What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2026-02-18 compared with 2025-02-19 · 277 added, 228 removed, 1205 unchanged (30% of the section changed)

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Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheets of Otter Tail Corporation and subsidiaries (the "Company") as of December 31, 2024 and 2023, the related consolidated statements of income, comprehensive income, shareholders' equity, and cash flows, for each of the three years in the period ended December 31, 2024, the related notes and the schedules listed in the Index at Item 15 (collectively referred to as the "financial statements").

We have audited the accompanying consolidated balance sheets of Otter Tail Corporation and subsidiaries (the "Company") as of December 31, 2025 and 2024, the related consolidated statements of income, comprehensive income, shareholders' equity, and cash flows, for each of the three years in the period ended December 31, 2025, and the related notes and the schedules listed in the Index at Item 15 (collectively referred to as the "financial statements").

We also have audited the Company's internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

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Short-Term Debt $ 60,242 $ 69,615

Current Maturities of Long-Term Debt 79,951 —

Accounts Payable 93,606 113,574

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Other Comprehensive Income (Loss):

Unrealized Gain (Loss) on Available-for-Sale Securities, net of tax (expense) benefit of $( 128 ), $( 51 ) and $ 115

386 192 ( 432 )

Unrealized Gain (Loss) on Pension and Other Postretirement Benefit Plans, net of tax (expense) benefit of $ 352 , $( 14 ) and $( 2,769 )

Unrealized Gain on Available-for-Sale Securities, net of tax expense of $ 68 , $ 128 and $ 51

Unrealized Gain (Loss) on Pension and Other Postretirement Benefit Plans, net of tax benefit (expense) of $ 107 , $ 352 and $( 14 )

( 303 ) ( 1,002 ) 41

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Net Income — — — 301,662 — 301,662

Other Comprehensive Income — — — — 233 233

Other Comprehensive Loss — — — — ( 616 ) ( 616 )

Common Dividends ($ 1.87 per share)

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Deferred Income Taxes 33,187 23,057 13,508

Discretionary Contribution to Pension Plan — — ( 20,000 )

Investment (Gains) Losses ( 5,482 ) ( 7,222 ) 3,296

Investment Gains ( 6,701 ) ( 5,482 ) ( 7,222 )

Stock Compensation Expense 9,119 9,529 7,753

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Capital Expenditures ( 288,068 ) ( 358,650 ) ( 287,134 )

Proceeds from Disposal of Noncurrent Assets 8,849 6,225 4,346

Proceeds from Disposal of Investments and Other Assets 6,925 8,849 6,225

Purchases of Investments and Other Assets ( 9,581 ) ( 61,573 ) ( 8,378 )

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Proceeds from Issuance of Long-Term Debt 100,000 120,000 —

Payments for Retirement of Long-Term Debt — — ( 30,000 )

Dividends Paid ( 88,064 ) ( 78,266 ) ( 73,061 )

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Consequently, operating results can be affected by revisions to prior accounting estimates.

Reclassifications

Short-term investments in the amount of $ 0.8 million were previously included in other current assets on our consolidated balance sheets as of December 31, 2024.

This amount has been reclassified to maintain consistency and comparability between the periods presented and is now presented separately on the consolidated balance sheets.

The reclassification had no impact on previously reported current or total assets, current or total liabilities, or total shareholders' equity.

Regulatory Accounting

Our regulated electric utility company, OTP, is subject to regulation of rates and other matters by state utility commissions in Minnesota, North Dakota and South Dakota and by the FERC for certain interstate operations.

Our regulated electric utility company, Otter Tail Power Company (OTP), is subject to regulation of rates and other matters by state utility commissions in Minnesota, North Dakota and South Dakota and by the FERC for certain interstate operations.

OTP accounts for the financial effects of regulation in accordance with accounting guidance for regulated operations.

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We recognize revenue from contracts with customers at prices that are fixed or determinable as evidenced by an agreement with the customer, when we have met our performance obligation under the contract and it is probable that we will collect the amount to which we are entitled in exchange for the goods or services transferred or to be transferred to the customer.

Depending on the product produced and sold or service performed and the terms of the agreement with the customer, we recognize revenue either over time, in the case of delivery or transmission of electricity or related services or the production and storage of certain custom-made products, or at a point in time for the delivery of standardized products and other products made to customer specifications where the terms of the contract require transfer of the completed product.

customer specifications where the terms of the contract require transfer of the completed product.

Provisions for sales returns, early payment discounts and volume-based variable pricing incentives are recorded as reductions to revenue at the time revenue is recognized based on customer history, historical information and current trends.

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(in thousands) 2025 2024

Finished Goods $ 43,345 $ 47,614

Work in Process 22,637 26,354

Raw Material, Fuel and Supplies $ 90,720 $ 82,903

Work in Process 25,381 22,637

Finished Goods 42,497 43,345

Total Inventories $ 158,598 $ 148,885

We invest in and hold, through rabbi trusts, corporate-owned life insurance policies to provide future funding for obligations under our supplemental pension plan and a nonqualified deferred compensation plan.

The polices are recorded at cash surrender value and there are no restrictions on our ability to surrender the policies.

The policies are recorded at cash surrender value and there are no restrictions on our ability to surrender the policies.

Changes in the cash surrender value are recognized in earnings.

We hold debt, mutual fund and money market fund investments either as investments within our captive insurance entity, to provide future funding for obligations under nonqualified deferred compensation plans or provide a return on our available cash and liquidity.

These investments are recorded at fair value.

Debt securities are deemed to be available-for-sale securities, accordingly unrealized gains and losses are generally excluded from earnings and recognized in accumulated other comprehensive income.

We evaluate whether declines in the fair value of debt securities below the cost basis are other-than-temporary.

Declines in fair value deemed to be other-than-temporary result in the recognition of unrealized losses, or a portion thereof, in earnings.

Unrealized gains and losses on mutual and money market funds are recognized in earnings immediately.

Debt securities are deemed to be available-for-sale securities.

We evaluate these securities for impairment at each reporting date.

If the fair value of a security declines below its amortized cost, management assesses whether the decline is attributable to credit-related factors.

Credit-related impairments are recognized as an allowance for expected credit losses with a corresponding charge to earnings.

Non-credit related unrealized losses are recorded in accumulated other comprehensive income.

Unrealized gains and losses on mutual and money market funds are recognized in earnings.

Property, Plant and Equipment

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Depreciation is recognized on a straight-line basis over the asset's estimated useful life.

Estimated useful lives generally range from five years to 80 years depending on the asset type.

For certain asset classes, we employ a group or composite method of depreciation in which certain assets are combined and depreciated over the average life of the combined asset group.

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Depreciation is recognized on a straight-line basis over the asset's estimated useful life.

Estimated useful lives generally range from two years to 40 years depending on the asset type.

The cost of additions includes purchased assets, contracted work, direct labor and materials, allocable overheads and capitalized interest, as applicable.

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Gains or losses on asset dispositions are included in the determination of operating income.

The estimated service lives for rate-regulated electric assets and nonelectric assets are included below:

Service Life Range

(years) Low High

Electric Assets:

Production Plant 21 114

Transmission Plant 51 80

Distribution Plant 10 72

General Plant 5 56

Nonelectric Assets:

Equipment 2 20

Buildings and Leasehold Improvements 2 40

Jointly Owned Facilities

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OTP is also a joint owner, with other regional utilities, in several major transmission lines.

OTP's interest in each jointly owned facility is reflected in the consolidated balance sheets on a pro-rata basis and OTP's share

of direct revenue and expenses are included in operating revenues and expenses in the consolidated statements of income.

OTP's interest in each jointly owned facility is reflected in the consolidated balance sheets on a pro-rata basis and OTP's share of direct revenue and expenses are included in operating revenues and expenses in the consolidated statements of income.

Each participant in the jointly owned facilities finances their own investments.

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We perform our impairment testing in the fourth quarter of each year and have identified three reporting units that carry a goodwill balance.

We historically tested goodwill for impairment as of December 31st each year;

however, in 2024, we elected to change the date of our annual goodwill impairment test to October 1st.

We believe this new testing date allows us to better align our annual goodwill impairment testing procedures with our year-end financial reporting, as well as our annual budgeting and forecasting process.

This change did not delay, accelerate or avoid the recognition of an impairment charge.

We perform a quantitative impairment assessment, electing to forgo the optional qualitative assessment.

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Accumulated Amortization ( 6,993 ) ( 3,796 )

Cloud Computing Costs, net $ 11,945 $ 11,277

Total Cloud Computing Costs, net $ 13,210 $ 11,945

Amortization expense of capitalized implementation costs for each of the years ended December 31, 2025, 2024 and 2023 totaled $ 4.3 million, $ 3.0 million, and $ 1.3 million.

We recognize a right-of-use lease asset and a corresponding lease liability at the lease commencement date.

We recognize a right-of-use lease asset and a corresponding lease liability at the lease commencement date for all long-term leases.

The length of our lease agreements varies from less than one year to approximately ten years .

