Otter Tail Corp (OTTR)

CIK: 0001466593. SIC: 4911 Electric Services. Latest 10-K as of: 2026-02-18.

SIC breadcrumb: Transportation, Communications, Electric, Gas, And Sanitary Services > Electric, Gas, And Sanitary Services > SIC 4911 Electric Services

SEC company page: https://www.sec.gov/edgar/browse/?CIK=1466593. Latest filing source: 0001466593-26-000008.

Selected Fundamentals

Financials

Annual standardized facts from SEC companyfacts as of latest extracted filing date 2026-02-23. Source: https://data.sec.gov/api/xbrl/companyfacts/CIK0001466593.json. Derived margins are computed from the extracted annual SEC facts.

Flow metrics use full-year FY periods from 10-K/10-K/A filings; balance-sheet metrics use FY-end instants. Missing metrics are omitted rather than fabricated.

Financial Charts

Quarterly

Quarterly standardized facts from SEC companyfacts as of latest extracted filing date 2026-05-06. Source: https://data.sec.gov/api/xbrl/companyfacts/CIK0001466593.json.

Flow metrics use discrete quarter-length periods from 10-Q/10-Q/A filings. Q4 revenue and net income are derived only when annual FY and nine-month YTD facts exist for the same fiscal year; derived Q4 values are labeled. EPS Q4 is not derived.

Quarterly Charts

Macro Cross-References

• CPIAUCSL - Consumer Price Index for All Urban Consumers: All Items in U.S. City Average
• UNRATE - Unemployment Rate
• FEDFUNDS - Federal Funds Effective Rate
• CES0500000003 - Average Hourly Earnings of All Employees, Total Private
• DFEDTARU - Federal Funds Target Range - Upper Limit
• DFEDTARL - Federal Funds Target Range - Lower Limit
• DGS3MO - Market Yield on U.S. Treasury Securities at 3-Month Constant Maturity
• DGS2 - Market Yield on U.S. Treasury Securities at 2-Year Constant Maturity
• DGS10 - Market Yield on U.S. Treasury Securities at 10-Year Constant Maturity
• DGS30 - Market Yield on U.S. Treasury Securities at 30-Year Constant Maturity
• T10Y2Y - 10-Year Treasury Constant Maturity Minus 2-Year Treasury Constant Maturity
• CPILFESL - Consumer Price Index for All Urban Consumers: All Items Less Food and Energy
• CPIUFDSL - Consumer Price Index for All Urban Consumers: Food
• CPIENGSL - Consumer Price Index for All Urban Consumers: Energy
• CUSR0000SAH1 - Consumer Price Index for All Urban Consumers: Shelter
• PCEPI - Personal Consumption Expenditures: Chain-type Price Index
• PCEPILFE - Personal Consumption Expenditures Excluding Food and Energy: Chain-type Price Index
• PPIACO - Producer Price Index by Commodity: All Commodities
• T10YIE - 10-Year Breakeven Inflation Rate
• U6RATE - Total Unemployed, Plus All Marginally Attached Workers Plus Total Employed Part Time for Economic Reasons
• PAYEMS - All Employees, Total Nonfarm
• CIVPART - Labor Force Participation Rate
• EMRATIO - Employment-Population Ratio
• UNEMPLOY - Unemployed
• CE16OV - Employment Level
• ICSA - Initial Claims
• JTSJOL - Job Openings: Total Nonfarm
• JTSQUR - Quits: Total Nonfarm
• GDPC1 - Real Gross Domestic Product
• A191RL1Q225SBEA - Real Gross Domestic Product: Percent Change from Preceding Period
• INDPRO - Industrial Production: Total Index
• TCU - Capacity Utilization: Total Index
• HOUST - New Privately-Owned Housing Units Started: Total Units
• PERMIT - New Privately-Owned Housing Units Authorized in Permit-Issuing Places: Total Units
• RSAFS - Advance Retail Sales: Retail Trade
• PCE - Personal Consumption Expenditures
• DSPIC96 - Real Disposable Personal Income
• PSAVERT - Personal Saving Rate
• M2SL - M2
• BOPGSTB - U.S. International Trade in Goods and Services: Balance
• MSPUS - Median Sales Price of Houses Sold for the United States
• HSN1F - New One Family Houses Sold: United States
• RHORUSQ156N - Homeownership Rate in the United States
• TTLCONS - Total Construction Spending: Total Construction in the United States
• RRVRUSQ156N - Rental Vacancy Rate in the United States
• TOTALSL - Total Consumer Credit Owned and Securitized
• REVOLSL - Revolving Consumer Credit Owned and Securitized
• DRCCLACBS - Delinquency Rate on Credit Card Loans, All Commercial Banks
• GDP - Gross Domestic Product
• GPDI - Gross Private Domestic Investment
• GCE - Government Consumption Expenditures and Gross Investment
• PCEC - Personal Consumption Expenditures
• NETEXP - Net Exports of Goods and Services
• GFDEBTN - Federal Debt: Total Public Debt
• GFDEGDQ188S - Federal Debt: Total Public Debt as Percent of Gross Domestic Product
• FYFSD - Federal Surplus or Deficit
• FGRECPT - Federal Government Current Receipts
• FGEXPND - Federal Government: Current Expenditures
• MANEMP - All Employees, Manufacturing
• USCONS - All Employees, Construction
• USTRADE - All Employees, Retail Trade
• USFIRE - All Employees, Financial Activities
• USGOVT - All Employees, Government
• AWHAETP - Average Weekly Hours of All Employees, Total Private
• DGORDER - Manufacturers' New Orders: Durable Goods
• NEWORDER - Manufacturers' New Orders: Nondefense Capital Goods Excluding Aircraft
• BUSINV - Total Business Inventories
• EXPGS - Exports of Goods and Services
• IMPGS - Imports of Goods and Services
• IR - Import Price Index (End Use): All Commodities
• PPIFIS - Producer Price Index by Commodity: Final Demand

Latest quarter (10-Q)

Latest 10-Q source: 0001466593-26-000051.

Extracted between Part I Item 2 and the next Item 3/4 or Part II heading after HTML sanitization. Confidence: high. Filing date: 2026-05-06. Report date: 2026-03-31.

ITEM 2.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion and analysis of our financial condition and results of operations together with our interim financial statements and the related notes appearing under Item 1 of this Quarterly Report on Form 10-Q, and our annual financial statements and the related notes along with the discussion and analysis of our financial condition and results of operations contained in our Annual Report on Form 10-K for the year ended December 31, 2025.

Otter Tail Corporation and its subsidiaries form a diverse group of businesses with operations classified into three segments: Electric, Manufacturing and Plastics. Our Electric segment business is a vertically integrated, regulated utility with generation, transmission and distribution facilities to serve our customers in western Minnesota, eastern North Dakota and northeastern South Dakota. Our Manufacturing segment provides metal fabrication for custom machine parts and metal components and manufactures extruded and thermoformed plastic products. Our Plastics segment manufactures PVC pipe for use in, among other applications, municipal and rural water, wastewater and water reclamation projects.

RESULTS OF OPERATIONS

Provided below are a summary and discussion of our operating results on a consolidated basis followed by a discussion of the operating results of each of our segments: Electric, Manufacturing and Plastics. In addition to the segment results, we provide an overview of our Corporate costs. Our Corporate costs do not constitute a reportable segment, but rather consist of unallocated general corporate expenses, such as corporate staff and overhead costs, the results of our captive insurance company and other items excluded from the measurement of segment performance. Corporate costs are added to operating segment totals to reconcile to totals on our consolidated statements of income.

