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, 2024. 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, 2024. The effectiveness of the Company's internal control over financial reporting as of December 31, 2024, 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 Chief Financial Officer MDU Resources Group, Inc. Form 10-K 57 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, 2024 and 2023, the related consolidated statements of income, comprehensive income, equity, and cash flows for each of the three years in the period ended December 31, 2024, and the related notes and the schedule 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, 2024 and 2023, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2024, 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, 2024, 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 20, 2025, 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. Regulatory Matters—Impact of Rate Regulation on the Financial Statements—Refer to Notes 2, 6 and 20 to the financial statements Critical Audit Matter Description 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, natural gas distribution and pipeline companies. 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, 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 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. 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 58 MDU Resources Group, Inc. Form 10-K Index Part II 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 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 the effectiveness of 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, 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. Operating Revenues of Discontinued Operations - Construction Contracts with Customers—Refer to Note 3 to the financial statements Critical Audit Matter Description The Company recognized certain construction contract revenue over time using an input method based on the ratio of incurred costs to total estimated costs of the performance obligation (the cost-to-cost method) when this method was determined to best depict the transfer of the related performance obligation to the customer. This method depends largely on the ability of management to make reasonably dependable estimates related to the extent of progress toward completion of the contract and the contract’s transaction price, which estimates involve management’s judgment. 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 estimated variable consideration at the most likely amount it expects to be entitled and included those estimated amounts in the transaction price to the extent it was probable that a significant reversal of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration was resolved. Given the judgments necessary to account for the Company’s construction contracts including the use of estimates to determine the transaction price and total costs 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. How the Critical Audit Matter Was Addressed in the Audit Our audit procedures related to management’s estimates of the transaction price and total costs for the performance obligations used to recognize revenue for construction contracts included the following, among others: • 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. MDU Resources Group, Inc. Form 10-K 59 Index Part II • 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 inspected the progress toward 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. – Confirmed the transaction prices with the customer. – 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 occurrence of the costs incurred to date for the performance obligation. – We evaluated the reasonableness of the estimated variable consideration in the contract revenue by evaluating the information supporting management’s judgement as to their estimate of the most likely amount it expects to receive without a significant reversal of cumulative revenue occurring when the uncertainty associated with the variable consideration is resolved. – Evaluated the estimates of total cost for the performance obligation by: – 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/or supplier contracts for certain selected 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 for certain selected contracts. • 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. /s/ Deloitte & Touche LLP Minneapolis, Minnesota February 20, 2025 We have served as the Company's auditor since 2002. 60 MDU Resources Group, Inc. Form 10-K 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, 2024, 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, 2024, 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, 2024, of the Company and our report dated February 20, 2025, 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 20, 2025 MDU Resources Group, Inc. Form 10-K 61 Index Part II Consolidated Statements of Income Years ended December 31, 2024 2023 2022 (In thousands, except per share amounts) Operating revenues $ 1,757,978 $ 1,803,352 $ 1,747,298 Operating expenses: Purchased natural gas sold 630,403 742,965 757,883 Electric fuel and purchased power 141,148 134,779 119,405 Operation and maintenance 414,491 407,081 379,951 Depreciation and amortization 200,078 190,450 188,560 Taxes, other than income 106,216 103,133 100,629 Total operating expenses 1,492,336 1,578,408 1,546,428 Operating income 265,642 224,944 200,870 Realized gain on tax-free exchange of the retained shares in Knife River — 186,556 — Other income 41,367 33,454 3,260 Interest expense 108,347 104,624 80,683 Income before income taxes 198,662 340,330 123,447 Income taxes 17,589 10,213 6,195 Income from continuing operations 181,073 330,117 117,252 Discontinued operations, net of tax 100,035 84,590 250,237 Net income $ 281,108 $ 414,707 $ 367,489 Earnings per share - basic: Income from continuing operations $ .89 $ 1.62 $ .58 Discontinued operations, net of tax .49 .42 1.23 Earnings per share - basic $ 1.38 $ 2.04 $ 1.81 Earnings per share - diluted: Income from continuing operations $ .88 $ 1.62 $ .58 Discontinued operations, net of tax .49 .41 1.23 Earnings per share - diluted $ 1.37 $ 2.03 $ 1.81 Weighted average common shares outstanding - basic 203,867 203,640 203,358 Weighted average common shares outstanding - diluted 204,653 203,938 203,462 The accompanying notes are an integral part of these consolidated financial statements. 62 MDU Resources Group, Inc. Form 10-K Index Part II Consolidated Statements of Comprehensive Income Years ended December 31, 2024 2023 2022 (In thousands) Net income $ 281,108 $ 414,707 $ 367,489 Other comprehensive income (loss): Reclassification adjustment for loss on derivative instruments included in net income, net of tax of $ 0 , $ 15 and $ 177 in 2024, 2023 and 2022, respectively — 81 413 Postretirement liability adjustment: Postretirement liability gains (losses) arising during the period, net of tax of $ 360 , $( 201 ) and $ 3,965 in 2024, 2023 and 2022, respectively 1,049 ( 646 ) 12,007 Amortization of postretirement liability losses included in net periodic benefit credit, net of tax of $ 145 , $ 78 and $ 597 in 2024, 2023 and 2022, respectively 432 242 1,819 Reclassification of postretirement liability adjustment from regulatory asset, net of tax of $ 0 , $ 0 and $( 1,086 ) in 2024, 2023 and 2022, respectively — — ( 3,265 ) Postretirement liability adjustment 1,481 ( 404 ) 10,561 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 $ 23 , $ 46 and $( 177 ) in 2024, 2023 and 2022, respectively 85 173 ( 667 ) Reclassification adjustment for loss on available-for-sale investments included in net income, net of tax of $ 5 , $ 11 and $ 31 in 2024, 2023 and 2022, respectively 20 43 114 Net unrealized gain (loss) on available-for-sale investments 105 216 ( 553 ) Other comprehensive income (loss) 1,586 ( 107 ) 10,421 Comprehensive income attributable to common stockholders $ 282,694 $ 414,600 $ 377,910 The accompanying notes are an integral part of these consolidated financial statements. MDU Resources Group, Inc. Form 10-K 63 Index Part II Consolidated Balance Sheets December 31, 2024 2023 Assets (In thousands, except shares and per share amounts) Current assets: Cash, cash equivalents and restricted cash $ 66,904 $ 60,473 Receivables, net 274,303 250,153 Current regulatory assets 215,436 172,492 Inventories 44,940 44,684 Prepayments and other current assets 64,676 66,431 Current assets of discontinued operations — 769,490 Total current assets 666,259 1,363,723 Noncurrent assets: Property, plant and equipment 7,554,063 7,081,267 Less accumulated depreciation and amortization 2,209,771 2,076,375 Net property, plant and equipment 5,344,292 5,004,892 Goodwill 345,736 345,736 Regulatory assets 322,350 447,099 Investments 115,459 112,475 Other 244,722 211,369 Noncurrent assets of discontinued operations — 347,865 Total noncurrent assets 6,372,559 6,469,436 Total assets $ 7,038,818 $ 7,833,159 Liabilities and Stockholders' Equity Current liabilities: Short-term borrowings $ — $ 95,000 Long-term debt due within one year 161,700 61,319 Accounts payable 150,070 159,975 Regulatory liabilities due within one year 137,167 70,761 Taxes payable 43,372 49,553 Dividends payable 26,511 25,461 Accrued compensation 35,264 40,792 Other accrued liabilities 124,514 129,592 Current liabilities of discontinued operations — 443,280 Total current liabilities 678,598 1,075,733 Noncurrent liabilities: Long-term debt 2,130,910 2,104,904 Deferred income taxes 441,320 452,336 Regulatory liabilities 459,170 521,050 Asset retirement obligations 406,351 384,371 Other 231,895 209,882 Noncurrent liabilities of discontinued operations — 179,650 Total noncurrent liabilities 3,669,646 3,852,193 Commitments and contingencies Stockholders' equity: Common stock Authorized - 500,000,000 shares, $ 1.00 par value Shares issued - 203,934,578 at December 31, 2024 and 203,689,090 at December 31, 2023 203,935 203,689 Other paid-in capital 1,473,738 1,466,235 Retained earnings 1,029,699 1,253,693 Accumulated other comprehensive loss ( 16,798 ) ( 18,384 ) Total stockholders' equity 2,690,574 2,905,233 Total liabilities and stockholders' equity $ 7,038,818 $ 7,833,159 The accompanying notes are an integral part of these consolidated financial statements. 