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Certain of our leases contain options to renew or extend the lease term at our discretion if certain conditions are met.

If a lease contains an option to extend the lease term and there is reasonable certainty the option will be exercised, the option is considered in the lease term at inception, or at such time when an event occurs which triggers the remeasurement of a lease, as applicable.

In the determination of the lease term for one of our leased manufacturing facilities, we have incorporated the future lease renewals which we believe are reasonably certain to be exercised in the associated right-of-use asset and liability values.

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Recoverability of Long-Lived Assets

We review our long-lived assets including, among other assets, property, plant and equipment, amortizing intangible assets and right-of-use lease assets whenever events or changes in circumstances indicate the carrying amount of the assets may not be

We determine potential impairment by comparing the carrying amount of the assets with the net cash flows expected to be provided by operating activities of the business or related assets.

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We maintain pension and postretirement benefit plans for eligible employees.

Recognizing the cost of providing benefits and measuring the projected benefit obligation of these plans requires management to make various assumptions and estimates.

Recognizing the cost of providing benefits and measuring the projected benefit obligations of these plans requires management to make various assumptions and estimates.

Certain unrecognized actuarial gains and losses and unrecognized prior service costs or credits are deferred as regulatory assets and liabilities, rather than recorded as other comprehensive income, based on regulatory recovery mechanisms.

We have elected to apply a minimum amortization method for determining the amount of amortization of net cumulative gains or losses to be included as a component of net periodic benefit cost for any annual period.

Cumulative gains and losses recognized in accumulated other comprehensive income or as a deferred regulatory asset or liability that are in excess of 10% of the projected benefit obligation or the market value of pension plan assets are amortized over the expected remaining future service period of active plan participants.

In periods in which the cumulative gains and losses do not exceed 10%, no amortization to net period benefit cost is recognized.

Cumulative gains and losses recognized in accumulated other comprehensive income or as a deferred regulatory asset or liability that are in excess of 10% of the projected benefit obligation or, where applicable, the market value of pension plan assets are amortized over the expected remaining future service period of active plan participants.

In periods in which the cumulative gains and losses do not exceed 10%, no amortization to net periodic benefit cost is recognized.

Asset Retirement Obligations

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Company contributions to these plans were $ 1.0 million, $ 1.3 million and $ 1.2 million for the years ended December 31, 2025, 2024 and 2023.

Gains or (losses) recognized due to changes in our payment obligations in connection with these plans amounted to ($ 3.3 million), ($ 3.3 million) and $ 3.1 million for the years ended December 31, 2024, 2023 and 2022.

Expenses recognized due to changes in our payment obligations in connection with these plans amounted to $ 3.9 million, $ 3.3 million and $ 3.3 million for the years ended December 31, 2025, 2024 and 2023.

Stock-Based Compensation

Stock-based compensation awards are measured at the grant-date fair value of the award and compensation expense is recognized on a straight-line basis over the applicable service or performance period.

The service period may be limited to the period until such

time that a recipient is retirement eligible as determined under the award agreement.

The service period may be limited to the period until such time that a recipient is retirement eligible as determined under the award agreement.

Awards granted to employees eligible for retirement on the date of grant are expensed in the period of grant.

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Variable Interest Entity

In October 2012, the Coyote Station owners, including OTP, entered into an LSA with Coyote Creek Mining Company, LLC (CCMC), a subsidiary of The North American Coal Corporation, for the purchase of lignite coal to meet the coal supply requirements of Coyote Station for the period beginning in May 2016 and ending in December 2040.

The co-owners of Coyote Station, including OTP, are party to a Lignite Sales Agreement (LSA) with Coyote Creek Mining Company, LLC (CCMC), a subsidiary of The North American Coal Corporation.

The agreement provides for the purchase of lignite coal to meet the coal supply requirements of Coyote Station through December 2040.

The price per ton paid by the Coyote Station owners under the LSA reflects the cost of production, along with an agreed-upon profit and capital charge.

CCMC was formed for the purpose of mining coal to meet the coal fuel supply requirements of Coyote Station from May 2016 through December 2040 and, based on the terms of the LSA, is considered a variable interest entity (VIE) 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 would cover all costs of operations as well as future reclamation costs.

CCMC was formed for the purpose of mining coal to meet the coal fuel supply requirements of Coyote Station and, based on the terms of the LSA, is considered a variable interest entity (VIE) 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 would cover all costs of operations as well as future reclamation costs.

The Coyote Station owners are required to buy certain assets of CCMC 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 CCMC because the Coyote Station owners are required to buy the membership interests of CCMC at the end of the contract term at equity value.

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The Coyote Station owners have limited rights to assign their rights and obligations under the LSA without the consent of CCMC’s lenders during any period in which CCMC’s obligations to its lenders remain outstanding.

In the event the contract is terminated prior to the end of the term due to certain events, OTP’s maximum loss exposure, as a result of its involvement with CCMC, could be as high as $ 40 million, or OTP’s 35 % share of CCMC’s unrecovered costs as of December 31, 2024, if recovery of such a loss is denied by regulatory authorities.

In the event the contract is terminated prior to the end of the term due to certain events, OTP’s maximum loss exposure, as a result of its involvement with CCMC, could be as high as $ 35 million, or OTP’s 35 % share of CCMC’s unrecovered costs as of December 31, 2025.

Recently Adopted Accounting Pronouncements

Segment Reporting.

In November 2023, the Financial Accounting Standards Board (FASB) issued amended authoritative guidance codified in Accounting Standards Codification (ASC) 280, Segment Reporting.

The amended guidance expands annual and interim disclosure requirements for reportable segments, primarily through expanded disclosures about significant segment expenses.

We adopted this updated standard in the 2024 annual period on a retrospective basis, as required by the updated

The adoption of this updated standard resulted in additional disclosures related to our reportable segments and did not have an impact on our consolidated financial position or operating results.

Recent Accounting Pronouncements

Income Taxes.

In December 2023, the FASB issued amended authoritative guidance codified in ASC 740, Income Taxes.

In December 2023, the FASB issued amended authoritative guidance codified in Accounting Standards Codification (ASC) 740, Income Taxes.

The amended guidance requires additional disaggregated information in effective tax rate reconciliation disclosures and additional disaggregated information about income taxes paid.

The updated standard is effective for our annual periods beginning in 2025.

The amended guidance is to be applied on a prospective basis with the option to apply the standard retrospectively.

We anticipate adopting the updated standard in our Form 10-K for the year ended December 31, 2025 and electing to apply the standard on a retrospective basis for all periods presented.

We adopted this updated standard for the year ended December 31, 2025, on a retrospective basis and applied the new disclosure requirements.

Accordingly, prior periods in our effective tax rate reconciliation disclosures in Note 13 have been reclassified to conform to the current year presentation.

The adoption of this updated standard resulted in additional and modified disclosures related to our income tax expenses and income taxes paid.

The adoption of this updated standard did not have an impact on our consolidated financial position or operating results.

Recent Accounting Pronouncements

Disaggregated Income Statement Expenses.

In November 2024, the FASB issued authoritative guidance codified in ASC 220, Income Statement—Reporting Comprehensive Income, which will require additional disclosure of certain costs and expenses within the notes to the financial statements.

The updated standard is effective for our annual periods beginning in 2027 and interim periods beginning in the first quarter of fiscal 2028 and can be applied on either a prospective or retrospective basis.

Early adoption is permitted.

We are currently evaluating the impact that the updated standard will have on our financial statement disclosures.

The new standard is effective for our annual periods beginning in 2027 and interim periods beginning in the first quarter of fiscal 2028 and can be applied on either a prospective or retrospective basis.

Early adoption of the new standard is permitted.

We anticipate adopting the updated standard in our Form 10-K for the year ending December 31, 2027.

Software Costs.

In September 2025, the FASB issued amended authoritative guidance codified in ASC 350, Intangibles – Goodwill and Other.

The amended guidance updates the cost capitalization threshold for internal-use software development costs by removing all references to software project development stages and providing new guidance on how to evaluate whether the probable-to-complete recognition threshold has been met.

The updated standard is effective for our annual and interim periods beginning in 2028.

Early adoption of the amended guidance is permitted.

The amended guidance can be applied on a prospective, modified, or retrospective basis.

We are currently evaluating the impact that the updated standard will have on our consolidated financial statements, but we do not anticipate it will have a material effect on our future financial position or operating results.

Government Grants.

In December 2025, the FASB issued authoritative guidance codified in ASC 832, Government Grants, which adds guidance on the recognition, measurement and presentation of government grants.

The new guidance is effective for our annual periods beginning in 2029, including interim periods within that fiscal year, and can be applied on a modified prospective, modified retrospective, or full retrospective basis.

We are currently evaluating the impact of this guidance on our consolidated financial statements and related disclosures.

Segment Information

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We have aggregated two operating segments within our Manufacturing reportable segment based on the similarity between these businesses and their economic characteristics.

Electric includes the production, transmission, distribution and sale of electric energy in Minnesota, North Dakota and South Dakota by OTP.