CONSOLIDATED RESULTS    

The following table summarizes consolidated operating results for the three months ended March 31, 2026 and 2025:

(in thousands)

2026

2025

$ change

% change

Operating Revenues

$

347,026 

$

337,353 

$

9,673 

2.9 

%

Operating Expenses

261,789 

253,354 

8,435 

3.3 

Operating Income

85,237 

83,999 

1,238 

1.5 

Interest Expense

(12,636)

(11,553)

(1,083)

9.4 

Nonservice Components of Postretirement Benefits

443 

1,282 

(839)

(65.4)

Other Income (Expense), net

4,442 

4,456 

(14)

(0.3)

Income Before Income Taxes

77,486 

78,184 

(698)

(0.9)

Income Tax Expense

4,876 

10,085 

(5,209)

(51.7)

Net Income

$

72,610 

$

68,099 

$

4,511 

6.6 

%

Operating Revenues increased $9.7 million primarily due to increased revenues from our Electric segment driven by recent rate increases and higher sales volumes in our Manufacturing and Plastics segments, partially offset by lower sales prices in our Plastics segment. See our segment disclosures below for additional discussion of items impacting operating revenues.

Operating Expenses increased $8.4 million primarily due to an increase in production fuel costs in our Electric segment, increased material costs and sales volumes in our Manufacturing segment, and increased sales volumes in our Plastics segment, partially offset by a decrease in material costs in our Plastics segment. See our segment disclosures below for additional discussion of items impacting operating expenses.

Nonservice Components of Postretirement Benefits decreased by $0.8 million, having a negative impact on net income, primarily due to a decrease in the amortization of plan amendment-related gains and an increase in the amortization of actuarial losses.

Income Tax Expense decreased $5.2 million primarily due to an increase in PTCs at OTP driven by increased wind generation which qualified for credits. Our effective tax rate was 6.3% for the three months ended March 31, 2026 and 12.9% for the same period last year.

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ELECTRIC SEGMENT RESULTS

The following table summarizes Electric segment operating results for the three months ended March 31, 2026 and 2025:

(in thousands)

2026

2025

$ change

% change

Operating Revenues

$

165,870 

$

149,720 

$

16,150 

10.8 

Production Fuel

20,773 

14,321 

6,452 

45.1 

Purchased Power

27,013 

30,870 

(3,857)

(12.5)

Operating and Maintenance Expenses

50,255 

48,881 

1,374 

2.8 

Depreciation and Amortization

23,445 

22,377 

1,068 

4.8 

Property Taxes

4,462 

4,228 

234 

5.5 

Operating Income

39,922 

29,043 

10,879 

37.5 

Interest Expense

(11,736)

(10,657)

(1,079)

10.1 

Nonservice Components of Postretirement Benefits

725 

1,555 

(830)

(53.4)

Other Income (Expense), net

1,157 

759 

398 

52.4 

Income Before Income Taxes

30,068 

20,700 

9,368 

45.3 

Income Tax Benefit

(5,182)

(4,008)

(1,174)

29.3 

Net Income

$

35,250 

$

24,708 

$

10,542 

42.7 

%

2026

2025

change

% change

Electric kilowatt-hour (kwh) Sales (in thousands)

Retail kwh Sales

1,715,724 

1,673,004 

42,720 

2.6 

%

Wholesale kwh Sales – Company Generation

21,314 

56,175 

(34,861)

(62.1)

Heating Degree Days

3,155 

3,451 

(296)

(8.6)

The operating results of our Electric segment are impacted by fluctuations in weather conditions and the resulting demand for electricity for heating. The following table shows heating degree days as a percent of normal for the three months ended March 31, 2026 and 2025.

2026

2025

Heating Degree Days

92.2 

%

100.9 

%

The following table summarizes the estimated effect on diluted earnings per share of the difference in retail kwh sales under actual weather conditions and expected retail kwh sales under normal weather conditions for the three months ended March 31, 2026 and 2025, and between those periods.

2026 vs

Normal

2026 vs

2025

2025 vs

Normal

Effect on Diluted Earnings Per Share

$

(0.05)

$

(0.05)

$

— 

Operating Revenues increased $16.2 million primarily due to:

•A $9.2 million increase from higher rates, reflecting interim rates in Minnesota and South Dakota and updated base rates in North Dakota. Interim rates in Minnesota and South Dakota became effective in January 2026 and December 2025, respectively, and updated base rates in North Dakota went into effect in March 2025.

•A $4.3 million increase in fuel recovery revenues, driven by higher production fuel costs, as described below.

•A $3.5 million increase from the recovery of additional rate base investments.

•A $3.2 million increase from higher commercial and industrial sales volumes.

These increases were partially offset by:

•A $3.3 million increase in PTCs, the benefit of which is provided to customers, as described below.

•A $2.7 million decrease due to the impact of unfavorable weather.

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Production Fuel costs increased $6.5 million driven by higher generation from our natural gas facilities and coal-fired facilities, as well as higher natural gas prices.

Purchased Power costs decreased $3.9 million primarily due to a 32% reduction in purchased power volumes, partially offset by a 28% increase in the price of purchased power driven by higher market energy costs.

Operating and Maintenance expenses increased $1.4 million primarily due to higher labor costs, as well as an increase in software costs.

Depreciation and Amortization expense increased $1.1 million as additional assets, including certain wind generation, distribution and transmission assets, were placed in service.

Income Tax Benefit increased $1.2 million primarily due to an increase in PTCs driven by increased wind generation that qualified for PTCs compared to the same period last year. Our wind repowering project was completed in the first quarter of 2026. The completion of these facility repowering projects results in the commencement of PTCs earned from the generation from these facilities as they are placed back into service. PTCs are credited to customers, resulting in a reduction of both operating revenue and income taxes.

MANUFACTURING SEGMENT RESULTS

The following table summarizes Manufacturing segment operating results for the three months ended March 31, 2026 and 2025:

(in thousands)

2026

2025

$ change

% change

Operating Revenues

$

89,559 

$

81,685 

$

7,874 

9.6 

%

Cost of Products Sold (excluding depreciation)

67,521 

64,300 

3,221 

5.0 

Selling, General, and Administrative Expenses

11,122 

9,535 

1,587 

16.6 

Depreciation and Amortization

4,787 

5,424 

(637)

(11.7)

Operating Income

6,129 

2,426 

3,703 

152.6 

Interest Expense

(599)

(623)

24 

(3.9)

Other Income (Expense), net

— 

1 

(1)

(100.0)

Income Before Income Taxes

5,530 

1,804 

3,726 

206.5 

Income Tax Expense

1,247 

272 

975 

358.5 

Net Income

$

4,283 

$

1,532 

$

2,751 

179.6 

%

Operating Revenues increased $7.9 million primarily due to a 5% increase in steel costs, which are passed on to customers, and a 4% increase in sales volumes. Demand improved in certain markets we serve, including the construction and recreational vehicle markets, compared to softer demand and tighter inventory management efforts during the same period last year.

Cost of Products Sold increased $3.2 million primarily due to higher steel costs and sales volumes, partially offset by the impact of improved production efficiencies compared to the same period last year, as we have continued to align our cost structure with current demand levels.

Selling, General, and Administrative Expenses increased $1.6 million, driven by variable compensation costs associated with financial results during the period and expectations for full-year performance.

Income Tax Expense increased $1.0 million due to an increase in income before income taxes.