64 MDU Resources Group, Inc. Form 10-K Index Part II Consolidated Statements of Equity Years ended December 31, 2024, 2023 and 2022 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, 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 Net income — — — 281,108 — — — 281,108 Other comprehensive income — — — — 1,586 — — 1,586 Dividends declared on common stock — — — ( 104,786 ) — — — ( 104,786 ) Employee stock-based compensation — — 9,572 — — — — 9,572 Issuance of common stock upon vesting of stock-based compensation, net of shares used for tax withholdings 199,147 199 ( 2,822 ) — — — — ( 2,623 ) Separation of Everus — — — ( 400,316 ) — — — ( 400,316 ) Issuance of common stock 46,341 47 753 — — — — 800 At December 31, 2024 203,934,578 $ 203,935 $ 1,473,738 $ 1,029,699 $ ( 16,798 ) — $ — $ 2,690,574 The accompanying notes are an integral part of these consolidated financial statements. MDU Resources Group, Inc. Form 10-K 65 Index Part II Consolidated Statements of Cash Flows Years ended December 31, 2024 2023 2022 (In thousands) Operating activities: Net income $ 281,108 $ 414,707 $ 367,489 Income from discontinued operations, net of tax 100,035 84,590 250,237 Income from continuing operations 181,073 330,117 117,252 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 200,078 190,450 188,560 Deferred income taxes ( 16,078 ) ( 1,309 ) 20,187 Provision for credit losses 6,558 7,422 5,409 Amortization of debt issuance costs 1,828 1,013 885 Employee stock-based compensation costs 8,423 5,505 7,913 Pension and postretirement benefit plan net periodic benefit credit ( 3,837 ) ( 5,380 ) ( 7,323 ) Unrealized (gains) losses on investments ( 5,942 ) ( 7,431 ) 10,119 (Gains) losses on sales of assets ( 857 ) ( 347 ) 15 Gain on tax-free exchange of the retained shares in Knife River — ( 186,556 ) — Changes in current assets and liabilities, net of acquisitions: Receivables ( 30,310 ) 79,111 ( 91,193 ) Inventories 246 ( 21,729 ) 243 Other current assets 80,977 ( 48,492 ) 14,522 Accounts payable ( 443 ) ( 87,209 ) 84,547 Other current liabilities ( 5,252 ) 73,365 ( 26,873 ) Pension and postretirement benefit plan contributions ( 3,000 ) ( 7,643 ) ( 81 ) Other noncurrent changes ( 1,651 ) ( 15,554 ) ( 2,567 ) Net cash provided by continuing operations 411,813 305,333 321,615 Net cash provided by discontinued operations 90,505 27,294 188,449 Net cash provided by operating activities 502,318 332,627 510,064 Investing activities: Capital expenditures ( 522,824 ) ( 484,136 ) ( 442,582 ) Net proceeds from sale or disposition of property 691 260 3 Cost of removal, net of salvage value ( 5,539 ) 1,170 ( 11,779 ) Investments ( 5,155 ) ( 2,423 ) ( 2,571 ) Proceeds from investment cost basis withdrawal 9,000 20,000 — Net cash used in continuing operations ( 523,827 ) ( 465,129 ) ( 456,929 ) Net cash used in discontinued operations ( 28,858 ) ( 75,662 ) ( 181,952 ) Net cash used in investing activities ( 552,685 ) ( 540,791 ) ( 638,881 ) Financing activities: Issuance of short-term borrowings — 810,000 11,500 Repayment of short-term borrowings ( 95,000 ) ( 433,901 ) — Issuance of long-term debt 308,600 594,700 214,969 Repayment of long-term debt ( 182,135 ) ( 568,883 ) ( 38,764 ) Debt issuance costs ( 2,456 ) ( 2,521 ) ( 1,129 ) Costs of issuance of common stock ( 50 ) — ( 150 ) Dividends paid ( 102,939 ) ( 161,316 ) ( 176,915 ) Repurchase of common stock — ( 4,811 ) ( 7,399 ) Tax withholding on stock-based compensation ( 2,623 ) ( 3,040 ) ( 4,904 ) Net cash (used in) provided by continuing operations ( 76,603 ) 230,228 ( 2,792 ) Net cash provided by (used in) discontinued operations 116,899 ( 25,606 ) 157,965 Net cash provided by financing activities 40,296 204,622 155,173 (Decrease) increase in cash, cash equivalents and restricted cash ( 10,071 ) ( 3,542 ) 26,356 Cash, cash equivalents and restricted cash - beginning of year 76,975 80,517 54,161 Cash, cash equivalents and restricted cash - end of year * $ 66,904 $ 76,975 $ 80,517 *Includes cash of discontinued operations of $ 16.5 million and $ 9.7 million for the years ended December 31, 2023 and 2022, respectively. The accompanying notes are an integral part of these consolidated financial statements. 66 MDU Resources Group, Inc. Form 10-K Index Part II Notes to Consolidated Financial Statements Note 1 - Basis of Presentation The consolidated financial statements of the Company include the accounts of the following businesses: electric, natural gas distribution, pipeline and other. For further descriptions of the Company's businesses, see Note 17. On May 31, 2023, the Company completed the separation of Knife River, formerly the construction materials and contracting segment, resulting in Knife River becoming an independent, publicly-traded company. 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 were 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, except for cash received in lieu of fractional shares. On October 31, 2024, the Company completed the separation of Everus, its construction services business, resulting in Everus becoming an independent, publicly-traded company. The Company's board of directors approved the distribution of all the outstanding shares of Everus common stock to the Company's stockholders. Stockholders of the Company received one share of Everus common stock for every four shares of the Company's common stock held as of the close of business on October 21, 2024, the record date for the distribution. The separation of Everus was a tax-free spinoff transaction to the Company's stockholders for U.S. federal income tax purposes, except for cash received in lieu of fractional shares. 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 and Everus as discontinued operations, other than certain corporate overhead costs of the Company historically allocated to Knife River and Everus, 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 and Everus separations. 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. For more information on discontinued operations, see Note 3. Additionally, certain amounts recorded in prior year financial statements have been reclassified to conform to the current year presentation. The Company has reclassified $ 26.9 million and $ 27.4 million of transmission-related expenses from operation and maintenance to electric fuel and purchased power for the years ended December 31, 2023 and 2022, respectively, in the Consolidated Statements of Income. These transmission-related expenses are an integral component of the cost of electricity sold to customers and therefore, more appropriately reflected in electric fuel and purchased power than operation and maintenance expense. These reclassifications had no effect on previously reported results of operations or cash flows. Management has also evaluated the impact of events occurring after December 31, 2024, up to the date of issuance of these consolidated financial statements on February 20, 2025, 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 regulated operations in accordance with GAAP. For more information on intercompany revenues, see Note 17. 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 19 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. MDU Resources Group, Inc. Form 10-K 67 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 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 did not have a material impact on its results of operations, financial position, cash flows or disclosures. 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. December 31, 2024 The Company identified and updated disclosures to ensure compliance with the new guidance. See Note 17. Recently issued accounting standards not yet adopted ASU 2023-09 Income Taxes - Improvements to Income Tax Disclosures an Amendment, December 2023 In 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. Effective for annual reporting periods beginning after 2024 on a prospective basis. The Company is currently evaluating the impact the guidance will have on its disclosures for the year ended December 31, 2025. ASU 2024-01 Compensation - Stock Compensation In March 2024, the FASB issued Improvements to GAAP through an example to demonstrate application of the scope of paragraph 718-10-15-3 to determine whether profits interest and similar awards should be accounted in Compensation - Stock Compensation. Effective for fiscal year beginning after December 15, 2024. The Company is currently evaluating the impact the guidance will have on its disclosures for the year ended December 31, 2025. ASU 2024-03 Disaggregation of Income Statement Expenses In November 2024, the FASB issued guidance to improve the disclosures about a public business entity's expenses and address requests from investors for more detailed information about the types of expenses (including purchases of inventory, employee compensation, depreciation, amortization, and depletion) in commonly presented expense captions (such as cost of sales, selling, general, and administrative; and research and development). Effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. The Company is currently evaluating the impact the guidance will have on its disclosures for the year ended December 31, 2027. 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 $ 16.7 million and $ 13.2 million at December 31, 2024 and 2023, respectively. 68 MDU Resources Group, Inc. Form 10-K Index Part II 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 Company recognizes all other revenues when services are rendered or goods are delivered. Legal costs The Company generally expenses external legal fees as they are incurred unless it has specific circumstances to defer, such as probable recovery in a rate proceeding. Receivables and allowance for expected credit losses Receivables consist primarily of trade 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 $ 3.6 million and $ 3.7 million at December 31, 2024 and 2023, 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. MDU Resources Group, Inc. Form 10-K 69 Index Part II Details of the Company's expected credit losses were as follows: Electric Natural gas distribution Pipeline Total (In thousands) At December 31, 2022 $ 375 $ 1,615 $ 2 $ 1,992 Current expected credit loss provision 1,645 5,777 — 7,422 Less write-offs charged against the allowance 1,994 7,355 2 9,351 Credit loss recoveries collected 388 1,152 — 1,540 At December 31, 2023 414 1,189 — 1,603 Current expected credit loss provision 1,891 4,667 — 6,558 Less write-offs charged against the allowance 2,218 5,709 — 7,927 Credit loss recoveries collected 386 1,219 — 1,605 At December 31, 2024 $ 473 $ 1,366 $ — $ 1,839 Receivables also consist of accrued unbilled revenue representing revenues recognized in excess of amounts billed. Accrued unbilled revenue at MDU Energy Capital was $ 143.2 million and $ 132.0 million at December 31, 2024 and 2023, respectively. Inventories and natural gas in storage Natural gas in storage 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: 2024 2023 (In thousands) Natural gas in storage (current) $ 40,073 $ 39,377 Fuel stock 4,867 5,307 Total $ 44,940 $ 44,684 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 at both December 31, 2024 and 2023, 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: 2024 2023 2022 (In thousands) AFUDC - borrowed $ 10,964 $ 10,035 $ 2,236 AFUDC - equity $ 2,251 $ 1,894 $ 2,165 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. 