MDU Resources Group Inc: Form 10-Q for the period ended Jun 30, 2025

The Company generates, transmits and distributes electricity and provides natural gas distribution, transportation and storage services. Through a strategy focusing on its "CORE," the Company strives to deliver superior value and achieve industry-leading performance as a pure-play regulated energy delivery company, while pursuing organic growth opportunities. The Company's "CORE" strategy prioritizes customers and communities, operational excellence, returns focused initiatives and an employee driven culture.

Strategic Initiatives On October 31, 2024, the Company completed the separation of Everus, its former construction services business, resulting in Everus becoming an independent, publicly-traded company. The Company's board of directors approved the distribution of all the outstanding shares of Everus common stock to the Company's stockholders. Stockholders of the Company received one share of Everus common stock for every four shares of the Company's common stock held as of the close of business on October 21, 2024, the record date for the distribution. The separation of Everus was a tax-free spinoff transaction to the Company's stockholders for U.S. federal income tax purposes, except for cash received in lieu of fractional shares.

The Company incurred costs in connection with its strategic initiatives in 2024 and 2025, as noted in the Business Segment Financial and Operating Data section. The majority of the separation costs have already been incurred due to the separation of Everus in October 2024, as previously discussed.

Based on the Company becoming a pure-play regulated energy delivery business, the Company's board of directors established a long-term dividend payout ratio target of 60 percent to 70 percent of regulated energy delivery earnings. The Company has an 87-year history of uninterrupted dividend payments to stockholders and remains committed to paying a competitive dividend.

Market Trends The Company continues to manage the inflationary pressures experienced throughout the United States, including the impact that inflation, higher interest rates, changes in tariffs, commodity price volatility and supply chain disruptions may have on its business and customers and proactively looks for ways to lessen the impact to its business. The Company has observed supply chain improvements in lead times for certain commodities. Although the Company has started to see some reduction to interest rates, they remain elevated and have resulted in and may continue to result in increased borrowing costs on new debt, impacts to the Company's asset valuations and negatively impacting the purchasing power of its customers. The Company has not yet observed any material impacts related to the changes in tariffs and continues to monitor the future impacts that may occur.

For more information on possible impacts to the Company's businesses, see the Outlook for each segment below, Part II, Item 1A. Risk Factors in this quarterly report and Part I, Item 1A. Risk Factors in the 2024 Annual Report.

Cautionary Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the federal securities laws. Other than statements of historical facts, all statements which address activities, events, or developments that the Company anticipates will or may occur in the future are based on underlying assumptions (many of which are based, in turn, upon further assumptions), including, but not limited to, statements identified by the words "anticipates," "estimates," "expects," "intends," "plans," and "predicts" in each case related to such things as growth estimates, stockholder value creation, the Company's "CORE" strategy, capital expenditures, financial guidance, trends, objectives, goals, dividend payout ratio targets, strategies and other such matters, are forward-looking statements. These forward-looking statements are based on many assumptions and factors, which are detailed in the Company's filings with the SEC.

While made in good faith, these forward-looking statements are based largely on the Company's expectations and judgments and are subject to a number of risks and uncertainties, many of which are unforeseeable and beyond the Company's control. For additional discussion regarding risks and uncertainties that may affect forward-looking statements, see Part II, Item 1A. Risk Factors in this quarterly report, Part I, Item 1A. Risk Factors in the 2024 Annual Report and subsequent filings with the SEC. Any changes in such assumptions or factors could produce significantly different results. Undue reliance should not be placed on forward-looking statements, which speak only as of the date they are made. Except as required by applicable law, the Company undertakes no obligation to update the forward-looking statements, whether as a result of new information, future events, or otherwise.

Consolidated Earnings Overview

The following table summarizes the contribution to the consolidated income by each of the Company's business segments.

(In millions, except per share amounts)

On October 31, 2024, the Company completed the separation of Everus, its former construction services business, into a new independent publicly-traded company. As a result of the separation, the historical results of operations for Everus are shown in discontinued operations, net of tax, except for allocated general corporate overhead costs of the Company, which did not meet the criteria for discontinued operations and are reflected in Other. Also included in discontinued operations are certain strategic initiative costs associated with the separation of Everus.

Three Months Ended June 30, 2025, Compared to Three Months Ended June 30, 2024 The Company's consolidated earnings decreased $46.7 million. The decrease in earnings is primarily due to the absence of income from discontinued operations in 2025. Other drivers of the earnings decrease include:

• The electric business earnings decrease was largely the result of higher operation and maintenance expense, primarily due to increased payroll-related costs, higher contract services related to electric generation station planned outage-related costs, as well as increased software, which includes certain costs associated with TSA services provided, and insurance expenses. The decrease in net income was partially offset by rate relief in South Dakota and increased commercial retail sales volumes, largely from a data center near Ellendale, North Dakota.
• The natural gas distribution business reported an increased seasonal loss, largely the result of higher operation and maintenance expense, primarily due to higher payroll-related costs and increased software expenses, which includes certain costs associated with TSA services provided. Lower volumes due to warmer weather further drove the loss. The seasonal loss was partially offset by higher retail sales revenue due to rate relief in Washington and Montana, and higher transportation revenue.
• The earnings decrease at the pipeline business was driven by higher operations and maintenance expense, primarily attributable to payroll-related costs. The absence of proceeds received in 2024 from a customer settlement further drove the decrease. The business also incurred higher depreciation expense due to growth projects placed in service throughout 2024, and higher property tax accruals in certain jurisdictions. The decrease was offset in part by higher transportation revenue due to growth projects placed in service, as previously discussed, and customer demand for short-term natural gas transportation contracts.
• Other experienced lower operation and maintenance expense, primarily a result of corporate overhead costs classified as continuing operations allocated to Everus in 2024, which are not included in Other in 2025. Other was negatively impacted by higher income tax adjustments related to the Company's annualized estimated tax rate.
• As previously discussed, the Company was adversely impacted by the absence of income from discontinued operations in 2025.

