agreement with an expiration date of December 22, 2025. WBI Energy Transmission had $ 235.0 million of notes outstanding at December 31, 2023, 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, 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, 2023, was 41 percent. Schedule of Debt Maturities Long-term debt maturities, which excludes unamortized debt issuance costs and discount, for the five years and thereafter following December 31, 2023, were as follows: 2024 2025 2026 2027 2028 Thereafter (In thousands) Long-term debt maturities $ 61,319 $ 347,700 $ 140,700 $ 66,800 $ 219,900 $ 1,468,161 94 MDU Resources Group, Inc. Form 10-K Index Part II Note 11 - Leases Most of the leases the Company enters into are for equipment, buildings, easements and vehicles as part of their ongoing operations. The Company also leases certain equipment to third parties through its utility and construction services businesses. The Company determines if an arrangement contains a lease at inception of a contract and accounts for all leases in accordance with ASC 842 - Leases. The recognition of leases requires the Company to make estimates and assumptions that affect the lease classification and the assets and liabilities recorded. The accuracy of lease assets and liabilities reported on the Consolidated Financial Statements depends on, among other things, management's estimates of interest rates used to discount the lease assets and liabilities to their present value, as well as the lease terms based on the unique facts and circumstances of each lease. 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, 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. Generally, the leases for vehicles and equipment have a term of five years or less and buildings and easements have a longer term of up to 35 years or more. 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. The following tables provide information on the Company's operating leases at and for the years ended December 31: 2023 2022 2021 (In thousands) Lease costs: Short-term lease cost $ 101,610 $ 104,447 $ 79,433 Operating lease cost 29,257 27,016 24,708 Variable lease cost 1,891 1,641 1,431 $ 132,758 $ 133,104 $ 105,572 2023 2022 2021 (Dollars in thousands) Weighted average remaining lease term 3.20 years 3.17 years 3.27 years Weighted average discount rate 4.92 % 4.04 % 3.48 % Cash paid for amounts included in the measurement of lease liabilities $ 29,678 $ 26,572 $ 21,575 The reconciliation of future undiscounted cash flows to operating lease liabilities presented on the Consolidated Balance Sheet at December 31, 2023, was as follows: (In thousands) 2024 $ 25,916 2025 17,573 2026 11,143 2027 6,555 2028 3,805 Thereafter 25,724 Total 90,716 Less discount 16,187 Total operating lease liabilities $ 74,529 Lessor accounting The Company leases certain equipment to third parties through its utility and construction services businesses, which are considered short-term operating leases with terms of less than 12 months. The Company recognized revenue from operating leases of $ 46.0 million, $ 47.9 million and $ 50.1 million for the years ended December 31, 2023, 2022 and 2021, respectively. At December 31, 2023, the Company had $ 9.4 million of lease receivables with a majority due within 12 months or less. MDU Resources Group, Inc. Form 10-K 95 Index Part II Note 12 - 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, 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: 2023 2022 (In thousands) Balance at beginning of year $ 373,147 $ 435,280 Liabilities incurred 533 1,315 Liabilities settled ( 6,633 ) ( 7,529 ) Accretion expense* 18,894 21,773 Revisions in estimates ( 787 ) ( 77,692 ) Balance at end of year $ 385,154 $ 373,147 * Includes $ 18.9 million and $ 21.8 million in 2023 and 2022, respectively, recorded to regulatory assets. 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. For more information on the Company's regulatory assets and liabilities, see Note 6. Note 13 - Equity The Company depends on earnings and dividends from its subsidiaries to pay dividends on common stock. The Company has paid quarterly dividends for 86 consecutive years. For the years ended December 31, 2023, 2022 and 2021, dividends declared on common stock were $ .6950 , $ .8750 and $ .8550 per common share, respectively. Dividends on common stock are paid quarterly to the stockholders of record less than 30 days prior to the distribution date. For the years ended December 31, 2023, 2022 and 2021, the dividends declared to common stockholders were $ 141.5 million, $ 177.9 million and $ 173.0 million, respectively. The declaration and payment of dividends of the Company is at the sole discretion of the board of directors. In addition, the Company's subsidiaries are generally restricted to paying dividends out of capital accounts or net assets. The following discusses the most restrictive limitations. Certain credit agreements and regulatory limitations of the Company's subsidiaries also contain restrictions on dividend payments. The most restrictive limitation requires the Company's subsidiaries not to permit the ratio of funded debt to capitalization to be greater than 65 percent. Based on this limitation, approximately $ 1.3 billion of the net assets of the Company's subsidiaries, which represents common stockholders' equity including retained earnings, would be restricted from use for dividend payments at December 31, 2023. The Company may sell any combination of common stock and debt securities if warranted by market conditions and the Company's capital requirements. Any public offer and sale of such securities will be made only by means of a prospectus meeting the requirements of the Securities Act and the rules and regulations thereunder. In August 2020, the Company amended the Distribution Agreement dated February 22, 2019, with J.P. Morgan Securities LLC and MUFG Securities Americas Inc., as sales agents. This agreement, as amended, allows the offering, issuance and sale of up to 6.4 million shares of the Company's common stock in connection with an “at-the-market” offering. On August 10, 2023, the Company terminated the distribution agreement. Prior to the termination, the Company had capacity to issue up to 3.6 million additional shares of common stock under the "at-the-market" offering program. The Company was not subject to any termination penalties related to the termination of the distribution agreement. The Company had no issuances of shares under the "at-the-market" offering program for both the twelve months ended December 31, 2023 and 2022. The K-Plan provides participants the option to invest in the Company's common stock. For the years ended December 31, 2023, 2022 and 2021, the K-Plan purchased shares of common stock on the open market or issued original issue common stock of the Company. At December 31, 2023, there were 7.2 million shares of common stock reserved for original issuance under the K-Plan. The Company currently has 2.0 million shares of preferred stock authorized to be issued with a $ 100 par value. At December 31, 2023 and 2022, there were no shares outstanding. 96 MDU Resources Group, Inc. Form 10-K Index Part II Note 14 - Stock-Based Compensation The Company has stock-based compensation plans under which it is currently authorized to grant restricted stock units and other stock awards. As of December 31, 2023, there were 3.0 million remaining shares available to grant under these plans. The Company either purchases shares on the open market or issues new shares of common stock to satisfy the vesting of stock-based awards. Separation of Knife River In connection with the completed separation of Knife River through the spinoff, the provisions of the existing compensation plans required adjustments to the number and terms of outstanding employee time-vested restricted stock units and performance share awards to preserve the intrinsic value of the awards immediately prior to the separation. The outstanding awards will continue to vest over the original vesting period, which is generally three years from the grant date. However, the outstanding performance share awards will no longer be subject to performance-based vesting conditions. The number of performance share awards were first adjusted for performance. The combined performance factors were determined based on the performance of the Company as of December 31, 2022. Outstanding awards at the time of the spinoff were converted into awards of the holder’s employer following separation. The Company incurred $ 204,000 of incremental compensation expense related to the conversion of the restricted stock units, which is being recognized in expense over the remaining service periods of the applicable awards. There was no incremental compensation expense related to the conversion of the performance share awards. Total stock-based compensation expense (after tax) was $ 5.7 million, $ 7.7 million and $ 10.6 million in 2023, 2022 and 2021, respectively. The Company uses the straight-line amortization method to recognize compensation expense related to restricted stock units, which only has a service condition. The Company recognized 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, 2023, total remaining unrecognized compensation expense related to stock-based compensation was approximately $ 11.3 million (before income taxes) which will be amortized over a weighted average period of 1.6 years. Stock awards Non-employee directors receive shares of common stock in addition to and in lieu of cash payment for directors' fees. There were 50,717 shares with a fair value of $ 950,000 , 40,800 shares with a fair value of $ 1.2 million and 41,925 shares with a fair value of $ 1.2 million issued to non-employee directors during the years ended December 31, 2023, 