70 MDU Resources Group, Inc. Form 10-K Index Part II 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 2024, 2023 or 2022. Unforeseen events and changes in circumstances could require the recognition of impairment losses at some future date. Regulatory assets and liabilities The Company is subject to various state and federal agency regulations. The accounting policies followed by the Company 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 accounts for certain income and expense items under the provisions of regulatory accounting, which requires the Company 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. As of December 31, 2024, the only operating segment with goodwill was the natural gas distribution segment. For more information on the Company's operating segments, see Note 17. 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, 2024, 2023 and 2022, 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 18. 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 71 Index Part II 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 have any material commodity price derivative contracts at December 31, 2024 or 2023. 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. 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 RSUs, 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 PSAs 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 PSAs with market-based performance metrics on a straight-line basis over the requisite service period. Outstanding PSAs were converted to RSUs in connection with the completed separation of Knife River through the spinoff. The Company records the compensation expense for PSAs 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 2023 Knife River 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: 72 MDU Resources Group, Inc. Form 10-K Index Part II 2024 2023 2022 (In thousands, except per share amounts) Weighted average common shares outstanding - basic 203,867 203,640 203,358 Effect of dilutive performance share awards 786 298 104 Weighted average common shares outstanding - diluted 204,653 203,938 203,462 Earnings per share - basic: Income from continuing operations $ .89 $ 1.62 $ .58 Discontinued operations, net of tax .49 .42 1.23 Earnings per share - basic $ 1.38 $ 2.04 $ 1.81 Earnings per share - diluted: Income from continuing operations $ .88 $ 1.62 $ .58 Discontinued operations, net of tax .49 .41 1.23 Earnings per share - diluted $ 1.37 $ 2.03 $ 1.81 Shares excluded from the calculation of diluted earnings per share — — 14 Dividends declared per common share $ .5100 $ .6950 $ .8750 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. Note 3 - Discontinued Operations On May 31, 2023, the Company completed the separation of Knife River, its former construction materials and contracting segment, into a new independent 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 November 2023, the Company completed the tax-free exchange of its retained shares 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. The separation of Knife River was a tax-free spinoff transaction to the Company's stockholders for U.S. federal income tax purposes, except for cash received in lieu of fractional shares. On October 31, 2024, the Company completed the separation of Everus, its former construction services segment, into a new independent, publicly-traded company. The Company's board of directors approved the distribution of all the outstanding shares of Everus common stock to the Company's stockholders. Stockholders of the Company received one share of Everus common stock for every four shares of the Company's common stock held as of the close of business on October 21, 2024, the record date for the distribution. The separation of Everus was a tax-free spinoff transaction to the Company's stockholders for U.S. federal income tax purposes, except for cash received in lieu of fractional shares. As a result of the separations, the historical results of operations are shown in discontinued operations, net of tax, except for allocated general corporate overhead costs of the Company, which did not meet the criteria for discontinued operations. The Company’s consolidated financial statements and accompanying notes for prior periods have been restated. For the comparative periods, Everus' operations are only reflected through October 2024 compared to the full year in 2023 and 2022 and Knife River's operations are only reflected through May 2023 compared to the full year in 2022. MDU Resources Group, Inc. Form 10-K 73 Index Part II 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 of Knife River, 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 of Knife River, the 538,921 treasury shares were retired. The Company provided to Knife River and Knife River provided to the Company transition services in accordance with the transition services agreement entered into on May 31, 2023. For the twelve months ended December 31, 2024 and 2023, the Company received $ 1.5 million and $ 2.9 million, respectively; and paid $ 159,000 and $ 823,000 , respectively, for these related activities. All transition services were completed as of October 2024. The Company provided and will provide to Everus and Everus provided and will provide to the Company transition services in accordance with the transition services agreement entered into on October 31, 2024. For the twelve months ended December 31, 2024, the Company received $ 727,000 ; and paid $ 47,000 , for these related activities. The majority of the transition services are expected to be provided for a period of approximately eighteen months , however, no longer than two years after the separation. Separation related costs of $ 41.7 million, $ 58.6 million and $ 11.5 million net of tax, were incurred during the twelve months ended December 31, 2024, 2023 and 2022, respectively. Certain separation costs incurred are presented in discontinued operations, net of tax 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. 74 MDU Resources Group, Inc. Form 10-K Index Part II The Company had no assets or liabilities related to the discontinued operations of Knife River on its balance sheet as of December 31, 2024 and 2023. The carrying amounts of the major classes of assets and liabilities related to the discontinued operations of Everus included in the Company’s Consolidated Balance Sheet at December 31, 2023 were as follows: December 31, 2023 Assets (In Thousands) Current assets: Cash and cash equivalents $ 16,501 Receivables, net 692,629 Inventories 42,709 Prepayments and other current assets 17,651 Total current assets of discontinued operations 769,490 Noncurrent assets: Net property, plant and equipment 116,018 Goodwill 143,224 Other intangible assets, net 2,004 Investments 11,760 Operating lease right-of-use assets 53,232 Other 21,627 Total noncurrent assets of discontinued operations 347,865 Total assets of discontinued operations $ 1,117,355 Liabilities Current liabilities: Accounts payable $ 315,240 Taxes payable 8,557 Accrued compensation 44,721 Operating lease liabilities due within one year 21,143 Other accrued liabilities 53,619 Total current liabilities of discontinued operations 443,280 Noncurrent liabilities: Long-term debt 132,000 Deferred income taxes 6,212 Operating lease liabilities 32,504 Other 8,934 Total noncurrent liabilities of discontinued operations 179,650 Total liabilities of discontinued operations $ 622,930 The reconciliation of the major classes of income and expense constituting pretax income from discontinued operations to the after-tax income from discontinued operations on the Consolidated Statements of Income were as follows: 2024 2023 2022 (In thousands) Operating revenues $ 2,377,332 $ 3,589,251 $ 5,226,766 Operating expenses 2,241,162 3,422,393 4,853,408 Operating (loss) income 136,170 166,858 373,358 Other income (expense) 12,446 10,599 4,119 Interest expense 7,118 47,229 38,590 Income from discontinued operations before income taxes 141,498 130,228 338,887 Income taxes 41,463 45,638 88,650 Discontinued operations, net of tax $ 100,035 $ 84,590 $ 250,237 MDU Resources Group, Inc. Form 10-K 75 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. 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 17. Year ended December 31, 2024 Electric Natural gas distribution Pipeline Other Total (In thousands) Residential utility sales $ 140,054 $ 646,049 $ — $ — $ 786,103 Commercial utility sales 171,760 399,087 — — 570,847 Industrial utility sales 42,883 42,588 — — 85,471 Other utility sales 7,910 — — — 7,910 Natural gas transportation — 60,645 174,623 — 235,268 Natural gas storage — — 23,690 — 23,690 Other 59,288 40,703 13,139 195 113,325 Intersegment eliminations ( 72 ) ( 130 ) ( 69,222 ) ( 195 ) ( 69,619 ) Revenues from contracts with customers 421,823 1,188,942 142,230 — 1,752,995 Other revenues ( 7,417 ) 12,033 367 — 4,983 Total external operating revenues $ 414,406 $ 1,200,975 $ 142,597 $ — $ 1,757,978 Year ended December 31, 2023 Electric Natural gas distribution Pipeline 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 Other 54,508 15,141 13,874 119 83,642 Intersegment eliminations ( 138 ) ( 301 ) ( 62,533 ) ( 119 ) ( 63,091 ) Revenues from contracts with customers 411,298 1,279,617 114,892 — 1,805,807 Other revenues ( 10,261 ) 7,619 187 — ( 2,455 ) Total external operating revenues $ 401,037 $ 1,287,236 $ 115,079 $ — $ 1,803,352 76 MDU Resources Group, Inc. Form 10-K Index Part II Year ended December 31, 2022 Electric Natural gas distribution Pipeline 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 Other 45,608 13,617 11,450 86 70,761 Intersegment eliminations ( 58 ) ( 216 ) ( 58,884 ) ( 86 ) ( 59,244 ) Revenues from contracts with customers 381,729 1,275,990 96,439 — 1,754,158 Other revenues ( 4,714 ) ( 2,402 ) 256 — ( 6,860 ) Total external operating revenues $ 377,015 $ 1,273,588 $ 96,695 $ — $ 1,747,298 Remaining performance obligations 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 one year , respectively. At December 31, 2024, the Company's remaining performance obligations were $ 606.5 million. The Company expects to recognize the following revenue amounts in future periods related to these remaining performance obligations: $ 82.1 million within the next 12 months or less; $ 81.5 million within the next 13 to 24 months; and $ 442.9 million in 25 months or more. Note 5 - Property, Plant and Equipment