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Item 1. Business

2026-02-18 compared with 2025-02-19 · 257 added, 171 removed, 260 unchanged (62% of the section changed)

Otter Tail Corporation (OTC) is a holding company which has strategically invested in a portfolio of diversified operations including an electric utility and manufacturing and plastic pipe businesses with corporate offices located in Fergus Falls, Minnesota and Fargo, North Dakota.

Our corporate offices are located in Fergus Falls, Minnesota and Fargo, North Dakota.

We classify our five operating companies into three reportable segments consistent with our business strategy and management structure.

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Electric includes the generation, purchase, transmission, distribution and sale of electric energy in western Minnesota, eastern North Dakota and northeastern South Dakota.

Otter Tail Power (OTP), our primary business since 1907, serves approximately 134,000 customers in more than 400 communities across a predominantly rural and agricultural service territory.

Manufacturing consists of businesses engaged in the following manufacturing activities:

contract machining;

metal parts stamping;

fabrication and painting;

and production of plastic thermoformed horticultural containers, life science and industrial packaging, material handling components and extruded raw material stock.

Otter Tail Power (OTP), our primary business, serves approximately 134,000 customers in more than 400 communities across a predominantly rural and agricultural service territory.

Manufacturing consists of businesses which provide metal fabrication services and manufacture thermoformed plastic products.

These businesses have manufacturing facilities in Georgia, Illinois and Minnesota and sell products primarily in the United States.

Plastics consists of businesses producing polyvinyl chloride (PVC) pipe at plants in North Dakota and Arizona.

Plastics consists of businesses producing polyvinyl chloride (PVC) pipe primarily used in municipal water infrastructure at plants in North Dakota and Arizona.

The PVC pipe is sold primarily in the western half of the United States and Canada.

Throughout the remainder of this report, we use the terms "Company," "us," "our," or "we" to refer to OTC and its subsidiaries collectively.

We will also refer to our Electric, Manufacturing and Plastics segments and our individual subsidiaries as indicated above.

We also refer to our Electric, Manufacturing and Plastics segments and our individual subsidiaries as indicated above.

INVESTMENT AND GROWTH STRATEGY

Our investment and growth strategy is focused on our electric utility as our foundational business, complemented by our investments in our Manufacturing and Plastics segments (collectively, our Manufacturing Platform).

This strategic diversification allows us to maintain a moderate risk profile while driving growth through rate base investments in our Electric segment and organic growth opportunities in our Manufacturing Platform.

This strategy and risk profile are designed to provide a more predictable earnings stream, to provide growth over long-term cycles, to produce returns above the utility industry average, to support investment grade credit ratings, and to provide for dividend payments to our shareholders.

Our investment and growth strategy is driven by planned investments in our Electric segment and complemented by our strategic diversification.

Otter Tail Power, our foundational business dating back to 1907, is a high-performing electric utility with a robust five-year capital investment and growth plan.

Our electric operations are complemented by the long-term ownership of our Manufacturing and Plastics segment businesses (collectively, our Manufacturing Platform).

Our strategic diversification positions us to provide earnings, cash flow and dividend growth over long-term investment and economic cycles, and to produce shareholder returns above the utility industry average.

We drive growth through rate base investments in our Electric segment and organic growth opportunities in our Manufacturing Platform.

We are able to efficiently redeploy cash generated by our Manufacturing Platform to finance our Electric segment investments.

Our strategy and risk profile are designed to provide a predictable earnings stream, investment grade credit ratings and continuous dividend payments to our shareholders.

Our long-term focus remains on executing our strategy to grow our business and achieving operational, commercial and talent excellence to strengthen our position in the markets we serve.

Our long-term financial objectives include achieving a compounded annual growth rate in earnings per share in the range of 6 to 8%, with a long-term earnings mix of approximately 65% from our Electric segment and 35% from our Manufacturing Platform.

Our long-term financial objectives include achieving a compounded annual growth rate in earnings per share in the range of 7 to 9%, with a long-term earnings mix target of approximately 70% from our Electric segment and 30% from our Manufacturing Platform.

We also are targeting an annual increase in our dividend to be in the range of 6 to 8%.

We expect our earnings growth and cash flow generation to be driven by rate base investments in our Electric segment and from existing capacities and recent investments within our Manufacturing and Plastics segments.

We expect our earnings growth and cash flow generation to be driven by rate base investments in our Electric segment and from recent investments within our Manufacturing and Plastics segments.

Since 2021, our earnings mix has diverged from our long-term target of 70% from our Electric segment and 30% from our Manufacturing Platform and our earnings growth rate has exceeded our long-term targeted growth rate primarily due to market conditions within the PVC pipe industry.

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Once these industry conditions have normalized, we expect to achieve our long-term financial objectives as outlined above.

We will continue to review our business portfolio to identify additional opportunities to improve our risk profile, enhance our credit metrics and generate additional sources of cash to support the organic growth opportunities in our Electric, Manufacturing, and Plastics segments.

We will also evaluate opportunities to allocate capital to potential acquisitions.

We regularly review our business portfolio to identify additional opportunities to improve our earnings and cash flow generation profile, reduce our risk profile, enhance our credit metrics and generate additional sources of cash to support the organic growth opportunities in our Electric, Manufacturing and Plastics segments.

We will also evaluate opportunities to allocate capital to

potential acquisitions.

We are a committed long-term owner and do not acquire companies in pursuit of short-term gains.

However, we will divest of businesses which no longer fit into our strategy and risk profile over the long term.

However, we will divest of businesses which no longer fit into our long-term strategy and risk profile.

We maintain a set of criteria used in evaluating the strategic fit of our operating businesses.

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Inclusive Workplace - We hold every employee accountable for their behavior in maintaining a workplace free of discrimination and harassment.

We have implemented education initiatives for all employees, aimed at inclusive leadership and a respectful workplace.

We have implemented educational initiatives for all employees aimed at inclusive leadership and a respectful workplace.

Code of Business Ethics - We require employees to complete training on several topics associated with our code of business ethics to reinforce our commitment to compliance with laws, regulations and values that guide who we are and how we do business.

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As of December 31, 2025, 378 employees of OTP were represented by local unions of the International Brotherhood of Electrical Workers under two separate collective bargaining agreements expiring on August 31, 2026 and October 31, 2026.

OTP has not experienced any strike, work stoppage or strike vote, and considers its present relations with employees to be good.

None of the employees of our other operating companies are represented by local unions.

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The following charts summarize our retail electric revenues by state and by customer segment for the years ended December 31, 2025 and 2024:

In addition to retail revenue, our Electric segment also generates operating revenues from the transmission of electricity for others over the transmission assets we wholly or jointly own with other transmission service providers, and from the sale of electricity we generate and sell into the wholesale electricity market.

In addition to retail revenues, our Electric segment also generates operating revenues from the transmission of electricity for others over the transmission assets we wholly or jointly own, and from the sale of electricity we generate and sell into the wholesale electricity market.

COMPETITIVE CONDITIONS

Retail electric sales are made to customers in assigned service territories.

As a result, most retail customers do not have the ability to choose their electric supplier.

Our utility business operates as a regulated monopoly.

Our retail customers reside within our assigned service territories, and most retail customers do not have the ability to choose their electric supplier.

However, we are subject to extensive regulation, as further described below, along with certain public policies that promote competition and development of energy markets.

Competition is present in some areas from municipally owned systems, rural electric cooperatives and, in certain respects, from on-site generators and co-generators.

