MDU Resources Group, Inc. (MDU)

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MDU Resources Group Inc. (MDU)

Q1 2010 Earnings Call Transcript

April 30, 2010 1:00 pm ET

Executives

Doran Schwartz – VP and CFO

Terry Hildestad – President and CEO

Steve Bietz – President and CEO of WBI Holdings Inc.

John Harp – President and CEO of MDU Construction Services Group Inc.

Bill Schneider – President and CEO of Knife River Corp.

Dave Goodin – President and CEO of Montana-Dakota, Great Plains Natural Gas, Cascade Natural Gas and Intermountain Gas.

Analysts

Paul Patterson – Glenrock Associates

Holly Stewart – Howard Weil

Becca Followill – Tudor Pickering Holt

Jim Harmon – Barclays Capital

Chris Ellinghaus – Wellington Shields

Tim Schneider – Citigroup

James Bellessa – D.A. Davidson & Company

Paul Ridzon – KeyBanc

Presentation

Operator

Good afternoon. My name is Casey and I will be your conference facilitator. At this time, I would like to welcome everybody to the MDU Resources Group 2010 first quarter conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer period. (Operator Instructions)

This call will be available for replay beginning at 4 PM Eastern Time today through 11:59 PM Eastern Time on May 14. The conference ID number for the replay is 66644257. Again, the conference ID number for the replay is 66644,257. The number to dial for the replay is 1-800-642-1687 or 706-645-9291. I would now like to turn the conference over to Doran Schwartz, Vice President and Chief Financial Officer of MDU Resources Group. Thank you Mr. Schwartz, you may begin your conference.

Doran Schwartz

Thank you. Welcome to our earnings release conference call and before I turn the presentation over to Terry Hildestad, our President and Chief Executive Officer, I’d like to mention that this conference call is being broadcast live to the public over the Internet and slides will accompany our remarks.

If you'd like to review the slide over the website at www.mdu.com follow the links to the conference call. Our earnings release is also available on our website. Now, during the course of this presentation, we will make certain forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934. Although the company believes that its expectations and beliefs are based on reasonable assumptions, actual results may differ materially.

For discussion of facts that may cause actual results to differ, refer to item one A, risk factors, in our most recent Form 10-K as well the risk factors section in our most recent form 8-K. Our format today will include formal remarks by Terry followed by a Q&A session. Other members of our management team who will be available to answer questions during the Q&A session of the conference call today are Dave Goodin, President and CEO of Montana-Dakota Great Plains Natural Gas, Cascade Natural Gas, and Intermountain Gas; Steve Bietz, President and CEO of WBI Holdings; Bill Schneider, President and CEO of Knife River Corporation; John Harp, President and CEO of MDU Construction Services Group and Nicole Kivisto, Vice President and Controller and Chief Accounting Officer for MDU Resources. And with that, I'll turn the presentation over to Terry for his formal remarks. Terry?

Terry Hildestad

Thank you, Doran. Good afternoon. Thank you all for joining us today. We appreciate your interest in MDU Resources. Consolidated earnings for the first quarter of 2010 were $41.6 million or $0.22 per common share. That compares to the first quarter of 2009 earnings of $40.4 million or $0.22 cents per share, excluding an after tax non-cash charge of $384.4 million related to lower energy prices on March 31 of last year.

These results underscore the value of our industry and geographical diversification strategy, the regulated utility and pipeline and energy Services businesses both had record first quarters. They helped mitigate the effect of weather and the countries week economy on our construction businesses.

In addition, all of our businesses are continuing to focus on aggressively managing their costs as a result, we finished the first quarter ahead of where we were at this time in 2009. I'll discuss our individual company results and their outlook.

Again, with the utility business, again they reported record first quarter earnings of $29.2 million compared to earnings of $29 million for the same period in 2009. The increase reflects lower operating maintenance expense as a result of continued integration and efficiency efforts at that business unit.

These results were partially offset by a decline of 13% in retail natural gas sales volumes because of significantly warmer temperatures. Our west coast states experienced 10% to 20% warmer weather than last year.

We continue to pursue new rate based generation to accommodate our load growth and replace our purchase power on April 1, Wygen III began commercial operation, added 25 megawatts to our generation ownership. Last year, we filed an application with Wyoming PSC for an electric rate case primarily to recover the cost of Wygen III. On April 27, the commission approved an increase of $2.1 million annually or 13.1%, that's effective the 1st of May.

With respect to our renewable projects, construction on our 19.5 megawatt winds generating facility in Northwestern and 10.5 megawatt expansion of our win facility near Baker, Montana continues with turbine assemblies in process, we expect both projects to be commercial midyear.

Earlier this month, we filed an application with the North Dakota public service commission for an electric rate case of $15.1 million. This increase is to recover the costs associated with investments in inner infrastructure upgrades. The recent investment in our renewable energy generation and recovery of costs associated with the canceled Big Stone 2 project.

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