Property, plant and equipment at December 31 was as follows: 2024 2023 Weighted Average Depreciable Life in Years (Dollars in thousands, where applicable) Electric: Generation $ 1,014,906 $ 939,474 49 Distribution 546,121 521,215 47 Transmission 662,466 639,999 65 CWIP 81,316 115,103 0 Other 176,007 153,248 15 Natural gas distribution: Distribution 2,955,435 2,771,540 53 Transmission 146,710 115,057 56 Storage 43,700 42,654 37 General 229,034 215,572 13 CWIP 74,207 70,373 0 Other 282,007 246,991 15 Pipeline: Transmission 1,173,259 1,035,995 46 Storage 61,369 57,160 53 CWIP 29,629 57,038 0 Other 73,749 68,194 17 Other: Land and other 4,148 31,654 7 Less accumulated depreciation and amortization 2,209,771 2,076,375 Net property, plant and equipment $ 5,344,292 $ 5,004,892 MDU Resources Group, Inc. Form 10-K 77 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 * 2024 2023 (In thousands) Regulatory assets: Current: Natural gas costs recoverable through rate adjustments Up to 1 year $ 91,091 $ 98,844 Environmental compliance programs Up to 1 year 76,964 5,525 Conservation programs Up to 1 year 19,123 14,425 Electric fuel and purchased power deferral Up to 1 year 9,662 33,918 Decoupling mechanisms Up to 1 year 6,767 — Cost recovery mechanisms Up to 1 year 5,114 9,153 Other Up to 1 year 6,715 10,627 215,436 172,492 Noncurrent: Pension and postretirement benefits ** 142,064 142,511 Cost recovery mechanisms Up to 24 years 76,542 85,944 Plant costs/asset retirement obligations Over plant lives 47,042 46,009 Manufactured gas plant site remediation - 27,964 26,127 Taxes recoverable from customers Over plant lives 12,221 12,249 Electric fuel and purchased power deferral Up to 2 years 4,349 — Covid-19 deferred costs - 4,167 2,746 Long-term debt refinancing costs Up to 36 years 2,011 2,600 Environmental compliance programs - — 66,806 Natural gas costs recoverable through rate adjustments Up to 2 years — 55,493 Other Up to 14 years 5,990 6,614 322,350 447,099 Total regulatory assets $ 537,786 $ 619,591 Regulatory liabilities: Current: Environmental compliance Up to 1 year $ 72,387 $ — Natural gas costs refundable through rate adjustments Up to 1 year 45,427 43,161 Margin sharing Up to 1 year 4,156 5,243 Provision for rate refund Up to 1 year 3,677 6,866 Taxes refundable to customers Up to 1 year 2,163 2,149 Conservation programs Up to 1 year 2,082 2,130 Cost recovery mechanisms Up to 1 year 1,720 6,284 Other Up to 1 year 5,555 4,928 137,167 70,761 Noncurrent: Plant removal and decommissioning costs Over plant lives 217,603 220,147 Taxes refundable to customers Over plant lives 185,402 193,578 Cost recovery mechanisms Up to 17 years 30,354 21,791 Accumulated deferred investment tax credit Over plant lives 18,788 15,740 Pension and postretirement benefits ** 4,862 6,044 Environmental compliance programs - — 61,941 Other Up to 13 years 2,161 1,809 459,170 521,050 Total regulatory liabilities $ 596,337 $ 591,811 Net regulatory position $ ( 58,551 ) $ 27,780 * 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. 78 MDU Resources Group, Inc. Form 10-K Index Part II As of December 31, 2024 and 2023, approximately $ 181.2 million and $ 194.3 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 and the estimated future cost of manufactured gas plant site remediation. 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 compliance costs for these regulations and the revenues from the sale of the allocated emissions allowances are passed through to customers in rates and the Company has, accordingly, deferred the environmental compliance costs as a regulatory asset and proceeds from the sale of allowances as a regulatory liability. For a discussion of the Company's most recent cases by jurisdiction, see Note 20. 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 written off 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. 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. 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. 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 and recognized as a component of purchased natural gas sold as recovered in customer rates. For more information on the Company’s regulatory assets and liabilities, see Note 6. Note 8 - Goodwill The carrying amount of goodwill at the natural gas distribution segment, which remained unchanged, was $ 345.7 million, respectively, at both December 31, 2024 and 2023. No impairments of goodwill have been recorded in these periods. MDU Resources Group, Inc. Form 10-K 79 Index Part II 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 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 $ 59.3 million and $ 62.9 million at December 31, 2024 and 2023, respectively, are classified as investments on the Consolidated Balance Sheets. The net unrealized gain on these investments for the year ended December 31, 2024 and 2023, was $ 5.9 million and $ 7.4 million, respectively. The net unrealized loss on these investments for the year ended December 31, 2022 was $ 11.2 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 the first quarter of 2024 and the fourth quarter of 2023, the Company withdrew $ 9.0 million and $ 20.0 million, respectively, of its cost basis, which reduced Investments on the Consolidated Balance Sheets. 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 on the Consolidated Balance Sheets. Details of available-for-sale securities were as follows: December 31, 2024 Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value (In thousands) Mortgage-backed securities $ 7,933 $ 4 $ 383 $ 7,554 U.S. Treasury securities 3,945 80 1 4,024 Total $ 11,878 $ 84 $ 384 $ 11,578 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 80 MDU Resources Group, Inc. Form 10-K Index Part II The Company's assets measured at fair value on a recurring basis were as follows: Fair Value Measurements at December 31, 2024, 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, 2024 (In thousands) Assets: Money market funds $ — $ 12,879 $ — $ 12,879 Insurance contracts* — 59,282 — 59,282 Available-for-sale securities: Mortgage-backed securities — 7,554 — 7,554 U.S. Treasury securities — 4,024 — 4,024 Total assets measured at fair value $ — $ 83,739 $ — $ 83,739 * The insurance contracts invest approximately 58 percent in fixed-income investments, 17 percent in common stock of large-cap companies, 8 percent in target date investments, 8 percent in common stock of mid-cap companies, 4 percent in common stock of small-cap companies, 4 percent in cash equivalents, and 1 percent in international investments. 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* — 62,936 — 62,936 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 $ — $ 80,667 $ — $ 80,667 * 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. 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 are 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 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. MDU Resources Group, Inc. Form 10-K 81 Index Part II 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: 2024 2023 (In thousands) Carrying Amount $ 2,292,610 $ 2,166,223 Fair Value $ 1,963,396 $ 1,914,039 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 and its subsidiaries contain restrictive and financial covenants and cross-default provisions. In order to borrow under the respective debt agreements, the Company and its subsidiaries must be in compliance with the applicable covenants and certain other conditions, all of which the Company and its subsidiaries, as applicable, were in compliance with at December 31, 2024. In the event the Company or its 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 and its subsidiaries: Company Facility Facility Limit Amount Outstanding at December 31, 2024 Amount Outstanding at December 31, 2023 Letters of Credit at December 31, 2024 Expiration Date (In millions) Montana-Dakota Utilities Co. Commercial paper/Revolving credit agreement (a) $ 200.0 $ 81.4 $ 144.2 $ — 10/18/28 Cascade Natural Gas Corporation Revolving credit agreement $ 175.0 (b) $ 64.6 $ 15.4 $ 2.2 (c) 6/20/29 Intermountain Gas Company Revolving credit agreement $ 175.0 (b) $ 105.1 $ 30.7 $ — 6/20/29 MDU Resources Group, Inc. Revolving credit agreement $ 200.0 (d) $ — $ — $ 12.1 (c) 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, 2024 and 2023, there were no amounts outstanding under the revolving credit agreement. (b) Certain provisions allow for increased borrowings, up to a maximum of $ 225.0 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 $ 250.0 million. Montana-Dakota's commercial paper program is 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 the 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. 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. On January 19, 2024, Cascade made the final $ 50.0 million repayment on the term loan agreement. 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. On January 19, 2024 Intermountain made the final $ 45.0 million repayment on the term loan agreement. MDU Resources Group, Inc. 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, which remained that way until this agreement matured and subsequently terminated in May 2024. 82 MDU Resources Group, Inc. Form 10-K Index Part II Long-term debt Long-term Debt Outstanding Long-term debt outstanding was as follows: Weighted Average Interest Rate at December 31, 2024 2024 2023 (In thousands) Senior notes due on dates ranging from August 23, 2025 to June 15, 2062 4.57 % $ 1,947,000 $ 1,882,000 Credit agreements due on June 20, 2029 5.79 % 169,700 46,100 Commercial paper supported by revolving credit agreement 4.76 % 81,400 144,200 Term loan agreements due on dates ranging from September 3, 2032 to April 1, 2039 4.44 % 65,600 64,300 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 6.00 % 346 980 Less unamortized debt issuance costs 6,436 6,357 Total long-term debt 2,292,610 2,166,223 Less current maturities 161,700 61,319 Net long-term debt $ 2,130,910 $ 2,104,904 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. On July 11, 2024, Montana-Dakota issued $ 125.0 million of senior notes under a note purchase agreement with maturity dates ranging from July 11, 2039 to July 11, 2054, at a weighted average interest rate of 5.96 percent. The agreement contains customary covenants and provisions, including a covenant of Montana-Dakota not to permit, at any time, the ratio of total debt to capitalization to be greater than 65 percent. The covenants also include certain restrictions on the sale of certain assets, loans and investments. Montana-Dakota's ratio of total debt to total capitalization at December 31, 2024, was 48 percent. Cascade On June 20, 2024, Cascade amended and restated its revolving credit agreement to increase the borrowing capacity from $ 100.0 million to $ 175.0 million and extend the maturity date to June 20, 2029. 