PLASTICS SEGMENT RESULTS

The following table summarizes Plastics segment operating results for the three months ended March 31, 2026 and 2025:

(in thousands)

2026

2025

$ change

% change

Operating Revenues

$

91,597 

$

105,948 

$

(14,351)

(13.5)

%

Cost of Products Sold (excluding depreciation)

40,015 

40,087 

(72)

(0.2)

Selling, General, and Administrative Expenses

5,207 

5,439 

(232)

(4.3)

Depreciation and Amortization

1,672 

1,546 

126 

8.2 

Operating Income

44,703 

58,876 

(14,173)

(24.1)

Interest Expense

(146)

(146)

— 

— 

Other Income

2 

2 

— 

— 

Income Before Income Taxes

44,559 

58,732 

(14,173)

(24.1)

Income Tax Expense

11,619 

15,293 

(3,674)

(24.0)

Net Income

$

32,940 

$

43,439 

$

(10,499)

(24.2)

%

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Operating Revenues decreased $14.4 million primarily due to a 19% decrease in average sales prices compared with the same period last year, continuing the multi‑year decline in product pricing from peak levels in late 2022. This decrease was partially offset by a 7% increase in sales volumes. Sales volumes benefited from the opportunistic sale of specialty pipe during the period. Late in the quarter, we also benefited from distributor and contractor demand as they sought to secure inventories in advance of potential PVC resin cost increases. Expectations of higher resin costs, driven in part by energy market volatility and geopolitical developments, contributed to the demand during the period and may continue to impact customer purchasing patterns and future results.

Cost of Products Sold decreased $0.1 million primarily due to a 12% decrease in the cost of input materials, including PVC resin, however, the decrease was largely offset by a 7% increase in sales volumes.

Income Tax Expense decreased $3.7 million due to a decrease in income before income taxes.

CORPORATE RESULTS

The following table summarizes Corporate operating results for the three months ended March 31, 2026 and 2025:

(in thousands)

2026

2025

$ change

% change

General and Administrative Expenses

$

5,442 

$

6,318 

$

(876)

(13.9)

[Excerpt truncated for page length; source filing is linked above.]

Latest 10-K MD&A

Extracted between Item 7 and the next Item 7A/8 heading after HTML sanitization. Confidence: high. Filing date: 2026-02-18. Report date: 2025-12-31.

ITEM 7.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion and analysis of our financial condition and results of operations together with our financial statements and the related notes appearing under Item 8 of this Form 10-K.

OVERVIEW

Otter Tail Corporation and its subsidiaries form a diverse group of businesses with operations classified into three segments: Electric, Manufacturing and Plastics. Our Electric business is a vertically integrated, regulated utility with generation, transmission and distribution facilities to serve our customers in western Minnesota, eastern North Dakota and northeastern South Dakota. Our Manufacturing segment provides metal fabrication for custom machine parts and metal components, and manufactures extruded

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and thermoformed plastic products. Our Plastics segment manufactures PVC pipe for use in, among other applications, municipal and rural water, wastewater and water reclamation projects.

2025 FINANCIAL RESULTS

In 2025, our diversified business model generated strong financial results, producing net income of $275.9 million, or $6.55 per diluted share. As expected, our earnings declined from the record level achieved in 2024 when we generated earnings of $301.7 million, or $7.17 per diluted share. As we anticipated, product prices within our Plastics segment continued to decline in 2025 leading to the reduction in earnings compared to the prior year. We anticipate earnings from our Plastics segment will continue to decline through 2027 until such time that product pricing is expected to stabilize.

We generated $386.0 million of cash from operations in 2025 and ended the year with total available liquidity of $705.5 million. Our year-end equity ratio to total capital was 62.8%. We paid dividends totaling $2.10 per share, or $88.1 million, marking our 87th consecutive year of dividend payments to our shareholders.

Our Electric segment generated 7% earnings growth in 2025, producing earnings of $97.6 million. Our earnings growth was driven by the recovery of our rate base investments, which include investments in new generation and enhancements to our transmission and distribution system to promote reliable electric service. We also benefited from increased sales volumes in 2025, partially the result of favorable weather conditions compared to last year which impacted our customers' demand for energy, and lower operating and maintenance costs.

Earnings in our Manufacturing segment decreased 16% in 2025 to $11.5 million. Our sales volumes in the year were negatively impacted by soft end-market demand and customer inventory management efforts within many of the end markets we serve. Weak farm economics, persistently elevated interest rates, a cautious consumer and tariff uncertainty led to demand headwinds. We were able to partially mitigate the financial effects of lower sales volumes through cost-management efforts aligning our cost structure with the current demand environment, and enhanced production efficiencies.

Our Plastics segment earnings decreased 15% in 2025 to $170.4 million. As anticipated, sales prices for our PVC pipe products, after peaking in 2022, have gradually declined, including in 2025 when average prices declined 15% compared to the prior year. This pricing decline was the primary driver of our lower earnings in 2025. Partially offsetting the decline in product pricing was reduced material input costs and higher sales volumes. Our sales volumes in 2025 benefited from the additional production capacity and large diameter pipe capability installed at our Phoenix location in late 2024.

In 2025, our earnings mix was 35% from our Electric segment and 65% from the combination of our Manufacturing and Plastics segments including unallocated corporate costs. Since 2021, this mix has diverged from our long‑term target of 70% Electric and 30% Manufacturing Platform, largely due to market conditions in the PVC pipe industry. These conditions have resulted in elevated revenue, earnings, and cash flow in our Plastics segment.

We currently expect industry conditions within the PVC pipe market to gradually normalize through 2027. As this normalization occurs, we anticipate that earnings and cash flow from our Plastics segment will moderate from current levels and that our earnings mix will shift back toward our long‑term target.

FINANCIAL AND OTHER METRICS

Heating Degree Days (HDDs) is a measure of how much (in degrees), and for how long (in days), the outside air temperature was below a certain normalized level. Normal weather conditions are defined as the 20-year average of actual historical weather conditions. This measure is commonly used in calculations relating to the energy consumption required to heat buildings.

Cooling Degree Days (CDDs) is a measure of how much (in degrees), and for how long (in days), the outside air temperature was above a certain normalized level. This measure is commonly used in calculations relating to the energy consumption required to cool buildings.

OTP generally bases its forecasted kwh sales and rates on expected consumption under a normal level of HDDs and CDDs over a given period of time in its service territory. We present HDDs and CDDs to provide an indication of the impact of weather on kwh sales, revenues and earnings relative to forecast, and on period-to-period results.

RESULTS OF OPERATIONS

For a comparison of fiscal year 2024 to 2023, see Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our report on Form 10-K for the fiscal year ended December 31, 2024, filed with the SEC on February 19, 2025.

Provided below is a summary and discussion of our operating results on a consolidated basis followed by a discussion of the operating results of each of our segments, Electric, Manufacturing and Plastics. In addition to the segment results, we provide an

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Table of Contents

overview of our Corporate costs. Our Corporate costs do not constitute a reportable segment, but rather consist of unallocated general corporate expenses, such as corporate staff and overhead costs, the results of our captive insurance company and other items excluded from the measurement of segment performance. Corporate costs are added to operating segment totals to reconcile to totals on our consolidated statements of income.

CONSOLIDATED RESULTS

The following table summarizes our consolidated results of operations for the years ended December 31, 2025 and 2024:

(in thousands)

2025

2024

$ change

% change

Operating Revenues

$

1,304,058 

$

1,330,548 

$

(26,490)

(2.0)

%

Operating Expenses

958,376 

950,298 

8,078 

0.9 

Operating Income

345,682 

380,250 

(34,568)

(9.1)

Interest Expense

(47,226)

(41,815)

(5,411)

12.9 

Nonservice Components of Postretirement Benefits

3,334 

9,609 

(6,275)

(65.3)

Other Income

20,487 

18,848 

1,639 

8.7 

Income Before Income Taxes

322,277 

366,892 

(44,615)

(12.2)

Income Tax Expense

46,384 

65,230 

(18,846)

(28.9)

Net Income

$

275,893 

$

301,662 

$

(25,769)

(8.5)

%

Operating Revenues decreased $26.5 million in 2025 primarily due to decreased sales prices in our Plastics segment and decreased sales volumes in our Manufacturing segment, partially offset by increased sales volumes in our Plastics segment as well as increased fuel recovery revenues and sales volumes in our Electric segment. See our segment disclosures below for additional discussion of items impacting operating revenues.