2022 and 2021, respectively. Restricted stock units In February 2023, 2022 and 2021, key employees were granted restricted stock units 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 unit award grants. The shares vest over three years , contingent on continued employment. Compensation expense is recognized over the vesting period. Upon vesting, participants receive dividends that accumulate during the vesting period. As previously discussed, adjustments were made to the number of restricted stock units to preserve the intrinsic value of the awards in connection with the spinoff of Knife River and outstanding performance share awards were converted to restricted stock units. Target grants of restricted stock units outstanding at December 31, 2023, were as follows: Grant Date Performance Period Target Grant of Shares February 2022 2022-2024 403,088 February 2023/ July 2023 2023-2025 470,212 Historical performance share awards In February 2022 and 2021 key employees were granted performance share awards 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. Upon vesting, participants receive dividends that accumulate during the vesting period. Share awards were generally earned over a three-year vesting period and tied to financial metrics. However, as previously discussed in connection with the spinoff of Knife River, the outstanding performance share awards were converted to restricted stock units. As a result, there were no outstanding performance shares at December 31, 2023. MDU Resources Group, Inc. Form 10-K 97 Index Part II Under the market condition for these performance share awards, participants could 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 was based on the grant-date fair value as determined by Monte Carlo simulation. The blended volatility term structure ranges were comprised of 50 percent historical volatility and 50 percent implied volatility. Risk-free interest rates were based on U.S. Treasury security rates in effect as of the grant date. Assumptions used for initial grants applicable to the market condition for certain performance shares issued in 2022 and 2021 were: 2022 2021 Weighted average grant-date fair value $ 36.25 $ 37.96 Blended volatility range 24.07 % - 31.41 % 35.37 % - 46.35 % Risk-free interest rate range .71 % - 1.68 % .02 % - 0.20 % Weighted average discounted dividends per share $ 2.93 $ 3.16 Under the performance conditions for these performance share awards, participants could earn from zero to 200 percent of the apportioned target grant of shares. The performance conditions were based on the Company's compound annual growth rate in earnings from continuing operations. The weighted average grant-date fair value per share for the performance shares applicable to these performance conditions issued in 2022 and 2021 was $ 27.73 and $ 27.35 , respectively. The fair value of the performance shares that vested during the years ended December 31, 2022 and 2021, was $ 7.6 million and $ 13.7 million, respectively. A summary of the status of the restricted stock units and performance share awards for the year ended December 31, 2023, was as follows: Performance Share Awards Restricted Stock Units Number of Shares Weighted Average Grant-Date Fair Value Number of Shares Weighted Average Grant-Date Fair Value ** Nonvested at beginning of period 565,545 $ 32.32 188,499 $ 27.54 Granted pre-separation of Knife River — 432,557 30.42 Adjustments for performance ( 114,543 ) — Forfeited ( 1,858 ) 30.47 ( 5,532 ) 30.43 Non-vested pre-separation of Knife River 449,144 615,524 Adjustments related to the Knife River separation* ( 449,144 ) 562,944 Granted post-separation of Knife River — 21,159 22.48 Vested shares — ( 326,327 ) 18.68 Nonvested at end of period — 873,300 $ 21.16 * Includes the conversion adjustments to preserve the intrinsic value of the awards and the cancellation of outstanding awards held by employees that transferred to Knife River, which were replaced with awards issued by Knife River as part of the separation. ** Weighted average grant-date fair values post-separation of Knife River reflects the Company's adjusted stock price due to the separation. 98 MDU Resources Group, Inc. Form 10-K Index Part II Note 15 - Accumulated Other Comprehensive Loss The Company's accumulated other comprehensive loss is comprised of losses on derivative instruments qualifying as hedges, postretirement liability adjustments and gain (loss) on available-for-sale investments. The after-tax changes in the components of accumulated other comprehensive loss were as follows: Net Unrealized Loss on Derivative Instruments Qualifying as Hedges Post- retirement Liability Adjustment Net Unrealized Gain (Loss) on Available- for-sale Investments Total Accumulated Other Comprehensive Loss (In thousands) At December 31, 2021 $ ( 538 ) $ ( 40,461 ) $ ( 5 ) $ ( 41,004 ) 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 Net current-period other comprehensive income (loss) 413 10,561 ( 553 ) 10,421 At December 31, 2022 ( 125 ) ( 29,900 ) ( 558 ) ( 30,583 ) Other comprehensive income (loss) before reclassifications — ( 646 ) 173 ( 473 ) Amounts reclassified from accumulated other comprehensive loss 81 242 43 366 Net current-period other comprehensive income (loss) 81 ( 404 ) 216 ( 107 ) Amounts reclassified related to the separation of Knife River 44 12,262 — 12,306 At December 31, 2023 $ — $ ( 18,042 ) $ ( 342 ) $ ( 18,384 ) The following amounts were reclassified out of accumulated other comprehensive loss into net 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: 2023 2022 Location on Consolidated Statements of Income (In thousands) Reclassification adjustment for loss on derivative instruments included in net income $ ( 96 ) $ ( 590 ) Interest expense 15 177 Income taxes ( 81 ) ( 413 ) Amortization of postretirement liability losses included in net periodic benefit credit ( 320 ) ( 2,416 ) Other income 78 597 Income taxes ( 242 ) ( 1,819 ) Reclassification adjustment on available-for-sale investments included in net income ( 54 ) ( 145 ) Other income 11 31 Income taxes ( 43 ) ( 114 ) Total reclassifications $ ( 366 ) $ ( 2,346 ) MDU Resources Group, Inc. Form 10-K 99 Index Part II Note 16 - Income Taxes The components of income before income taxes from continuing operations for each of the years ended December 31 were as follows: 2023 2022 2021 (In thousands) United States $ 539,898 $ 300,529 $ 286,066 Foreign — — — Income before income taxes from continuing operations $ 539,898 $ 300,529 $ 286,066 Income tax expense (benefit) from continuing operations for the years ended December 31 was as follows: 2023 2022 2021 (In thousands) Current: Federal $ 50,180 $ 21,337 $ 11,737 State 13,707 7,176 4,414 Foreign — — — 63,887 28,513 16,151 Deferred: Income taxes: Federal ( 5,960 ) 16,105 19,092 State ( 601 ) 4,245 6,546 Investment tax credit - net 2,147 898 1,755 ( 4,414 ) 21,248 27,393 Total income tax expense $ 59,473 $ 49,761 $ 43,544 Components of deferred tax assets and deferred tax liabilities at December 31 were as follows: 2023 2022 (In thousands) Deferred tax assets: Postretirement $ 28,953 $ 30,228 Environmental compliance 28,873 — Compensation-related 27,363 19,867 Operating lease liabilities 14,242 13,914 Customer advances 8,312 7,615 Legal and environmental contingencies 4,881 8,265 Other 29,753 24,024 Total deferred tax assets 142,377 103,913 Deferred tax liabilities: Basis differences on property, plant and equipment 421,212 405,428 Postretirement 39,110 47,340 Purchased gas adjustment 34,618 33,567 Environmental compliance 16,221 — Operating lease right-of-use-assets 14,116 13,667 Intangible assets 12,756 12,032 Other 62,076 46,593 Total deferred tax liabilities 600,109 558,627 Valuation allowance 816 785 Net deferred income tax liability $ 458,548 $ 455,499 As of December 31, 2023 and 2022, the Company had various state income tax net operating loss carryforwards of $ 816,000 and $ 785,000 , respectively, and state income tax credit carryforwards, excluding alternative minimum tax credit carryforwards, of $ 33.7 million and $ 35.1 million, respectively. The state income tax credit carryforwards are due to expire between 2025 and 2037. Changes in tax regulations or assumptions regarding current and future taxable income could require additional valuation allowances in the future. 100 MDU Resources Group, Inc. Form 10-K Index Part II The following table reconciles the change in the net deferred income tax liability from December 31, 2022, to December 31, 2023, to deferred income tax expense: 2023 (In thousands) Change in net deferred income tax liability from the preceding table $ 3,049 Excess deferred income tax amortization ( 8,383 ) Deferred taxes associated with other comprehensive loss ( 46 ) Other 966 Deferred income tax expense for the period $ ( 4,414 ) Total income tax expense differs from the amount computed by applying the statutory federal income tax rate to income before taxes. The reasons for this difference were as follows: Years ended December 31, 2023 2022 2021 Amount % Amount % Amount % (Dollars in thousands) Computed tax at federal statutory rate $ 113,379 21.0 $ 63,111 21.0 $ 60,074 21.0 Increases (reductions) resulting from: State income taxes, net of federal income tax 11,677 2.2 9,268 3.1 9,971 3.5 Tax-free debt for equity exchange ( 38,967 ) ( 7.2 ) — — — — Federal renewable energy credit ( 15,175 ) ( 2.8 ) ( 15,343 ) ( 5.1 ) ( 13,914 ) ( 4.9 ) Excess deferred income tax amortization ( 8,383 ) ( 1.6 ) ( 9,008 ) ( 3.0 ) ( 10,295 ) ( 3.6 ) Other ( 3,058 ) ( .6 ) 1,733 .6 ( 2,292 ) ( .8 ) Total income tax expense $ 59,473 11.0 $ 49,761 16.6 $ 43,544 15.2 The Company's effective tax rate for 2023 differs from the U.S. federal statutory rate of 21 percent due primarily to the permanent difference on the gain on