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. Cascade's ratio of total debt to total capitalization at December 31, 2024, was 50 percent. Intermountain On June 20, 2024, Intermountain amended and restated its revolving credit agreement to increase the borrowing capacity from $ 100.0 million to $ 175.0 million and extend the maturity date to June 20, 2029. 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. Intermountain's ratio of total debt to total capitalization at December 31, 2024, was 60 percent. 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 the term loan agreement. On November 1, 2024, the Company repaid its remaining outstanding balance of $ 190.0 million and the term loan agreement subsequently terminated. The Company's repayment was MDU Resources Group, Inc. Form 10-K 83 Index Part II funded by the Everus repayment of debt in connection with the separation. Refer to Note 3 for additional information related to the repayment of debt associated with the Everus separation. The Company's ratio of total debt to total capitalization at December 31, 2024, was 46 percent. 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, 2024, 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. On April 1, 2024, WBI Energy Transmission entered into a $ 60.0 million term loan agreement with an interest rate of 4.52 percent and a maturity date of April 1, 2039, with the principal to be repaid in equal annual installments of $ 4.0 million each, beginning March 2025 and continuing through the maturity date. The agreement contains customary covenants and provisions, including a covenant of WBI Energy Transmission not to permit, at any time, the ratio of total debt to total capitalization to be greater than 65 percent. The covenants also include certain restrictions on the sale of certain assets, loans and investments. WBI Energy Transmission's ratio of total debt to total capitalization at December 31, 2024, was 40 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, 2024, were as follows: 2025 2026 2027 2028 2029 Thereafter (In thousands) Long-term debt maturities $ 161,700 $ 144,700 $ 24,700 $ 161,100 $ 244,400 $ 1,562,446 Note 11 - 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: 2024 2023 (In thousands) Balance at beginning of year $ 385,154 $ 373,147 Liabilities incurred 2,721 533 Liabilities settled ( 5,271 ) ( 6,633 ) Accretion expense* 19,655 18,894 Revisions in estimates 4,388 ( 787 ) Balance at end of year $ 406,647 $ 385,154 * Includes $ 19.6 million and $ 18.9 million in 2024 and 2023, respectively, recorded to regulatory assets. The 2024 revisions in estimates consist principally of updated asset retirement obligation costs resulting from decommissioning studies performed for electric generating facilities at the electric 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 12 - Equity The Company depends on earnings and dividends from its subsidiaries to pay dividends on common stock. The Company has paid quarterly dividends for 87 consecutive years. For the years ended December 31, 2024, 2023 and 2022, dividends declared on common stock were $ .5100 , $ .6950 and $ .8750 per common share, respectively. Dividends on common stock are paid quarterly to the stockholders as of the record date. For the years ended December 31, 2024, 2023 and 2022, the dividends declared to common stockholders were $ 103.9 million, $ 141.5 million and $ 177.9 million, respectively. 84 MDU Resources Group, Inc. Form 10-K Index Part II 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, 2024. 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. The K-Plan provides participants the option to invest in the Company's common stock. For the years ended December 31, 2024, 2023 and 2022, the K-Plan purchased shares of common stock on the open market. At December 31, 2024, 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, 2024 and 2023, there were no shares outstanding. Note 13 - Stock-Based Compensation The Company has stock-based compensation plans under which it is currently authorized to grant RSUs and other stock awards. As of December 31, 2024, there were 2.3 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. Separations of Knife River and Everus In connection with the completed separations of Knife River and Everus through spinoffs, the provisions of the existing compensation plans required adjustments to the number and terms of outstanding employee time-vested RSUs and PSAs to preserve the intrinsic value of the awards immediately prior to each separation. The outstanding awards will continue to vest over the original vesting period, which is generally three years from the grant date. The outstanding PSAs in place at the time of the Knife River spinoff were modified to no longer be subject to performance-based vesting conditions. The number of PSAs were first adjusted for performance. The combined performance factors were determined based on the performance of the Company as of December 31, 2022. As a result, there were no outstanding PSAs at December 31, 2023. Outstanding awards at the time of the spinoffs were converted into awards of the holder’s employer following each separation. The Company incurred $ 1.7 million of incremental compensation expense related to the conversion of the RSUs associated with the Everus spinoff, of which $ 854,000 was recognized in 2024 and the remainder will be recognized in expense over the remaining service periods of the applicable awards. Total stock-based compensation expense (after tax) was $ 7.1 million, $ 5.1 million and $ 6.9 million in 2024, 2023 and 2022, respectively. The Company uses the straight-line amortization method to recognize compensation expense related to RSUs, which only has a service condition. The Company recognized compensation expense related to PSAs with market-based performance metrics on a straight-line basis over the requisite service period. As of December 31, 2024, total remaining unrecognized compensation expense related to stock-based compensation was approximately $ 8.4 million (before income taxes) which will be amortized over a weighted average period of 1.3 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 46,341 shares with a fair value of $ 850,000 , 50,717 shares with a fair value of $ 950,000 and 40,800 shares with a fair value of $ 1.2 million issued to non-employee directors during the years ended December 31, 2024, 2023 and 2022, respectively. RSUs In February 2024, 2023 and 2022, key employees were granted RSUs 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 RSUs to preserve the intrinsic value of the awards in connection with the spinoffs of Knife River and Everus and outstanding PSAs in place at the time of the Knife River spinoff were converted to RSUs. MDU Resources Group, Inc. Form 10-K 85 Index Part II Target grants of RSUs outstanding at December 31, 2024, were as follows: Grant Date Performance Period Target Grant of Shares February 2023/ July 2023 2023-2025 542,233 February 2024/ June 2024 2024-2026 698,284 A summary of the status of the RSUs for the year ended December 31, 2024, was as follows: RSUs Number of Shares Weighted Average Grant-Date Fair Value ** Nonvested at beginning of period 873,300 $ 21.16 Granted pre-separation of Everus 478,938 20.89 Forfeited ( 112,826 ) 21.35 Non-vested pre-separation of Everus 1,239,412 Adjustments related to the Everus separation* 663,661 Vested shares ( 662,556 ) 12.04 Nonvested at end of period 1,240,517 $ 12.56 * Includes the conversion adjustments to preserve the intrinsic value of the awards and the cancellation of outstanding awards held by employees that transferred to Everus, which were replaced with awards issued by Everus as part of the separation. ** Weighted average grant-date fair values post-separation of Everus reflects incremental fair value related to modifying the awards and the Company's adjusted stock price due to the separation. Historical PSAs In February 2022, key employees were granted PSAs 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, in connection with the spinoff of Knife River, the outstanding PSAs were converted to RSUs. As a result, there were no outstanding PSAs at December 31, 2024. Under the market condition for these PSAs, 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 PSAs issued in 2022 were: 2022 Weighted average grant-date fair value $ 36.25 Blended volatility range 24.07 % - 31.41 % Risk-free interest rate range .71 % - 1.68 % Weighted average discounted dividends per share $ 2.93 Under the performance conditions for these PSAs, 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 PSAs applicable to these performance conditions issued in 2022 was $ 27.73 . The fair value of the PSAs that vested during the year ended December 31, 2022, was $ 7.6 million. 86 MDU Resources Group, Inc. Form 10-K Index Part II Note 14 - 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, 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 ) Other comprehensive income before reclassifications — 1,049 85 1,134 Amounts reclassified from accumulated other comprehensive loss — 432 20 452 Net current-period other comprehensive income — 1,481 105 1,586 At December 31, 2024 $ — $ ( 16,561 ) $ ( 237 ) $ ( 16,798 ) 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: 2024 2023 Location on Consolidated Statements of Income (In thousands) Reclassification adjustment for loss on derivative instruments included in net income $ — $ ( 96 ) Interest expense — 15 Income taxes — ( 81 ) Amortization of postretirement liability losses included in net periodic benefit credit ( 577 ) ( 320 ) Other income 145 78 Income taxes ( 432 ) ( 242 ) Reclassification adjustment on available-for-sale investments included in net income ( 25 ) ( 54 ) Other income 5 11 Income taxes ( 20 ) ( 43 ) Total reclassifications $ ( 452 ) $ ( 366 ) MDU Resources Group, Inc. Form 10-K 87 Index Part II Note 15 - Income Taxes The components of income before income taxes from continuing operations for each of the years ended December 31 were as follows: 2024 2023 2022 (In thousands) United States $ 198,662 $ 340,330 $ 123,447 Income before income taxes from continuing operations $ 198,662 $ 340,330 $ 123,447 Income tax expense (benefit) from continuing operations for the years ended December 31 was as follows: 2024 2023 2022 (In thousands) Current: Federal $ 30,412 $ 8,271 $ ( 15,849 ) State 3,255 3,251 1,857 33,667 11,522 ( 13,992 ) Deferred: Income taxes: Federal ( 17,321 ) ( 3,331 ) 15,038 State ( 1,805 ) ( 125 ) 4,251 Investment tax credit - net 3,048 2,147 898 ( 16,078 ) ( 1,309 ) 20,187 Total income tax expense $ 17,589 $ 10,213 $ 6,195 Components of deferred tax assets and deferred tax liabilities at December 31 were as follows: 2024 2023 (In thousands) Deferred tax assets: Environmental compliance $ 33,730 $ 28,873 Pension and postretirement 25,508 27,584 Compensation-related 15,651 17,106 Customer advances 9,719 8,312 Cost recovery mechanisms 7,402 5,314 Legal and environmental contingencies 5,317 4,881 Other 20,386 13,045 Total deferred tax assets 117,713 105,115 Deferred tax liabilities: Basis differences on property, plant and equipment 426,493 404,039 Pension and postretirement 48,355 39,110 Purchased gas adjustment 20,441 34,618 Environmental compliance 17,260 16,221 Cost recovery mechanisms 19,245 22,604 Legal and environmental contingencies 6,300 5,902 Other 19,931 33,947 Total deferred tax liabilities 558,025 556,441 Valuation allowance 1,008 1,010 Net deferred income tax liability $ 441,320 $ 452,336 As of both December 31, 2024 and 2023, the Company had various state income tax net operating loss carryforwards of $ 1.0 million and state income tax credit carryforwards, excluding alternative minimum tax credit carryforwards, of $ 31.6 million and $ 33.7 million, respectively. The state income tax credit carryforwards are due to expire between 2026 and 2038. Changes in tax regulations or assumptions regarding current and future taxable income could require additional valuation allowances in the future. 