Operating Expenses increased $8.1 million in 2025 primarily due to an increase in purchased power costs, production fuel costs, and depreciation expense in our Electric segment, partially offset by lower cost of goods sold driven by decreased sales volumes in our Manufacturing segment and the impact of lower material costs in our Plastics segment, as well as lower operating and maintenance expenses in our Electric segment. See our segment disclosures below for additional discussion of items impacting operating expenses.

Interest Expense increased $5.4 million in 2025 primarily due to the issuance of $100.0 million of long-term debt at OTP during the year, the proceeds of which were used to repay short-term borrowings, fund capital expenditures and support operating activities.

Nonservice Components of Postretirement Benefits decreased by $6.3 million in 2025, having a negative impact on net income, primarily due to a decrease in the amortization of postretirement plan amendment-related gains and an increase in the amortization of actuarial losses.

Income Tax Expense decreased $18.8 million in 2025 primarily due to a decrease in income before income taxes, as well as an increase in PTCs at OTP. The increase in PTCs was the result of increased wind generation that qualified for tax credits. We completed the first of our wind facility upgrades in late 2024 and completed additional upgrades throughout 2025. The completion of these upgrades resulted in the commencement of PTCs earned from the generation at these facilities. Our effective tax rate was 14.4% in 2025 and 17.8% in 2024, with the decrease primarily driven by the increase in PTCs.

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ELECTRIC SEGMENT RESULTS

The following table summarizes the operating results of our Electric segment for the years ended December 31, 2025 and 2024:

(in thousands)

2025

2024

$ change

% change

Retail Revenue

$

484,016 

$

453,214 

$

30,802 

6.8 

%

Transmission Services Revenue

54,656 

53,517 

1,139 

2.1 

Wholesale Revenue

21,121 

11,077 

10,044 

90.7 

Other Electric Revenues

6,963 

6,707 

256 

3.8 

Total Operating Revenue

566,756 

524,515 

42,241 

8.1 

Production Fuel

75,048 

60,945 

14,103 

23.1 

Purchased Power

78,658 

61,561 

17,097 

27.8 

Operating and Maintenance Expenses

184,310 

190,422 

(6,112)

(3.2)

Depreciation and Amortization

90,168 

82,136 

8,032 

9.8 

Property Taxes

17,023 

15,662 

1,361 

8.7 

Operating Income

121,549 

113,789 

7,760 

6.8 

Interest Expense

(43,633)

(38,216)

(5,417)

14.2 

Nonservice Cost Components of Postretirement Benefits

4,425 

10,578 

(6,153)

(58.2)

Other Income

3,446 

3,268 

178 

5.4 

Income Before Income Taxes

85,787 

89,419 

(3,632)

(4.1)

Income Tax Benefit

(11,799)

(1,544)

(10,255)

664.2 

Net Income

$

97,586 

$

90,963 

$

6,623 

7.3 

%

Electric kwh Sales (in thousands)

2025

2024

kwh change

% change

Retail kwh Sales

5,917,736 

5,681,268 

236,468 

4.2 

%

Wholesale kwh Sales

404,750 

273,365 

131,385 

48.1 

Heating Degree Days

6,117 

5,313 

804 

15.1 

Cooling Degree Days

492 

440 

52 

11.8 

%

Our Electric segment operating results are impacted by fluctuations in weather conditions and the resulting demand for electricity for heating and cooling. The following table presents heating and cooling degree days as a percent of normal for the years ended December 31, 2025 and 2024:

2025

2024

Heating Degree Days

97.1 

%

83.7 

%

Cooling Degree Days

102.5 

%

93.8 

%

The following table summarizes the estimated effect on diluted earnings per share of the difference in retail sales under actual weather conditions and expected retail sales under normal weather conditions for the years ended December 31, 2025 and 2024, and between years:

2025 vs Normal

2025 vs

 2024

2024 vs Normal

Effect on Diluted Earnings Per Share

$

(0.03)

$

0.10 

$

(0.13)

Retail Revenue increased $30.8 million primarily due to the following:

•A $21.7 million increase in fuel recovery revenues due to higher purchased power and fuel costs, as described below.

•An $8.7 million increase primarily from recovery of rate base investments.

•A $6.1 million increase in sales volumes, exclusive of the impact of weather, primarily driven by increased customer usage.

•A $5.7 million increase from the impact of favorable weather compared to last year.

These increases were partially offset by a net decrease in rider revenues resulting from higher PTCs during the year following the completion of certain of our wind facility upgrades. PTCs generated during the year increased $9.6 million. These credits are generally passed through to customers, reducing retail revenue.

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Wholesale Revenues increased $10.0 million due to a 29% increase in wholesale prices driven by increased fuel costs and market demand for wholesale energy, as well as a 48% increase in wholesale sales volumes. Wholesale revenues, net of wholesale fuel costs, are generally returned to customers and result in a reduction of retail revenue.

Production Fuel costs increased $14.1 million driven by higher fuel consumption associated with increased generation at Big Stone Plant and our natural gas facilities in response to increased customer demand. Higher natural gas prices also contributed to the increase in production fuel costs.

Purchased Power costs to serve retail customers increased $17.1 million due to a 20% increase in the price of purchased power, primarily due to increased market energy costs, as well as a 7% increase in the volume of purchased power driven by increased customer demand.

Operating and Maintenance Expenses decreased $6.1 million primarily due to decreased labor costs. Compared to the last year, a greater percentage of labor hours were dedicated to capital investment projects, which resulted in an increase in capitalized labor costs and a corresponding reduction in operating and maintenance expenses. External service provider costs also decreased compared to last year. These decreases were partially offset by expenses related to a planned outage at Coyote Station during the year.

Depreciation and Amortization expense increased $8.0 million due to additional assets, including certain wind generation, transmission and distribution assets, being placed into service during the year.

Interest Expense increased $5.4 million primarily due to the issuance of an additional $100.0 million of long-term debt during the year, the proceeds of which were primarily used to repay short-term debt and fund our capital investments.

Nonservice Cost Components of Postretirement Benefits decreased by $6.2 million, having a negative impact on net income, due to a decrease in the amortization of plan amendment-related gains and an increase in the amortization of actuarial losses.

Income Tax Benefit increased $10.3 million primarily due to an increase in PTCs driven by increased wind generation that qualified for tax credits compared to last year. PTCs are generally credited to customers and result in a reduction of operating revenue as well as income taxes.

MANUFACTURING SEGMENT RESULTS

The following table summarizes the operating results of our Manufacturing segment for the years ended December 31, 2025 and 2024:

(in thousands)

2025

2024

$ change

% change

Operating Revenues

$

314,547 

$

342,592 

$

(28,045)

(8.2)

%

Cost of Products Sold (excluding depreciation)

238,790 

267,904 

(29,114)

(10.9)

Selling, General, and Administrative Expenses

37,575 

35,203 

2,372 

6.7 

Depreciation and Amortization

21,282 

20,393 

889 

4.4 

Operating Income

16,900 

19,092 

(2,192)

(11.5)

Interest Expense

(2,506)

(2,516)

10 

(0.4)

Income Before Income Taxes

14,394 

16,576 

(2,182)

(13.2)

Income Tax Expense

2,877 

2,895 

(18)

(0.6)

Net Income

$

11,517 

$

13,681 

$

(2,164)

(15.8)

%

Operating Revenues decreased $28.0 million primarily driven by a 7% decline in sales volumes at our metal fabrication business, with reductions across several end markets, including agriculture, lawn and garden and recreational vehicles. Sales volumes were negatively affected by soft end-market demand and inventory management efforts by manufacturers and dealers throughout much of the year, continuing a trend that began in the third quarter of 2024. A 1% decrease in steel costs, which are passed through to customers, also contributed to the decrease in operating revenues.