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Wholesale electricity markets are competitive under the Federal Energy Regulatory Commission (FERC) open access transmission tariffs, which require utilities to provide nondiscriminatory access to all wholesale users.

In addition, the FERC has established a competitive process for the construction and operation of certain new electric transmission facilities under federal regulation.

In addition, the FERC has established a competitive process for the construction and operation of certain new electric transmission facilities under federal regulations.

Certain states, including the three states in our service territory, have laws which provide the incumbent transmission owner the right of first refusal to construct and own new transmission facilities.

Future changes to the laws which provide for the right of first refusal could impact the competitive conditions related to the construction of new transmission facilities.

Future changes or legal challenges to the laws which provide for the right of first refusal could impact the competitive conditions related to the construction of new transmission facilities.

OTP has franchises to operate as an electric utility in substantially all of the incorporated municipalities it serves.

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GENERATION AND PURCHASED POWER

OTP primarily relies on company-owned generation, supplemented by power purchase agreements, to supply the energy to meet our customer needs.

Wholesale market purchases and sales of electricity are used as necessary to balance supply and demand.

Our mix of owned generation and wholesale market energy purchases to meet customer demand are impacted by wholesale energy prices and the relative cost of each energy source with wholesale market energy being utilized when it is determined to be beneficial to customers.

As of December 31, 2024, OTP’s wholly or jointly owned plants and facilities, as well as in place power purchase agreements, and their dependable kilowatt (kW) capacity were:

Purchased Power

OTP primarily uses its own generation facilities to supply energy to customers and supplements this with power purchase agreements.

To balance supply and demand, OTP also buys and sells electricity on the wholesale market as needed.

The decision to use either owned generation or wholesale market energy depends on current market prices and the cost-effectiveness of each source.

Wholesale energy is used when it offers a benefit to customers.

As of December 31, 2025, OTP’s wholly or jointly owned plants and facilities, as well as in place power purchase agreements, and their nameplate capacity were:

Purchased Power in kW

(Nameplate Rating)

Owned Generation:

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Total Combustion Turbine and Small Diesel Units 361,708

Owned Wind Facilities (rated at nameplate)

Owned Wind Facilities

Merricourt 150,000

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Total Owned Wind Facilities 350,400

Hoot Lake Solar (rated at nameplate)

Hoot Lake Solar

Hydroelectric Facilities 3,870

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Power Purchase Agreements:

Purchased Wind Power (rated at nameplate and greater than 2,000 kW)

Purchased Wind Power (greater than 2,000 kW)

Edgeley 21,000

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(2) Reflects OTP's 35.0% ownership percentage of jointly owned facility.

The following charts summarize the percentage of our generating capacity by source, including owned and jointly owned facilities and through power purchase arrangements, as of December 31, 2024 and 2023:

The following charts summarize the percentage of our nameplate capacity by source, including owned and jointly owned facilities and through power purchase arrangements, as of December 31, 2025 and 2024:

Under the Midcontinent Independent System Operator (MISO) requirements, OTP is required to provide sufficient capacity through wholly or jointly owned generating capacity or power purchase agreements to meet its monthly weather-normalized forecast demand, plus a reserve obligation.

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The following charts summarize the percentage of retail kwh sold by source during the years ended December 31, 2025 and 2024:

Capacity Additions

As part of our investment plan to meet our future energy needs, the following projects are under development or construction:

Wind Energy Facility Upgrades consist of the replacement and upgrade of hubs, gearboxes, blades, generators and other components of our Ashtabula, Ashtabula III, Langdon and Luverne wind facilities at a total cost of approximately $230 million.

Once complete, we expect the increased energy production from these facilities will be equivalent to an additional 40 megawatts (MW) of generation.

Our Langdon facility upgrades were completed in the fourth quarter of 2024 and we anticipate the remaining facilities will be completed in 2025.

Once complete, the energy production from each of these facilities is eligible for production tax credits (PTCs) over a ten-year period.

We expect these projects will lower customer costs through a combination of fuel savings and the tax credit benefits afforded to our customers.

Solway Solar is a solar facility currently under development that is planned to be constructed adjacent to our existing Solway natural gas plant in northern Minnesota.

Our sources of energy to serve our retail customers include energy from our owned or contracted generation plus energy acquired through the wholesale market.

Market energy is purchased to meet customer demand when energy from our owned and contracted generation is insufficient or when market prices are lower than our internal production cost and therefore it is more economical to serve our customers with wholesale energy.

Capacity and Storage Additions

As part of our investment plan to meet our future energy needs, the following projects were recently completed or are currently under development or construction:

Wind Energy Facility Upgrades consisted of the replacement or upgrade of hubs, gearboxes, blades, generators and other components of our Ashtabula, Ashtabula III, Langdon and Luverne wind facilities at a total cost of approximately $230 million.

We expect the increased energy production from these facilities after the recently completed upgrades will be equivalent to an additional 40 megawatts (MW) of generation.

Following the completion of these upgrades, the energy production from each of these facilities became eligible for production tax credits (PTCs) over a ten-year period.

We expect these projects will lower customer costs through a combination of fuel and purchased power savings and the tax credit benefits afforded to our customers.

Solway Solar is a solar facility currently under construction and located adjacent to our existing Solway natural gas plant in northern Minnesota.

The project is expected to add an additional 50 MW of generating capacity.

We estimate the facility will be operational by the end of 2026 and OTP's capital investment is estimated to be $100 million.

The recovery of the costs of this project remains subject to regulatory approval.

We estimate the facility will be operational by the end of 2026 or early 2027.

OTP's capital investment is estimated to be approximately $80 million.

We expect the energy production from this facility will be eligible for PTCs over a ten-year period.

The costs of this project will be allocated to customers in Minnesota and South Dakota and have been approved for recovery subject to certain terms and conditions.

Abercrombie Solar is solar facility currently under development in southeastern North Dakota.

In October 2024, we entered into a purchase agreement to acquire the development assets of the project, including approximately 3,400 acres of land, interconnection agreements, state and local permits, and all other assets of the project.

We anticipate we will close on the purchase of the development project in late 2025 or early 2026 and estimate the facility will be operational by the end of 2028.

The acquisition of these assets was completed in January 2026, and we currently estimate the facility will be operational by the end of 2028.

Once complete, the facility is expected to have a generating capacity of 295 MW.

OTP's capital investment in the project is estimated to be $450 million.

The recovery of the costs of this project remains subject to regulatory approval.

OTP's capital investment in the project is estimated to be approximately $450 million.

We anticipate the energy production from this facility will be eligible for PTCs over a ten-year period.

The costs of this project will be allocated to customers in Minnesota and South Dakota and have been approved for recovery subject to certain terms and conditions.

Hoot Lake Battery Energy Storage System is a battery storage project currently under development located near our Hoot Lake Solar facility in Minnesota.

Once complete, the facility is expected to have a storage capacity of 75 MW and a storage duration of four hours.

OTP's capital investment in the project is estimated to be approximately $120 million, and we expect the project to qualify for a 40% investment tax credit upon completion.

The costs of this project have been deemed eligible for rider recovery in Minnesota.

We currently expect the facility will be operational in 2028.

ENERGY TRANSITION

OTP is transitioning to a lower-carbon and increasingly clean energy future, while maintaining affordable and reliable electricity to serve our customers.