88 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, 2023, to December 31, 2024, to deferred income tax expense: 2024 (In thousands) Change in net deferred income tax liability from the preceding table $ ( 11,016 ) Excess deferred income tax amortization ( 8,121 ) Deferred taxes associated with other comprehensive income ( 532 ) Other 3,591 Deferred income tax expense for the period $ ( 16,078 ) 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, 2024 2023 2022 Amount % Amount % Amount % (Dollars in thousands) Computed tax at federal statutory rate $ 41,719 21.0 $ 71,469 21.0 $ 25,924 21.0 Increases (reductions) resulting from: State income taxes, net of federal income tax 4,047 2.0 3,605 1.1 2,484 2.0 State investment tax credit, net of federal income tax 2,400 1.2 1,545 .5 1,624 1.3 Executive compensation 2,111 1.1 564 .2 683 .6 Federal renewable energy credit ( 16,871 ) ( 8.5 ) ( 15,175 ) ( 4.5 ) ( 15,343 ) ( 12.4 ) Excess deferred income tax amortization ( 8,121 ) ( 4.1 ) ( 8,383 ) ( 2.5 ) ( 9,008 ) ( 7.3 ) State tax rate change ( 2,317 ) ( 1.2 ) ( 9 ) — ( 3 ) — Research and development tax credit ( 1,465 ) ( .7 ) ( 1,985 ) ( .6 ) ( 1,692 ) ( 1.4 ) Nonqualified benefit plans ( 1,142 ) ( .6 ) ( 1,313 ) ( .4 ) 1,516 1.2 Tax-free debt for equity exchange — — ( 38,967 ) ( 11.4 ) — — Other ( 2,772 ) ( 1.4 ) ( 1,138 ) ( .3 ) 10 — Total income tax expense $ 17,589 8.8 $ 10,213 3.1 $ 6,195 5.0 The Company's effective tax rate for 2024 differs from the U.S. federal statutory rate of 21 percent due primarily to the impact of credits and deductions provided by law and excess deferred income tax amortization. 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. 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 16 - Cash Flow Information Cash expenditures for interest and income taxes for the years ended December 31 were as follows: 2024 2023 2022 (In thousands) Interest, net* $ 108,242 $ 112,839 $ 49,036 Income taxes paid (refunded), net** $ 43,572 $ 12,162 $ ( 27,884 ) * AFUDC - borrowed was $ 11.0 million, $ 10.0 million and $ 2.2 million for the years ended December 31, 2024, 2023 and 2022, respectively. ** Income taxes paid, including discontinued operations, were $ 80.9 million, $ 62.5 million and $ 26.4 million for the years ended December 31, 2024, 2023 and 2022, respectively. Noncash investing and financing transactions at December 31 were as follows: 2024 2023 2022 (In thousands) Property, plant and equipment additions in accounts payable $ 36,820 $ 46,364 $ 34,886 Right-of-use assets obtained in exchange for new operating lease liabilities $ 1,787 $ 2,265 $ 1,324 Debt for equity exchange of retained shares in Knife River $ — $ 293,239 $ — MDU Resources Group, Inc. Form 10-K 89 Index Part II Note 17 - 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 activities 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 CODM, the chief executive officer. The Company's operations are located within the United States. The Company’s CODM regularly reviews discrete financial information of each reportable segment and uses net income to assess performance of each reportable segment. The CODM uses this information to assess performance and make decisions about resources to be allocated to each reportable segment, including capital and personnel. The information provided to the CODM is prepared at the reportable segment level in quarterly financial packages and on a more summarized basis monthly. Budget and forecast information is also provided to the CODM at the reportable segment level. 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 FERC regulated pipeline system primarily in the Rocky Mountain and northern Great Plains regions of the United States. This segment also provides non-regulated energy-related services, including cathodic protection. 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 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 Knife River, Everus, Fidelity and the refining business and did not meet the criteria for discontinued operations. Discontinued operations includes the results of operations for Knife River and Everus and certain associated separation costs, including interest on certain debt facilities repaid in connection with the separations. For the comparative periods below, Everus' operations are only reflected through October 2024 compared to the full year in 2023 and 2022 and Knife River's operations are only reflected through May 2023, compared to the full year in 2022. Discontinued operations also includes the supporting activities of Fidelity other than certain general and administrative costs and interest expense as described above. 90 MDU Resources Group, Inc. Form 10-K Index Part II 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: Year ended December 31, 2024 Electric Natural gas distribution Pipeline Other Consolidated (In thousands) Operating revenues: External operating revenues $ 414,406 $ 1,200,975 $ 142,597 $ — $ 1,757,978 Intersegment operating revenues 72 130 69,222 195 69,619 Operation and maintenance: External operation and maintenance 94,897 231,087 75,456 13,051 414,491 Intersegment operation and maintenance 72 130 324 195 721 Purchased natural gas sold: External purchased natural gas sold — 630,403 — — 630,403 Intersegment purchased natural gas sold — 68,898 — — 68,898 Electric fuel and purchased power 141,148 — — — 141,148 Depreciation and amortization 66,524 101,958 29,362 2,234 200,078 Taxes, other than income 17,605 76,042 12,175 394 106,216 Other income: External other income 8,205 25,509 5,850 1,803 41,367 Intersegment other income — — 655 14,798 15,453 Interest expense: External interest expense 30,058 63,185 10,862 4,242 108,347 Intersegment interest expense — — 4,633 10,820 15,453 Income tax expense (benefit) ( 2,414 ) 7,974 17,470 ( 5,441 ) 17,589 Income (loss) from continuing operations 74,793 46,937 68,042 ( 8,699 ) 181,073 Discontinued operations, net of tax — — — 100,035 100,035 Net income $ 74,793 $ 46,937 $ 68,042 $ 91,336 $ 281,108 Capital expenditures (a) $ 110,812 $ 286,152 $ 126,806 $ 1,728 $ 525,498 Assets $ 1,976,912 (b) $ 3,730,532 (b) $ 1,151,317 $ 180,057 (c) $ 7,038,818 Property, plant and equipment $ 2,480,816 (b) $ 3,731,093 (b) $ 1,338,006 $ 4,148 $ 7,554,063 Accumulated depreciation and amortization $ 716,736 (b) $ 1,139,223 (b) $ 351,045 $ 2,767 $ 2,209,771 (a) Capital expenditures include noncash transactions such as capital expenditure-related accounts payable and AFUDC totaling $ 7.1 million. (b) Includes allocations of common utility property for the Electric and Natural gas distribution segments. (c) Other includes 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). MDU Resources Group, Inc. Form 10-K 91 Index Part II Year ended December 31, 2023 Electric Natural gas distribution Pipeline Other Consolidated (In thousands) Operating revenues: External operating revenues $ 401,037 $ 1,287,236 $ 115,079 $ — $ 1,803,352 Intersegment operating revenues 138 301 62,533 119 63,091 Operation and maintenance: External operation and maintenance 92,521 219,481 70,386 24,693 407,081 Intersegment operation and maintenance 138 301 431 119 989 Purchased natural gas sold: External purchased natural gas sold — 742,965 — — 742,965 Intersegment purchased natural gas sold — 62,102 — — 62,102 Electric fuel and purchased power 134,779 — — — 134,779 Depreciation and amortization 64,253 95,300 26,811 4,086 190,450 Taxes, other than income 16,695 75,207 10,822 409 103,133 Realized gain on tax-free exchange of the retained shares in Knife River — — — 186,556 186,556 Other income: External other income 5,815 20,867 3,675 3,097 33,454 Intersegment other income — — 217 13,431 13,648 Interest expense: External interest expense 28,064 57,601 9,428 9,531 104,624 Intersegment interest expense — — 3,842 9,806 13,648 Income tax expense (benefit) ( 1,019 ) 6,927 12,409 ( 8,104 ) 10,213 Income from continuing operations 71,559 48,520 47,375 162,663 330,117 Discontinued operations, net of tax — — ( 457 ) 85,047 84,590 Net income $ 71,559 $ 48,520 $ 46,918 $ 247,710 $ 414,707 Capital expenditures (a) $ 109,805 $ 274,836 $ 115,903 $ ( 2,825 ) $ 497,719 Assets $ 1,955,644 (b) $ 3,532,142 (b) $ 1,045,704 $ 1,299,669 (c) $ 7,833,159 Property, plant and equipment $ 2,369,039 (b) $ 3,462,187 (b) $ 1,218,387 $ 31,654 $ 7,081,267 Accumulated depreciation and amortization $ 660,438 (b) $ 1,068,037 (b) $ 328,010 $ 19,890 $ 2,076,375 (a) Capital expenditures include noncash transactions such as capital expenditure-related accounts payable and AFUDC totaling $( 13.6 ) million. (b) Includes allocations of common utility property for the Electric and Natural gas distribution segments. (c) Other includes assets of discontinued operations 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). 