Cost of Products Sold decreased $29.1 million primarily due to lower sales volumes. Our gross profit margin increased to 24.1% in 2025 from 21.8% in the prior year. This improvement was driven by cost management efforts made to align our cost structure with the current demand environment, and improved labor productivity and production efficiencies.

Selling, General, and Administrative Expenses increased $2.4 million primarily due to variable compensation costs.

Depreciation and Amortization expense increased $0.9 million, largely driven by our facility expansion and new equipment at our BTD location in Georgia, which were placed into service in early 2025.

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PLASTICS SEGMENT RESULTS

The following table summarizes the operating results for our Plastics segment for the years ended December 31, 2025 and 2024:

(in thousands)

2025

2024

$ change

% change

Operating Revenues

$

422,755 

$

463,441 

$

(40,686)

(8.8)

%

Cost of Products Sold (excluding depreciation)

163,874 

166,628 

(2,754)

(1.7)

Selling, General, and Administrative Expenses

21,380 

20,414 

966 

4.7 

Depreciation and Amortization

6,422 

4,494 

1,928 

42.9 

Operating Income

231,079 

271,905 

(40,826)

(15.0)

Interest Expense

(685)

(590)

(95)

16.1 

Other Income

5 

76 

(71)

(93.4)

Income Before Income Taxes

230,399 

271,391 

(40,992)

(15.1)

Income Tax Expense

59,999 

70,644 

(10,645)

(15.1)

Net Income

$

170,400 

$

200,747 

$

(30,347)

(15.1)

%

Operating Revenues decreased $40.7 million primarily driven by a 15% decline in sales prices compared to last year. Prices have been declining for several years after peaking in late 2022. The impact of lower sales prices was partially offset by an 8% increase in sales volumes, largely driven by additional production capacity following the completion of the first phase of our expansion project at Vinyltech in late 2024.

Cost of Products Sold decreased $2.8 million primarily reflecting a 14% reduction in the cost of input materials, including PVC resin. The reduction in PVC resin cost was driven by global supply and demand dynamics which has resulted in elevated resin supply. This decrease was partially offset by higher sales volumes, as discussed above.

Selling, General, and Administrative Expenses increased $1.0 million primarily due to costs associated with ongoing litigation and related matters regarding the pricing of PVC pipe, which is further described in Note 14 to the consolidated financial statements. There is considerable uncertainty regarding the timing of significant developments or the resolution of these matters. As such, it is reasonably possible that our estimate of a loss, if any, arising from these matters could change in the near term and have a material impact on our future operating results.

Depreciation and Amortization expense increased $1.9, largely driven by our facility expansion and new equipment at Vinyltech, which were placed into service in late 2024.

Income Tax Expense decreased $10.6 million due to a decrease in income before taxes.

CORPORATE

The following table summarizes Corporate results of operations for the years ended December 31, 2025 and 2024:

(in thousands)

2025

2024

$ change

% change

Selling, General, and Administrative Expenses

$

23,611 

$

24,438 

$

(827)

(3.4)

%

Depreciation and Amortization

235 

98 

137 

139.8 

Operating Loss

23,846 

24,536 

(690)

(2.8)

Interest Expense

(402)

(493)

91 

(18.5)

Nonservice Cost Components of Postretirement Benefits

(1,091)

(969)

(122)

12.6 

Other Income

17,036 

15,504 

1,532 

9.9 

Loss Before Income Taxes

8,303 

10,494 

(2,191)

(20.9)

Income Tax Benefit

(4,693)

(6,765)

2,072 

(30.6)

Net Loss

$

3,610 

$

3,729 

$

(119)

3.2 

%

Other Income increased $1.5 million driven by higher investment income earned on our short-term investments resulting from increased cash available for investment, as well as gains on our corporate-owned life insurance policies.

Income Tax Benefit decreased $2.1 million primarily due to a decrease in loss before taxes.

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Table of Contents

REGULATORY MATTERS

The following provides a summary of OTP's current and recent rate case filings, rate rider filings, and other regulatory filings that have, or are expected to have, a material impact on our operating results, financial position or cash flows.

RATE CASES

The following includes a summary of electric rate cases as determined in OTP's most recently concluded general rate case in each state:

Revenue

Allowed

Implementation

Requirement

Return on

Return

Equity

Jurisdiction

Date

(in millions)

Rate Base

on Equity

Ratio

Minnesota

07/01/22

$

209.0 

7.18 

%

9.48 

%

52.50 

%

North Dakota(1)

03/15/25

225.6 

7.53 

10.10 

53.50 

South Dakota(2)

08/01/19

35.5 

7.09 

8.75 

52.92 

(1) Includes an earnings-sharing mechanism to share with North Dakota customers any earnings above an ROE of 10.20%. The mechanism requires 70% of any revenue creating annual earnings in excess of the authorized ROE be returned to customers.

(2) Includes an earnings-sharing mechanism to share with South Dakota customers any weather-normalized earnings above the authorized ROE of 8.75%. The mechanism requires 50% of any weather-normalized revenue creating annual earnings in excess of the authorized ROE up to a maximum of 9.50% be returned to customers and 100% returns of revenue creating annual earnings above 9.50%.

South Dakota Rate Case

On June 4, 2025, OTP filed a request with the South Dakota Public Utilities Commission (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 prior to the currently estimated end of its useful life. 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.

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Table of Contents

RATE RIDERS

The following table includes a summary of substantial pending and recently concluded rate rider proceedings:

Recovery

Filing

Amount

Effective

Mechanism

Jurisdiction

Status

Date

(in millions)

Date

Notes

ECO - 2025

MN

Approved

04/01/25

9.5

12/01/25

Recovery of energy conservation improvement costs as well as a demand-side management financial incentive.

ECO - 2024

MN

Approved

04/01/24

8.8

10/01/24

Recovery of energy conservation improvement costs as well as a demand-side management financial incentive.

RRR - 2024

MN

Approved

12/04/23

8.0

09/01/24

Recovery of Hoot Lake Solar costs, Ashtabula III costs, wind upgrade project costs at our four owned wind facilities, and true up of PTCs for Merricourt.

EUIC - 2025

MN

Approved

05/03/24

4.1

02/01/25

Recovery of advanced metering infrastructure, outage management system, geographic information system, and demand-response projects.

TCR - 2026

ND

Approved

09/15/25

5.1

02/01/26

Recovery of transmission project costs.

TCR - 2024

ND

Approved

11/02/23

4.5

01/01/24

Recovery of transmission project costs.

MDT - 2026

ND

Approved

08/01/25

3.7

01/01/26

Recovery of advanced metering infrastructure and demand-response projects.

TCR - 2025

ND

Approved

09/16/24

3.1

01/01/25

Recovery of transmission project costs.

PIR - 2025

SD

Approved

12/20/24

3.2

09/01/25

Recovery of Ashtabula III, Merricourt, Astoria Station, Abercrombie Solar, Solway Solar, wind upgrade projects, advanced metering infrastructure, outage management system, demand-response system, and impact of load-growth credits.

PIR - 2024

SD

Approved

06/03/24

3.2

09/01/24

Recovery of Ashtabula III, Merricourt, Astoria Station, wind upgrade projects, Advanced Grid Infrastructure project costs, and impact of load-growth credits.

OTHER

In July 2025, the utility commissions from five states, including the NDPSC, filed a complaint with FERC challenging MISO’s analysis supporting the benefits of MISO’s Tranche 2.1 portfolio of transmission projects. The complaint alleges that the benefits of the Tranche 2.1 projects do not exceed forecasted costs and contends that MISO lacks the authority to direct these projects under the current cost allocation system. FERC has not established a timeline to review this matter and no statutory deadline exists.