the Knife River retained shares due to the tax-free treatment of the disposition of the shares through the debt-for-equity exchange that was completed in November 2023, the impact of credits and deductions provided by law, and excess deferred income tax amortization. The debt-for equity exchange included an exchange of the approximately 10 percent of Knife River retained shares owned by the Company. The Company and its subsidiaries file income tax returns in the U.S. federal jurisdiction, and various state and local jurisdictions. The Company is no longer subject to U.S. federal, non-U.S., state or local income tax examinations by tax authorities for years ending prior to 2020. For the years ended December 31, 2023, 2022 and 2021, total reserves for uncertain tax positions were not material. The Company recognizes interest and penalties accrued relative to unrecognized tax benefits in income tax expense. Note 17 - Cash Flow Information Cash expenditures for interest and income taxes for the years ended December 31 were as follows: 2023 2022 2021 (In thousands) Interest, net* $ 120,431 $ 55,240 $ 72,219 Income taxes paid, net** $ 64,484 $ 5,317 $ 36,295 * AFUDC - borrowed was $ 10.0 million, $ 2.2 million and $ 2.8 million for the years ended December 31, 2023, 2022 and 2021, respectively. ** Income taxes paid, including discontinued operations, were $ 62.5 million, $ 26.4 million and $ 70.9 million for the years ended December 31, 2023, 2022 and 2021, respectively. Noncash investing and financing transactions at December 31 were as follows: 2023 2022 2021 (In thousands) Property, plant and equipment additions in accounts payable $ 46,622 $ 35,637 $ 41,765 Right-of-use assets obtained in exchange for new operating lease liabilities $ 46,181 $ 39,158 $ 44,490 Debt for equity exchange of retained shares in Knife River $ 293,239 $ — $ — MDU Resources Group, Inc. Form 10-K 101 Index Part II Note 18 - Business Segment Data The Company's reportable segments are those that are based on the Company's method of internal reporting, which generally segregates the strategic business units due to differences in products, services and regulation. The internal reporting of these operating segments is defined based on the reporting and review process used by the Company's chief executive officer. The Company's operations are located within the United States. The electric segment generates, transmits and distributes electricity in Montana, North Dakota, South Dakota and Wyoming. The natural gas distribution segment distributes natural gas in those states, as well as in Idaho, Minnesota, Oregon and Washington. These operations also supply related value-added services. 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 services. 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 United States. 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. Its transmission and distribution contracting services include construction and maintenance of overhead and underground electrical, gas and communication infrastructure, as well as manufacturing and supplying transmission and distribution line construction equipment and tools. The Other category includes the activities of Centennial Capital, which, through its subsidiary InterSource Insurance Company, insures various types of risks as a captive insurer for certain of the Company's subsidiaries. The function of the captive insurer is to fund the self-insured layers of the insured Company's general liability, automobile liability, pollution liability and other coverages. 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 with corporate functions, as well as the gain on the tax-free exchange of the retained shares in Knife River and costs associated with certain 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, Fidelity and Knife River and do not meet the criteria for income (loss) from discontinued operations. Discontinued operations includes Knife River's operations and its associated separation costs and interest on debt facilities repaid in connection with the Knife River separation. For the comparative periods below, Knife River's operations are only reflected through May 2023, whereas 2022 and 2021 include the full year from Knife River's operations. Discontinued operations also includes the supporting activities of Fidelity other than certain general and administrative costs and interest expense as described above. The information below follows the same accounting policies as described in Note 2. Information on the Company's segments as of December 31 and for the years then ended was as follows: 2023 2022 2021 (In thousands) External operating revenues: Regulated operations: Electric $ 400,901 $ 376,936 $ 349,412 Natural gas distribution 1,287,121 1,273,530 971,640 Pipeline 101,615 85,931 69,940 1,789,637 1,736,397 1,390,992 Non-regulated operations: Pipeline 13,457 10,764 13,126 Construction services 2,854,246 2,694,623 2,050,234 Other — — 84 2,867,703 2,705,387 2,063,444 Total external operating revenues $ 4,657,340 $ 4,441,784 $ 3,454,436 102 MDU Resources Group, Inc. Form 10-K Index Part II 2023 2022 2021 (In thousands) Intersegment operating revenues: Regulated operations: Electric $ 274 $ 137 $ 170 Natural gas distribution 416 274 300 Pipeline 62,211 58,369 58,989 62,901 58,780 59,459 Non-regulated operations: Pipeline 329 515 481 Construction services 143 4,627 1,403 Other 7,941 5,840 4,522 8,413 10,982 6,406 Total Intersegment operating revenues $ 71,314 $ 69,762 $ 65,865 Depreciation and amortization: Electric $ 64,253 $ 67,802 $ 66,750 Natural gas distribution 95,300 89,466 86,065 Pipeline 26,811 26,857 20,569 Construction services 23,148 21,468 20,270 Other 4,086 4,435 4,586 Total depreciation and amortization $ 213,598 $ 210,028 $ 198,240 Operating income (loss): Electric $ 92,789 $ 79,655 $ 66,335 Natural gas distribution 92,181 91,889 89,173 Pipeline 69,162 55,466 48,078 Construction services 190,541 164,644 145,754 Other ( 18,695 ) ( 21,655 ) ( 18,289 ) Total operating income $ 425,978 $ 369,999 $ 331,051 Interest expense: Electric $ 28,064 $ 28,526 $ 26,712 Natural gas distribution 57,601 42,126 37,265 Pipeline 13,270 10,102 6,705 Construction services 10,057 165 ( 130 ) Other 18,964 415 260 Intersegment eliminations ( 13,648 ) ( 636 ) ( 103 ) Total interest expense $ 114,308 $ 80,698 $ 70,709 Income tax expense (benefit): Electric $ ( 1,019 ) $ ( 5,420 ) $ ( 7,626 ) Natural gas distribution 6,927 7,805 8,366 Pipeline 12,409 10,522 9,672 Construction services 46,968 42,298 36,322 Other ( 5,812 ) ( 5,444 ) ( 3,190 ) Total income tax expense $ 59,473 $ 49,761 $ 43,544 Net income (loss): Regulated operations: Electric $ 71,559 $ 57,077 $ 51,906 Natural gas distribution 48,520 45,171 51,596 Pipeline 46,233 36,253 39,796 166,312 138,501 143,298 MDU Resources Group, Inc. Form 10-K 103 Index Part II 2023 2022 2021 (In thousands) Non-regulated operations: Pipeline 1,142 ( 59 ) 1,327 Construction services 142,444 129,460 112,176 Other 170,527 ( 17,134 ) ( 14,279 ) 314,113 112,267 99,224 Income from continuing operations 480,425 250,768 242,522 Discontinued operations, net of tax ( 65,718 ) 116,721 135,609 Net income $ 414,707 $ 367,489 $ 378,131 Capital expenditures: Electric $ 109,805 $ 133,970 $ 82,427 Natural gas distribution 274,836 240,064 170,411 Pipeline 115,903 61,923 234,803 Construction services 35,096 36,413 29,140 Other ( 2,825 ) 2,272 1,501 Total capital expenditures (a) $ 532,815 $ 474,642 $ 518,282 Assets: Electric (b) $ 1,955,644 $ 1,856,258 $ 1,810,695 Natural gas distribution (b) 3,532,142 3,214,452 2,929,519 Pipeline 1,045,704 961,893 913,945 Construction services 1,106,570 1,126,323 845,262 Other (c) 193,099 2,501,855 2,411,014 Total assets $ 7,833,159 $ 9,660,781 $ 8,910,435 Property, plant and equipment: Electric (b) $ 2,369,039 $ 2,276,613 $ 2,295,646 Natural gas distribution (b) 3,462,187 3,208,059 3,015,164 Pipeline 1,218,387 1,108,141 1,051,868 Construction services 259,849 245,111 225,758 Other 31,654 36,705 36,717 Less accumulated depreciation and amortization 2,220,206 2,098,298 2,119,074 Net property, plant and equipment $ 5,120,910 $ 4,776,331 $ 4,506,079 (a) Capital expenditures for 2023, 2022 and 2021 include noncash transactions such as capital expenditure-related accounts payable and AFUDC totaling $ 13.1 million, $( 3.8 ) million and $ 30.6 million, respectively. (b) Includes allocations of common utility property. (c) Includes assets of discontinued operations in 2022 and 2021 and assets not directly assignable to a business (i.e. cash, cash equivalents and restricted cash, certain accounts receivable, certain investments and other miscellaneous current and deferred assets). A reconciliation of reportable segment operating revenues and assets to consolidated operating revenues and assets is as follows: 2023 2022 2021 (In thousands) Operating revenues reconciliation: Total reportable segment operating revenues $ 4,720,713 $ 4,505,706 $ 3,515,695 Other revenue 7,941 5,840 4,606 Elimination of intersegment operating revenues ( 71,314 ) ( 69,762 ) ( 65,865 ) Total consolidated operating revenues $ 4,657,340 $ 4,441,784 $ 3,454,436 Asset reconciliation: Total reportable segment assets $ 7,685,794 $ 7,205,711 $ 6,535,988 Other assets 726,600 3,639,582 3,366,531 Elimination of intersegment receivables ( 579,235 ) ( 1,184,512 ) ( 992,084 ) Total consolidated assets $ 7,833,159 $ 9,660,781 $ 8,910,435 104 MDU Resources Group, Inc. Form 10-K Index Part II Note 19 - Employee Benefit Plans Pension and other postretirement benefit plans The Company has noncontributory qualified defined benefit pension plans and other postretirement benefit plans for certain eligible employees. The Company uses a measurement date of December 31 for all of its pension and postretirement benefit plans. Prior to 2013, defined benefit pension plan benefits and accruals for all nonunion and certain union plans were frozen and on June 30, 2015, the remaining union plan was frozen. These employees were eligible to receive additional defined contribution plan benefits. Effective January 1, 2010, eligibility to receive retiree medical benefits was modified at certain of the Company's businesses. Employees who had attained age 55 with 10 years of continuous service by December 31, 2010, were provided the option to choose between a pre-65 comprehensive medical plan coupled with a Medicare supplement or a specified company funded Retiree Reimbursement Account, regardless of when they retire. All other eligible employees must meet the new eligibility criteria of age 60 and 10 years of continuous service at the time they retire to be eligible for a specified company funded Retiree Reimbursement Account. Employees hired after December 31, 2009, will not be eligible for retiree medical benefits at certain of the Company's businesses. 