In addition, OTP is a participant in the MISO markets.

OTP’s operations have been our primary business since 1907.

Manufacturing consists of businesses 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, and material handling components.

Electric includes our vertically integrated regulated utility engaged in the production, transmission, distribution and sale of electric energy in western Minnesota, eastern North Dakota and northeastern South Dakota.

Manufacturing consists of businesses which provide metal fabrication services for custom machine parts and metal components and manufacture thermoformed plastic products for use in the agriculture, construction, horticulture, industrial, lawn and garden, recreational vehicle (powersports) and other end markets.

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

Plastics consists of businesses producing PVC pipe at plants in North Dakota and Arizona.

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

Our PVC pipe is sold primarily in the western half of the United States and Canada and is generally used in municipal water infrastructure, which encompasses potable water distribution, wastewater collection and distribution and water reclamation systems.

Our PVC pipe is also used within residential and commercial structures and rural water systems.

Segment Profit or Loss

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Corporate 634 288 126

$ 358,650 $ 287,134 $ 171,134

Total Capital Expenditures $ 288,068 $ 358,650 $ 287,134

The following provides the identifiable assets by segment and corporate assets as of December 31, 2025 and 2024:

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Corporate 527,911 426,072

$ 3,652,082 $ 3,242,568

Corporate assets consist primarily of cash and cash equivalents, prepaid expenses, investments and fixed assets.

Total Identifiable Assets $ 3,964,279 $ 3,652,082

Corporate assets consist primarily of cash and cash equivalents, investments, fixed assets, and prepaid expenses.

Reconciliation to Consolidated Amounts

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Corporate 235 98 102

107,121 97,954 92,597

Total Depreciation and Amortization 118,107 107,121 97,954

Interest Expense

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Corporate Interest Expense 402 493 916

41,815 37,677 36,016

Total Interest Expense 47,226 41,815 37,677

Income Tax Expense (Benefit)

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Corporate Income Tax Benefit ( 4,693 ) ( 6,765 ) ( 3,806 )

Total Income Tax Expense

46,384 65,230 69,298

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Corporate Net Income (Loss) ( 3,610 ) ( 3,729 ) 565

Total Net Income

$ 275,893 $ 301,662 $ 294,191

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Our Plastics segment businesses use PVC resin as a critical component within their PVC pipe manufacturing process.

There are a limited number of PVC resin suppliers in the U.S., and in 2024 we sourced all of our PVC resin needs from four vendors.

Although there are a limited number of PVC resin suppliers, we believe that other suppliers could provide PVC resin on comparable terms.

The domestic PVC resin industry is highly consolidated, with only four resin suppliers in the U.S.

We rely on these four suppliers to source our PVC resin requirements.

Additionally, most U.S.

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The loss of a key vendor, or any interruption or delay in the supply of PVC resin could cause production delays, a possible loss of sales or result in increased costs to secure resin, all of which would adversely affect our operating results.

For the year ended December 31, 2024, two customers combined accounted for 19 % of Electric segment operating revenues, two customers combined to account for 36 % of Manufacturing segment operating revenues and two customers combined to account for 52 % of Plastics segment operating revenues, with one of those customers providing 11 % of our consolidated operating revenues.

For the year ended December 31, 2025, two customers combined to account for 16 % of Electric segment operating revenues, three customers combined to account for 44 % of Manufacturing segment operating revenues and two customers combined to account for 47 % of Plastics segment operating revenues.

However, no individual customer provided 10% or more of our consolidated operating revenues.

Entity-Wide Information

All of our long-lived assets are located within the United States and substantially all of our operating revenues are from customers located within the United States.

We present our operating revenues from external customers, in total and by amounts arising from contracts with customers and ARP arrangements, disaggregated by revenue source and segment for the years ended December 31, 2024, 2023 and 2022:

Presented below are our operating revenues from external customers, in total and by amounts arising from contracts with customers and ARP arrangements, disaggregated by revenue source and segment for the years ended December 31, 2025, 2024 and 2023:

(in thousands) 2025 2024 2023

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Manufacturing Segment

Metal Parts and Tooling 303,077 351,267 338,865

Plastic Products and Tooling 32,210 41,395 49,080

Metal Parts 274,272 303,077 351,267

Plastic Products 33,458 32,210 41,395

Scrap Metal 6,817 7,305 10,119

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Less Allowance for Credit Losses 1,646 1,920

Receivables, net of allowance for credit losses $ 145,964 $ 157,143

Total Receivables, net of allowance for credit losses $ 145,496 $ 145,964

The following is a summary of activity in the allowance for credit losses for the years ended December 31, 2025 and 2024:

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Government Debt Securities

$ 53,915 $ 753

Corporate Debt Securities

Total Short-term Investments 54,311 753

Long-term Investments

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Total Investments $ 133,134 $ 121,930

In April 2024, we made a $ 50.1 million investment in U.S.

treasuries which mature in September 2026.

As of December 31, 2024, our government and corporate debt securities had maturity dates ranging from May 2025 to August 2029.

During the years ended December 31, 2024 and 2023, our investment income, which consisted primarily of interest on our cash equivalent and debt security investments and gains on our corporate-owned life insurance policy investments, totaled $ 19.8 million and $ 15.2 million, which is included in other income in our consolidated statements of income.

As of December 31, 2025, our government and corporate debt securities had maturity dates ranging from June 2026 to July 2035.

During the years ended December 31, 2025, 2024 and 2023, our investment income, which consisted primarily of interest on our cash equivalent and debt security investments, and gains on our corporate-owned life insurance policy investments, totaled $ 22.2 million, $ 19.8 million, and $ 15.2 million, which is included in other income in our consolidated statements of income.

Debt Securities

The following table summarizes the amortized cost and fair value of debt securities available for sale and the corresponding amounts of gross unrealized gains and losses as of December 31, 2024:

The following table summarizes the amortized cost and fair value of debt securities available for sale and the corresponding amounts of gross unrealized gains and losses as of December 31, 2025 and 2024:

December 31, 2025

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Corporate Debt Securities 1,309 12 ( 1 ) 1,320

Total $ 62,520 $ 433 $ ( 194 ) $ 62,759

Unrealized gains and losses on available-for-sale debt securities as of December 31, 2023 were not material.

As of December 31, 2024 and December 31, 2023, no unrealized losses on debt securities were deemed to be other-than-temporary.

Total Debt Securities $ 63,926 $ 539 $ ( 9 ) $ 64,456

December 31, 2024

(in thousands) Amortized Cost Gross Unrealized Gains Gross Unrealized (Losses) Fair Value

Government Debt Securities $ 60,891 $ 424 $ ( 184 ) 61,131

Corporate Debt Securities 1,629 9 ( 10 ) 1,628

Total Debt Securities

$ 62,520 $ 433 $ ( 194 ) $ 62,759

As of December 31, 2025 and 2024, no unrealized losses on debt securities were deemed to be credit-related.

The following table summarizes the fair value of debt securities available for sale by contractual maturity date as of December 31, 2025:

(in thousands) December 31, 2024

Due in one year or less

Due in one to five years

Total $ 62,759

(in thousands) 2025

Within 1 year $ 54,311

After 1 year through 5 years 9,621

After 5 years through 10 years 524

Total Debt Securities $ 64,456

Equity Securities

The amount of net unrealized gains and losses during the years ended December 31, 2024 and 2023 on marketable equity securities still held as of December 31, 2024 and 2023, respectively, was not material.

The amount of net unrealized gains and losses during the years ended December 31, 2025 and 2024 on marketable equity securities still held as of December 31, 2025 and 2024 was not material.

Regulatory Matters

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North Dakota Rate Case

On November 2, 2023, OTP filed a request with the NDPSC for an increase in revenue recoverable under general rates in North Dakota.

In its filing, OTP requested a net increase in annual revenue of $ 17.4 million, or 8.4 %, based on an allowed rate of return on rate base of 7.85 % and an allowed rate of ROE of 10.6 % on an equity ratio of 53.5 % of total capital.

The filing also included an interim rate request of a net increase in annual revenue of $ 12.4 million, or 6.0 %, which was approved by the NDPSC on December 13, 2023.

Interim rates went into effect on January 1, 2024.

On July 3, 2024, OTP filed an update to the original request increasing the amount of the net annual revenue requirement from $ 17.4 million to $ 22.5 million, or a net increase of 10.9 % in annual revenue, to account for certain items identified throughout the regulatory process.

On December 30, 2024, the NDPSC approved a settlement agreement between OTP and certain interested parties in the general rate case and issued its written order on final rates.

On December 30, 2024, the NDPSC approved a settlement agreement between OTP and certain interested parties in their general rate case and issued its written order on final rates.

The key provisions of the order include a revenue requirement of $ 225.6 million, based on a return on rate base of 7.53 %, and an allowed ROE of 10.10 % on an equity ratio of 53.50 %.

The net annual revenue requirement includes a net increase of $ 13.1 million, or 6.18 %.

