Good morning and welcome to the Otter Tail Corporation's 2019 Earnings Conference Call. Today's call is being recorded and we will hold a question-and-answer session after the prepared remarks.I will now turn the call over to the Company for opening comments.

Good morning, everyone and welcome to our call. My name is Loren Hanson and I manage Otter Tail's Investor Relations area. Last Friday, we announced our 2019 earnings results and our 2020 earnings per share guidance range. Our complete earnings release and slides accompanying this call are available on our website at ottertail.com. A replay of the call will be available on our website later today.With me on the call today are Chuck MacFarlane, Otter Tail Corporation's President and CEO; and Kevin Moug, Otter Tail Corporation's Senior Vice President and Chief Financial Officer.Before we begin, I want to remind you that we will be making forward-looking statements during the call. As noted on Slide 2, these statements represent our current judgment or opinion of what the future holds. They are subject to risks and uncertainties that may cause actual results to differ materially. So please be advised about placing undue reliance on any of these statements. Our forward-looking statements are described in more detail in our filings with the Securities and Exchange Commission which we encourage you to review. Otter Tail Corporation disclaims any duty to update or revise our forward-looking statements due to new information, future events, developments or otherwise.For opening remarks, I will now turn the call over to Otter Tail Corporation's President and CEO, Mr. Chuck MacFarlane.

Thank you, Loren and good morning, everyone. Welcome to our 2019 year-end earnings call. Please refer to Slide 5 as I begin my comments. Earnings per share were $2.17 which is above the midpoint of our updated 2019 earnings guidance of $2.10 to $2.20. Operating revenues, net income and diluted earnings per share all increased year-over-year.Our Electric segment earnings increased primarily due to transmission costs and renewable resource rider recovery as well as final rate increases in South Dakota rate case. While Manufacturing segment earnings were relatively flat, we saw improved performance of BTD driven by growth in parts revenue. As anticipated Plastics segment earnings were lower due to lower pipe prices and lower operating margin. Some of Otter Tail Power's 2019 accomplishments include, the Merricourt Wind Energy Center, Astoria Station, South Dakota Transmission Reliability and self-fund transmission projects all began construction. Our projected investments in those projects totals approximately $500 million. To put this into context, this represents approximately 43% of our current $1.2 billion rate base. I'll touch briefly on a few of these projects.On Slide 16, the Merricourt Wind Energy Center remains on time and on budget. More than two-thirds of all civil work and tower foundations are complete. The project has received Minnesota Renewable Resource Rider approval, North Dakota advanced determination of prudence and South Dakota phase-in rider recovery. We estimate this project will cost approximately $258 million and will generate enough energy to power more than 65,000 homes. This is the largest capital project in Otter Tail Power history and we anticipate beginning commercial operation in the fourth quarter of 2020.On Slide 17, Astoria Station construction also remains on time and on budget. We awarded the general work contract last quarter. Astoria will be a highly efficient 245 megawatt natural gas combustion turbine. It will…

Well thanks, Chuck and good morning everyone. I'll cover the following items, our 2019 full year financial results, details on the fourth quarter results are covered in our earnings release, our liquidity position, strength of balance sheet, corporate credit ratings, the increase in our 2020 indicated annual dividend rate, our five-year capital expenditure plan and our 2020 business outlook. 2019 was another strong year for us financially. We earned $2.17 a share, which represents a 5.3% increase over 2018. This increase was primarily driven by our Electric segment supported in large part by our continued investments in our growing rate base.Our Manufacturing segment earnings were flat year-over-year. BTD's earnings grew approximately 14% but were offset by disappointing year-over-year decline of T.O. Plastics earnings of 54%. And as expected our Plastics segment earnings were down from our record year in 2018. Our 2019 return on equity was 11.6% on an equity ratio of 52.9%. Our two-platform strategy continues to deliver higher returns on equity on a higher equity layer when compared to holding company peers.Let me now provide an overview of 2019 earnings by segment, as shown on slides 24 and 25. Electric segment net earnings increased $4.6 million. Key drivers include increased transmission cost recovery in Minnesota, renewable resource rider revenues, increased retail revenues in South Dakota due to the final outcome of our 2018 South Dakota rate case settlement, increased revenues from the establishment of a generation cost recovery rider in North Dakota in conjunction with the construction of the Astoria Station, increased Minnesota SIP revenues and slightly favorable year-over-year weather impact.Other key items impacting Electric segment earnings were a decrease in transmission service revenues into lower MISO tariff revenues and the impact of the November FERC ruling related to the methodology used to determine the return on equity…

[Operator Instructions] After the Q&A, Chuck will return for a few closing remarks. Our first question comes from Tate Sullivan with Maxim Group.