OTP will be a co-owner of three projects within the Tranche 2.1 portfolio of projects, with an estimated total capital investment of approximately $800 million to $1.0 billion. The complaint, FERC’s adjudication of it, and potential rehearing proceedings and legal challenges to the outcome, could delay OTP’s investments or result in the cancellation of the projects.

LIQUIDITY

LIQUIDITY OVERVIEW

We believe our financial condition is strong and our cash and cash equivalents, other liquid assets, operating cash flows, existing lines of credit, access to capital markets and borrowing ability, because of investment-grade credit ratings, when taken together, provide us ample liquidity to conduct our business operations, fund our capital expenditure program and satisfy our obligations as they become due. Our liquidity, including our operating cash flows and access to capital markets, could be impacted by macroeconomic factors outside of our control, including higher interest rates and debt capital costs, and diminished credit availability. In addition, our liquidity could be impacted by non-compliance with certain financial covenants under our various debt instruments. As of December 31, 2025, we were in compliance with all financial covenants (see the Financial Covenant section under Capital Resources below).

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The following table presents the status of our lines of credit as of December 31, 2025:

2025

(in thousands)

Line Limit

Amount Outstanding

Letters

of Credit

Amount Available

OTC Credit Agreement

$

170,000 

$

— 

$

— 

$

170,000 

OTP Credit Agreement

220,000 

60,242 

10,461 

149,297 

Total

$

390,000 

$

60,242 

$

10,461 

$

319,297 

OTC and OTP are each party to separate credit agreements (the OTC Credit Agreement and OTP Credit Agreement, respectively) which provide for unsecured revolving lines of credit. Should additional liquidity be needed, the OTC Credit Agreement includes an accordion feature allowing us to increase the amount available to $290 million, subject to certain terms and conditions. The OTP Credit Agreement also includes an accordion feature allowing OTP to increase that facility to $300 million, subject to certain terms and conditions.

As of December 31, 2025, we had $319.3 million of available liquidity under our credit agreements and $386.2 million of available cash and cash equivalents, resulting in total available liquidity of $705.5 million, compared to total available liquidity of $606.3 million as of December 31, 2024.

CASH FLOWS

The following is a discussion of our cash flows for the years ended December 31, 2025 and 2024:

(in thousands)

2025

2024

Net Cash Provided by Operating Activities

$

385,985 

$

452,731 

Net Cash Provided by Operating Activities decreased $66.7 million primarily due to higher working capital requirements, largely in our Electric segment, and a decrease in earnings. These working capital changes were largely driven by the timing of capital spending and the timing of fuel cost and rider recoveries from our utility customers.

Operating cash flows in our Electric segment may fluctuate materially from period to period because they are significantly influenced by the timing of payments for operating costs and the regulatory mechanisms through which we recover or return costs. The timing of these recoveries and refunds varies depending on the specific cost-recovery mechanism approved by regulators. As a result, cash provided by operating activities may differ significantly from net income in any given reporting period.

Market dynamics experienced by our Plastics segment businesses in 2025 and 2024 contributed to a substantial increase in consolidated cash from operations over this period. We expect cash provided by operating activities in future years to decline from recent levels, consistent with the anticipated normalization of earnings in the Plastics segment.

(in thousands)

2025

2024

Net Cash Used in Investing Activities

$

290,724 

$

411,374 

Net Cash Used in Investment Activities decreased $120.7 million, primarily the result of a $70.6 million decrease in capital expenditures. Capital expenditures in our Manufacturing and Plastics segments decreased $40.1 million following the completion of our expansion projects at Vinyltech and BTD Manufacturing in late 2024 and early 2025. Capital expenditures in our Electric segment also decreased, primarily due to the timing of investments under our capital spending plan.

Investing activities in 2024 also included a $50.1 million investment in U.S. treasuries, which was made to secure a fixed rate of return until their maturity in September 2026.

(in thousands)

2025

2024

Net Cash Provided by (Used in) Financing Activities

$

(3,719)

$

22,921 

Net Cash Used in Financing Activities totaled $3.7 million in 2025, compared with $22.9 million of net cash provided by financing activities in 2024.

Financing activities in 2025 included the issuance of $100.0 million of long-term debt at OTP, the proceeds of which were used to repay short-term borrowings under the OTP credit agreement, fund Electric segment construction expenditures and support operating activities. In 2024, financing activities included the issuance of $120.0 million of long-term debt at OTP. We manage OTP's capital structure independently from our consolidated financial position to ensure compliance with the capital structure approved

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Table of Contents

through regulation. As a result, decisions related to the issuance of long-term debt at OTP are not influenced by our consolidated cash and cash equivalent position.

Financing activities during 2025 also included net repayments of short-term debt of $9.4 million, compared with net repayments of $11.8 million in 2024. Dividend payments totaled $88.1 million in 2025, compared to $78.3 million in 2024.

CAPITAL REQUIREMENTS

CAPITAL EXPENDITURES

Our capital expenditure plan includes investments in electric generation facilities, transmission and distribution lines and facilities, manufacturing facilities and upgrades, equipment used in the manufacturing process, and computer hardware and information systems. Our capital expenditure plan is subject to review and is revised in light of changes in demands for energy, technology, environmental laws, regulatory approvals, business expansion opportunities, the costs of labor, materials and equipment, and our overall financial condition.

The following provides a summary of capital expenditures for the years ended December 31, 2025 and 2024 for our Electric segment and non-electric businesses and anticipated capital expenditures for the five-year period from 2026 through 2030:

(in millions)

2024

2025

2026

2027

2028

2029

2030

Total

2026 - 2030

Electric Segment:

Renewable Generation and Storage

$

134 

$

91 

$

251 

$

295 

$

89 

$

4 

$

6 

$

645 

Transmission

60 

50 

80 

167 

167 

186 

255 

855 

Distribution

46 

88 

55 

49 

53 

54 

57 

268 

Other

61 

42 

50 

36 

24 

23 

20 

153 

Total Electric Segment

301 

271 

436 

547 

333 

267 

338 

1,921 

Manufacturing and Plastics Segments

58 

17 

31 

27 

29 

23 

19 

129 

Total Capital Expenditures

$

359 

$

288 

$

467 

$

574 

$

362 

$

290 

$

357 

$

2,050 

CONTRACTUAL AND OTHER OBLIGATIONS

The following table summarizes our contractual obligations on December 31, 2025 and the effect these obligations are expected to have on our liquidity and cash flow in future periods.

(in millions)

Total

Less than

1 Year

1-3

Years

3-5

Years

More than

5 Years

Debt Obligations

$

1,107 

$

140 

$

42 

$

120 

$

805 

Interest on Debt Obligations

773 

47 

87 

79 

560 

Coal Contract Obligations

417 

24 

51 

53 

289 

Equipment Purchase Obligations

53 

12 

41 

— 

— 

Land Easement Payments

56 

2 

4 

4 

46 

Postretirement Benefit Obligations

70 

6 

12 

12 

40 

Operating Lease Obligations

34 

7 

10 

6 

11 

Other Obligations

23 

4 

8 

5 

6 

Total Contractual Obligations

$

2,533 

$

242 

$

255 

$

279 

$

1,757 

Coal contract obligations are based on estimated coal consumption and costs for the delivery of coal to Coyote Station from Coyote Creek Mining Company (CCMC) under the Lignite Sales Agreement (LSA) that ends in 2040. Postretirement benefit obligations include estimated cash expenditures for the payment of retiree medical and life insurance benefits and supplemental pension benefits under our unfunded Executive Survivor and Supplemental Retirement Plan (ESSRP), but do not include amounts to fund our noncontributory funded pension plan, as we are not currently required to make any contributions to that plan. OTP also has contractual agreements for the purchase of capacity and wind-generated energy. Generally, the terms of OTP's wind power purchase agreements require OTP to purchase all of the electricity generated by a particular wind farm, but do not include fixed or minimum payments.