OTP’s revenue requirement was reduced by approximately

$ 3.0 million primarily due to the inclusion of forecasted PTCs plus adjustments for new customer load additions, which were not included in OTP’s updated request filed on July 3, 2024.

The net annual revenue

requirement includes a net increase of $ 13.1 million or 6.18 %.

Through the settlement of the case, the parties also agreed to establish an earnings-sharing mechanism, whereby 70 % of actual earnings in excess of a 10.20 % ROE would be returned to customers, with OTP retaining the remaining 30 %.

New base rates in North Dakota went into effect on March 15, 2025.

South Dakota Rate Case

On June 4, 2025, OTP filed a request with the SDPUC for an increase in revenue recoverable under general rates in South Dakota.

In its filing, OTP requested a net increase in annual revenue of $ 5.7 million, or 12.50 %, based on an allowed rate of return on rate base of 8.29 % and an allowed ROE of 10.80 % on an equity ratio of 53.54 % of total capital.

Through this proceeding, OTP has proposed changes to the mechanism of certain cost and investment recovery, with recovery moving from riders into base rates.

Interim rates went into effect on December 1, 2025 and are subject to potential refund until the finalization of the rate case.

Minnesota Rate Case

On October 31, 2025, OTP filed a request with the MPUC for an increase in revenue recoverable under general rates in Minnesota.

In its filing, OTP requested a net increase in annual revenue of $ 44.8 million, or 17.7 %, based on an allowed rate of return on rate base of 7.92 % and an allowed ROE of 10.65 % on an equity ratio of 53.5 % of total capital.

The request includes, among other items, accelerated recovery of the remaining investment of the jurisdictionally allocated share of Coyote Station, which has a $ 4.3 million annual impact.

The request for accelerated recovery is driven by the MPUC’s order in OTP’s most recent IRP to discontinue serving Minnesota customers with capacity and energy from Coyote Station by December 2031.

If this part of the request is granted, we anticipate the amounts collected would be deferred and recognized over the remaining estimated useful life of the plant, which extends until 2041.

The filing also included an interim rate request for a net increase in annual revenue of $ 31.8 million, or 12.6 %.

On December 23, 2025, the MPUC approved the interim rate request with a modification to exclude the impact of the accelerated recovery of the remaining investment of the jurisdictionally allocated share of Coyote Station from interim rates.

The resulting interim net increase in annual revenue is $ 28.6 million, or 11.3 %.

Interim rates went into effect on January 1, 2026, and are subject to potential refund until the finalization of the rate case.

Property, Plant and Equipment

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Jamestown– Ellendale 345 kV line 50.0 % — 11,951 — 11,951

Big Stone South–Alexandria 345 kV line 40.0 % — 2,418 — 2,418

Alexandria–Big Oaks 345 kV line 15.8 % — 6,754 — 6,754

Big Stone South–Alexandria 345 kV line 40.0 % — 4,004 — 4,004

Oslo - Lake Ardoch 115 kV line 72.0 % 2,693 — ( 21 ) 2,672

Bison to Alexandria 345 kV 14.2 % — 14 — 14

Total $ 820,651 $ 31,344 $ ( 302,673 ) $ 549,322

December 31, 2024

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50.0 % — 5,509 — 5,509

Big Stone South–Alexandria 345 kV line 40.0 % — 555 — 555

Alexandria–Big Oaks 345 kV line 14.2 % — 417 — 417

Big Stone South–Alexandria 345 kV line 40.0 % — 2,418 — 2,418

Oslo - Lake Ardoch 115 kV line 72.0 % — 2,646 — 2,646

$ 815,936 $ 13,393 $ ( 287,481 ) $ 541,848

Intangible Assets

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Total Goodwill $ 37,572 $ 37,572

Our annual goodwill impairment testing, performed in the fourth quarters of 2024 and 2023, indicated no impairment existed as of the test date.

Our annual goodwill impairment testing, performed in the fourth quarter of 2025 and 2024, indicated no impairment existed as of the test date.

The following table summarizes the components of our intangible assets as of December 31, 2025 and 2024:

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Other 26 10 16

Total $ 22,517 $ 16,774 $ 5,743

Total Intangible Assets $ 22,517 $ 17,875 $ 4,642

December 31, 2024

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Other 26 8 18

Total $ 22,517 $ 15,674 $ 6,843

Amortization expense for these intangible assets for each of the years ended December 31, 2024, 2023 and 2022 totaled $ 1.1 million.

Total Intangible Assets

$ 22,517 $ 16,774 $ 5,743

Amortization expense for these intangible assets for each of the years ended December 31, 2025, 2024 and 2023 was $ 1.1 million each year.

Annual amortization expense for these intangible assets for the next five years is:

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Short-Term Debt $ — $ 60,242 $ 60,242 $ — $ 69,615 $ 69,615

Current Maturities of Long-Term Debt 79,951 — 79,951 — — —

Long-Term Debt — 963,566 963,566 79,900 863,834 943,734

Total $ 79,900 $ 933,449 $ 1,013,349 $ 79,849 $ 825,632 $ 905,481

Total Debt $ 79,951 $ 1,023,808 $ 1,103,759 $ 79,900 $ 933,449 $ 1,013,349

Short-Term Debt

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Total $ 390,000 $ 60,242 $ 10,461 $ 319,297 $ 311,613

On December 11, 2024, OTC entered into a Sixth Amended and Restated Credit Agreement (the OTC Credit Agreement) and OTP entered into a Fifth Amended and Restated Credit Agreement (the OTP Credit Agreement), in each case amending and restating the previously existing credit agreements, to extend the maturity date of each credit facility and adjust the maximum debt to total capitalization covenant.

The OTP Credit Agreement was also amended to increase the maximum borrowing capacity.

The OTC agreement provides for a $ 170.0 million unsecured revolving line of credit and the OTP agreement provides for a $ 220.0 million unsecured revolving line of credit to support operations, fund capital expenditures, refinance certain indebtedness and provide for the issuance of letters of credit in an aggregate amount not to exceed $ 40.0 million under the OTC Credit Agreement and $ 50.0 million under the OTP Credit Agreement.

OTC and OTP are each party to separate credit agreements (the OTC Credit Agreement and OTP Credit Agreement, respectively).

The OTC Credit Agreement provides for a $ 170.0 million unsecured revolving line of credit, and the OTP Credit Agreement provides for a $ 220.0 million unsecured revolving line of credit.

Both credit facilities are to support operations, fund capital expenditures, refinance certain indebtedness and provide for the issuance of letters of credit in an aggregate amount not to exceed $ 40.0 million under the OTC Credit Agreement and $ 50.0 million under the OTP Credit Agreement.

Each credit facility includes an accordion provision allowing the borrower to increase the borrowing capacity under the facility, subject to certain conditions, up to $ 290.0 million and $ 300.0 million under the OTC Credit Agreement and OTP Credit Agreement, respectively.

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The variable rate of interest to be charged is based on a benchmark interest rate, either SOFR or a Base Rate, as defined in the credit agreements, selected by the borrower at the time of an advance, subject to the conditions of each agreement, plus an applicable credit spread.

The credit spread ranges from zero to 2.00 %, depending on the benchmark interest rate selected, and is subject to adjustment based on the credit ratings of the relevant borrower.

The credit spread ranges from zero to 2.00 %, depending on the benchmark interest rate selected, and is subject to adjustment based on the credit

ratings of the relevant borrower.

The weighted-average interest rate on all outstanding borrowings as of December 31, 2025 and 2024 was 5.08 % and 5.61 %.

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Each credit facility includes a cross-default provision whereby an event of default of other outstanding indebtedness will trigger an event of default under the agreement.

Each credit facility expires on December 11, 2029.

The terms of each credit facility include a provision for the borrower to request, and the lenders to grant an extension of the maturity date of the facility by one year, subject to certain terms and conditions.

In 2025, a one-year extension was granted, and the current maturity date of each facility is December 11, 2030.

Long-Term Debt

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OTP Series 2024A Senior Unsecured Notes 5.48 % 04/01/34 60,000 60,000

OTP Series 2025A Senior Unsecured Notes 5.49 % 03/27/35 50,000 —

OTP Series 2007D Senior Unsecured Notes 6.47 % 08/20/37 50,000 50,000

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OTP Series 2024B Senior Unsecured Notes 5.77 % 04/01/54 60,000 60,000

Total 947,000 827,000

OTP Series 2025B Senior Unsecured Notes 5.98 % 06/05/55 50,000 —

Total Long-Term Debt 1,047,000 947,000

Current Maturities Net of Unamortized Debt Issuance Costs 79,951 —

Unamortized Long-Term Debt Issuance Costs 3,483 3,266

Total Long-Term Debt Net of Unamortized Debt Issuance Costs $ 963,566 $ 943,734

On March 28, 2024, OTP entered into a Note Purchase Agreement pursuant to which OTP issued, in a private placement transaction, $ 120.0 million of senior unsecured notes consisting of (a) $ 60.0 million of 5.48 % Series 2024A Senior Unsecured Notes due April 1, 2034, and (b) $ 60.0 million of 5.77 % Series 2024B Senior Unsecured Notes due April 1, 2054.