We have developed the following goals in furtherance of our efforts to support the energy transition:

Own or purchase energy generation that is 55% renewable by 2030 .

Reduce carbon emissions from owned generation resources 50% by 2030 from 2005 levels.

Reduce carbon emissions from owned generation resources 97% by 2050 from 2005 levels.

We have undertaken numerous initiatives to reduce our carbon footprint and mitigate greenhouse gas (GHG) emissions in the process of generating electricity for our customers.

Our recent initiatives include adding the 49 MW Hoot Lake Solar facility to our resource mix, the investment in our wind energy facility upgrades, the commencement of development of the 50 MW Solway Solar and 295 MW Abercrombie Solar facilities, and sponsoring energy conservation programs.

From 2005 through 2024, we have reduced our carbon dioxide (CO 2 ) emissions approximately 40% and increased the amount of renewable generation resources we own or purchase through power purchase agreements by approximately 420 MW.

We currently own or contract energy generation that is 37% renewable.

The following chart depicts our energy resource mix, which is the electricity we used to serve our customers in 2005 and 2024, and the projected mix in 2030 and 2050.

The amounts include energy generated from owned resources, procured through power purchase agreements and energy purchased in the wholesale market:

OTP is committed to providing reliable and affordable electric service to its customers while transitioning to a lower-carbon and increasingly clean energy future.

We are intent on satisfying the public policy priorities of each jurisdiction in which we operate, including renewable and clean energy milestones applicable in certain of our state jurisdictions.

The energy transition of our generation portfolio includes historical and planned future investments in renewable generation, including wind and solar facilities, the planned investment in a battery storage facility, and the retirement of our two remaining co-owned coal generation facilities.

From 2005 through 2025, we added 420 MW of owned or contracted renewable generation to our portfolio.

We anticipate adding an additional 345 MW of owned renewable solar generation to our portfolio between 2026 and 2028, and we are analyzing the potential for up to an additional 200 MW of owned or contracted wind generation by 2029.

In addition, we anticipate adding 75 MW of battery storage by 2028 to complement our renewable generation portfolio.

Finally, we currently anticipate closing our two co-owned coal generation facilities in the 2040s upon reaching the end of their operating lives.

The transition of our energy generation portfolio has reduced our carbon dioxide (CO 2 ) emissions from our owned generation portfolio by approximately 35% from 2005 to 2025.

We are targeting to reduce our CO 2 emissions from our owned generation portfolio by 90% by 2050 from 2005 levels.

In 2025, we modified our 2050 carbon reduction goal, previously a targeted 97% reduction from 2005 levels, and eliminated our 2030 goal in recognition of the evolving energy landscape.

Our near-term carbon emission levels are significantly impacted by many external factors, including regional energy demand, market energy prices, actual and planned retirements of baseload energy generation within our region, and other factors.

As a result, it is difficult to predict with reasonable certainty the operating levels of our baseload and peaking generation facilities and resulting CO 2 emissions.

RESOURCE MATERIALS

Coal is the principal fuel burned at our jointly owned Big Stone and Coyote Station generating plants.

Coal is the principal fuel burned at our jointly owned Big Stone Plant and Coyote Station generating plants.

Coyote Station, a mine-mouth facility, burns North Dakota lignite coal.

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Our coal supply contracts for our Big Stone Plant and Coyote Station have expiration dates in 2026 and 2040, respectively.

The supply agreement between the Coyote Station owners, including OTP, and the coal supplier includes provisions requiring the Coyote Station owners to purchase the membership interests and pay off or assume loan and lease obligations of the coal supplier, as well as complete mine closing and post-mining reclamation, in the event of certain early termination events and at the expiration of the coal supply agreement in 2040.

The supply agreement expires in 2040 but does provide for early termination under certain circumstances and with requirements to fulfill certain obligations.

See below and Note 1 to our consolidated financial statements included in this report on Form 10-K for additional information.

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MISO seeks to optimize the efficiency of the interconnected system, provide solutions to regional planning needs and minimize risk to reliability through its security coordination, long-term regional planning, market monitoring, scheduling and tariff administration functions.

Transmission Additions

Transmission Investments

As a utility and transmission owner operating as a member within MISO, we are participating in large transmission investments intended to improve system reliability and resilience, to promote a cost-effective regional and interregional transmission system,

and to allow new generating capacity to access the electric grid.

The following projects are in various stages of planning and development or construction:

MISO Tranche 1.0.

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These projects will be developed and constructed over several years and OTP's total investment in these projects is estimated to be $475 million.

The following is a brief overview of the two projects included in Tranche 1.0:

Jamestown-Ellendale includes the construction of a new 345 kV transmission line in southeastern North Dakota spanning approximately 95 miles from Jamestown, North Dakota to Ellendale, North Dakota.

This project is in the initial stages of planning and development and is expected to be completed in 2028.

We continue project planning and development and expect material procurement and construction to commence in 2026.

The project is expected to be completed in 2029.

Big Stone South-Alexandria-Big Oaks includes the construction of a new 345 kV transmission line in eastern South Dakota and western Minnesota and the addition of a second circuit to an existing 345 kV line in central Minnesota.

The new transmission

line will span approximately 100 miles between Big Stone, South Dakota and Alexandria, Minnesota.

The new transmission line will span approximately 100 miles between Big Stone, South Dakota and Alexandria, Minnesota.

A second circuit will be added to the existing transmission line spanning from Alexandria, Minnesota to Big Oaks, Minnesota.

This project is in the initial stages of planning and development and is expected to be completed in 2032.

We continue project planning and development.

Line construction on the second circuit has commenced.

We expect construction to commence on the Big Stone South-Alexandria portion of the line in 2028.

The project is expected to be completed in 2030.

MISO Tranche 2.1.

In December 2024, MISO approved several projects within the second tranche of its long-range transmission plan.

Within this second tranche of projects, we anticipate OTP will be a partial owner of three projects, including a new 345 kV transmission line, a new 765 kV transmission line, and the addition of a second circuit to an existing 345 kV transmission line.

These projects will be developed and constructed over several years and OTP's total investment in these projects is estimated to be $700 million.

Bison-Alexandria includes the construction of a second 345 kV circuit, which is being added to an existing transmission line in eastern North Dakota and western Minnesota.

This project is in the initial stages of planning and development and is expected to be completed in 2032.

Within this second tranche of projects, OTP will be a partial owner of three projects, including the addition of a second circuit to an existing 345 kV transmission line, a new 345 kV transmission line, and a new 765 kV transmission line.

These projects will be developed and constructed over several years, and OTP's total investment in these projects is currently estimated to be $800 million to $1.0 billion.

The following is a brief overview of the three projects included in Tranche 2.1:

Bison-Alexandria includes the construction of a second 345 kV circuit, which is being added to an existing transmission line in eastern North Dakota and western Minnesota, as well as upgrades to an existing 230 kV line and substation.

This project is in the initial stages of development and is expected to be completed in 2032.

Maple River-Cuyuna includes the construction of a new 345 kV transmission line in eastern North Dakota and western Minnesota, as well as investment in substation expansion.

This project is in the initial stages of planning and development and is expected to be completed in 2033.

This project is in the initial stages of development and is expected to be completed in 2033.

Big Stone South-Brookings County includes the construction of a new 765 kV transmission line in eastern South Dakota, as well as investment in substation expansion.

This project is in the initial stages of planning and development and is expected to be completed in 2034.

This project is in the initial stages of development and is expected to be completed in 2034.