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 a healthcare exchange. In connection with the previously discussed separation of Knife River on May 31, 2023, Knife River's pension plan, including the associated assets and liabilities, was transferred to Knife River and therefore is no longer reflected as part of the Company. Also in connection with the separation, a remeasurement of the Company's postretirement plan and the Company's unfunded, non-qualified defined benefit plan were performed and the applicable liabilities from the plans relating to transferring employees were transferred to Knife River. Changes in benefit obligation and plan assets and amounts recognized in the Consolidated Balance Sheets at December 31 were as follows: Pension Benefits Other Postretirement Benefits 2023 2022 2023 2022 Change in benefit obligation: (In thousands) Benefit obligation at beginning of year $ 278,286 $ 367,134 $ 40,315 $ 53,981 Service cost — — 534 894 Interest cost 13,521 9,396 1,956 1,383 Plan participants' contributions — — 479 566 Actuarial loss/(gain) 5,395 ( 76,130 ) ( 215 ) ( 13,083 ) Benefits paid ( 21,616 ) ( 22,114 ) ( 3,479 ) ( 3,426 ) Benefit obligation at end of year 275,586 278,286 39,590 40,315 Change in net plan assets: Fair value of plan assets at beginning of year 242,031 333,764 76,640 99,844 Actual return on plan assets 20,576 ( 69,619 ) 5,518 ( 20,419 ) Employer contribution 7,567 — 76 75 Plan participants' contributions — — 479 566 Benefits paid ( 21,616 ) ( 22,114 ) ( 3,479 ) ( 3,426 ) Fair value of net plan assets at end of year 248,558 242,031 79,234 76,640 Funded status - (under) over $ ( 27,028 ) $ ( 36,255 ) $ 39,644 $ 36,325 Amounts recognized in the Consolidated Balance Sheets at December 31: Noncurrent assets - other $ — $ — $ 39,644 $ 36,325 Noncurrent liabilities - other 27,028 36,255 — — Benefit obligation (liabilities) assets - net amount recognized $ ( 27,028 ) $ ( 36,255 ) $ 39,644 $ 36,325 Amounts recognized in accumulated other comprehensive loss: Actuarial loss (gain) $ 32,273 $ 32,378 $ ( 3,515 ) $ ( 2,923 ) Prior service credit — — ( 115 ) ( 289 ) Total $ 32,273 $ 32,378 $ ( 3,630 ) $ ( 3,212 ) Amounts recognized in regulatory assets or liabilities: Actuarial loss (gain) $ 140,232 $ 141,207 $ ( 1,146 ) $ ( 1,439 ) Prior service credit — — ( 2,619 ) ( 3,796 ) Total $ 140,232 $ 141,207 $ ( 3,765 ) $ ( 5,235 ) MDU Resources Group, Inc. Form 10-K 105 Index Part II Employer contributions and benefits paid in the preceding table include only those amounts contributed directly to, or paid directly from, plan assets. Amounts related to regulated operations are recorded as regulatory assets or liabilities and are expected to be reflected in rates charged to customers over time. For more information on regulatory assets and liabilities, see Note 6. In 2023, the actuarial loss recognized in the benefit obligation was primarily the result of a decrease in the discount rate. In 2022, 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 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. The pension plans all have accumulated benefit obligations in excess of plan assets. The projected benefit obligation, accumulated benefit obligation and fair value of plan assets for these plans at December 31 were as follows: 2023 2022 (In thousands) Projected benefit obligation $ 275,586 $ 278,286 Accumulated benefit obligation $ 275,586 $ 278,286 Fair value of plan assets $ 248,558 $ 242,031 The components of net periodic benefit cost (credit), other than the service cost component, are included in other income on the Consolidated Statements of Income. Prior service credit is amortized on a straight-line basis over the average remaining service period of active participants. These components related to the Company's pension and other postretirement benefit plans for the years ended December 31 were as follows: Pension Benefits Other Postretirement Benefits 2023 2022 2021 2023 2022 2021 Components of net periodic benefit credit: (In thousands) Service cost $ — $ — $ — $ 534 $ 894 $ 1,033 Interest cost 13,521 9,396 8,767 1,956 1,383 1,370 Expected return on assets ( 17,194 ) ( 17,482 ) ( 17,548 ) ( 5,361 ) ( 5,277 ) ( 5,079 ) Amortization of prior service credit — — — ( 1,318 ) ( 1,318 ) ( 1,318 ) Recognized net actuarial loss (gain) 3,093 5,826 7,046 ( 504 ) ( 570 ) ( 111 ) Net periodic benefit credit, including amount capitalized ( 580 ) ( 2,260 ) ( 1,735 ) ( 4,693 ) ( 4,888 ) ( 4,105 ) Less amount capitalized — — — 107 175 150 Net periodic benefit cost credit ( 580 ) ( 2,260 ) ( 1,735 ) ( 4,800 ) ( 5,063 ) ( 4,255 ) Other changes in plan assets and benefit obligations recognized in accumulated comprehensive loss: Net (gain) loss 187 2,369 ( 265 ) ( 604 ) ( 4,141 ) ( 2,811 ) Amortization of actuarial (loss) gain ( 292 ) ( 1,310 ) ( 1,286 ) 108 ( 281 ) ( 135 ) Amortization of prior service credit — — — 78 125 100 Reclassification of postretirement liability adjustment from regulatory asset — 5,343 — — ( 992 ) — Total recognized in accumulated other comprehensive loss ( 105 ) 6,402 ( 1,551 ) ( 418 ) ( 5,289 ) ( 2,846 ) Other changes in plan assets and benefit obligations recognized in regulatory assets or liabilities: Net (gain) loss 1,826 9,757 ( 5,116 ) ( 107 ) 11,920 ( 6,292 ) Amortization of actuarial (loss) gain ( 2,801 ) ( 5,373 ) ( 6,731 ) 304 500 110 Amortization of prior service credit — — — 1,273 1,273 1,298 Reclassification of postretirement liability adjustment from regulatory asset — ( 5,343 ) — — 992 — Total recognized in regulatory assets or liabilities ( 975 ) ( 959 ) ( 11,847 ) 1,470 14,685 ( 4,884 ) Total recognized in net periodic benefit credit, accumulated other comprehensive loss and regulatory assets or liabilities $ ( 1,660 ) $ 3,183 $ ( 15,133 ) $ ( 3,748 ) $ 4,333 $ ( 11,985 ) 106 MDU Resources Group, Inc. Form 10-K Index Part II Weighted average assumptions used to determine benefit obligations at December 31 were as follows: Pension Benefits Other Postretirement Benefits 2023 2022 2023 2022 Discount rate 4.84 % 5.06 % 4.85 % 5.07 % Expected return on plan assets 6.50 % 6.50 % 6.00 % 6.00 % Weighted average assumptions used to determine net periodic benefit cost (credit) for the years ended December 31 were as follows: Pension Benefits Other Postretirement Benefits 2023 2022 2023 2022 Discount rate 5.06 % 2.64 % 5.07 % 2.65 % Expected return on plan assets 6.50 % 6.00 % 6.00 % 5.50 % The expected rate of return on pension plan assets is based on a targeted asset allocation range determined by the funded ratio of the plan. As of December 31, 2023, 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 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. Health care rate assumptions for the Company's other postretirement benefit plans as of December 31 were as follows: 2023 2022 Health care trend rate assumed for next year 6.5 % 6.5 % Health care cost trend rate - ultimate 4.5 % 4.5 % Year in which ultimate trend rate achieved 2033 2032 The Company's other postretirement benefit plans include health care and life insurance benefits for certain retirees. The plans underlying these benefits may require contributions by the retiree depending on such retiree's age and years of service at retirement or the date of retirement. The Company contributes a flat dollar amount to the monthly premiums which is updated annually on January 1. The Company expects to contribute to its defined benefit pension plans in 2024 the minimum funding requirement of $ 3.3 million. The Company expects to contribute approximately $ 22,000 to its postretirement benefit plans in 2024. The following benefit payments, which reflect future service, as appropriate, and expected Medicare Part D subsidies at December 31, 2023, are as follows: Years Pension Benefits Other Postretirement Benefits Expected Medicare Part D Subsidy (In thousands) 2024 $ 22,050 $ 3,498 $ 50 2025 21,980 3,473 44 2026 21,810 3,359 39 2027 21,660 3,265 35 2028 21,320 3,171 29 2029-2033 99,970 14,580 94 Outside investment managers manage the Company's pension and postretirement assets. The Company's investment policy with respect to pension and other postretirement assets is to make investments solely in the interest of the participants and beneficiaries of the plans and for the exclusive purpose of providing benefits accrued and defraying the reasonable expenses of administration. The Company strives to maintain investment diversification to assist in minimizing the risk of large losses. The Company's policy guidelines allow for investment of funds in cash equivalents, fixed-income securities and equity securities. The guidelines prohibit investment in commodities and futures contracts, equity private placement, employer securities, leveraged or derivative