On March 27, 2025, OTP entered into a Note Purchase Agreement pursuant to which OTP issued, in a private placement transaction, $ 100.0 million of senior unsecured notes consisting of (a) $ 50.0 million of 5.49 % Series 2025A Senior Unsecured Notes due March 27, 2035, and (b) $ 50.0 million of 5.98 % Series 2025B Senior Unsecured Notes due June 5, 2055.

The Series 2025A Notes were issued on March 27, 2025, upon entering into the agreement.

The Series 2025B Notes were issued on June 5, 2025.

Per the terms of the agreement, OTP may prepay all or any part of the notes (in an amount not less than 10 % of the aggregate principal amount of the notes then outstanding in the case of a partial prepayment) at 100 % of the principal amount so prepaid, together with unpaid accrued interest and a make-whole amount, as defined in the agreement;

provided that no default or event of default exists under the agreement.

Any prepayment of the Series 2024A Notes then outstanding on or after January 1, 2034, or the Series 2024B Notes then outstanding on or after October 1, 2053, will be made without any make-whole amount.

Any prepayment of the Series 2025A Notes then outstanding on or after December 27, 2034, or the Series 2025B Notes then outstanding on or after December 5, 2054, will be made without any make-whole amount.

Consistent with other of our borrowings, the agreement contains a number of restrictions on the business of OTP, including restrictions on OTP’s ability to merge, sell substantially all assets, create or incur liens on assets, guarantee the obligations of any other party, and engage in certain transactions with affiliates.

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Pension Plan Assets.

We have established a Retirement Plans Administration Committee to develop and monitor our investment strategy for our Pension Plan assets.

We have established an investment committee, comprised of members of management of the Company, to develop and monitor our investment strategy for our Pension Plan assets.

Our investment strategy includes the following objectives:

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This investment mix is intended to achieve the financial objectives of the plan.

The permitted range is a guide and will at times not reflect the actual asset allocation due to market conditions, actions of our investment managers and required cash flows to and from the Pension Plan.

The permitted range is a guide and

will at times not reflect the actual asset allocation due to market conditions, actions of our investment managers and required cash flows to and from the Pension Plan.

The following table presents our target asset allocation permitted range along with the actual asset allocation as of December 31, 2025 and 2024:

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Alternative investments seek to either provide return enhancement through long-term appreciation or risk management through decreased downside risk.

The defining characteristic of these asset types is uncorrelated source of returns, less liquidity and private market access.

The defining characteristics of these asset types are uncorrelated sources of returns, less liquidity and private market access.

Examples include investments in the SEI Energy Debt Collective Fund.

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The investments held by the SEI Energy Debt Collective Fund on December 31, 2025 and 2024 consist mainly of below investment grade high yield bonds and loans of U.S.

energy companies which trade at a discount to fair value.

Redemptions are allowed semi-annually with a 95 -day notice period, subject to fund director consent and certain gate, holdback and suspension restrictions.

Subscriptions are allowed monthly with a three-year lock up on subscriptions.

The fund’s assets are valued in accordance with valuations reported by the fund’s sub-advisor or the fund’s underlying investments or other independent third-party sources, although SEI, in its discretion, may use other valuation methods, subject to compliance with ERISA, as applicable.

On an annual basis, as determined by the investment manager in its sole discretion, an independent valuation agent is retained to provide a valuation of the illiquid assets of the fund and of any other asset of the fund.

energy companies.

Funded Status.

The following table provides a reconciliation of the changes in the fair value of plan assets and the actuarially computed benefit obligation for the years ended December 31, 2025 and 2024 and the funded status of the plans as of December 31, 2025 and 2024:

Pension Benefits (Pension Plan) Pension Benefits (ESSRP) Postretirement Benefits

Pension Benefits

(Pension Plan) Pension Benefits

(ESSRP) Postretirement

(in thousands) 2025 2024 2025 2024 2025 2024

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Participant Premium Payments — — — — 1,867 2,166

Plan Amendments — — — — — ( 17,493 )

Actuarial (Gain) Loss ( 3,782 ) ( 7,686 ) 550 331 5,809 ( 664 )

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The following assumptions were used to determine benefit obligations as of December 31, 2025 and 2024:

Pension Benefits (Pension Plan) Pension Benefits (ESSRP) Postretirement Benefits

Pension Benefits

(Pension Plan) Pension Benefits

(ESSRP) Postretirement

2025 2024 2025 2024 2025 2024

Discount Rate 5.71 % 5.70 % 5.46 % 5.60 % 5.47 % 5.61 %

Long-Term Rate of Compensation Increase n/a n/a 3.00 % 3.00 % n/a n/a

Long-Term Rate of Compensation Increase 3.00 % 3.00 % n/a n/a

Participants up to Age 39 (1)

4.50 % 4.50 % n/a n/a n/a n/a

4.50 % 4.50 %

Participants Ages 40 to 49 (2)

4.50 % 4.50 % n/a n/a n/a n/a

4.50 % 4.50 %

Participants Age 50 and Older (3)

3.75 % 3.75 % n/a n/a n/a n/a

3.75 % 3.75 %

Healthcare Cost Immediate Trend Rate n/a n/a n/a n/a 9.00 % 6.44 %

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returns on Pension Plan assets in 2025 were $ 33.6 million, compared to an expected return of $ 24.8 million, impacting our net obligation by $ 8.8 million.

• For the ESSRP, an increase in the discount rate in 2024 and 2023 reduced our obligation by $ 0.2 million and $ 0.1 million.

• For the postretirement healthcare plan, an increase in the discount rate in 2024 and 2023 reduced our obligation by $ 0.2 million and $ 1.3 million.

Revised estimates of healthcare cost trends and participant contribution assumptions increased the benefit obligation by $ 0.4 million in 2024.

Changes in plan participant census data decreased our benefit obligation by $ 0.9 million in 2024.

• For the ESSRP, a decrease in the discount rate in 2025 increased our obligation by $ 0.5 million, and an increase in the discount rate in 2024 reduced our obligation by $ 0.2 million.

• For the postretirement healthcare plan, a decrease in the discount rate in 2025 increased our benefit obligation by $ 0.4 million and an increase in our discount rate in 2024 reduced our obligation by $ 0.2 million.

Revised estimates of healthcare cost trends, participant contribution assumptions, and other trend assumptions increased the benefit obligation by $ 4.5 million in 2025.

Changes in plan participant census data increased our benefit obligation by $ 0.9 million in 2025.

Net Periodic Benefit Cost.

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Discount Rate 5.70 % 5.57 % 5.51 % 5.60 % 5.53 % 5.51 % 5.61 % 5.53 % 5.52 %

Long-Term Rate of Return on Plan Assets 7.00 % 7.00 % 6.30 % n/a n/a n/a n/a n/a n/a

Long-Term Rate of Compensation Increase n/a n/a n/a 3.00 % 3.00 % 3.00 % n/a n/a n/a

Participants to Age 39 4.50 % 4.50 % 4.50 % n/a n/a n/a n/a n/a n/a

Participants Ages 40 to 49 4.00 % 3.50 % 3.50 % n/a n/a n/a n/a n/a n/a

Participants Age 50 and Older 3.38 % 2.75 % 2.75 % n/a n/a n/a n/a n/a n/a

Long-Term Rate of

Return on Plan Assets 7.00 % 7.00 % 7.00 % n/a n/a n/a n/a n/a n/a

Long-Term Rate of

Compensation Increase 3.00 % 3.00 % 3.00 % n/a n/a n/a

Participants to Age 39 4.50 % 4.50 % 4.50 %

Participants Ages 40 to 49 4.00 % 4.00 % 3.50 %

Participants Age 50 and Older 3.38 % 3.38 % 2.75 %

We develop our estimated discount rate through the use of a hypothetical bond portfolio method.

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The following table presents the amounts not yet recognized as components of net periodic benefit cost as of December 31, 2025 and 2024:

Pension Benefits (Pension Plan) Pension Benefits (ESSRP) Postretirement Benefits

Pension Benefits

(Pension Plan) Pension Benefits

(ESSRP) Postretirement

(in thousands) 2025 2024 2025 2024 2025 2024

2 unchanged sentences

Unrecognized Actuarial Loss 74,332 87,868 293 292 6,735 1,121

Net Regulatory Assets (Liabilities) $ 87,868 $ 85,227 $ 292 $ 1,061 $ ( 11,582 ) $ ( 17,086 )

Total $ 74,332 $ 87,868 $ 293 $ 292 $ ( 2,272 ) $ ( 11,582 )

Accumulated Other Comprehensive Income (Loss):

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Unrecognized Actuarial Gain (Loss) 2,374 1,937 ( 3,052 ) ( 2,502 ) 537 732

Total Accumulated Other Comprehensive Income (Loss) $ 1,937 $ 1,994 $ ( 2,502 ) $ ( 1,403 ) $ 1,071 $ 1,205

Total $ 2,374 $ 1,937 $ ( 3,052 ) $ ( 2,502 ) $ 777 $ 1,071

We did not make any contributions to our Pension Plan in 2025, 2024 or 2023.