Hi, thank you. Good morning. Slide 19 on the self-fund transmission projects, are the -- can you just walk through what is included in your current CapEx guidance just the ones that have received FERC approval, is that the case?

Good morning, Tate. This is Chuck. The ones that are included are all the ones that we anticipate to interconnect in '20 and '21. They include both ones that have approved FERC interconnection and anticipated ones. One other thing is there each project may have more than one FERC FSA that goes with it. So we are anticipating that these are largely the projects that will be put in service before the end of the ramp down of the PTC for wind.

Okay, thank you. And then Kevin on CapEx on the -- also on the CapEx guidance, slight changes from your previous guidance. I mean can you just comp, was it timing related to, I think you previously guided spending $233 million this year, you spent $207 million and then you increased by a lesser amount for the out years. But can you just give us some context to what changed, please?

Yes. I mean, Tate, thanks. I mean it's -- a fair amount of it's just timing in terms of the one that expenditures are coming through. So, one we originally expected is what's driving that kind of change. And then maybe just to further clarify your first question, we have what's actually included in the self-fund is the $45 million in our capital plan that we show on Slide 14 and on Slide 19.

Okay. Thank you for that. I'll get back in line.

Our next question comes from Chris Ellinghaus from The Williams [ph].

Hey guys. How are you today?

Good, Chris.

Good, Chris.

Can you just elaborate a little bit about your outlook for BTD and specifically sort of what you're thinking about the ATV [ph] market and how that might influence Georgia's performance also?

Yes, Chris, this is Kevin. As we head into '20 and what we're seeing from our customers in that recreational vehicle market, we're starting to see some softening in terms of the -- some of the demands that are coming from them. And so our 2020 guidance for manufacturing of which BTD is included is reflecting what we expect to see that decline in volumes to be coming from the RV end market or specifically the customers within that end market.

Okay. So can we infer from the -- with the midpoint of the Manufacturing guidance seems to be kind of in the flat range, should we be generally expecting a little weaker TD offset by your expectations?

In terms of [indiscernible] but in terms of the guidance range of that $31 million to $35 million and that midpoint, BTD's part of that is slightly lower now than where 2019 earnings came in and that -- like I said, that's really driven in large part by the softening in the RV end market.

Okay. Yes, what I was saying was it looks like or -- I mean I'm inferring from the midpoint of the range being kind of flat [Technical Difficulty] maybe BTD is down a little bit but that's picked up by slack from improvement you talked about expecting at T.O.?

That's correct.

And what is -- what is your thought about T.O.'s outlook to better than 2019 at this point?

Sure. T.O. has kind of a handful of struggles in 2019. They were started out the year as a challenge with productivity, efficiency on the manufacturing side. They had some challenges related to, of course, the roof collapse in March that occurred and shut the warehouse down and had impact on shipping for a while and then we had a number of new hires in the plant. There were lots of transition and training and education that occurred with that. So our productivity and efficiency around the manufacturing process was certainly below our expectations in '19 when we saw that continue into December of '19. And as we head into '20, we expect that those efficiencies and -- productivity and inefficiencies, I should say are pretty much behind us. And so we would expect to see better productivity coming out of the plants [ph]. And then given some of the slowness that occurred in sales in the fourth quarter in December, we expect to see a pickup from that as we head into 2020.

Okay. And as far as PVC's outlook sort of address what your -- kind of weakness that you saw in some of the demand in 2019 and also can you elaborate on what the weather impact look like in 2019 a little bit?

Yes, I think -- we do expect -- we saw weather impact in the second part of the -- probably the tail end of the first quarter, into the second quarter. And as we talk about increased volumes in 2020, we expect that we're going to see some of that come back to us in 2020 because of the delays that were caused by the heavy rains that occurred in our regions that we serve. So that -- this volume increase that we're talking about for '20 is in part driven by giving that weather back -- or I am sorry, the weather delays back based on, if you will, a more normal weather pattern for construction that we would expect to see in our regions.

Okay. And the general demand weakness that you sort of note, was that influenced by the weather as well?

In part, it certainly was, yes.

And your -- what kind of market [Technical Difficulty] weakness in last year and is that outlook better for this year?

Well we saw, weakness in parts of our Midwest and West Coast service territories, if you will, in '19. We ended up -- we saw a fair amount of product in the Texas as a part of softening in the Midwest and West Coast. And based on this, we expect to see in 2020 some strengthening back in that West Coast and Midwest markets, as we head into the year and we certainly have assumptions around that in our guidance.