Joint Targeted Interconnection Queue (JTIQ).

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These projects will improve reliability and resolve constraints in the transmission system to allow for up to 30 gigawatts of new generation to be added to the system.

OTP expects to participate in one JTIQ project, being the sole owner of a new 345 kV transmission line spanning from Big Stone, South Dakota to Hankinson, North Dakota, and a partial owner of a new 345 kV line spanning from Hankinson, North Dakota to Bison, North Dakota.

In October 2023, the U.S.

Department of Energy (DOE) approved a grant in an amount up to 25% of the total JTIQ project costs.

OTP's capital investment in these projects, after the impact of the 25% DOE grant, is estimated to be $450 million.

Bison-Hankinson-Big Stone South is a two-part new transmission line project.

OTP is the sole owner of a new 345 kV transmission line spanning from Big Stone, South Dakota to Hankinson, North Dakota, and a partial owner of a new 345 kV line spanning from Hankinson, North Dakota to Mapleton, North Dakota.

These projects, which are expected to be completed in 2034, are in the early stages of development.

Department of Energy (DOE) has approved a grant to partially fund the construction of these projects in an amount up to 25% of the total JTIQ project costs.

OTP's capital investment in these projects, after the impact of the 25% DOE grant, is currently estimated to be $450 to $500 million.

Electricity demand is affected by seasonal weather differences, with peak demand occurring in the summer and winter months.

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Tariff rates are designed to recover plant investments, a return on those investments and operating costs.

In addition to determining rate tariffs, state regulatory commissions also authorize return on equity (ROE), capital structure and depreciation rates of our capital investments.

In addition to determining rate tariffs, state regulatory commissions also authorize return on equity (ROE), capital structure

and depreciation rates of our capital investments.

Decisions by our regulators significantly impact our operating results, financial position and cash flows.

Below is a summary of the regulatory agencies with jurisdiction over OTP covered by each regulatory agency:

Below is a summary of the regulatory agencies with jurisdiction over OTP and the areas of regulation covered by each agency:

Agency Areas of Regulation

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Retail rates, issuance of securities, depreciation rates, capital structure, public utility services, construction of major facilities, establishment of exclusive assigned service areas, contracts with subsidiaries and other affiliated interests and other matters.

Selection or designation of sites for new generating plants (50,000 kW or more) and routes for transmission lines (100 kV or more).

Selection or designation of sites for new generating plants (5,000 kW or more for wind generating facilities;

50,000 kW or more for non-wind generating facilities) and routes for transmission lines (100 kV or more and exceeding 1,500 feet).

Certificates of Need for generating plants and transmission assets.

Review and approval of fifteen-year Integrated Resource Plan.

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(NDPSC) Retail rates, certain issuances of securities, construction of major utility facilities and other matters.

Approval of site and routes for new electric generating facilities (>500 kW for wind generating facilities;

>50,000 kW for non-wind generating facilities) and high voltage transmission lines (>115 kV).

Approval of site and routes for new electric generating facilities (exceeding 500 kW for wind generating facilities;

exceeding 50,000 kW for non-wind generating facilities) and high voltage transmission lines (exceeding 115 kV).

Certificates of Convenience and Necessity for service territory expansions.

Review and approval of fifteen-year Integrated Resource Plan.

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(SDPUC) Retail rates, public utility services, construction of major facilities, establishment of assigned service areas and other matters.

Approval of sites and routes for new electric generating facilities (100,000 kW or more) and most transmission lines (115 kV or more).

Approval of sites and routes for new electric generating facilities (100,000 kW or more) and most transmission lines (exceeding 115 kV).

Federal Energy Regulatory Commission

(FERC) Wholesale electricity sales, transmission and sale of electric energy in interstate commerce, interconnection of facilities, hydroelectric licensing and accounting policies and practices.

(FERC) Wholesale electricity sales, the transmission and sale of electric energy in interstate commerce, interconnection of facilities to the interstate transmission system, certain mergers and acquisitions, and corporate transactions, hydroelectric licensing and accounting policies and practices.

Compliance with North American Electric Reliability Corporation (NERC) reliability standards, including standards on cybersecurity and protection of critical infrastructure.

In addition to base rates, which are established through periodic rate case proceedings within each state jurisdiction, there are other mechanisms for recovery of our capital investments and operating costs between rate cases.

The following table summarizes these recovery mechanisms:

The following table summarizes the significant recovery mechanisms:

Recovery Mechanism Jurisdiction(s) Additional Information

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In Minnesota, fuel and purchased power costs are estimated on an annual basis and the accumulated difference between actual and estimated cost is refunded or recovered, subject to regulatory approval, in subsequent periods.

Transmission Cost Recovery Rider (TCR) MN, ND, SD Provides for the recovery of costs outside of a general rate case for investments in new or modified electric transmission assets and certain MISO transmission service and related costs.

Renewable Resource Rider (RRR) MN, ND Provides for the recovery of costs outside of a general rate case for investments in certain new renewable energy projects.

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Resource Planning

Under Minnesota law, utilities are required to submit for approval by the Minnesota Public Utilities Commission (MPUC) a 15-year advance Integrated Resource Plan (IRP).

An IRP is a set of resource options a utility could use to meet the service needs of its customers over the forecast period, including an explanation of the utility’s supply and demand circumstances, and the extent to

which each resource option would be used to meet those service needs.

Under Minnesota law, utilities are required to submit for approval by the Minnesota Public Utilities Commission (MPUC) a 15-year advance Integrated Resource Plan (IRP) every two years.

The MPUC’s findings of fact and conclusions regarding IRPs are considered to be prima facie evidence, subject to rebuttal, in future rate reviews and other proceedings.

Under North Dakota law, utilities are required to submit for approval by the North Dakota Public Service Commission (NDPSC) a 15-year advance IRP every three years.

OTP will file their next IRP in Minnesota in 2026.

Under North Dakota law, utilities are required to submit a 15-year advance IRP every three years for approval by the North Dakota Public Service Commission (NDPSC).

OTP will file their next IRP in North Dakota in 2027.

South Dakota does not have a formal advance IRP process.

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Once approved, OTP may issue securities without further petition or approval, provided the issuance is consistent with the purposes and amounts set forth in the approved petition.

OTP’s current capital structure approved by the MPUC on July 30, 2024, allows for an equity-to-total-capitalization ratio between 47.2% and 57.7%, with total capitalization not to exceed $2.2 billion.

OTP’s current capital structure, approved by the MPUC on December 12, 2025, allows for an equity-to-total-capitalization ratio between 46.7% and 57.1%, with total capitalization not to exceed $2.4 billion.

Renewable Energy Standard

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25% by 2025 and 55% by 2035.

Qualifying renewable sources are classified as wind, hydropower, hydrogen and certain biomass generation.

Qualifying renewable sources are classified as solar, wind, hydropower, hydrogen and certain biomass generation.

We met the current renewable sources requirements with a combination of owned renewable generation and purchases from renewable generation sources.

We were in compliance with the 2025 target established by the standard, and we plan to comply with the future requirements of this standard through a combination of our existing and projected renewable generation fleet.

Minnesota law also requires 1.5% of total Minnesota retail electric sales by public utilities to be supplied by solar energy.

For a public utility with between 50,000 and 200,000 retail electric customers, such as OTP, at least 10% of the 1.5% requirement must be met by solar energy generated by or procured from solar photovoltaic devices with a nameplate capacity of 40 kW or less.

