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MDU Resources Reports First Quarter Earnings, Reaffirms 2012 Earnings Guidance

Stocks in this article: MDU

The following information highlights the key growth strategies, projections and certain assumptions for this segment:

  • The EPA approved the South Dakota Regional Haze Program on March 29 which requires the Big Stone Station to install and operate a best available retrofit technology (BART) air quality control system to reduce emissions of particulate matter, sulfur dioxide and nitrogen oxides. The company's share of the cost of this air quality control system is estimated at $125 million. The company intends to seek recovery of costs related to the above matter in electric rates charged to customers. The company expects an order for an advance determination of prudence from the North Dakota Public Service Commission in the second quarter.
  • On July 7 the company filed for an advance determination of prudence with the NDPSC on the construction of an 88-MW simple cycle natural gas turbine and associated facilities projected to be in service in 2015. The turbine will be located on currently owned property that is adjacent to the company's Heskett Generating Station near Mandan, North Dakota and is necessary to meet the capacity requirements of the company's integrated electric system customers. The capacity will be a partial replacement for third party contract capacity expiring in 2015. Project cost is estimated to be $85.6 million. On April 11 the commission issued an order approving the advance determination of prudence.
  • The company is analyzing potential projects for accommodating load growth in its industrial and agricultural sectors with company and customer-owned pipeline facilities designed to serve existing facilities currently served by fuel oil or propane, and to serve new customers. A project the company is currently engaged on is a 30-mile natural gas line into the Hanford Nuclear Site in Washington.
  • Currently the company is involved with a number of pipeline projects to enhance the reliability and deliverability of its system in the Pacific Northwest.
  • The company is pursuing opportunities associated with the potential development of high-voltage transmission lines and system enhancements targeted towards delivery of renewable energy from the wind rich regions that lie within its traditional electric service territory to major market areas. The company has a contract to develop a 30-mile high-voltage power line in southeast North Dakota to move power to the electric grid from a proposed 150-MW wind farm. The company's portion of the project totals approximately $18 million and includes substation upgrades. Construction is underway and the transmission project is expected to be completed by the third quarter.
Pipeline and Energy Services  
Three Months Ended
    March 31,
    2012     2011  
(Dollars in millions)
Operating revenues   $ 49.6     $ 74.0  
Operating expenses:  
Purchased natural gas sold 16.0 34.1
Operation and maintenance 17.1 17.6
Depreciation, depletion and amortization 6.2 6.4
Taxes, other than income   3.5     3.6  
    42.8     61.7  
Operating income   6.8     12.3  
Earnings   $ 2.8     $ 6.9  
Transportation volumes (MMdk) 32.0 27.3
Gathering volumes (MMdk) 14.2 17.5
Customer natural gas storage balance (MMdk):
Beginning of period 36.0 58.8
Net withdrawal   (8.7 )   (25.9 )
End of period   27.3     32.9  

This segment reported first quarter earnings of $2.8 million, compared to earnings of $6.9 million for the same period in 2011. This decrease reflects lower storage services revenue, lower gathering volumes, as well as the absence of an income tax benefit of $500,000 related to favorable resolution of certain income tax matters in 2011.

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