securities, options, direct real estate investments, precious metals, venture capital and limited partnerships. The guidelines also prohibit short selling and margin transactions. The Company's practice is to periodically review and rebalance asset categories based on its targeted asset allocation percentage policy. MDU Resources Group, Inc. Form 10-K 107 Index Part II Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the measurement date. The fair value ASC establishes a hierarchy for grouping assets and liabilities, based on the significance of inputs. The estimated fair values of the Company's pension plans' assets are determined using the market approach. The carrying value of the pension plans' Level 2 cash equivalents approximates fair value and is determined using observable inputs in active markets or the net asset value of shares held at year end, which is determined using other observable inputs including pricing from outside sources. The estimated fair value of the pension plans' Level 1 and Level 2 equity securities are based on the closing price reported on the active market on which the individual securities are traded or other known sources including pricing from outside sources. The estimated fair value of the pension plans' Level 1 and Level 2 collective and mutual funds are based on the net asset value of shares held at year end, based on either published market quotations on active markets or other known sources including pricing from outside sources. The estimated fair value of the pension plans' Level 2 corporate and municipal bonds is determined using other observable inputs, including benchmark yields, reported trades, broker/dealer quotes, bids, offers, future cash flows and other reference data. The estimated fair value of the pension plans' Level 1 U.S. Government securities are valued based on quoted prices on an active market. The estimated fair value of the pension plans' Level 2 U.S. Government securities are valued mainly using other observable inputs, including benchmark yields, reported trades, broker/dealer quotes, bids, offers, to be announced prices, future cash flows and other reference data. The estimated fair value of the pension plans' Level 2 pooled separate accounts are determined using observable inputs in active markets or the net asset value of shares held at year end, or other observable inputs. Some of these securities are valued using pricing from outside sources. All investments measured at net asset value in the tables that follow are invested in commingled funds, separate accounts or common collective trusts which do not have publicly quoted prices. The fair value of the commingled funds, separate accounts and common collective trusts are determined based on the net asset value of the underlying investments. The fair value of the underlying investments held by the commingled funds, separate accounts and common collective trusts is generally based on quoted prices in active markets. Though the Company believes the methods used to estimate fair value are consistent with those used by other market participants, the use of other methods or assumptions could result in a different estimate of fair value. The fair value of the Company's pension plans' assets (excluding cash) by class were as follows: Fair Value Measurements at December 31, 2023, Using Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Balance at December 31, 2023 (In thousands) Assets: Cash equivalents $ — $ 7,197 $ — $ 7,197 Equity securities: U.S. companies ( 2 ) — — ( 2 ) Collective and mutual funds (a) 84,761 88,219 — 172,980 U.S. Government securities 30,162 33,141 — 63,303 Investments measured at net asset value (b) — — — 5,080 Total assets measured at fair value $ 114,921 $ 128,557 $ — $ 248,558 (a) Collective and mutual funds invest approximately 51 percent in corporate bonds, 15 percent in common stock of international companies, 11 percent in common stock of large-cap and mid-cap U.S. companies, 7 percent cash and cash equivalents, 7 percent in U.S. Government securities and 9 percent in other investments. (b) 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. 108 MDU Resources Group, Inc. Form 10-K Index Part II Fair Value Measurements at December 31, 2022, Using Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Balance at December 31, 2022 (In thousands) Assets: Cash equivalents $ — $ 7,311 $ — $ 7,311 Equity securities: U.S. companies 6,611 — — 6,611 International companies — 418 — 418 Collective and mutual funds (a) 108,343 29,863 — 138,206 Corporate bonds — 72,809 — 72,809 Municipal bonds — 5,283 — 5,283 U.S. Government securities 2,724 788 — 3,512 Pooled separate accounts (b) — 2,904 — 2,904 Investments measured at net asset value (c) — — — 4,977 Total assets measured at fair value $ 117,678 $ 119,376 $ — $ 242,031 (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 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. 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. The estimated fair value of the other postretirement benefit plans' Level 1 and Level 2 equity securities is based on the closing price reported on the active market on which the individual securities are traded or other known sources including pricing from outside sources . The estimated fair value of the other postretirement benefit plans' Level 2 insurance contract 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. The managed separate accounts are valued based on other observable inputs or corroborated market data. Though the Company believes the methods used to estimate fair value are consistent with those used by other market participants, the use of other methods or assumptions could result in a different estimate of fair value. The fair value of the Company's other postretirement benefit plans' assets (excluding cash) by asset class were as follows: Fair Value Measurements at December 31, 2023, Using Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Balance at December 31, 2023 (In thousands) Assets: Cash equivalents $ — $ 4,562 $ — $ 4,562 Equity securities: U.S. companies 2,369 — — 2,369 Insurance contract (a) — 72,303 — 72,303 Total assets measured at fair value $ 2,369 $ 76,865 $ — $ 79,234 (a) The insurance contract invests approximately 60 percent in corporate bonds, 16 percent in common stock of large-cap U.S. companies, 15 percent in U.S. Government securities, 5 percent in common stock of small-cap U.S. companies and 4 percent in other investments. MDU Resources Group, Inc. Form 10-K 109 Index Part II Fair Value Measurements at December 31, 2022, Using Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Balance at December 31, 2022 (In thousands) Assets: Cash equivalents $ — $ 4,213 $ — $ 4,213 Equity securities: U.S. companies 2,583 — — 2,583 Collective and mutual funds (a) 5 5 — 10 Insurance contract (b) — 69,834 — 69,834 Total assets measured at fair value $ 2,588 $ 74,052 $ — $ 76,640 (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. (b) The insurance contract invests approximately 69 percent in corporate bonds, 14 percent in common stock of large-cap U.S. companies, 13 percent in U.S. Government securities and 4 percent in common stock of small-cap U.S. companies. Nonqualified benefit plans In addition to the qualified defined benefit pension plans reflected in the table at the beginning of this note, the Company also has unfunded, nonqualified defined benefit plans for executive officers and certain key management employees that generally provide for defined benefit payments at age 65 following the employee's retirement or, upon death, to their beneficiaries for a 15-year period. In February 2016, the Company froze the unfunded, nonqualified defined benefit plans to new participants and eliminated benefit increases. Vesting for participants not fully vested was retained. The projected benefit obligation and accumulated benefit obligation for these plans at December 31 were as follows: 2023 2022 (In thousands) Projected benefit obligation $ 57,033 $ 58,683 Accumulated benefit obligation $ 57,033 $ 58,683 The components of net periodic benefit cost are included in other income on the Consolidated Statements of Income. These components related to the Company's nonqualified defined benefit plans for the years ended December 31 were as follows: 2023 2022 2021 (In thousands) Components of net periodic benefit cost: Interest cost 2,740 1,681 1,505 Recognized net actuarial loss 273 911 942 Net periodic benefit cost $ 3,013 $ 2,592 $ 2,447 Weighted average assumptions used at December 31 were as follows: 2023 2022 Benefit obligation discount rate 4.73 % 4.97 % Benefit obligation rate of compensation increase N/A N/A Net periodic benefit cost discount rate 4.97 % 2.40 % Net periodic benefit cost rate of compensation increase N/A N/A The amount of future benefit payments for the unfunded, nonqualified defined benefit plans at December 31, 2023, are expected to aggregate as follows: 2024 2025 2026 2027 2028 2029-2033 (In thousands) Nonqualified benefits $ 5,584 $ 5,726 $ 5,795 $ 5,807 $ 5,481 $ 21,962 110 MDU Resources Group, Inc. Form 10-K Index Part II In 2012, the Company established a nonqualified defined contribution plan for certain key management employees. In 2020, the plan was frozen to new participants and no new Company contributions will be made to the plan after December 31, 2020. Vesting for participants not fully vested was retained. A new nonqualified defined contribution plan was adopted in 2020, effective January 1, 2021, to replace the plan originally established in 2012 with similar provisions. Expenses incurred under these plans for 2023, 2022 and 2021 were $ 5.5 million, $ 2.2 million and $ 1.5 million, respectively. The amount of investments that the Company anticipates using to satisfy obligations under these plans at December 