We made a discretionary contribution of $ 20.0 million in in 2022.

As of December 31, 2025, we had no minimum funding requirements for our Pension Plan.

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Asset Retirement Obligations

We have recognized asset retirement obligations (AROs) related to our coal-fired generation plants, natural gas combustion turbines, solar facility and wind turbines.

The cost of AROs include items such as site restoration, closure or removal of ash pits and removal of certain structures, generators, asbestos and storage tanks.

We have recognized AROs related to our coal-fired generation plants, natural gas combustion turbines, solar facility and wind turbines.

The cost of AROs includes items such as site restoration, closure or removal of ash pits and removal of certain structures, generators, asbestos and storage tanks.

We have other legal obligations associated with the retirement of a variety of other long-lived tangible assets used in electric operations where the estimated settlement costs are individually and collectively immaterial.

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Ending Balance $ 43,987 $ 42,163

Coal Combustion Residual Regulations

In May 2024, the Environmental Protection Agency (EPA) published a final rule amending coal combustion residual (CCR) regulations.

The final rule introduces 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.

At this time, we do not believe there are any significant new requirements which are applicable to our coal-fired power plants, except for Big Stone Plant.

During the fourth quarter of 2024, a site evaluation was performed at Big Stone Plant to assess the presence and estimated volumes of coal ash stored at the facility.

Based on this and our assessment of the regulations, we believe the plant will be impacted by the new requirements.

As of December 31, 2024, we recognized $ 3.0 million of additional liabilities for new obligations resulting from the EPA's final CCR rule for costs associated with coal ash removal and groundwater monitoring we expect to incur in the future.

The final rule requires facility evaluations to be performed in the future.

Revisions to our estimated compliance costs or further obligations could be identified through the process of performing the additional evaluations.

Should such revisions be necessary or if additional cost obligations are identified, we will update our cash flow estimates and resulting retirement obligation at that time.

Income before income taxes for the years ended December 31, 2025, 2024 and 2023 consists entirely of domestic earnings.

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Investment Tax Credit Amortization ( 26 ) ( 12 ) ( 3 )

Total $ 65,230 $ 69,298 $ 73,351

Total Income Tax Expense $ 46,384 $ 65,230 $ 69,298

The reconciliation of the statutory federal income tax rate to our effective tax rate for each of the years ended December 31, 2025, 2024 and 2023 is as follows:

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Increases (Decreases) in Tax from:

State Taxes on Income, Net of Federal Tax 14,360 3.9 14,429 4.0 15,049 4.2

Production Tax Credits (PTCs) ( 20,106 ) ( 5.5 ) ( 17,394 ) ( 4.8 ) ( 14,985 ) ( 4.2 )

Amortization of Excess Deferred Income Taxes ( 2,788 ) ( 0.8 ) ( 2,205 ) ( 0.6 ) ( 1,625 ) ( 0.5 )

North Dakota Wind Tax Credit Amortization, Net of Federal Tax ( 586 ) ( 0.2 ) ( 586 ) ( 0.2 ) ( 586 ) ( 0.2 )

Other, Net ( 2,697 ) ( 0.6 ) ( 1,278 ) ( 0.3 ) 416 0.2

State and Local Taxes on Income, Net of Federal Tax 1

12,696 3.9 13,081 3.6 12,933 3.6

Energy Related Tax Credits ( 29,773 ) ( 9.2 ) ( 20,118 ) ( 5.5 ) ( 17,397 ) ( 4.8 )

Other ( 646 ) ( 0.2 ) ( 1,116 ) ( 0.3 ) ( 1,290 ) ( 0.4 )

Nontaxable or Nondeductible Items ( 125 ) — 276 0.1 ( 587 ) ( 0.2 )

Changes in Unrecognized Tax Benefits ( 26 ) — ( 364 ) ( 0.1 ) 566 0.2

Impact of Regulation ( 3,420 ) ( 1.1 ) ( 3,576 ) ( 1.0 ) ( 1,259 ) ( 0.3 )

Income Taxes at Effective Tax Rate $ 46,384 14.4 % $ 65,230 17.8 % $ 69,298 19.1 %

PTCs, North Dakota wind tax credits and excess deferred income taxes arising from the federal tax rate reduction in the 2017 Tax Cuts and Jobs Act are returned to customers as a reduction of the rates they are charged and result in a reduction of operating revenues.

1 State taxes in Minnesota made up the majority (greater than 50%) of the tax effect in this category for each year presented.

In the above table, the impact of regulation consists of excess deferred income taxes arising from the federal tax rate reduction in the 2017 Tax Cuts and Jobs Act and the impact of allowance for equity funds used during construction at OTP.

Energy-related tax credits, which consist of PTCs and ITCs, North Dakota wind tax credits, which are included with state taxes in the above table, and excess deferred income taxes are returned to customers as a reduction of the rates they are charged and result in a reduction of operating revenues.

Income tax payments by jurisdiction, net of refunds, were composed of the following for the years ended December 31, 2025, 2024 and 2023:

(in thousands) 2025 2024 2023

Federal $ 8,061 $ 47,838 $ 38,918

Minnesota 2,600 8,500 5,700

All Other 432 1,276 1,666

Total Income Taxes Paid $ 11,093 $ 57,614 $ 46,284

Deferred tax assets and liabilities were composed of the following on December 31, 2025 and 2024:

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Total Deferred Tax Liabilities ( 476,815 ) ( 444,193 )

Deferred Income Taxes $ ( 267,745 ) $ ( 237,273 )

As of December 31, 2024, we had net operating loss carryforwards for state tax purposes totaling $ 2.3 million that expire between 2029 and 2037, and state tax credits totaling $ 18.3 million which expire between 2040 and 2043.

Total Deferred Income Taxes $ ( 305,931 ) $ ( 267,745 )

As of December 31, 2025, we had net operating loss carryforwards for state tax purposes totaling $ 2.5 million which expire between 2029 and 2047, state tax credits totaling $ 15.9 million which expire between 2041 and 2043, and federal tax credits totaling $ 2.0 million which expire in 2047.

The following table summarizes the activity for unrecognized tax benefits for the years ended December 31, 2025, 2024 and 2023:

4 unchanged sentences

Increases for tax positions taken during the current period 183 188 163

Decreases due to settlements with taxing authorities — — —

Decreases as a result of a lapse of applicable statutes of limitations ( 214 ) ( 363 ) ( 193 )

Balance on December 31 $ 1,090 $ 1,125 $ 1,489

The balance of unrecognized tax benefits as of December 31, 2024 would reduce our effective tax rate if recognized.

The total amount of unrecognized tax benefits as of December 31, 2024 is not expected to change significantly within the next 12 months.

The Company and its subsidiaries file a consolidated U.S.

1 unchanged sentence

As of December 31, 2025, with limited exceptions, we are no longer subject to examinations by taxing authorities for tax years prior to 2022 for federal and North Dakota income taxes and prior to 2021 for Minnesota state income taxes.

One Big Beautiful Bill Act

On July 4, 2025, broad spending and tax law legislation referred to as the One Big Beautiful Bill Act (OBBBA) was enacted in the U.S.

The aspects of the law that impact our financial position and may impact our future investment opportunities include certain changes to corporate income taxes and modifications to existing renewable energy credits.

The OBBBA includes changes to corporate income tax rules and regulations, including reinstating 100% bonus depreciation, immediate expensing of domestic research and development costs, and modifications to the business interest expense limitation.

The effects of changes in tax laws and regulations are required to be recognized in our consolidated financial statements in the period of enactment.

Accordingly, in 2025, we recognized a reduction to our current year income tax payable in the amount of $ 7.0 million, with a corresponding increase to our deferred income tax liability, as a result of electing to deduct previously deferred research and development costs in the current year.

We also anticipate electing bonus depreciation for eligible assets in our 2025 corporate income tax return, which resulted in a reduction of our current year income tax payable and an increase to our deferred income tax liability.

The OBBBA also alters the timing and eligibility of certain tax credits for renewable energy projects.

Wind and solar projects that begin construction by July 4, 2026 are eligible for technology-neutral tax credits (production tax credits or investment tax credits).

Projects that begin construction after July 4, 2026 must be in service by December 31, 2027 to qualify for technology-neutral tax credits.

For projects that begin construction after December 31, 2025, new provisions restrict tax credit eligibility for those projects involving material assistance or effective control by a Foreign Entity of Concern, as defined in the legislation, which includes entities linked to China, Russia, Iran or North Korea.

Commitments and Contingencies

5 unchanged sentences

Coal Purchase Commitments.

OTP has contracts providing for the purchase and delivery of its coal requirements.

OTP is party to contracts providing for the purchase and delivery of its coal requirements.

OTP’s current coal purchase agreement with CCMC for Coyote Station expires on December 31, 2040.