COMMON STOCK DIVIDENDS

We paid dividends to our shareholders totaling $88.1 million, or $2.10 per share, in 2025. The determination of the amount of future cash dividends to be paid will depend on, among other things, our financial condition, our actual or expected level of earnings and cash flows from operations, the level of our capital expenditures and our future business prospects. As a result of certain statutory

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Table of Contents

limitations or regulatory or financing agreements, restrictions could occur on the amount of distributions allowed to be made by OTC subsidiaries to OTC. These intercompany distributions serve as the primary source of funding for dividends paid to our shareholders. See Note 15 to our consolidated financial statements included in this report on Form 10-K for additional information. The decision to declare a dividend is reviewed quarterly by our Board of Directors. On January 8, 2026, our Board of Directors approved a quarterly dividend of $0.5775 per common share.

CAPITAL RESOURCES

Financial flexibility is provided by operating cash flows, unused lines of credit, access to capital markets and alternative financing arrangements such as leasing. Debt financing will be required in the five-year period from 2026 through 2030 to refinance maturing debt and to finance our planned capital investments. Our financing plans are subject to change and are impacted by our planned level of capital investments, decisions to reduce borrowings under our lines of credit, to refund or retire early any of our presently outstanding debt, to complete acquisitions or to use capital for other purposes.

REGISTRATION STATEMENTS

On May 3, 2024, we filed two registration statements with the SEC. The first statement, a shelf registration, allows us to offer for sale, from time to time, either separately or together in any combination, equity, debt or other securities described in the registration statement. No new equity, debt, or other securities have been issued pursuant to this registration statement. The second registration statement allows for the issuance of up to 1,500,000 common shares under our Automatic Dividend Reinvestment and Share Purchase Plan, which provides our common shareholders, retail customers of OTP and other interested investors a method of purchasing our common shares by reinvesting their dividends and/or making optional cash investments. Shares purchased under the plan may be newly issued common shares or common shares purchased on the open market. As of December 31, 2025, there were 1,330,821 shares available for purchase or issuance under the plan. Both registration statements expire in May 2027.

SHORT-TERM DEBT

The OTC Credit Agreement and OTP Credit Agreement provide for unsecured revolving lines of credit. Outstanding balances under these facilities bear interest at a variable rate comprised of a benchmark rate plus an applicable credit spread, which is subject to adjustment based on the credit ratings of the borrower. The weighted-average interest rate on all outstanding borrowings as of December 31, 2025 and 2024 was 5.08% and 5.61%.

The following is a summary of key provisions and borrowing information as of and for the year ended December 31, 2025:

(in thousands, except interest rates)

OTC Credit Agreement

OTP Credit Agreement

Borrowing Limit

$

170,000 

$

220,000 

Borrowing Limit if Accordion Exercised1

290,000 

300,000 

Amount Restricted Due to Outstanding Letters of Credit at Year-End

— 

10,461 

Amount Outstanding at Year-End

— 

60,242 

Average Amount Outstanding During Year

— 

34,479 

Maximum Amount Outstanding During the Year

— 

111,820 

Interest Rate at Year-End

5.19 

%

5.08 

%

Expiration Date

December 11, 2030

December 11, 2030

1Each facility includes an accordion feature allowing the borrower to increase the borrowing limit if certain terms and conditions are met.

LONG-TERM DEBT

In March 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 proceeds of the notes were used to repay existing short-term borrowings, fund capital expenditures and for general corporate purposes.

As of December 31, 2025, we had $1.0 billion of principal outstanding under long-term debt arrangements. Note 10 to our consolidated financial statements included in this report on Form 10-K includes information regarding these instruments. The agreements generally provide for unsecured borrowings at fixed rates of interest with maturities ranging from 2026 to 2055.

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Financial Covenants

Our short- and long-term debt agreements require OTC and OTP to maintain certain financial covenants. As of December 31, 2025, we were in compliance with these financial covenants as further described below:

OTC, under its financial covenants, may not permit its ratio of interest-bearing debt to total capitalization to exceed 0.60 to 1.00 or 0.65 to 1.00, depending on the debt agreement, may not permit its interest and dividend coverage ratio to be less than 1.50 to 1.00 and may not permit its priority indebtedness to exceed 10% of our total capitalization. As of December 31, 2025, OTC's interest-bearing debt to total capitalization was 0.38 to 1.00, OTC's interest and dividend coverage ratio was 8.02 to 1.00 and OTC had no priority indebtedness outstanding.

OTP, under its financial covenants, may not permit its ratio of interest-bearing debt to total capitalization to exceed 0.60 to 1.00 or 0.65 to 1.00, depending on the debt agreement, may not permit its interest and dividend coverage ratio to be less than 1.50 to 1.00 and may not permit its priority indebtedness to exceed 20% of its total capitalization. As of December 31, 2025, OTP's interest-bearing debt to total capitalization was 0.47 to 1.00, OTP's interest and dividend coverage ratio was 2.97 to 1.00 and OTP had no priority indebtedness outstanding.

None of our debt agreements include any provisions that would trigger an acceleration of the related debt as a result of changes in the credit rating levels assigned to the related obligor by rating agencies.

Credit Ratings

The current credit ratings of OTC and OTP are summarized below:

Otter Tail Corporation

Otter Tail Power Company

Moody's

Fitch

S&P

Moody's

Fitch

S&P

Corporate Credit/Long-Term Issuer Default Rating

Baa2

BBB

BBB

Baa1

BBB+

BBB+

Senior Unsecured Debt

n/a

BBB

n/a

n/a

A-

n/a

Outlook

Stable

Stable

Positive

Stable

Stable

Stable

CRITICAL ACCOUNTING POLICIES INVOLVING SIGNIFICANT ESTIMATES

The discussion and analysis of our results of operations are based on financial statements prepared in accordance with generally accepted accounting principles in the United States of America. Certain of our accounting policies require management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities in the preparation of our consolidated financial statements. While we believe the estimates, assumptions and judgments we use in preparing our consolidated financial statements are appropriate and are based on the best available information, they are subject to future events and uncertainties regarding their outcome and therefore actual results may materially differ from these estimates. Management has discussed the application of these critical accounting policies and the development of these estimates with the Audit Committee of our Board of Directors. The following critical accounting policies affect the most significant judgments and estimates used in the preparation of our consolidated financial statements.

REGULATORY ACCOUNTING

Our utility business 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. Accordingly, our utility business must adhere to the accounting requirements of regulated operations, which require the recognition of regulatory assets and regulatory liabilities for amounts that otherwise would impact the statements of income or comprehensive income when it is probable that such amounts will be collected from or credited to customers through the rate-making process. This guidance also provides recognition criteria for adjustments to rates outside of a general rate case proceeding, which are provided to encourage or incentivize investments in certain areas such as conservation, renewable energy, pollution reduction or control, improved infrastructure of the transmission grid or other programs that provide benefits to the general public under public policy, laws or regulations. Regulatory assets generally represent costs that have been incurred but have been deferred because future recovery from customers, as established through the rate-making process, is probable. Regulatory liabilities generally represent amounts to be refunded to customers or amounts currently collected from customers for future costs.