We met the current solar requirement with a combination of owned solar generation and solar renewable energy certificate (REC) purchases.

We plan to comply with the requirements of this standard in the future through a combination of our existing and projected renewable generation fleet.

For a public utility with between 50,000 and 200,000 retail electric customers, such as OTP, at least 10% of the 1.5% requirement must be met by

solar energy generated by or procured from solar photovoltaic devices with a nameplate capacity of 40 kW or less.

We met the overall solar requirement in 2025, with a combination of owned solar generation and solar renewable energy certificate (REC) purchases, but we were not compliant with the requirement that 10% of the 1.5% be met by solar energy generated by or procured from solar photovoltaic devices with a nameplate capacity of 40 kW or less.

Minnesota Clean Energy Law

In February 2023, Minnesota enacted the Clean Energy Law, which requires electric utilities to generate or procure sufficient electricity from carbon-free resources, to provide retail customers in Minnesota with at least the following percentages of carbon-free electric energy:

Minnesota's Clean Energy Law requires electric utilities to generate or procure sufficient electricity from carbon-free resources to provide retail customers in Minnesota with at least the following percentages of carbon-free electric energy:

80% by 2030, 90% by 2035, and 100% by 2040.

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The timing and amount of our expenditures may change as the regulatory environment changes.

Emerging Environmental Regulation

Emerging Regulation

Regional Haze Rule (RHR).

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and to periodically evaluate whether those goals and progress are on track or whether additional emission reductions are necessary.

The second RHR implementation period covers the years 2018-2028.

RHR compliance is to be monitored through several implementation periods, the second of which covers the years 2018-2028.

Coyote Station, OTP's jointly owned coal-fired power plant in North Dakota, is subject to assessment in the second implementation period under the North Dakota SIP.

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On December 2, 2024, the EPA published its final ruling on North Dakota's SIP, approving certain aspects of the plan and disapproving other aspects of the plan.

Regarding the partial disapproval, the EPA found that North Dakota failed to submit a long-

term strategy that includes enforceable emissions limitations, compliance schedules, and other measures necessary to make reasonable progress on national visibility goals.

Specific to Coyote Station, the EPA found that North Dakota relied on non-statutory visibility modeling to reject the installation of additional nitrogen oxides (NOx) and sulfur dioxide (SO 2 ) emission controls.

Having disapproved, in part, the North Dakota SIP, the EPA now must promulgate a Federal Implementation Plan within two years from the issuance of its final decision.

As part of its partial disapproval, the EPA found that North Dakota failed to submit a long-term strategy that includes enforceable emissions limitations, compliance schedules and other measures necessary to make reasonable progress on national visibility goals.

Specific to Coyote Station, the EPA found that North Dakota relied on non-statutory visibility modeling to reject the installation of additional nitrogen oxides and sulfur dioxide emission controls.

Having disapproved, in part, the North Dakota SIP, the EPA must promulgate a Federal Implementation Plan within two years from the issuance of its final decision.

The Federal Implementation Plan may include emission controls required to satisfy the requirements of the RHR.

We cannot predict with certainty the final resolution of regional haze compliance in North Dakota and specifically the impact, if any, on the operations of Coyote Station.

However, significant emission control investments could be required which may have a material impact on our operating results, financial condition and liquidity.

Alternatively, such investments may prove to be uneconomic and result in the early closure, sale of or withdrawal from our interest in Coyote Station.

In March 2025, the EPA announced it would begin restructuring the RHR to streamline requirements for states, and on April 30, 2025, the EPA granted a request to reconsider the December 2024 partial disapproval of the North Dakota SIP.

At this time, the final resolution of regional haze compliance in North Dakota, and specifically the impact, if any, on the operations of Coyote Station is uncertain.

Clean Air Act.

In May 2024, the EPA finalized new regulations under Section 111 of the Clean Air Act to regulate GHG emissions from existing and new fossil fuel-based power plants.

In May 2024, the EPA finalized new regulations under Section 111 of the Clean Air Act to regulate greenhouse gas (GHG) emissions from existing and new fossil fuel-based power plants.

The final rule establishes subcategories for new combustion turbines and existing coal-fired power plants to achieve certain CO 2 emission reduction levels based on the respective subcategory.

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For existing coal-fired power plants anticipated to be operated after January 2039, the regulation set a Best System of Emission Reduction (BSER) based on 90% capture and sequestration of CO 2 emissions with a compliance date of January 2032.

For existing coal-fired power plants anticipated to be operated after January 2032 but plan to cease operations before January 2039, the regulation set a BSER of 40% co-firing with natural gas, which would result in a 16% reduction in CO 2 emissions rate with a compliance date of January 2030.

coal-fired power plants anticipated to be operated after January 2032 but planned to cease operations before January 2039, the regulation set a BSER of 40% co-firing with natural gas, which would result in a 16% reduction in CO 2 emissions rate with a compliance date of January 2030.

Coal-fired power plants with federally enforceable plans to cease operations by January 2032 are not subject to this regulation.

Several states and industry groups have filed lawsuits challenging the new regulation, arguing the EPA has overstepped its authority under the Clean Air Act.

We continue to review and evaluate the final regulations and the ongoing legal challenges.

We cannot at this time conclude what the impact may be on our power plants and the potential impact to our operating results, financial condition and liquidity.

However, significant emission control investments could be required, which may have a material impact on our operating results, financial condition and liquidity.

Alternatively, such investments may prove to be uneconomic and result in the early closure, sale of or withdrawal from our interest in a coal-fired plant.

Coyote Station and Big Stone Plant, our two co-owned coal-fired power plants, are within the scope of the regulations but our combustion turbines are not within the scope of the final regulation.

Following the issuance of the new regulations, several states and industry groups filed lawsuits challenging the regulation, arguing the EPA overstepped its authority under the Clean Air Act.

In June 2025, the EPA published a proposed rule that would repeal the existing GHG emission standards for fossil fuel-fired power plants.

The proposal includes a finding that GHG emissions from such sources do not significantly contribute to dangerous air pollution, which the EPA asserts is a necessary legal predicate for regulation under the Clean Air Act.

As an alternative, the EPA is also proposing to repeal only the emission guidelines applicable to existing fossil fuel-fired steam generating units.

The proposed rule has not yet been finalized.

Coal Combustion Residual (CCR) Regulation.

In May 2024, the EPA published a final rule amending CCR regulations, which introduce new requirements for the management of coal ash at active coal-fired power plants and inactive coal-fired power plants with a legacy surface impoundment.

In May 2024, the EPA published a final rule amending CCR regulations, which introduced new requirements for the management of coal ash at active coal-fired power plants and inactive coal-fired power plants with a legacy surface impoundment.

The regulations impose new requirements including groundwater monitoring, closure standards, post-closure care obligations and potential remediation activities.

We anticipate we will incur costs related to coal ash removal and groundwater monitoring in the future as a result of the amended regulation;

however, we continue to review and evaluate the overall impact this regulation may have on our business, including potential impacts to our operating results, financial condition and liquidity.

Mercury and Air Toxics Standards.

In May 2024, the EPA published final regulations to strengthen and update Mercury and Air Toxics Standards for coal-fired power plants, tightening the emission standard for toxic metals and finalizing a reduction standard for mercury from existing lignite-fired sources.

We continue to review and evaluate the overall impact this regulation may have on our business, including potential impacts to our operating results, financial condition and liquidity.