92 MDU Resources Group, Inc. Form 10-K Index Part II Year ended December 31, 2022 Electric Natural gas distribution Pipeline Other Consolidated (In thousands) Operating revenues: External operating revenues $ 377,015 $ 1,273,588 $ 96,695 $ — $ 1,747,298 Intersegment operating revenues 58 216 58,884 86 59,244 Operation and maintenance: External operation and maintenance 93,236 205,009 60,300 21,406 379,951 Intersegment operation and maintenance 58 216 638 86 998 Purchased natural gas sold: External purchased natural gas sold — 757,883 — — 757,883 Intersegment purchased natural gas sold — 58,246 — — 58,246 Electric fuel and purchased power 119,405 — — — 119,405 Depreciation and amortization 67,802 89,466 26,857 4,435 188,560 Taxes, other than income 16,917 71,095 12,318 299 100,629 Other income: External other income 528 3,213 1,272 ( 1,753 ) 3,260 Intersegment other income — — 80 556 636 Interest expense: External interest expense 28,526 42,126 9,966 65 80,683 Intersegment interest expense — — 136 500 636 Income tax expense (benefit) ( 5,420 ) 7,805 10,522 ( 6,712 ) 6,195 Income (loss) from continuing operations 57,077 45,171 36,194 ( 21,190 ) 117,252 Discontinued operations, net of tax — — ( 906 ) 251,143 250,237 Net income $ 57,077 $ 45,171 $ 35,288 $ 229,953 $ 367,489 Capital expenditures (a) $ 133,970 $ 240,064 $ 61,923 $ 2,272 $ 438,229 Assets $ 1,856,258 (b) $ 3,214,452 (b) $ 961,893 $ 3,628,178 (c) $ 9,660,781 Property, plant and equipment $ 2,276,613 (b) $ 3,208,059 (b) $ 1,108,141 $ 36,705 $ 6,629,518 Accumulated depreciation and amortization $ 625,813 (b) $ 1,009,788 (b) $ 308,516 $ 19,143 $ 1,963,260 (a) Capital expenditures include noncash transactions such as capital expenditure-related accounts payable and AFUDC totaling $ 4.4 million. (b) Includes allocations of common utility property for the Electric and Natural gas distribution segments. (c) Other includes assets of discontinued operations 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: 2024 2023 2022 (In thousands) Operating revenues reconciliation: Total reportable segment operating revenues $ 1,827,402 $ 1,866,324 $ 1,806,456 Other revenue 195 119 86 Elimination of intersegment operating revenues ( 69,619 ) ( 63,091 ) ( 59,244 ) Total consolidated operating revenues $ 1,757,978 $ 1,803,352 $ 1,747,298 Asset reconciliation: Total reportable segment assets $ 6,892,959 $ 6,564,962 $ 6,061,151 Other assets 525,258 1,847,432 4,784,142 Elimination of intersegment receivables ( 379,399 ) ( 579,235 ) ( 1,184,512 ) Total consolidated assets $ 7,038,818 $ 7,833,159 $ 9,660,781 MDU Resources Group, Inc. Form 10-K 93 Index Part II Note 18 - 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. 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 2024 2023 2024 2023 Change in benefit obligation: (In thousands) Benefit obligation at beginning of year $ 275,586 $ 278,286 $ 39,590 $ 40,315 Service cost — — 505 534 Interest cost 12,799 13,521 1,837 1,956 Plan participants' contributions — — 412 479 Actuarial (gain) loss ( 11,040 ) 5,395 ( 3,420 ) ( 215 ) Benefits paid ( 21,995 ) ( 21,616 ) ( 3,249 ) ( 3,479 ) Benefit obligation at end of year 255,350 275,586 35,675 39,590 Change in net plan assets: Fair value of plan assets at beginning of year 248,558 242,031 79,234 76,640 Actual return on plan assets 1,152 20,576 2,297 5,518 Employer contribution 2,911 7,567 71 76 Plan participants' contributions — — 412 479 Benefits paid ( 21,995 ) ( 21,616 ) ( 3,249 ) ( 3,479 ) Fair value of net plan assets at end of year 230,626 248,558 78,765 79,234 Funded status - (under) over $ ( 24,724 ) $ ( 27,028 ) $ 43,090 $ 39,644 Amounts recognized in the Consolidated Balance Sheets at December 31: Noncurrent assets - other $ — $ — $ 43,090 $ 39,644 Noncurrent liabilities - other 24,724 27,028 — — Benefit obligation (liabilities) assets - net amount recognized $ ( 24,724 ) $ ( 27,028 ) $ 43,090 $ 39,644 Amounts recognized in accumulated other comprehensive loss: Actuarial loss (gain) $ 13,228 $ 32,273 $ ( 809 ) $ ( 3,515 ) Prior service credit — — ( 37 ) ( 115 ) Total $ 13,228 $ 32,273 $ ( 846 ) $ ( 3,630 ) Amounts recognized in regulatory assets or liabilities: Actuarial loss (gain) $ 139,962 $ 140,232 $ ( 1,478 ) $ ( 1,146 ) Prior service credit — — ( 1,303 ) ( 2,619 ) Total $ 139,962 $ 140,232 $ ( 2,781 ) $ ( 3,765 ) 94 MDU Resources Group, Inc. Form 10-K 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 2024, the actuarial gain recognized in the benefit obligation was primarily the result of an increase in the discount rate. In 2023, the actuarial loss recognized in the benefit obligation was primarily the result of a decrease 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: 2024 2023 (In thousands) Projected benefit obligation $ 255,350 $ 275,586 Accumulated benefit obligation $ 255,350 $ 275,586 Fair value of plan assets $ 230,626 $ 248,558 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 2024 2023 2022 2024 2023 2022 Components of net periodic benefit cost (credit): (In thousands) Service cost $ — $ — $ — $ 505 $ 534 $ 894 Interest cost 12,799 13,521 9,396 1,837 1,956 1,383 Expected return on assets ( 16,113 ) ( 17,194 ) ( 17,482 ) ( 5,315 ) ( 5,361 ) ( 5,277 ) Amortization of prior service credit — — — ( 1,318 ) ( 1,318 ) ( 1,318 ) Recognized net actuarial loss (gain) 4,149 3,093 5,826 ( 288 ) ( 504 ) ( 570 ) Net periodic benefit cost (credit), including amount capitalized 835 ( 580 ) ( 2,260 ) ( 4,579 ) ( 4,693 ) ( 4,888 ) Less amount capitalized — — — — 107 175 Net periodic benefit cost (credit) 835 ( 580 ) ( 2,260 ) ( 4,579 ) ( 4,800 ) ( 5,063 ) Other changes in plan assets and benefit obligations recognized in accumulated comprehensive loss: Net loss (gain) 401 187 2,369 71 ( 604 ) ( 4,141 ) Amortization of actuarial (loss) gain ( 359 ) ( 292 ) ( 1,310 ) 130 108 ( 281 ) Amortization of prior service credit — — — 45 78 125 Reclassification of postretirement liability adjustment from regulatory asset — — 5,343 — — ( 992 ) Total recognized in accumulated other comprehensive loss 42 ( 105 ) 6,402 246 ( 418 ) ( 5,289 ) Other changes in plan assets and benefit obligations recognized in regulatory assets or liabilities: Net loss (gain) 3,520 1,826 9,757 ( 472 ) ( 107 ) 11,920 Amortization of actuarial (loss) gain ( 3,790 ) ( 2,801 ) ( 5,373 ) 158 304 500 Amortization of prior service credit — — — 1,273 1,273 1,273 Reclassification of postretirement liability adjustment from regulatory asset — — ( 5,343 ) — — 992 Total recognized in regulatory assets or liabilities ( 270 ) ( 975 ) ( 959 ) 959 1,470 14,685 Total recognized in net periodic benefit credit, accumulated other comprehensive loss and regulatory assets or liabilities $ 607 $ ( 1,660 ) $ 3,183 $ ( 3,374 ) $ ( 3,748 ) $ 4,333 MDU Resources Group, Inc. Form 10-K 95 Index Part II Weighted average assumptions used to determine benefit obligations at December 31 were as follows: Pension Benefits Other Postretirement Benefits 2024 2023 2024 2023 Discount rate 5.41 % 4.84 % 5.43 % 4.85 % 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 2024 2023 2024 2023 Discount rate 4.84 % 5.06 % 4.85 % 5.07 % Expected return on plan assets 6.50 % 6.50 % 6.00 % 6.00 % 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, 2024, 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: 2024 2023 Health care trend rate assumed for next year (pre-65/post-65) 8.5 %/ 6.25 % 7.5 %/ 6.5 % Health care cost trend rate - ultimate 4.5 % 4.5 % Year in which ultimate trend rate achieved (pre-65/post-65) 2035/2034 2034/2033 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 2025 the minimum funding requirement of $ 1.7 million. The Company expects to contribute approximately $ 18,000 to its postretirement benefit plans in 2025. The following benefit payments, which reflect future service, as appropriate, and expected Medicare Part D subsidies at December 31, 2024, are as follows: Years Pension Benefits Other Postretirement Benefits Expected Medicare Part D Subsidy (In thousands) 2025 $ 22,280 $ 3,333 $ 48 2026 $ 22,070 $ 3,235 $ 43 2027 $ 21,870 $ 3,153 $ 37 2028 $ 21,500 $ 3,064 $ 32 2029 $ 21,170 $ 2,941 $ 27 2030-2034 $ 98,020 $ 13,659 $ 85 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. 96 MDU Resources Group, Inc. Form 10-K 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, 2024, 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, 2024 (In thousands) Assets: Cash equivalents $ — $ 4,512 $ — $ 4,512 Equity securities: U.S. companies ( 2 ) — — ( 2 ) Collective and mutual funds (a) 72,777 93,606 — 166,383 U.S. Government securities 33,616 25,857 — 59,473 Investments measured at net asset value (b) — — — 260 Total assets measured at fair value $ 106,391 $ 123,975 $ — $ 230,626 (a) Collective and mutual funds invest approximately 39 percent in corporate bonds, 19 percent in U.S. Government securities, 17 percent in other investments, 15 percent in common stock of international companies, 9 percent in common stock of large-cap and mid-cap U.S. companies, and 1 percent cash and cash equivalents. (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. MDU Resources Group, Inc. Form 10-K 97 Index Part II 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. 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, 2024, 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, 2024 (In thousands) Assets: Cash equivalents $ — $ 4,373 $ — $ 4,373 Equity securities: U.S. companies 2,880 — — 2,880 Insurance contract (a) — 71,512 — 71,512 Total assets measured at fair value $ 2,880 $ 75,885 $ — $ 78,765 (a) The insurance contract invests approximately 41 percent in corporate bonds, 28 percent in U.S. Government securities, 19 percent in common stock of large-cap U.S. companies, 6 percent in common stock of small-cap U.S. companies and 6 percent in other investments. 98 MDU Resources Group, Inc. Form 10-K Index Part II 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. 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: 2024 2023 (In thousands) Projected benefit obligation $ 52,007 $ 57,033 Accumulated benefit obligation $ 52,007 $ 57,033 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: 2024 2023 2022 (In thousands) Components of net periodic benefit cost: Interest cost $ 2,568 $ 2,740 $ 1,681 Recognized net actuarial loss 365 273 911 Net periodic benefit cost $ 2,933 $ 3,013 $ 2,592 Weighted average assumptions used at December 31 were as follows: 2024 2023 Benefit obligation discount rate 5.26 % 4.73 % Benefit obligation rate of compensation increase N/A N/A Net periodic benefit cost discount rate 4.73 % 4.97 % 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, 2024, are expected to aggregate as follows: 2025 2026 2027 2028 2029 2030-2034 (In thousands) Nonqualified benefits $ 5,700 $ 5,610 $ 5,830 $ 5,560 $ 5,190 $ 20,920 MDU Resources Group, Inc. Form 10-K 99 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 2024, 2023 and 2022 were $ 4.0 million, $ 2.7 million and $ 538,000 , respectively. The amount of investments that the Company anticipates using to satisfy obligations under these plans at December 31 was as follows: 2024 2023 (In thousands) Investments Insurance contracts* $ 59,282 $ 62,936 Life insurance** 30,834 31,303 Other 12,879 6,409 Total investments $ 102,995 $ 100,648 * 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 $ 10.7 million in 2024, $ 17.0 million in 2023 and $ 14.3 million in 2022. Multiemployer plans The Company contributes to a MEPP under the terms of a collective-bargaining agreement that covers its union-represented employees. The risks of participating in this multiemployer plan is 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 its MEPP, 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 this plan is outlined in the following table. Unless otherwise noted, the most recent Pension Protection Act zone status available in 2024 and 2023 is for the plan's year-end status at December 31, 2023, and December 31, 2022, 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, a plan in the red zone is generally less than 65 percent funded, a plan in the yellow zone is between 65 percent and 80 percent funded, and a plan in the green zone is at least 80 percent funded. 