We assess the probability of recovery of regulatory assets and the obligations arising from regulatory liabilities on a quarterly basis. Our probability estimates incorporate numerous factors, including recent rate-making decisions, historical precedents for similar matters, the current regulatory environments in which we operate and the impact these incurred costs may have on our customers. Changes in our assessments regarding the likelihood of recovery or settlement of our regulatory assets and liabilities may have a material impact on our operating results and financial position. Further, if we determine that all or a portion of our utility business no longer meets the criteria for continued application of regulatory accounting, or our regulators disallow recovery of a previously

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incurred cost or eliminate a regulatory liability, we would be required to remove the associated regulatory assets and liabilities from our consolidated balance sheets and recognize those amounts in the consolidated statements of income as an expense or income item, or in the consolidated statements of comprehensive income as a loss or gain, in the period in which this accounting treatment is no longer applicable.

As of December 31, 2025 and 2024, we had regulatory assets of $106.5 million and $108.6 million and regulatory liabilities of $314.0 million and $318.2 million. If future recovery of amounts recorded as regulatory assets was no longer probable, we would be required to recognize an expense or loss in the period in which recovery was deemed to no longer be probable.

PENSION AND OTHER POSTRETIREMENT BENEFITS OBLIGATIONS AND COSTS

Pension and postretirement benefit liabilities and expenses are actuarially determined and incorporate numerous assumptions, including a discount rate, an expected return on plan assets, compensation changes, healthcare cost-trend rates and other demographic assumptions. These assumptions are reviewed annually, or more frequently under certain circumstances.

Discount Rate - the discount rate used to measure pension and other postretirement benefit obligations should reflect the rate at which the obligations could be effectively settled as of the measurement date. We estimate the discount rate using a hypothetical bond portfolio method, which incorporates yields on a collection of high credit quality bonds that produce cash flows similar to our anticipated future benefit payments. Lower discount rates increase the benefit obligation and future pension expense, while higher discount rates reduce such amounts.

Expected Return on Plan Assets - we estimate the long-term expected rate of return on pension plan assets based on asset category studies using historical returns and forward-looking capital market assumptions based on our asset allocation. Differences between expected and actual returns are recognized as actuarial gains or losses and amortized to expense over time.

Other Assumptions - additional assumptions applicable to the measurement of benefit obligations and expense for some or all of our plans include projected participant compensation changes, healthcare cost trends, mortality or life expectancy, and other demographic assumptions. We estimate these items by reference to relevant third-party information, internal projections and historical experience of our plan participants. Differences between our assumptions and actual results are recognized as actuarial gains or losses and amortized to expense over time.

Actuarial gains and losses reflect differences between actual plan experience and our actuarial assumptions, as discussed above. Such actuarial gains and losses can materially impact our benefit obligations, in certain instances plan funding requirements, and plan expense.

Actuarial gains and losses are initially recognized as a component of accumulated other comprehensive income or as a regulatory asset or liability and are subsequently amortized to plan expense. We have elected to apply a corridor approach as allowed under applicable accounting standards to determine the amount of actuarial gains and losses amortized to plan expense. This approach is intended to moderate short-term fluctuations in pension expense. Under the corridor method, actuarial gains and losses are amortized to plan expense only when they exceed 10% of the greater of the benefit obligation or, where applicable, the market value of plan assets for our funded pension plan. Cumulative gains and losses in excess of the 10% threshold are amortized to plan expense generally over the expected average remaining future service period of active plan participants, which for our pension plan is currently approximately 10 years.

The Company sponsors a noncontributory funded pension plan (the Pension Plan), an unfunded, nonqualified Executive Survivor and Supplemental Retirement Plan (ESSRP), both accounted for as defined benefit pension plans, and a postretirement healthcare plan accounted for as an other postretirement benefit plan. The following table summarizes the discount rates used to measure our pension plan and other postretirement obligations, as well as the assumed rate of return on pension plan assets for our funded pension plan, as of December 31, 2025 and 2024:

2025

2024

change

Pension Plan (Pension):

Discount Rate

5.71 

%

5.70 

%

1 bp

Long-Term Return on Plan Assets

7.00 

%

7.00 

%

— 

Pension Plan (ESSRP):

Discount Rate

5.46 

%

5.60 

%

(14 bps)

Other Postretirement Benefits:

Discount Rate

5.47 

%

5.61 

%

(14 bps)

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The following table summarizes the impact on 2025 pension and postretirement costs of a 25-basis point increase or decrease, holding all other variables constant, on certain key assumptions:

(in thousands)

+0.25

-0.25

Discount Rate

$

(807)

$

840 

Rate of Increase in Future Compensation1

515 

(497)

Long-Term Return on Plan Assets2

(884)

884 

1 Not applicable to the postretirement healthcare plan.

2 Not applicable to the ESSRP or postretirement healthcare plan.

For 2026, we expect pension and other postretirement benefit income to be $0.5 million compared to $2.4 million in 2025 due to the impacts of updated actuarial assumptions.

Pension and postretirement benefit liabilities and plan expense are sensitive to changes in actuarial assumptions and differences between these assumptions and actual plan experience. Our financial position and operating results could be materially impacted by these factors. We believe the estimates made for our pension and other postretirement benefit plans are reasonable and based on the best information available.

GOODWILL IMPAIRMENT

Goodwill is required to be evaluated annually for impairment and more frequently as events or circumstances require. Goodwill is tested for impairment at the reporting unit level. We have identified two reporting units which carry a material amount of goodwill, BTD Manufacturing, our contract metal fabrication business, and our Plastics segment. As of December 31, 2025, BTD Manufacturing and our Plastics segment carried goodwill balances of $18.1 million and $19.3 million, respectively.

The goodwill impairment test is a single-step quantitative assessment which compares the estimated fair value of the reporting unit to its carrying value. An impairment charge is recognized if the carrying amount exceeds the estimated fair value in an amount that is equal to the excess but limited to the amount of recorded goodwill of the reporting unit. An optional qualitative impairment assessment may be performed prior to, and may eliminate the need to perform, the quantitative assessment.

Estimating the fair value of a reporting unit under the quantitative impairment method requires significant judgments and estimates. We estimate the fair value of our reporting units using income and market approaches. Our income approach uses a discounted cash flow methodology to arrive at a fair value estimate by determining the present value of projected future cash flows over a specified period plus a terminal value to reflect cash flows beyond the projection period. The discount rate applied to the estimated future cash flows reflects our estimate of the weighted-average cost of capital of comparable entities. Our market approach includes estimating the fair value of our reporting units by reference to various market indications of value, including fair value estimates using multiples derived from comparable enterprise values to earnings before interest, taxes, depreciation and amortization (EBITDA) of select peer companies, and, if available, comparable sales transactions for comparative peer companies.

Our discounted cash flow methodology incorporates significant estimates, which include assumptions of future operating results and cash flows, which are impacted by economic and industry conditions, the amount and timing of estimated capital expenditures, an estimated terminal growth rate and the selection of an appropriate weighted-average cost of capital, among others. Our market approaches require significant judgment in selecting comparable peer companies and comparable sales transactions and from these peer groups selecting an appropriate EBITDA multiple and indication of fair value. In addition, weighting the indications of fair value between the income and market approaches to arrive at a single fair value estimate for each reporting unit also requires judgment.

Our goodwill impairment testing performed in the fourth quarter of 2025 indicated no impairment was present for either reporting unit and the estimated fair value of each reporting unit substantially exceeded the respective carrying value. As part of our testing, we perform various sensitivity analyses to understand if our conclusions are sensitive to changes in certain assumptions. A 3% decrease in projected operating revenues, a one hundred basis point decrease in projected gross profit margins, a one hundred basis point decrease in the projected terminal growth rate, a 50 basis point increase in weighted-average cost of capital or a 1.0x decrease in the assumed EBITDA multiple would not lead to a goodwill impairment charge for either reporting unit.

We believe the estimates and assumptions used in our impairment assessments are reasonable and based on the best information available. However, these estimates and assumptions include an inherent degree of uncertainty. Significant adverse changes in our expectations for any of these estimates could result in an impairment charge in a future period which may materially impact our operating results and financial position.

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