In 2025, the EPA proposed several delays for coal ash disposal and plant closure requirements to address electric grid reliability concerns.

We anticipate we may incur costs related to coal ash removal and groundwater monitoring in the future as a result of the amended regulation.

We continue to review and evaluate the overall impact this regulation may have on our business, including potential impacts on our operating results, financial condition and liquidity.

Mercury and Air Toxics Standards (MATS).

In May 2024, the EPA published final regulations to strengthen and update MATS for coal-fired power plants, tightening the emission standards for both particulate matter and for mercury from existing lignite-fired sources.

Currently, OTP's coal-fired power plants would be required to comply with these regulations in 2029.

However, in June 2025, the EPA published a proposed rule to repeal the May 2024 MATS for coal-fired power plants.

Multiple environmental organizations have filed legal challenges to the proposed rule.

These legal challenges remain pending but are currently held in abeyance while the EPA undertakes its reconsideration of the MATS amendments.

We continue to review and evaluate the overall impact this regulation may have on our business, including potential impacts on our operating results, financial condition and liquidity.

Climate Change and Greenhouse Gas Regulation

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Combustion of fossil fuels for the generation of electricity is a considerable source of CO 2 emissions, which is the primary GHG emitted by our utility operations.

The federal government, many states and international organizations are pursuing climate policies to regulate GHG emissions as part of a broad-based effort to limit global warming.

The Minnesota Clean Energy Law, passed in 2023, requires electric utilities to generate or procure sufficient electricity from carbon-free resources to provide retail customers in Minnesota with at least the following percentages of carbon-free electric energy:

80% by 2030, 90% by 2035, and 100% by 2040.

The implementation of climate change programs, such as the Minnesota Clean Energy Law, regulations under the Clean Air Act and other existing or future federal or state regulations targeting GHG emissions, may have a significant impact on our utility business.

While the future financial impact of any current, proposed or pending regulation of GHG or other emissions is unknown at this time, any capital or operating costs incurred for additional pollution control equipment or emission reduction measures could materially

adversely impact our future operating results, financial position and liquidity unless such costs could be recovered through related rates and/or future market prices for energy.

The federal government, state governments and international organizations have periodically pursued, and may continue to pursue, climate policies to regulate GHG emissions as part of a broad-based effort to limit global warming.

The implementation of climate change programs, such as the Minnesota Clean Energy Law, regulations under the Clean Air Act, if not repealed, and other existing or future federal or state regulations targeting GHG emissions, may have a significant impact on our utility business.

MANUFACTURING Contribution to Operating Revenues:

24% (2025), 26% (2024), 30% (2023)

Our Manufacturing businesses are engaged in the production of metal or plastics products sold to commercial customers.

Our Manufacturing businesses are engaged in the production of metal or plastics parts and products sold to commercial customers.

The following is a brief description of each of these businesses:

BTD Manufacturing, Inc.

(BTD), with facilities in Detroit Lakes and Lakeville, Minnesota, Washington, Illinois and Dawsonville, Georgia, provides metal fabrication services for custom machine parts and metal components.

BTD is a full-service contract metal fabricator with capabilities in metal stamping and fabrication, tool and die, machining, tube bending, welding, assembly and product painting.

(BTD), founded in 1979 and acquired by Otter Tail Corporation in 1995, provides metal fabrication services for custom machine parts and metal components through its facilities in Detroit Lakes and Lakeville, Minnesota, Washington, Illinois and Dawsonville, Georgia.

Plastics, Inc.

Plastics) , with facilities in Otsego and Clearwater, Minnesota, manufactures thermoformed plastics products, including its own line of horticulture containers and custom packaging products for the medical and industrial product markets.

Our metal fabrication business primarily serves Midwestern and Southeastern U.S.

original equipment manufacturers (OEM) in the recreational vehicle, lawn and garden, agricultural, construction, industrial, energy equipment and other end markets.

Our customers include some of the largest recreational vehicle and equipment manufacturers based in the U.S.

Plastics) , founded in 1948 and acquired by Otter Tail Corporation in 2001, manufactures thermoformed plastics products, including horticulture containers and custom packaging for medical and industrial markets through its facilities in Otsego and Clearwater, Minnesota.

BTD is a value-added metal fabricator that produces custom machine parts and metal components for its original equipment manufacturer (OEM) customers.

Through our manufacturing facilities in Minnesota, Illinois, and Georgia, with more than a million square feet of manufacturing capacity, we provide a comprehensive suite of capabilities to produce highly engineered metal parts and components to serve our OEM customers.

Our metal fabrication services include:

Research and development resources to design and produce product prototypes quickly and cost-effectively;

Tool design and construction specializing in both short- and long-run tooling, providing cost effective tools tailored to customer specifications;

Fabrication and welding including advanced fabrication and welding, including robotic welding, using the latest technologies to deliver high-quality products;

Stamping is the cornerstone service of our business, with presses ranging from 45 to 800 tons, providing cost-effective solutions and flexible options for short and long production runs;

Tubing including precise forming and bending operations to manufacture tubular products tailored to customer requirements;

Assembly capabilities to provide a full-service experience for our customers;

Finishing and painting services including liquid primers and powder coating to meet customer specifications;

Inventory management services include warehousing, packaging, kitting and product sequencing to ensure we deliver the right products to our customers when they need them.

Through these capabilities, BTD manufacturers over 30,000 unique parts, including products ranging from welded frames and chassis, roll cages, heat shields, support brackets, handles and railings, and tube and pipe components.

Our facilities are ISO 9001:2015 certified, which is the international standard for quality management systems.

Our strategy emphasizes utilizing the above set of capabilities from development through inventory management to provide highly engineered metal parts and components at a competitive cost.

Leveraging our engineering expertise and technical proficiency, BTD creates value during the entire development, manufacturing and logistics cycle.

Plastics provides custom and proprietary thermoforming solutions for the horticulture, medical, industrial and various other markets.

Our proprietary horticulture products are manufactured through a vertically integrated process of raw material pelletizing, extrusion and thermoforming to produce plastic products that serve the early-growth horticulture market.

Our proprietary products include round and square pots, plug, carrying and specialty trays, propagation sheets and various other products used in the germination and early growth horticulture industry.

The applications for our products include greenhouses and nurseries, microgreen development and vertical farming.

Plastics also provides custom thermoformed plastic packing and parts to serve customers in the medical, industrial, recreational, electronic and other markets.

We offer a full suite of capabilities including design, prototyping, tooling construction and thermoforming production to meet our customers' packaging and other plastic parts needs.

Our products include various medical device packaging, shipping trays, laboratory trays, housing enclosures and consumer packaging.

Both our Clearwater and Otsego facilities in Minnesota are ISO 9001:2015 certified.

In addition, our Otsego facility is certified under ISO 13485:2016, which is the international standard for quality management systems in the design and manufacture of medical devices.

In addition, we maintain two Class 8 cleanrooms at our Otsego facility used in the production of plastic packaging and parts for the medical industry.

Our strategy is focused on producing horticulture products through our integrated manufacturing capabilities to deliver high-quality products at a competitive cost.

We also strive to provide custom plastics packaging and parts to our medical and industrial customers through our end-to-end service offering from discovery and design to tooling and manufacturing while meeting all customer product specifications.

Our metal fabrication business primarily serves OEMs operating in the Midwest and Southeastern U.S.