4 unchanged sentences

There is no fixed minimum purchase requirement, and no amounts for this agreement have been included in the table below;

however, under this agreement all of Big Stone Plant’s coal requirements for the period

covered must be purchased under this agreement.

however, under this agreement all of Big Stone Plant’s coal requirements for the period covered must be purchased under this agreement.

Coal purchase costs under these two agreements totaled $ 50.5 million, $ 44.7 million and $ 43.7 million for the years ended December 31, 2025, 2024 and 2023.

Equipment Purchase Commitments.

As of December 31, 2025, OTP had commitments with third parties for the procurement, construction, delivery and installation of certain electric grid equipment which extend into 2028 and totaled approximately $ 53.1 million.

Land Easement Payments.

6 unchanged sentences

Other Commitments.

As of December 31, 2024, we had commitments under contracts for plant maintenance, software subscriptions and other services extending into 2046 which totaled approximately $ 10.6 million.

As of December 31, 2025, we had commitments under contracts for maintenance, software subscriptions and other services extending into 2046 which totaled approximately $ 23.0 million.

Our future commitments as of December 31, 2025 were as follows:

(in thousands) Coal Purchase

Commitments Land

Payments Other Commitments

Commitments Equipment Purchase Commitments Land

Easement Payments Other Commitments

2026 $ 24,416 $ 12,156 $ 1,916 $ 4,426

9 unchanged sentences

Per the agreement, the purchase price is equal to $ 23.6 million, plus the reimbursement of certain interconnection costs and costs to purchase and store the main power transformer.

Closing of the transaction is expected to occur in late 2025 or early 2026, and remains subject to certain conditions to close, including regulatory and other approvals.

OTP would be subject to a termination fee of up to $ 5.0 million if the seller has satisfied all required conditions to close but the transaction is not consummated.

On January 9, 2026, OTP completed this acquisition at a total cost of $ 35.7 million, including reimbursements and fees.

Contingencies

In November 2013 and February 2015, customers filed complaints with FERC seeking to reduce the ROE component of the transmission rates that MISO transmission owners, including OTP, may collect under the MISO tariff rate.

FERC issued an order on November 19, 2020, which adopted a revised ROE methodology and set the base ROE at 10.02% (10.52% with an adder) effective for the fifteen-month period from November 2013 to February 2015 and on a prospective basis beginning in September 2016.

The order also dismissed any complaints covering the period from February 2015 to May 2016.

On August 9, 2022, the U.S.

Court of Appeals for the District of Columbia Circuit vacated the FERC order citing a lack of reasoned explanation by FERC in its adoption of its revised ROE methodology as outlined in its November 2020 order and remanded the matter to FERC to reopen the proceedings.

On October 17, 2024, FERC issued an Order on Remand modifying its ROE methodology and establishing a base ROE of 9.98% (10.48% with an adder) effective for the fifteen-month period from November 2013 to February 2015 and on a prospective basis beginning in September 2016, and required MISO transmission owners to provide refunds to customers for collections in excess of the base ROE of 9.98% for the applicable period, plus interest.

In addition, FERC concluded the evidentiary record continues to support the ROE established for the period from February 2015 to May 2016.

Prior to FERC's Order on Remand, we had deferred recognition of certain revenues and recognized a refund liability which reflected the amount previously collected under the MISO tariff rate that we anticipated would be refunded to customers.

Our previous estimated refund amount was larger than the actual amount ordered by FERC in the Order on Remand and was therefore reduced, which resulted in a pre-tax benefit of $ 2.5 million recognized in our consolidated statements of income for the year ended December 31, 2024.

The balance of the recorded refund liability as of December 31, 2024 was $ 0.5 million.

Self-Funding of Transmission Upgrades for Generator Interconnections.

12 unchanged sentences

Other responses have been provided by other RTOs, individual transmission owners, developers of renewable generation facilities and other interested parties.

OTP, as a transmission owner in MISO, has exercised its authority and elected to self-fund previous transmission upgrades necessary to accommodate new system generation.

OTP, as a transmission owner in MISO, has exercised its authority and elected to self-fund transmission upgrades necessary to accommodate new system generation.

Under such an election, OTP is recovering the cost of the transmission upgrade and a return on that investment from the generator over a contractual period of time.

Should the resolution of this matter eliminate transmission owners’ unilateral funding authority on either a prospective or retrospective basis, our financial results would be impacted.

We cannot at this time reasonably predict the outcome of this matter given the uncertainty as to how FERC may ultimately decide on the matter after RTOs' filings in response to the Order to Show Cause.

Class Action Lawsuits.

Several class action complaints against certain PVC pipe manufacturers, including OTC, have been filed in the U.S.

District Court for the Northern District of Illinois alleging violations of antitrust laws.

The first of the complaints was filed on August 23, 2024.

The various complaints have been consolidated under the caption In re:

We cannot at this time reasonably predict the outcome of this matter given the uncertainty as to how FERC may ultimately decide on the matter.

Class Action Lawsuits and Related Matters.

Beginning in August of 2024, a series of putative federal class action lawsuits consolidated under the caption In re:

PVC Pipe Antitrust Litigation (Case No.

1:24-cv-07639).

Specifically, the complaints allege, among other things, that beginning in at least January 2021, the defendants conspired and combined to fix, raise, maintain and stabilize the price of PVC municipal water and electrical conduit pipe in violation of U.S.

antitrust laws.

The plaintiffs are seeking treble damages, injunctive relief, pre- and post-judgment interest, costs and attorneys’ fees.

In addition, on August 27, 2024, the Company received a grand jury subpoena issued by the U.S.

1:24-cv-07639) were filed in the United States District Court for the Northern District of Illinois against Northern Pipe Products, Vinyltech Corporation, Otter Tail Corporation and more than twenty other PVC pipe manufacturers, as well as Oil Price Information Systems, LLC (OPIS), a reporting service that provides pricing and market intelligence in various industries, including the PVC pipe industry during the relevant period.

The Court has allowed three putative classes to file complaints:

a Direct Purchaser Class, a Non-Converter Seller Purchaser Class and an End-User Class.

In July 2025, the Court preliminarily approved a settlement agreement among the Direct Purchaser Class, the Non-Converter Seller Purchaser Class and OPIS.

The settlement agreement resolved claims against OPIS and provides for its cooperation with the plaintiffs.

In August of 2025, the three putative classes each filed a first or an amended complaint alleging, among other things, that beginning in January 2017 or January 2020, depending on the class, the defendants and alleged co-conspirators conspired to fix, raise, maintain and stabilize the price of PVC municipal pipe, PVC plumbing pipe, PVC electrical pipe and PVC pipe fittings in violation of U.S.

federal and state antitrust laws.

The complaints allege that PVC pipe manufacturers improperly exchanged confidential information through OPIS and engaged in other indirect and direct communications with each other.

Plaintiffs are seeking treble damages, injunctive relief, pre- and post-judgment interest, costs and attorneys' fees on behalf of the putative classes.

On October 30, 2025, the defendants, including OTC, filed motions to dismiss.

Briefings on these motions were completed in early 2026, and at this time no Court decision has been issued on the motions.

In August 2024, the Company received a grand jury subpoena issued by the U.S.

District Court for the Northern District of California, from the U.S.

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The subpoena calls for production of documents regarding the manufacturing, selling and pricing of PVC pipe.

The Company is responding to the subpoena and intends to comply with its obligations under the subpoena.

At this time, we are unable to determine the likelihood of an outcome or estimate a range of reasonably possible losses, if any, arising from the class action complaints or the DOJ investigation.

However, if an antitrust violation by the Company is found, it could have a material impact on the Company’s financial condition, operating results and liquidity.

The Company believes that there are factual and legal defenses to the allegations in the complaints and intends to defend itself accordingly.

The Company has responded to the subpoena and intends to comply with its obligations thereunder.

On October 7, 2025, the DOJ filed a motion to intervene and for a partial stay of document discovery for a period of six months in In Re:

PVC Pipe Antitrust Litigation, which the Court granted on October 10, 2025.

On September 26, 2025, a putative nation-wide class action complaint (Case No.

S-257310) was filed in the Supreme Court of British Columbia, Canada against Northern Pipe, Vinyltech Corporation, Otter Tail Corporation and several other PVC pipe manufacturers, as well as OPIS.

The complaint alleges that the defendants, beginning in 2021, conspired to fix, raise, maintain, and stabilize the price of PVC pipe through an information exchange, OPIS, breaching Canada's Competition Act, and creating tortious liability.

The plaintiffs seek general damages, injunctive relief, pre- and post-judgment interest, punitive damages, cost, and attorneys' fees on behalf of the putative class.

The Company believes there are factual and legal defenses to the allegations in the complaints and is defending itself accordingly.

There remains considerable uncertainty regarding the timing or ultimate resolution of these matters.

At this time, we are unable to determine the likelihood of an outcome or estimate a range of reasonably possible losses, if any, arising from the class action complaints in the United States and Canada or the DOJ investigation.