Okay [Technical Difficulty] 2019, are they ending up being lower margin due to the distance for transportation?

Yes.

Thanks, guys. Appreciate the color.

Thanks, Chris.

Our next question comes from Brian Russo with Sidoti.

Hi, good morning. The $158 million total cost for Astoria, how much is allocated to Minnesota?

Brian, this is Chuck. All of our generation and transmission is based on allocation partly driven by our coincident [ph] peak. So, roughly 53% of the total project will be allocated to Minnesota.

Okay. And that as well as any other accumulating rate base you will file for recovery in late 2020 with a 2021 test year?

We will -- I think it's important that in Minnesota, because we do have rider recovery in the Dakotas for the Astoria Station, in Minnesota we have approval in our integrated resource plan of the gas plant and we will need to file that. We're collecting AFUDC at this point, we will need to file that in our next general rate case, which is rightly anticipated at end of 2020 for a 2021 test year, yes.

Okay, great. And remind us of when the last rate case was finalized in Minnesota?

That's 2017.

2017, but I do not have the month regarding the final order.

Yes, it was filed -- we filed in the November of '17 and I think the final order was in the third quarter or early fourth quarter of '18.

Got it. Okay. And then I think you said there is $0.05 dilution to the -- at the market and/or dividend reinvestment plans in 2020. Would you mind just quantifying that on an absolute basis of how much equity might be needed?

Yes. Brian, we're expecting the issue another $55 million to $60 million of equity in 2020.

Okay, great. And then just on pension expense, the incremental information was helpful. What is the drag in 2020 over 2019 due to the lower interest rate and is that one-time or is that just kind of the new levelized cost going forward?

Yes, so the impact on the discount rate change is approximately $4 million year-over-year from [indiscernible] to the new rate that we have for 2020 and then the drag on the long-term rate of return changes is about another $1 million. So collectively about $5 million year-over-year impact because of change in the two rates. That is then affects -- that's the impact for 2020. We reset those rates annually so in the December -- late December of 2020, we will reset those rates based on current interest rate conditions in place at the time using methodologies we use upon matching our model to set our discount rate. And then of course we'll look at what kind of actual returns we had in our pension plan and what our asset allocation is amongst the plan assets to help set the long-term rate of return for 2021.

Okay. And is that -- incremental pension expense, is that included in the updated -- or included in the corporate costs for 2020 or is that -- does that fall somewhere else?

That is predominantly, Brian, in the utilities numbers.

Okay.

The utility is where the pension plan sits. Corporate has a slight impact from that because there are a few corporate employees that are in the pension plan, but it's predominantly at utility.

Okay, great. And I think you mentioned in 2019 there was a $0.06 positive weather impact versus normal. Could you narrow that down to which quarter that occurred in?

It was $0.08, Brian, was the impact in the -- that was about a pretty healthy impact in the first quarter of '19, is where a fair amount of that came from.

Okay, great. And then just lastly, the mix of business, I think you disclosed in 2020, roughly 75% of earnings will be derived from the Electric segment. Is that kind of the ideal mix, 75%-25% or do you expect given what appears to be well above average electric or regulated utility growth rate is offset by rather flat, if not lower unregulated segment earnings? So if all else equal the regulated earnings profile on a percentage basis should increase through the planning period?

Hi Brian, this is Chuck. Yes our target is 25% manufacturing, 75% utility. We have been over the last couple of years had a little bit higher percentage than 25% from manufacturing and our target is to get to -- in 2020 because of the utility investment to get back to this 25%-75% and we project that will -- we want to maintain that and give or take, that's going to vary a little bit year-to-year. But that is our target long-term.

Okay, great. Thank you very much.

[Operator Instructions] And I'm not showing any further questions at this time, I'd like to turn the call back to Chuck MacFarlane for closing comments.

Thank you for your questions and your support to Otter Tail Corporation. We continued execution on our utility growth projects and emphasis on operational and commercial performance in our manufacturing companies. We remain confident in our ability to deliver shareholder value. In 2020 we will focus on continuing to improve BTD profitability. We will further refine our long-term strategy for Northern Pipe, Vinyltech and T.O. Plastics and we will continue to execute on Otter Tail Power's major generation transmission projects. We believe this will allow us to deliver on our 2020 guidance of $2.22 to $2.37 a share.Thank you for joining our call. We appreciate your interest in Otter Tail Corporation and we look forward to a successful year.

Ladies and gentlemen, this does conclude today's presentation. You may now disconnect and have a wonderful day.