The primary end markets we serve include recreational vehicle (powersports), lawn and garden, agricultural, construction, industrial, energy equipment and certain other markets.

Our customers include some of the largest vehicle and equipment manufacturers operating in the U.S., including Caterpillar Inc., CNH Industrial N.V., Cummins Inc., Deere & Company, Honda Motor Co., Kawasaki Heavy Industries, Polaris Inc.

and The Toro Company.

We have developed long-standing business relationships with our OEM customers, many of which span decades.

In many cases, we are an integral component of our customers' supply chains and strive to maintain strong strategic alignment.

We have not historically experienced high rates of customer attrition given high customer switching costs resulting from our embedded relationships driven by our broad capabilities and scale.

The principal method of product distribution is by direct shipment to our customers through direct customer pick-up or common carrier ground transportation.

Our plastic products business primarily serves U.S.

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Most of our horticulture products are sold through distributors.

Our customer packaging products are manufactured to customer specifications and sold directly to the end customer.

Although we sell our products to a large number of customers across a diverse group of end markets, two customers combined to account for approximately 36% of segment operating revenues in 2024.

The principal method of production distribution is by direct shipment to our customers through direct customer pick-up or common carrier ground transportation.

The following presents our revenue by end market for the years ended December 31, 2024 and 2023:

Our custom packaging and other plastic products are manufactured to customer specifications and sold to other manufacturers or end customers.

The following presents our revenue by end market for each of the five years ended December 31:

Although we sell our products to a large number of customers across a diverse group of end markets, three customers combined to account for approximately 44% of segment operating revenues in 2025.

COMPETITIVE CONDITIONS

We compete in a highly fragmented market with competition from both domestic and international entities.

Our competitors vary in size, ranging from small companies focused on certain end markets or geographical area, to large companies with broad manufacturing capabilities and domestic and international geographical reach.

Competition can be geographically regionalized as customers procure products locally to manage cost and minimize logistical complexities.

Certain competitors may have broader product lines, more manufacturing capacity and greater distribution capabilities than we do.

We believe the principal competitive factors in our Manufacturing segment are product performance, quality, price, technical innovation, cost effectiveness, customer service and breadth of product line.

The metal fabrication market is highly fragmented with competition primarily from domestic entities.

Most competition is comprised of privately owned small-scale fabrication shops that specialize in a single or limited set of production capabilities or focus on certain end markets or geographical service territories.

Some larger competitors bring broad manufacturing capabilities and greater geographical reach.

Competition can be geographically regionalized as customers procure products locally to manage costs and minimize logistical complexities.

Competitive dynamics we face within the industry include breadth of product offerings, competitive cost structures and product pricing, and manufacturing capacity and distribution capabilities.

BTD competes on its full breadth of value-add services from research and development, to tool and die design and manufacturing, to its full suite of fabrication and machining capabilities, and its finishing services and inventory management capabilities.

Our end-to-end solution reduces customer logistics burden, compresses cycle times and improves quality.

We have invested in automation and robotics to improve productivity, increase process repeatability, manage skilled labor constraints and enhance product quality.

The diversity of end markets BTD serves, its full suite of manufacturing capabilities, and its geographical reach from the Midwest to the Southeast of the U.S.

provides resilience against fluctuations in individual sector or geographical demand.

When demand shifts, we can adapt by reallocating production to align with changing conditions.

The plastic thermoforming market for horticultural products is highly fragmented with competition from domestic and international entities.

Our competitors vary in size, production capabilities, geographical reach and customer focus.

Competition varies by sales channel, with some competitors primarily selling through horticulture focused distribution, while other competitors implement a direct sales strategy to the horticulture grower customer.

Low-cost import competition from Southeast Asia has expanded with these competitors primarily targeting the direct to grower sales channel.

Competition in the custom plastic packaging and parts industry is highly fragmented with competition from domestic and international entities.

Many competitors are larger in size with greater manufacturing capabilities and geographical reach.

Overall, the principal competitive factors in our Manufacturing segment are product quality, price competitiveness, breadth of product line and customer service.

We intend to continue to compete based on high-quality products, innovative production technologies, cost-effective manufacturing techniques, close customer relations and support, and increasing product offerings.

In December 2024, we completed an expansion project at our Georgia location, which added approximately 162,000 square feet of owned manufacturing and warehouse space and will replace a warehouse facility that is currently being leased near the same location.

This expansion provides additional manufacturing capacity in the southeastern U.S.

to meet customer demand as their manufacturing base expands in the same region.

RESOURCE MATERIALS

We use raw materials in the products we manufacture, including, among others, steel, aluminum, and polystyrene and other plastics resins.

Steel is our most significant raw material input.

We obtain nearly all of our steel inventory from large domestic suppliers.

Managing price volatility and ensuring raw material availability are important aspects of our business.

We attempt to pass increases in the costs of these raw materials through to our customers.

Increases in the costs of raw materials that cannot be passed on to customers could have a negative effect on profit margins.

Consistent with industry practice, our contracts with our metal fabrication customers incorporate steel cost pass-through mechanisms or indexed pricing that mitigates commodity volatility and its impact on profitability.

Additionally, a certain amount of residual material (scrap) is a by-product of the manufacturing and production processes.

We are able to sell nearly all scrap material in the scrap market.

Declines in commodity prices for these scrap materials due to weakened demand or excess supply can negatively impact the profitability of our Manufacturing segment.

Demand for our products can be impacted by the seasonality of the demand for our customers' products and our customers' production schedules.

Generally, sales volumes and earnings are lower in the fourth quarter.

ENVIRONMENTAL REGULATION

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Northern Pipe Products, Inc.

(Northern Pipe) , located in Fargo, North Dakota, manufactures and sells PVC pipe for municipal water, rural water, wastewater, storm drainage systems and other uses in the northern, midwestern, south-central and western regions of the United States as well as central and western Canada.

Vinyltech Corporation (Vinyltech) , located in Phoenix, Arizona, manufactures and sells PVC pipe for municipal water, wastewater, water reclamation systems and other uses in the western, northwest and south-central regions of the United States.

PVC pipe is manufactured through an extrusion process, during which PVC compound (a dry powder-like substance) is blended with other materials and introduced into an extrusion machine, where it is heated to a molten state and then forced through a sizing apparatus to produce the pipe.

(Northern Pipe) , founded in 1979 and acquired by Otter Tail Corporation in 1995, located in Fargo, North Dakota, manufactures and sells PVC pipe for municipal water, rural water, wastewater, storm drainage systems and other uses in the northern, midwestern, south-central and western regions of the United States as well as central and western Canada.

Vinyltech Corporation (Vinyltech) , founded in 1983 and acquired by Otter Tail Corporation in 2000, located in Phoenix, Arizona, manufactures and sells PVC pipe for municipal water, wastewater, water reclamation systems and other uses in the western, northwest and south-central regions of the United States.

Our Plastics segment businesses manufacture PVC pipe primarily used in municipal water infrastructure, which encompasses potable water distribution, wastewater collection and distribution, and water reclamation systems.

Potable water systems use PVC pressure pipe for transmission and distribution lines delivering treated water to residential and commercial developments.

Wastewater and water reclamation systems use PVC pipe to transport non-potable water to treatment facilities or for reuse applications within municipal systems.

Our Plastics segment businesses also manufacture PVC pipe for use within residential and commercial structures and rural water systems.

The end markets and uses of our PVC pipe generally approximate the following:

90% Municipal;

5% Residential and Commercial;

5% Rural Water.