31 was as follows: 2023 2022 (In thousands) Investments Insurance contracts* $ 66,283 $ 77,958 Life insurance** 31,303 31,214 Other 6,409 4,913 Total investments $ 103,995 $ 114,085 * For more information on the insurance contracts, see Note 9. ** Investments of life insurance are carried on plan participants (payable upon the employee's death). Defined contribution plans The Company sponsors a defined contribution plan for eligible employees and the costs incurred under this plan were $ 23.2 million in 2023, $ 18.7 million in 2022 and $ 18.8 million in 2021. Multiemployer plans The Company contributes to a number of MEPPs under the terms of collective-bargaining agreements that cover its union-represented employees. The risks of participating in these multiemployer plans are different from single-employer plans in the following aspects: • Assets contributed to the MEPP by one employer may be used to provide benefits to employees of other participating employers • If a participating employer stops contributing to the plan, the unfunded obligations of the plan may be borne by the remaining participating employers • If the Company chooses to stop participating in some of its MEPPs, the Company may be required to pay those plans an amount based on the underfunded status of the plan, referred to as a withdrawal liability The Company's participation in these plans is outlined in the following table. Unless otherwise noted, the most recent Pension Protection Act zone status available in 2023 and 2022 is for the plan's year-end at December 31, 2022, and December 31, 2021, respectively. The zone status is based on information that the Company received from the plan and is certified by the plan's actuary. Among other factors, plans in the red zone are generally less than 65 percent funded, plans in the yellow zone are between 65 percent and 80 percent funded, and plans in the green zone are at least 80 percent funded. MDU Resources Group, Inc. Form 10-K 111 Index Part II EIN/Pension Plan Number Pension Protection Act Zone Status FIP/RP Status Pending/Implemented Contributions Surcharge Imposed Expiration Date of Collective Bargaining Agreement Pension Fund 2023 2022 2023 2022 2021 (In thousands) Edison Pension Plan 936061681 - 001 Green Green No $ 16,957 $ 18,750 $ 18,331 No 12/31/2026 IBEW Local 212 Pension Trust 316127280 - 001 Green as of 4/30/2022 Green as of 4/30/2021 No 1,350 1,622 1,733 No 6/1/2025 IBEW Local 357 Pension Plan A 886023284 - 001 Green Green No 18,936 12,876 6,485 No 5/31/2024 IBEW Local 82 Pension Plan 316127268 - 001 Green as of 6/30/2023 Green as of 6/30/2022 No 2,149 1,854 1,353 No 12/6/2026 IBEW Local 683 Pension Fund Pension Plan 341442087 - 001 Green Green No 3,986 3,362 1,238 No 5/26/2024 Idaho Plumbers and Pipefitters Pension Plan 826010346 - 001 Green as of 5/31/2023 Green as of 5/31/2022 No 1,690 1,613 1,528 No 3/31/2027 National Electrical Benefit Fund 530181657 - 001 Green Green No 19,040 18,060 14,361 No 12/31/2023 - 12/27/2027 * Pension and Retirement Plan of Plumbers and Pipefitters Local 525 886003864 - 001 Green as of 6/30/2022 Green as of 6/30/2022 No 8,020 6,304 4,345 No 9/30/2024 Sheet Metal Workers Pension Plan of Southern CA, AZ, and NV 956052257 - 001 Green Green No 3,631 3,400 2,615 No 6/30/2024 Other funds 21,289 20,437 17,930 Total contributions $ 97,048 $ 88,278 $ 69,919 * Plan includes contributions required by collective bargaining agreements which have expired but contain provisions automatically renewing their terms in the absence of a subsequent negotiated agreement. The Company was listed in the plans' Forms 5500 as providing more than 5 percent of the total contributions for the following plans and plan years: Pension Fund Year Contributions to Plan Exceeded More Than 5 Percent of Total Contributions (as of December 31 of the Plan's Year-End) Edison Pension Plan 2022 and 2021 Eighth District Electrical Pension Fund 2022 Electrical Workers Local No. 26 Pension Fund 2022 IBEW Local 82 Pension Plan 2022 and 2021 IBEW Local 124 Pension Trust Fund 2022 and 2021 IBEW Local 212 Pension Trust Fund 2022 and 2021 IBEW Local 357 Pension Plan A 2021 IBEW Local 648 Pension Plan 2022 and 2021 IBEW Local 683 Pension Fund Pension Plan 2022 and 2021 Idaho Plumbers and Pipefitters Pension Plan 2022 and 2021 National Electrical Benefit Fund 2022 Pension and Retirement Plan of Plumbers and Pipefitters Local 525 2022 and 2021 Sheet Metal Workers Pension Plan of Southern CA, AZ, and NV 2022 Western States Insulators and Allied Workers' Pension Plan 2022 The Company also contributes to a number of multiemployer other postretirement plans under the terms of collective-bargaining agreements that cover its union-represented employees. These plans provide benefits such as health insurance, disability insurance and life insurance to retired union employees. Many of the multiemployer other postretirement plans are combined with active multiemployer health and welfare plans. The Company's total contributions to its multiemployer other postretirement plans, which also includes contributions to active multiemployer health and welfare plans, were $ 86.6 million, $ 79.1 million and $ 64.4 million for the years ended December 31, 2023, 2022 and 2021, respectively. Amounts contributed in 2023, 2022 and 2021 to defined contribution multiemployer plans were $ 73.3 million, $ 67.6 million and $ 54.6 million, respectively. 112 MDU Resources Group, Inc. Form 10-K Index Part II Note 20 - Jointly Owned Facilities The consolidated financial statements include the Company's ownership interests in three coal-fired electric generating facilities (Big Stone Station, Coyote Station and Wygen III) and two major transmission lines (BSSE and JETx). Each owner of the jointly owned facilities is responsible for financing its investment. The Company's share of the jointly owned facilities operating expenses was reflected in the appropriate categories of operating expenses (electric fuel and purchased power; operation and maintenance; and taxes, other than income) in the Consolidated Statements of Income. At December 31, the Company's share of the cost of utility plant in service, construction work in progress and related accumulated depreciation for the jointly owned facilities was as follows: Ownership Percentage 2023 2022 (In thousands) Big Stone Station: 22.7 % Utility plant in service $ 159,437 $ 157,699 Construction work in progress 197 231 Less accumulated depreciation 52,264 48,590 $ 107,370 $ 109,340 BSSE: 50.0 % Utility plant in service $ 107,260 $ 107,260 Construction work in progress — — Less accumulated depreciation 8,111 6,182 $ 99,149 $ 101,078 Coyote Station: 25.0 % Utility plant in service $ 160,208 $ 158,274 Construction work in progress 159 1,807 Less accumulated depreciation 113,187 111,203 $ 47,180 $ 48,878 JETx: 50.0 % Utility plant in service $ — $ — Construction work in progress 1,372 — Less accumulated depreciation — — $ 1,372 $ — Wygen III: 25.0 % Utility plant in service $ 66,852 $ 66,238 Construction work in progress 127 273 Less accumulated depreciation 13,728 12,477 $ 53,251 $ 54,034 MDU Resources Group, Inc. Form 10-K 113 Index Part II Note 21 - Regulatory Matters The Company regularly reviews the need for electric and natural gas rate changes in each of the jurisdictions in which service is provided. The Company files for rate adjustments to seek recovery of operating costs and capital investments, as well as reasonable returns as allowed by regulators. Certain regulatory proceedings and cases may also contain recurring mechanisms that can have an annual true-up. Examples of these recurring mechanisms include: infrastructure riders, transmission trackers, renewable resource cost adjustment riders, as well as weather normalization and decoupling mechanisms. The following paragraphs summarize the Company's significant open regulatory proceedings and cases by jurisdiction. 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. NDPSC On November 1, 2023, Montana-Dakota filed a request with the NDPSC for a natural gas general rate increase of approximately $ 11.6 million annually or 7.5 percent above current rates. The requested increase is primarily to recover investments in system upgrades and pipeline replacement projects enhancing the reliability, safety and integrity of the natural gas system, as well as increased costs to operate and maintain that system. On December 13, 2023, the NDPSC approved an interim rate increase of approximately $ 10.1 million annually or 6.5 percent above current rates, subject to refund, for service rendered on and after January 1, 2024. This matter is pending before the NDPSC. 