The resolution of these matters could have a material impact on the Company’s financial position, operating results and liquidity, and it is reasonably possible that our estimate of a loss arising from these matters could change in the near term.

On May 20, 2025, the Otter Tail Corporation Board of Directors received a letter from counsel submitted on behalf of a shareholder, demanding the Board investigate and take legal action against certain current and former directors and officers of the Company.

The derivative demand letter includes alleged securities law violations and breach of fiduciary duties and unjust enrichment against certain current and former officers and directors of the company in connection with the matters at issue in the pending civil antitrust cases.

At this time, we are unable to determine the likelihood of any outcome related to this matter.

Other Contingencies.

We are party to litigation and regulatory matters arising in the normal course of business.

We regularly analyze relevant information and, as necessary, estimate and record accrued liabilities for legal, regulatory enforcement and other matters in which a loss is probable of occurring and can be reasonably estimated.

We are involved in claims, legal proceedings, investigations and regulatory matters arising in the normal course of business.

We regularly analyze relevant information and, as necessary, estimate and record accrued liabilities for legal, regulatory enforcement and other matters in which a loss or range of loss is probable of occurring and can be reasonably estimated.

We believe the effect on our consolidated operating results, financial position and cash flows, if any, for the disposition of all matters pending as of December 31, 2025, other than those discussed above, will not be material.

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The primary source of funds for payments of dividends to our shareholders is from intercompany distributions made by OTC's subsidiaries to OTC.

As a result of certain statutory limitations or regulatory or financing agreements, restrictions could occur on the amount of distributions allowed to be made by OTC's subsidiaries, as further described below:

As a result of potential restrictions under our financing agreements, certain statutory limitations or regulatory requirements, our ability to pay dividends, or our subsidiaries' ability to provide funding to OTC for the payment of dividends may be limited, as further described below:

Both the OTC Credit Agreement and OTP Credit Agreement contain restrictions on the payment of cash dividends upon a default or event of default, including failure to maintain certain financial covenants.

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Accumulated Other Comprehensive Income (Loss)

The Company's other comprehensive income (loss) consists of unamortized actuarial losses and prior service costs related to pension and other postretirement benefits and unrealized gains and losses on marketable securities classified as available-for-sale.

The Company's accumulated other comprehensive income (loss) consists of unamortized actuarial gains and losses and prior service costs related to pension and other postretirement benefits and unrealized gains and losses on marketable securities classified as available-for-sale.

The income tax expense or benefit associated with amounts reclassified from accumulated other comprehensive income (loss) and reflected in the consolidated statements of income are recognized in the same period as the amounts are reclassified.

The following table shows the changes in accumulated other comprehensive income (loss) for the years ended December 31, 2025, 2024 and 2023:

(in thousands) Pension and Other Postretirement Benefits Net Unrealized Gain (Losses) on Available-for-Sale Securities Total

Balance, December 31, 2021

$ ( 6,537 ) $ 13 $ ( 6,524 )

Other Comprehensive Income (Loss) Before Reclassifications, net of tax 7,331 ( 433 ) 6,898

Amounts Reclassified from Accumulated Other Comprehensive Income (Loss) 540 (1)

Total Other Comprehensive Income (Loss) 7,871 ( 432 ) 7,439

(in thousands) Pension and Other Postretirement Benefits Net Unrealized Gain (Losses) on Available-for-Sale Securities Total Accumulated Other Comprehensive Income (Loss)

Balance, December 31, 2022

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Other Comprehensive Income Before Reclassifications, net of tax 59 180 239

Amounts Reclassified from Accumulated Other Comprehensive Income (Loss) ( 18 ) (1)

Amounts Reclassified from Accumulated Other Comprehensive Income (Loss), net of tax ( 18 ) (1)

Total Other Comprehensive Income 41 192 233

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Other Comprehensive Income Before Reclassifications, net of tax

Amounts Reclassified from Accumulated Other Comprehensive Income (Loss) ( 1,503 ) (1)

Amounts Reclassified from Accumulated Other Comprehensive Income (Loss), net of tax ( 1,503 ) (1)

Total Other Comprehensive Income (Loss) ( 1,002 ) 386 ( 616 )

Balance, December 31, 2024

Other Comprehensive Income Before Reclassifications, net of tax 256 246 502

Amounts Reclassified from Accumulated Other Comprehensive Income (Loss), net of tax ( 559 ) (1)

Total Other Comprehensive Income (Loss)

( 303 ) 241 ( 62 )

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Employee Stock Purchase Plan

The 1999 Employee Stock Purchase Plan authorizes the issuance of 1,400,000 common shares, allowing eligible employees to purchase our common shares through payroll withholding at a discount of up to 15 % off the market price at the end of each six-month purchase period.

The 1999 Employee Stock Purchase Plan, as amended, authorizes the issuance of 1,400,000 common shares, allowing eligible employees to purchase our common shares through payroll withholding at a discount of up to 15 % off the market price at the end of each six-month purchase period.

Employee withholding amounts may not be less than $ 10 or more than $ 2,000 per month, subject to certain limitations, as described in the plan.

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Shares purchased under the plan may not be assigned, transferred, pledged, or otherwise disposed, except for certain situations allowed by the plan, such as upon death, for a period of 18 months after purchase.

At our discretion, shares purchased under the plan can be either new issue shares or shares purchased in the open market.

At our discretion, shares purchased under the

plan can be either new issue shares or shares purchased in the open market.

The plan shall automatically terminate when all of the shares authorized under the plan have been issued.

We recognize the 15 % discount to the fair market value of the purchased shares as stock-based compensation expense, which amounted to $ 0.4 million, $ 0.4 million and $ 0.3 million for the years ended December 31, 2025, 2024 and 2023.

For the years ended December 31, 2024, 2023 and 2022, the amount of shares issued under the plan amounted to 31,252 , 26,348 and 26,420 shares.

For the years ended December 31, 2025, 2024 and 2023, the number of shares issued under the plan was 34,955 , 31,252 and 26,348 shares.

As of December 31, 2025, there were 171,160 shares available for purchase under the plan.

Share-Based Compensation Plan

The 2023 Stock Incentive Plan, which was approved by our shareholders in April 2023, authorizes the issuance of 979,891 common shares, including 500,000 newly requested common shares, for the granting of stock options, stock appreciation rights, restricted

stock, restricted stock units, dividend equivalents, performance awards and other stock-based awards.

The 2023 Stock Incentive Plan, which was approved by our shareholders in April 2023, authorizes the issuance of 979,891 common shares for the granting of stock options, stock appreciation rights, restricted stock, restricted stock units, dividend equivalents, performance awards and other stock-based awards.

In addition, common shares subject to any outstanding awards under our prior stock incentive plans that are forfeited, canceled or reacquired by the Company will become available for re-issuance under the 2023 Stock Incentive Plan.

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The grant-date fair value of the ROE component of the stock performance awards granted during the years ended December 31, 2025, 2024 and 2023 was determined using the grant-date stock price and a discounted cash flow analysis to adjust for expected unearned dividends during the vesting period.

The grant-date fair value of the TSR component of the stock performance awards granted during the years ended December 31, 2024, 2023 and 2022 was determined using a Monte Carlo fair value simulation model incorporating the following assumptions:

The grant-date fair value of the TSR component of the stock performance awards granted during the years ended December 31, 2025, 2024 and 2023 was determined using a Monte Carlo fair value simulation model

incorporating the following assumptions:

2025 2024 2023

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The expected term of the award is equal to the three-year performance period.

Expected volatility was estimated based on actual historical volatility of our common stock over a five-year period.

Expected volatility was estimated based on actual historical volatility of our common stock over a three-year period.

Dividend yield was estimated based on historic and future yield estimates.

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Restricted Stock Awards 96 96 100

Employee Stock Purchase Plan Shares and Other 2 2 2

Employee Stock Purchase Plan Shares 2 2 2

Dilutive Effect of Potential Common Shares 253 294 371

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Megawatt hours of electricity 311 167

Derivative Assets:

Other Current Assets $ 124 $ —

Other Noncurrent Assets

Total Derivative Assets 124 —

Derivative Liabilities:

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The following tables present our assets and liabilities measured at fair value on a recurring basis as of December 31, 2025 and 2024 classified by the input method used to measure fair value:

Level 1 Level 2 Level 3

(in thousands) Level 1 Level 2 Level 3

December 31, 2025

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Government Debt Securities — 63,136 —

Total Assets 11,249 62,759 —

Derivative Instruments — 124 —

19,393 64,580 —

Derivative Instruments — 2,717 —

Total Liabilities

(in thousands) Level 1 Level 2 Level 3

$ — $ 2,717 $ —

December 31, 2024

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Government Debt Securities — 61,131 —

Total Assets $ 10,896 $ 9,303 $ —

11,249 62,759 —

Derivative Instruments — 1,989 —

Total Liabilities

$ — $ 1,989 $ —

Level 1 fair value measurements are based on quoted prices (unadjusted) in active markets for identical assets or liabilities that we have the ability to access at the measurement date.

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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 8. Financial Statements and Supplementary Data