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 2024 2023 2024 2023 2022 (In thousands) Idaho Plumbers and Pipefitters Pension Plan 826010346 - 001 Green as of 5/31/2024 Green as of 5/31/2023 No $ 1,434 $ 1,690 $ 1,613 No 3/31/2027 Total contributions $ 1,434 $ 1,690 $ 1,613 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) Idaho Plumbers and Pipefitters Pension Plan 2023 and 2022 100 MDU Resources Group, Inc. Form 10-K Index Part II Note 19 - 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 2024 2023 (In thousands) Big Stone Station: 22.7 % Utility plant in service $ 155,302 $ 159,437 CWIP 318 197 Less accumulated depreciation 55,327 52,264 $ 100,293 $ 107,370 BSSE: 50.0 % Utility plant in service $ 111,043 $ 107,260 CWIP — — Less accumulated depreciation 10,359 8,111 $ 100,684 $ 99,149 Coyote Station: 25.0 % Utility plant in service $ 160,343 $ 160,208 CWIP 755 159 Less accumulated depreciation 115,133 113,187 $ 45,965 $ 47,180 JETx: 50.0 % Utility plant in service $ — $ — CWIP 6,112 1,372 Less accumulated depreciation — — $ 6,112 $ 1,372 Wygen III: 25.0 % Utility plant in service $ 67,851 $ 66,852 CWIP 97 127 Less accumulated depreciation 15,340 13,728 $ 52,608 $ 53,251 MDU Resources Group, Inc. Form 10-K 101 Index Part II Note 20 - 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. MTPSC On July 15, 2024, Montana-Dakota filed a request with the MTPSC for a natural gas general rate increase of approximately $ 9.4 million annually or 11.1 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 October 15, 2024, the MTPSC denied Montana-Dakota's request for an interim rate increase of approximately $ 8.0 million annually or 10.2 percent above current rates. On October 25, 2024, Montana-Dakota filed a motion for reconsideration of the interim rate increase. On January 14, 2025, the MTPSC approved an interim increase of approximately $ 7.7 million with interim rates effective on and after February 1, 2025. 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. On September 16, 2024, an all-party settlement agreement was filed reflecting an annual revenue increase of $ 9.4 million or 6.1 percent overall. The reduction from the original filing includes lower incentives and a decreased return on equity. On November 7, 2024, the NDPSC approved the settlement with rates effective on and after December 1, 2024. Montana-Dakota has a renewable resource cost adjustment rate tariff that allows for annual adjustments for recent projected capital costs and related expenses for projects determined to be recoverable under the tariff. On November 1, 2024, Montana-Dakota filed an annual update to its renewable resource cost adjustment requesting to recover a revenue requirement of approximately $ 18.3 million annually. The update reflects a decrease of approximately $ 2.8 million annually from the revenues currently included in rates. The NDPSC approved the renewable resource cost adjustment on January 22, 2025, with rates effective February 1, 2025. WUTC On March 29, 2024, Cascade filed a request with the WUTC for a multi-year natural gas general rate increase of $ 43.8 million or 11.6 percent effective March 1, 2025 and $ 11.7 million or 2.8 percent to be effective March 1, 2026. Multi-year filings are now required by Washington law that went into effect on January 1, 2022. The requested increase is primarily to recover infrastructure investments necessary to provide safe and reliable service and higher operating costs due to inflation. On December 11, 2024, a multi-party settlement agreement was filed reflecting rate increases of $ 29.8 million or 7.9 percent proposed to be effective March 1, 2025, and $ 10.8 million or 2.6 percent proposed to be effective March 1, 2026. WYPSC On October 31, 2024, Montana-Dakota filed a request with the WYPSC for a natural gas general rate increase of approximately $ 2.6 million annually or 14.0 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. This matter is pending before the WYPSC. FERC On August 29, 2024, Montana-Dakota filed an update to its transmission formula rate under the MISO tariff for its multi-value project and network upgrade changes for $ 19.7 million. Rates were effective January 1, 2025. 102 MDU Resources Group, Inc. Form 10-K Index Part II Note 21 - 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, 2024 and 2023, the Company accrued liabilities which have not been discounted of $ 24.1 million and $ 22.5 million, respectively. At December 31, 2024 and 2023, the Company also recorded corresponding insurance receivables of $ 24,000 and $ 152,000 , respectively, and regulatory assets of $ 22.9 million and $ 21.6 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 $ 2.0 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 $ 645,000 for the remediation and investigation costs and has incurred costs of $ 1.2 million as of December 31, 2024. 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 $ 16.0 million of which $ 11.7 million has been incurred as of December 31, 2024. 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, 2024, Cascade has accrued $ 4.3 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. A significant portion of the costs incurred to date have been recovered by insurance. MDU Resources Group, Inc. Form 10-K 103 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 and Engineering Design Report submitted to Washington Ecology in June 2023 and November 2024, respectively. The remedy construction is expected to commence in 2028 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 35 years. The commitments under these contracts as of December 31, 2024, were: 2025 2026 2027 2028 2029 Thereafter (In thousands) Purchase commitments $ 658,012 $ 310,894 $ 210,152 $ 177,613 $ 147,081 $ 1,221,125 These commitments were not reflected in the Company's consolidated financial statements. Amounts purchased under various commitments for the years ended December 31, 2024, 2023 and 2022, were $ 841.7 million, $ 1.0 billion and $ 870.6 million, respectively. Guarantees 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, 2024, the fixed maximum amounts guaranteed under these letters of credit aggregated $ 14.3 million. The amounts of scheduled expiration of the maximum amounts guaranteed under these letters of credit aggregate to $ 14.3 million in 2025. There were no amounts outstanding under the previously mentioned letters of credit at December 31, 2024. 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 the normal course of business, the Company and its subsidiaries have surety bonds. In the event the Company or its subsidiaries do not fulfill a bonded obligation, the Company or its subsidiaries would be responsible to the surety bond company for completion of the bonded contract or obligation. At December 31, 2024, approximately $ 15.6 million of surety bonds were outstanding, which were not reflected on the Consolidated Balance Sheet. 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 business. 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 noncurrent assets - other, current liabilities - other accrued liabilities and noncurrent liabilities - other . The corresponding lease costs are included in operation and maintenance expense on the Consolidated Statements of Income. Generally, the leases for 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. 104 MDU Resources Group, Inc. Form 10-K Index Part II The following tables provide information on the Company's operating leases at and for the years ended December 31: 2024 2023 2022 (In thousands) Lease costs: Short-term lease cost $ 1,549 $ 1,646 $ 1,373 Operating lease cost 3,069 2,871 2,497 Variable lease cost 819 676 413 $ 5,437 $ 5,193 $ 4,283 2024 2023 2022 (Dollars in thousands) Weighted average remaining lease term 12.65 years 15.35 years 15.15 years Weighted average discount rate 6.08 % 4.88 % 4.65 % Cash paid for amounts included in the measurement of lease liabilities $ 3,063 $ 2,868 $ 2,500 The reconciliation of future undiscounted cash flows to operating lease liabilities presented on the Consolidated Balance Sheet at December 31, 2024, was as follows: (In thousands) 2025 $ 3,034 2026 2,648 2027 2,011 2028 1,570 2029 1,492 Thereafter 20,808 Total 31,563 Less discount 10,654 Total operating lease liabilities $ 20,909 Lessor accounting The Company leases certain equipment to third parties through its utility businesses, which are considered short-term operating leases with terms of less than 12 months. Lease revenue was not material for the years ended December 31, 2024, 2023 and 2022, respectively. 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, 2024, 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 $ 25.6 million. MDU Resources Group, Inc. Form 10-K 105 Index Part II Note 22 - Subsequent Events On February 13, 2025, Montana-Dakota entered into a definitive purchase and sale agreement with Badger Wind, LLC, a subsidiary of Orsted Onshore North America, LLC. Pursuant to the terms of the agreement, Montana-Dakota will purchase a 49 percent undivided ownership interest in a wind project being constructed and located in North Dakota that is anticipated to have a net generating capacity of approximately 250 MW for a purchase price of $ 294.0 million, which would represent 122.5 MW of wind generation to be owned by Montana-Dakota. The purchase agreement is contingent on regulatory approval from the NDPSC. This transaction would reduce Montana-Dakota's purchase requirements under the existing power purchase agreement with Badger Wind, LLC, dated November 4, 2024. 106 MDU Resources Group, Inc. Form 10-K Index Part II Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure None.