Otter Tail (NASDAQ:OTTR) reported fourth-quarter and full-year 2025 results that management said exceeded the company’s original expectations, even as earnings declined from the prior year due to softer plastics performance. On the company’s earnings call, President and CEO Chuck MacFarlane highlighted continued execution on utility capital investments and regulatory priorities, progress on capacity expansions in plastics, and another double-digit dividend increase.
2025 results and dividend update
For 2025, Otter Tail posted diluted earnings per share of $6.55, down 9% from 2024. Management attributed the year-over-year decline to the plastics segment “receding from record levels” achieved in the prior year.
Regulatory and capital plan progress at Otter Tail Power
In the electric utility segment, MacFarlane emphasized ongoing rate base growth and regulatory activity across jurisdictions.
- Minnesota rate case: The Minnesota Public Utilities Commission approved $28.6 million of interim rate revenues, effective January 1, 2026, subject to refund. The company said the procedural schedule is set and it continues to anticipate final rates being implemented in mid-2027.
- South Dakota rate case: Interim rate revenues of $5.7 million went into effect December 1, also subject to refund. Management said there were no intervenors and the company reached a settlement in principle with South Dakota Public Utilities Commission staff, with work continuing to finalize the settlement.
Otter Tail Power refreshed its five-year capital spending plan while keeping the total unchanged. The update included adding a battery storage project, accelerating solar investment, and shifting a portion of transmission investment outside the planning period due to updated timing. Management reaffirmed a 10% five-year rate base compound annual growth rate and said it continues to expect rate base growth to translate into earnings per share growth near a one-to-one ratio.
MacFarlane said the utility recently completed a wind repowering project across four owned wind energy centers, which is expected to increase output by 20% and extend renewable energy tax credits by an additional 10 years. On solar, Solway Solar was described as being in early construction stages, while the company completed the acquisition of development assets for Abercrombie Solar in January 2026. The company expects Solway to be operational toward the end of 2026 or early 2027, with Abercrombie targeted for 2028.
Management also detailed a planned battery storage facility near its Hoot Lake Solar site. The company expects the project to provide 75 MW of capacity with a four-hour duration, with total capital investment of approximately $120 million. The Minnesota commission approved rider recovery in November 2025, and the company expects the facility to be operational in 2028.
On transmission, Otter Tail said development continues across its MISO Tranche 1, MISO Tranche 2.1, and JTIQ portfolios. Management cited landowner and local government resistance tied to siting and certain permits for one Tranche 1 project. The company also noted a FERC complaint filed in mid-2025 regarding MISO’s Tranche 2.1 portfolio benefit calculations; Otter Tail said it currently expects the projects to move forward for reliability-related benefits, but believes delays are possible.
Large load pipeline and rate outlook
Otter Tail refreshed its large load pipeline by removing a 155 MW load that went into service in 2025. The company said it remains “optimistic” about a 430 MW data center opportunity in phase II and continues to engage with the customer toward a signed electric service agreement. Management emphasized it has not adjusted its load growth forecast for phase I and II opportunities and that the current five-year capital plan does not include investment tied to new large loads.
MacFarlane said the utility’s 2025 residential electric rates were 34% below the national average and 19% below regional peers. Looking ahead, the company projects customer bills will rise 3% to 4% on a compounded annual basis over the current five-year planning period, though management said annual increases may vary by year and by jurisdiction due to timing of rate cases, capital spending, and recovery.
Segment performance, 2026 guidance, and balance sheet
CFO Todd Wahlund said 2025 diluted EPS of $6.55 was toward the upper end of the company’s guidance range. He broke down year-over-year earnings changes by segment:
- Electric: Earnings increased more than 7%, or $0.16 per share, driven by recovery of increased rate base investments, higher residential and commercial volumes, more favorable weather versus 2024, and lower operating and maintenance expenses. These were partially offset by higher depreciation and interest expense tied to investments and financing.
- Manufacturing: Earnings decreased $0.06 per share, or 16%, reflecting lower sales volumes, product mix impacts on pricing, and higher SG&A. Wahlund said lower volumes were linked to soft end-market demand and inventory management by manufacturers and dealers, partially offset by lower production costs. He added the year ended with higher year-over-year Q4 sales volumes and said momentum was carrying into 2026.
- Plastics: Earnings decreased $0.72 per share, or 15%, primarily due to lower average sales prices. The company said it offset part of the pricing decline with higher sales volumes and lower input material costs.
Otter Tail ended 2025 with $386 million of cash on hand. Wahlund said the company produced a 16% return on equity on an equity layer of 63% and that the balance sheet can fund its growth plan without external equity through at least 2030.
For 2026, management initiated diluted EPS guidance of $5.22 to $5.62 (midpoint $5.42). Wahlund said the midpoint implies an above-average return on equity of about 12%. The company’s segment expectations include:
- Electric: Earnings expected to increase 14%, driven by a 14% increase in average rate base and interim revenues from the Minnesota general rate case, partially offset by higher O&M, depreciation, and interest expense.
- Manufacturing: Earnings expected to increase 7%, based on an improved sales outlook, including modest volume increases at BTD and higher horticulture product volumes, plus improved productivity. Management expects a stronger first half but said it is more cautious on the second half due to end-market challenges.
- Plastics: Earnings expected to decrease 36% as PVC pipe prices continue to fall from peak levels. Management expects higher volumes—helped by phase II capacity at Vinyltech coming online in early 2026—to partially offset pricing pressure, with resin costs expected to be largely flat year over year.
Wahlund also reiterated the utility’s updated five-year capital spending plan totals $1.9 billion. The company said it shifted roughly $140 million of transmission investments outside the planning window due to timing updates and added spending for renewables and battery storage to reflect the Hoot Lake project. The financing plan includes annual utility debt issuance, and the company expects to retire $80 million of parent-level debt maturing later in 2026 without replacement, leaving no outstanding parent-level debt.
On longer-term plastics expectations, management reaffirmed its view that plastics earnings will continue to decline through the end of 2027, with 2028 expected to be the first full year within a $45 million to $50 million earnings range. For 2026, the company expects average PVC sales prices to be approximately 20% lower than the 2025 average, while noting variability and uncertainty in forecasting longer-term plastics earnings.
The call concluded without any analyst questions during the Q&A period.
About Otter Tail (NASDAQ:OTTR)
Otter Tail Corporation, through its primary subsidiary Otter Tail Power Company, is a regulated electric utility engaged in the generation, transmission and distribution of electricity. The company operates a diversified portfolio of owned and contracted power generation facilities, including coal, natural gas, wind and hydroelectric units, supplemented by long-term power purchase agreements. In addition to utility operations, Otter Tail provides related engineering, construction and maintenance services to support grid reliability and efficiency.
The company’s service territory covers a predominantly rural footprint in the Upper Midwest, including communities in west-central Minnesota, eastern North Dakota, northwest Wisconsin and small portions of South Dakota.