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 October 31, 2023, Montana-Dakota filed an annual update to its renewable resource cost adjustment requesting to recover a revenue requirement of approximately $ 21.0 million annually, which was revised to $ 19.5 million on January 29, 2024. The update reflects an increase of approximately $ 4.2 million from the revenues currently included in rates. The NDPSC approved the renewable resource cost adjustment on February 7, 2024, with rates effective March 1, 2024. SDPUC On August 15, 2023, Montana-Dakota filed a request with the SDPUC for an electric general rate increase of approximately $ 3.0 million annually or 17.3 percent above current rates. The requested increase is primarily to recover investments in system upgrades and pipeline replacement projects enhancing the reliability, safety and integrity of the natural gas system, as well as increased costs to operate and maintain that system. On January 26, 2024, Montana-Dakota filed a notice of intent to implement interim rates of $ 2.7 million annually or 15.4 percent above current rates, which reflects the removal of Heskett Unit 4 due to the project delay caused by unforeseen operational setbacks. The interim rates, subject to refund, will be effective March 1, 2024. This matter is pending before the SDPUC. On August 15, 2023, Montana-Dakota filed a request with the SDPUC for a natural gas general rate increase of approximately $ 7.4 million annually or 11.2 percent above current rates. The requested increase is primarily to recover investments and the associated depreciation, operation and maintenance expenses and taxes associated with the increased investment. On January 26, 2024, Montana-Dakota filed a notice of intent to implement interim rates, subject to refund, effective March 1, 2024. This matter is pending before the SDPUC. FERC 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. In August 2023, the Company reached a rate case settlement agreement with its customers and FERC staff and the agreed-upon rates were placed into effect as of August 1, 2023. The settlement agreement did not include a Greenhouse Gas Cost Recovery Mechanism. On October 17, 2023, the Administrative Law Judge certified the Company's rate case settlement agreement to the FERC for final approval. On November 27, 2023, the request was approved by FERC. On August 31, 2023, Montana-Dakota filed an update to its transmission formula rate under the MISO tariff for its multi-value project and network upgrade charges for $ 15.2 million, which was updated to $ 15.4 million on November 16, 2023. Rates were effective January 1, 2024. 114 MDU Resources Group, Inc. Form 10-K Index Part II Note 22 - Commitments and Contingencies The Company is party to claims and lawsuits arising out of its business and that of its consolidated subsidiaries, which may include, but are not limited to, matters involving property damage, personal injury, and environmental, contractual, statutory and regulatory obligations. The Company accrues a liability for those contingencies when the incurrence of a loss is probable and the amount can be reasonably estimated. If a range of amounts can be reasonably estimated and no amount within the range is a better estimate than any other amount, then the minimum of the range is accrued. The Company does not accrue liabilities when the likelihood that the liability has been incurred is probable but the amount cannot be reasonably estimated or when the liability is believed to be only reasonably possible or remote. For contingencies where an unfavorable outcome is probable or reasonably possible and which are material, the Company discloses the nature of the contingency and, in some circumstances, an estimate of the possible loss. Accruals are based on the best information available, but in certain situations management is unable to estimate an amount or range of a reasonably possible loss including, but not limited to when: (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, 2023 and 2022, the Company accrued liabilities which have not been discounted of $ 22.5 million and $ 31.9 million, respectively. At December 31, 2023 and 2022, the Company also recorded corresponding insurance receivables of $ 202,000 and $ 10.0 million, respectively, and regulatory assets of $ 21.6 million and $ 20.9 million, respectively, related to the accrued liabilities. 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. The Company will continue to monitor each matter and adjust accruals as might be warranted based on new information and further developments. Management believes that the outcomes with respect to probable and reasonably possible losses in excess of the amounts accrued, net of insurance recoveries, while uncertain, either cannot be estimated or will not have a material effect upon the Company's financial position, results of operations or cash flows. Unless otherwise required by GAAP, legal costs are expensed as they are incurred. Environmental matters Manufactured Gas Plant Sites Claims have been made against Cascade for cleanup of environmental contamination at manufactured gas plant sites operated by Cascade's predecessors and a similar claim has been made against Montana-Dakota for a site operated by Montana-Dakota and its predecessors. Any accruals related to these claims are reflected in regulatory assets. For more information, see Note 6. Demand has been made of Montana-Dakota to participate in investigation and remediation of environmental contamination at a site in Missoula, Montana. The site operated as a former manufactured gas plant from approximately 1907 to 1938 when it was converted to a butane-air plant that operated until 1956. Montana-Dakota or its predecessors owned or controlled the site for a period of the time it operated as a manufactured gas plant and Montana-Dakota operated the butane-air plant from 1940 to 1951, at which time it sold the plant. There are no documented wastes or by-products resulting from the mixing or distribution of butane-air gas. Preliminary assessment of a portion of the site provided a recommended remedial alternative for that portion of approximately $ 560,000 . 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, which was started in 2020 and is still underway, is estimated to cost approximately $ 1.8 million. 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. Montana-Dakota has accrued costs of $ 610,000 for the remediation and investigation costs, and has incurred costs of $ 1.0 million as of December 31, 2023. Montana-Dakota received notice from a prior insurance carrier that it will participate in payment of defense costs incurred in relation to the claim. 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. 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. A preliminary investigation has found soil and groundwater at the site contain impacts requiring further investigation and cleanup. The EPA conducted a Targeted Brownfields Assessment of the site and released a report summarizing the results of that assessment in August 2009. The assessment confirmed that impacts have affected soil and groundwater at the site, as well as sediments in the adjacent Port Washington Narrows. In April 2010, the Washington DOE issued notice it considered Cascade a PRP for hazardous substances at the site. In May 2012, the EPA added the site to the National Priorities List of Superfund sites. Cascade entered into an administrative settlement agreement and consent order with the EPA regarding the scope and schedule for a remedial investigation and feasibility study for the site. Current estimates for the cost to complete the remedial investigation and feasibility study are approximately $ 13.7 million of which $ 10.6 million has been incurred as of December 31, 2023. Based on the site investigation, preliminary remediation alternative costs were provided by consultants in August 2020. The preliminary information received through the completion of the data report allowed for the projection of possible costs for a variety of site configurations, remedial measures and potential natural resource damage claims of between $ 13.6 million and $ 71.5 million. At December 31, 2023, Cascade has accrued $ 3.2 million for the remedial investigation and feasibility study, as well as $ 17.5 million for remediation of this site. The accrual for remediation costs will be reviewed and adjusted, if necessary, after the completion of the feasibility study. In April 2010, Cascade filed a petition with the WUTC for authority to defer the costs incurred in relation to the environmental remediation of this site. The WUTC approved the petition in September 2010, subject to conditions set forth in the order. MDU Resources Group, Inc. Form 10-K 115 Index Part II A claim was made against Cascade for impacts at a site in Bellingham, Washington. Cascade received notice from a party in May 2008 that Cascade may be a PRP, along with other parties, for impacts from a manufactured gas plant owned by Cascade and its predecessor from about 1946 to 1962. Other PRPs reached an agreed order and work plan with the Washington DOE for completion of a remedial investigation and feasibility study for the site. A feasibility study prepared for one of the PRPs in March 2018 identifies five cleanup action alternatives for the site with estimated costs ranging from $ 8.0 million to $ 20.4 million with a selected preferred alternative having an estimated total cost of $ 9.3 million. The other PRPs developed a cleanup action plan and completed public review in 2020. The development of the remediation design is underway, with the Pre-Remedial Design Investigation Data Report submitted to Washington Ecology on June 28, 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. The plant manufactured gas from coal between approximately 1890 and 1946. In 1946, shortly after Cascade's predecessor acquired the plant, the plant converted to a propane-air gas facility. There are no documented wastes or by-products resulting from the mixing or distribution of propane-air gas. Cascade has recorded an accrual for this site for an amount that is not material. The Company has received notices from and entered into agreements with certain of its insurance carriers that they will participate in the defense for certain contamination claims subject to full and complete reservations of rights and defenses to insurance coverage. 