PVC pipe is manufactured through an extrusion process, during which PVC resin compound (a dry powder-like substance) is blended with other materials and introduced into an extrusion machine, where it is heated to a molten state and then forced through a sizing apparatus to produce the pipe.

The newly extruded pipe is pulled through a series of water-cooling tanks, marked to identify the type of pipe and cut to finished lengths.

We produce pipe in a variety of diameters ranging from 3/4" to 24" and in varying lengths, generally from 10 feet to 20 feet.

Our PVC pipe is used in municipal and wastewater systems, residential and commercial plumbing applications, and rural water systems.

Our pipe products are marketed through a combination of independent sales representatives, company salespersons and customer service representatives.

Substantially all of our products are sold through distribution partners, which range from large, national distributors to smaller regional or local distributors.

In 2024, two customers, both of which are distributors of PVC pipe, combined to account for 52% of segment operating revenues.

The principal method for distribution of our products is by common carrier ground transportation.

The following presents our revenue by end market for the years ended December 31, 2024 and 2023:

We produce pipe in a variety of diameters ranging from 3/4" to 24" and in varying lengths, generally from 10 feet to 20 feet, and up to 45 feet for certain types of pipe.

All PVC pipe is manufactured to applicable standards and specifications defined by the American Water Works Association or ASTM International standards and are subject to rigorous internal quality assurances and third-party inspections for ongoing compliance.

We have approximately 400 million pounds of annual nameplate production capacity between our facilities in Fargo, North Dakota and Phoenix, Arizona, with over 250,000 square feet of manufacturing and warehousing space.

Our strategy is aimed at providing market-leading reliability and responsiveness, delivering quality products when our customers need them.

Our agile operations provide us the flexibility to respond to customer needs and allow us to deliver the needed products in a timely manner.

Substantially all of our products are sold through distributors, which range from large, national distributors to smaller regional or local distributors.

In total, we sell to over 200 distribution customers, but do have a large volume of sales activity with two national distributors.

In 2025, these two distributor customers combined to account for 47% of segment operating revenues.

Our distributor customers serve contractors, municipalities and other local governmental entities engaged in public infrastructure projects and residential and commercial development.

Demand for our products is influenced by new construction development, as growth in residential and commercial building activity drives municipal water infrastructure, and system rehabilitation and replacement as aging municipal systems require upgrades or replacement.

Our sales and service territory generally includes the western half of the U.S.

and western Canada.

We market our products through a combination of independent sales representatives, company salespeople and customer service representatives.

The principal method for the distribution of our products is by common carrier ground transportation.

COMPETITIVE CONDITIONS

Competition in the plastic pipe industry arises from other PVC pipe manufacturers and the fungible nature of the product.

Due to shipping costs, competition is usually regional instead of national in scope.

Competition in the PVC pipe industry is characterized by a limited number of domestic PVC pipe manufacturers, with the three largest competitors capturing a significant portion of the overall market.

These large competitors have a broader geographical reach, integration with PVC resin producers, greater manufacturing capacity and national relationships with key distributors.

Competition is generally geographically regionalized as shipping costs are typically cost prohibitive to compete on a national basis.

The principal factors of competition are price, customer service, product availability, shipping costs and product performance.

Industry competition is characterized by a limited number of competitors, with the three largest competitors capturing a significant portion of the overall market.

These competitors have a broader geographical reach, integration with PVC resin producers, greater manufacturing capacity and national relationships with key distribution partners.

We compete on a regional basis, serving our core markets with strong customer service and high-quality products.

In addition to competition with other PVC pipe manufacturers, our PVC pipe competes with other products that serve the same end markets, including ductile iron, high-density polyethylene (HDPE), steel and concrete pipe products.

We will continue to compete based on our high level of service quality, including being a responsive and reliable partner to our customers, through maintaining product availability, by producing high-quality products and using cost-effective production techniques.

In December 2024, we completed an expansion project at our Arizona location, which added approximately 62,000 square feet of manufacturing, warehouse and office space, allowing for additional manufacturing capacity, including the ability to produce large diameter pipe to serve our customers in our regional market.

In addition to competition with other PVC pipe manufacturers, our PVC pipe products compete with other products that serve the same end markets, including ductile iron, high-density polyethylene (HDPE), steel and concrete pipe products.

We will continue to compete based on our high level of service and quality, including being a responsive and reliable partner to our customers through maintaining product availability, by producing high-quality products and by using cost-effective production techniques.

RESOURCE MATERIALS

PVC resins are acquired in bulk and shipped to our facilities by rail.

There are four vendors from which we can source our PVC resin requirements and in 2024 we utilized all four vendors to source our PVC resin.

Our contractual arrangements to acquire resin generally include estimated annual order quantities, with no required minimum purchases, and include variable pricing based on market prices for resin.

The supply of PVC resin may also be limited due to manufacturing capacity and the limited availability of raw material components, along with rail transportation disruptions from PVC resin plants to our facilities.

resin production plants are located in the Gulf Coast region.

These plants are subject to the risk of damage and production shutdowns because of exposure to hurricanes or other extreme weather events that occur in this part of the United States.

The loss of a key vendor or any interruption or delay in the supply of PVC resin could disrupt the ability of our Plastics segment businesses to manufacture products, cause customers to cancel orders or result in increased expenses for obtaining PVC resin from alternative sources, if such sources were available.

We believe we have good relationships with our key raw material vendors.

Due to the commodity nature of PVC resin and the dynamic supply and demand factors worldwide, historically the market for PVC resin has been cyclical and subject to significant fluctuations in price.

There are four domestic manufacturers of PVC resin, the primary material input used in the manufacturing of PVC pipe.

In 2025, we utilized all four vendors to source our PVC resin.

We maintain contractual arrangements with certain PVC resin manufacturers.

These multi-year agreements include estimated annual order quantities, with no required minimum purchases, and negotiated pricing based on the market price of resin.

The supply of PVC resin may be limited at times due to insufficient manufacturing capacity or limited availability of feedstock products.

resin production facilities are located in the Gulf Coast region.

These facilities are subject to the risk of damage or production shutdowns because of exposure to hurricanes or other extreme weather events.

We acquire PVC resin in bulk, shipped by rail to our facilities.

We have the capability to store a limited supply of resin at our manufacturing plants.

Due to the commodity nature of PVC resin and the dynamic supply and demand factors worldwide, the market for PVC resin can be subject to significant fluctuations in price.

In addition to PVC resin, we use certain other materials, such as stabilizers, waxes, gaskets and lumber, in the process of manufacturing and shipping our PVC pipe products.

We generally source these materials from a limited number of suppliers, and supply chain constraints or disruptions related to these materials could disrupt our ability to manufacture or ship products and could result in increased costs.

Demand for our PVC pipe products can be impacted by seasonal weather differences, with generally lower sales volumes realized in the first quarter of the year when cold temperatures and frozen ground across the northern portion of our footprint can delay or prevent construction activity and consequently delay or prevent customer orders of PVC pipe.

We generally source these materials from a limited number of suppliers.

Demand for our PVC pipe products can be impacted by seasonal weather differences, with generally lower sales volumes realized in the first and fourth quarters of the year when cold temperatures and frozen ground across the northern portion of our footprint can delay or prevent construction activity and consequently delay or prevent customer orders of PVC pipe.

ENVIRONMENTAL REGULATION

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

What changed 10-K

Item 1. Business