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. Purchase commitments The Company has entered into various commitments largely consisting of contracts for natural gas and coal supply; purchased power; natural gas transportation and storage; and information technology. Certain of these contracts are subject to variability in volume and price. The commitment terms vary in length, up to 36 years. The commitments under these contracts as of December 31, 2023, were: 2024 2025 2026 2027 2028 Thereafter (In thousands) Purchase commitments $ 674,932 $ 298,785 $ 167,915 $ 124,893 $ 119,600 $ 670,311 These commitments were not reflected in the Company's consolidated financial statements. Amounts purchased under various commitments for the years ended December 31, 2023, 2022 and 2021, were $ 1.0 billion, $ 870.6 million and $ 711.9 million, respectively. Guarantees Certain subsidiaries of the Company have outstanding guarantees to third parties that guarantee the performance of other subsidiaries of the Company. These guarantees are related to construction contracts, insurance deductibles and loss limits, and certain other guarantees. At December 31, 2023, the fixed maximum amounts guaranteed under these agreements aggregated $ 341.4 million. Certain of the guarantees also have no fixed maximum amounts specified. The amounts of scheduled expiration of the maximum amounts guaranteed under these agreements aggregate to $ 80.9 million in 2024; $ 255.1 million in 2025; $ 4.1 million in 2026; $ 1.0 million in 2027; $ 300,000 in 2028; and $ 0 thereafter. There were no amounts outstanding under the previously mentioned guarantees at December 31, 2023. 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. The Company and certain subsidiaries have outstanding letters of credit to third parties related to insurance policies and other agreements, some of which are guaranteed by other subsidiaries of the Company. At December 31, 2023, the fixed maximum amounts guaranteed under these letters of credit aggregated $ 33.9 million. The amounts of scheduled expiration of the maximum amounts guaranteed under these letters of credit aggregate to $ 33.9 million in 2024. There were no amounts outstanding under the previously mentioned letters of credit at December 31, 2023. In the event of default under these letter of credit obligations, the Company or subsidiary guaranteeing the letter of credit would be obligated for reimbursement of payments made under the letter of credit. In addition, Centennial and MDU Construction Services have issued guarantees to third parties related to the routine purchase of maintenance items, materials and lease obligations for which no fixed maximum amounts have been specified. These guarantees have no scheduled maturity date. In the event a subsidiary of the Company defaults under these obligations, Centennial or MDU Construction Services would be required to make payments under these guarantees. Any amounts outstanding by subsidiaries of the Company were reflected on the Consolidated Balance Sheet at December 31, 2023. In the normal course of business, Centennial has surety bonds related to construction contracts and reclamation obligations of its subsidiaries. In the event a subsidiary of Centennial does not fulfill a bonded obligation, Centennial would be responsible to the surety bond company for completion of the bonded contract or obligation. A large portion of the surety bonds is expected to expire within the next 12 months; however, Centennial will likely continue to enter into surety bonds for its subsidiaries in the future. At December 31, 2023, approximately $ 313.0 million of surety bonds were outstanding, which were not reflected on the Consolidated Balance Sheet. 116 MDU Resources Group, Inc. Form 10-K Index Part II 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. Fuel Contract Coyote Station entered into a coal supply agreement with Coyote Creek that provides for the purchase of coal necessary to supply the coal requirements of the Coyote Station for the period May 2016 through December 2040. Coal purchased under the coal supply agreement is reflected in inventories on the Consolidated Balance Sheets and is recovered from customers as a component of electric fuel and purchased power. The coal supply agreement creates a variable interest in Coyote Creek due to the transfer of all operating and economic risk to the Coyote Station owners, as the agreement is structured so that the price of the coal will cover all costs of operations, as well as future reclamation costs. The Coyote Station owners are also providing a guarantee of the value of the assets of Coyote Creek as they would be required to buy the assets at book value should they terminate the contract prior to the end of the contract term and are providing a guarantee of the value of the equity of Coyote Creek in that they are required to buy the entity at the end of the contract term at equity value. Although the Company has determined that Coyote Creek is a VIE, the Company has concluded that it is not the primary beneficiary of Coyote Creek because the authority to direct the activities of the entity is shared by the four unrelated owners of the Coyote Station, with no primary beneficiary existing. As a result, Coyote Creek is not required to be consolidated in the Company's financial statements. At December 31, 2023, 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 $ 27.6 million. Note 23 - Subsequent Events On January 19, 2024, Cascade made the final $ 50.0 million repayment on the $ 150.0 million term loan agreement which Cascade had entered into on January 20, 2023, with a SOFR-based variable interest rate and a maturity date of January 19, 2024. On January 19, 2024, Intermountain made the final $ 45.0 million repayment on the $ 125.0 million term loan agreement which Intermountain had entered into on January 20, 2023, with a SOFR-based variable interest rate and a maturity date of January 19, 2024. MDU Resources Group, Inc. Form 10-K 117 Index Part II Definitions The following abbreviations and acronyms used in Notes to Consolidated Financial Statements are defined below: Abbreviation or Acronym AFUDC Allowance for funds used during construction ASC FASB Accounting Standards Codification ASU FASB Accounting Standards Update Big Stone Station 475-MW coal-fired electric generating facility near Big Stone City, South Dakota (22.7 percent ownership) BSSE 345-kV transmission line from Ellendale, North Dakota, to Big Stone City, South Dakota (50 percent ownership) Cascade Cascade Natural Gas Corporation, an indirect wholly owned subsidiary of MDU Energy Capital Centennial CEHI, LLC, a direct wholly owned subsidiary of the Company, formally known as Centennial Energy Holdings, Inc. prior to the separation of Knife River from the Company. References to Centennial's historical business and operations refer to the business and operations of Centennial Energy Holdings, Inc. Centennial Capital Centennial Holdings Capital LLC, a direct wholly owned subsidiary of Centennial Company MDU Resources Group, Inc. Coyote Creek Coyote Creek Mining Company, LLC, a subsidiary of The North American Coal Corporation Coyote Station 427-MW coal-fired electric generating facility near Beulah, North Dakota (25 percent ownership) EBITDA Earnings before interest, taxes, depreciation and amortization EIN Employer Identification Number EPA United States Environmental Protection Agency FASB Financial Accounting Standards Board FERC Federal Energy Regulatory Commission Fidelity Fidelity Exploration & Production Company, a direct wholly owned subsidiary of WBI Holdings (previously referred to as the Company's exploration and production segment) FIP Funding improvement plan GAAP Accounting principles generally accepted in the United States of America Great Plains Great Plains Natural Gas Co., a public utility division of Montana-Dakota IBEW International Brotherhood of Electrical Workers Intermountain Intermountain Gas Company, an indirect wholly owned subsidiary of MDU Energy Capital IPUC Idaho Public Utilities Commission IRS Internal Revenue Service JETx 345-kV transmission line from Jamestown, North Dakota to Ellendale, North Dakota (50 percent ownership) Knife River Established as Knife River Corporation prior to the separation from the Company, a direct wholly owned subsidiary of Centennial. Knife River refers to Knife River Corporation, during the period prior to separation, now known as "KRC Materials, Inc." Following the separation Knife River refers to Knife River Holding Company, now known as Knife River Corporation. K-Plan Company's 401(k) Retirement Plan LIBOR London Inter-bank Offered Rate MDU Construction Services MDU Construction Services Group, Inc., a direct wholly owned subsidiary of Centennial MDU Energy Capital MDU Energy Capital, LLC, a direct wholly owned subsidiary of the Company MEPP Multiemployer pension plan MISO Midcontinent Independent System Operator, Inc., the organization that provides open-access transmission services and monitors the high-voltage transmission system in the Midwest United States and Manitoba, Canada and a southern United States region which includes much of Arkansas, Mississippi and Louisiana MNPUC Minnesota Public Utilities Commission Montana-Dakota Montana-Dakota Utilities Co. a direct wholly owned subsidiary of MDU Energy Capital MTPSC Montana Public Service Commission MW Megawatt NDPSC North Dakota Public Service Commission PRP Potentially Responsible Party RP Rehabilitation plan SDPUC South Dakota Public Utilities Commission 118 MDU Resources Group, Inc. Form 10-K Index Part II SEC United States Securities and Exchange Commission Securities Act Securities Act of 1933, as amended SOFR Secured Overnight Financing Rate VIE Variable interest entity Washington DOE Washington State Department of Ecology WBI Energy Transmission WBI Energy Transmission, Inc., an indirect wholly owned subsidiary of WBI Holdings WBI Holdings WBI Holdings, Inc., a direct wholly owned subsidiary of Centennial WUTC Washington Utilities and Transportation Commission Wygen III 100-MW coal-fired electric generating facility near Gillette, Wyoming (25 percent ownership) MDU Resources Group, Inc. Form 10-K 119 Index Part II Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure None.