Six Months Ended June 30, 2025, Compared to Six Months Ended June 30, 2024 The Company's consolidated earnings decreased $65.6 million. The decrease in earnings is primarily due to the absence of income from discontinued operations in 2025.

• The electric business earnings decrease was largely the result of higher operation and maintenance expense, primarily due to higher payroll-related costs, increased software expenses, which includes certain costs associated with TSA services provided, higher contract services related to electric generation station planned outage-related costs, and higher insurance expense. The decrease in net income was partially offset by higher retail sales volumes, partly from a data center near Ellendale, North Dakota, as well as rate relief in South Dakota.
• The natural gas distribution earnings improvement was largely the result of higher retail sales revenue due to rate relief in Washington, Montana and South Dakota, increased volumes due to colder weather in certain jurisdictions, as well as higher transportation revenue. These increases were partially offset by higher operation and maintenance expense, primarily due to increased payroll-related costs and higher software expenses, which includes certain costs associated with TSA services provided. Lower interest income also negatively impacted earnings.
• The slight earnings increase at the pipeline business was driven by growth projects placed in service throughout 2024 and customer demand for short-term natural gas transportation contracts. Higher storage-related revenue further drove the increase. The increase was largely offset by higher operation and maintenance expense, primarily attributable to payroll-related costs, and the absence of proceeds received in 2024 from a customer settlement. The business also incurred higher depreciation expense due to growth projects placed in service, as previously discussed, and higher property tax accruals in certain jurisdictions.
• Other experienced lower operation and maintenance expense, primarily a result of corporate overhead costs classified as continuing operations allocated to Everus in 2024, which are not included in Other in 2025.
• As previously discussed, the Company was adversely impacted by the absence of income from discontinued operations in 2025.

A discussion of key financial data from the Company's business segments follows.

Business Segment Financial and Operating Data

The following sections include key financial and operating data for each of the Company's business segments. Also included are highlights on key growth strategies, projections and certain assumptions for the Company and its subsidiaries and other matters of the Company's business segments.

The Company's CODM, the chief executive officer of MDU Resources Group, Inc., regularly reviews discrete financial information of each reportable segment and uses net income to assess performance of each reportable segment. The CODM uses this information to assess performance and make decisions about resources to be allocated to each reportable segment, including capital and personnel. The information provided to the CODM is prepared at the reportable segment level in quarterly financial packages and on a more summarized basis monthly. Budget and forecast information is also provided to the CODM at the reportable segment level.

For information pertinent to various commitments and contingencies, see the Notes to Consolidated Financial Statements. For a summary of the Company's business segments, see Note 14 of the Notes to Consolidated Financial Statements.

Electric and Natural Gas Distribution

Strategy and challenges The electric and natural gas distribution segments provide electric and natural gas distribution services to customers, as discussed in Note 14. Both segments strive to be top performing utilities and provide safe, reliable, competitively priced and environmentally responsible energy services to customers. The segments are focused on cultivating organic growth while managing operating costs and monitoring opportunities for these segments to retain, grow and expand their customer base through extensions of existing operations, including building and upgrading electric generation, transmission and distribution, and natural gas systems. The continued efforts to create operational improvements and efficiencies across both segments promotes the Company's business integration strategy. The primary factors that impact the results of these segments are the ability to earn authorized rates of return; weather; climate change laws, regulations and initiatives; competitive factors in the energy industry; population growth; and economic conditions in the segments' service areas.

The electric and natural gas distribution segments are subject to extensive regulation in the jurisdictions where they conduct operations with respect to costs, timely recovery of investments and permitted returns on investment. The Company is focused on modernizing utility infrastructure to meet the varied energy needs of both its customers and communities while working to deliver safe, reliable, affordable and environmentally responsible energy. The segments continue to invest in facility upgrades to be in compliance with existing and known future regulations. To assist in the reduction of regulatory lag in obtaining revenue increases to align with increased investments, tracking mechanisms have been implemented in certain jurisdictions. The Company also seeks rate adjustments for operating costs and capital investments, as well as reasonable returns on investments not covered by tracking mechanisms. For more information on the Company's tracking mechanisms and recent rate cases, see Note 16 and the 2024 Annual Report.

These segments are also subject to extensive regulation related to certain operational and environmental compliance, cybersecurity, permit terms and system integrity. Both segments are faced with the ongoing need to actively evaluate cybersecurity processes and procedures related to its transmission and distribution systems for opportunities to further strengthen its cybersecurity protections. There have been cyber and physical attacks within the energy industry on infrastructure, such as substations, and the Company continues to evaluate the safeguards implemented to protect its electric and natural gas utility systems. Implementation of enhancements and additional requirements to protect the Company's infrastructure is ongoing.

To date, many states have enacted and others are considering, mandatory clean energy standards requiring utilities to meet certain thresholds of renewable and/or carbon-free energy supply. Over the long-term, the Company expects overall electric demand to be positively impacted by increased electrification trends as a means to address economy-wide carbon emission concerns, data center growth and changing customer conservation patterns. Recently, MISO and NERC announced concerns with the reliability of the electric grid due to rapid expansion of renewables and retirement of baseload resources such as coal and the uncertainty of adequate energy production during certain periods of time, while load growth has increased faster than expected. Montana-Dakota filed its 2024 IRP with the NDPSC in July 2024. With MISO's filed changes in resources adequacy at FERC and the adoption of direct loss of load accreditation for generation resources around riskiest hours on the system versus peak load hours, Montana-Dakota is seeing the need to add additional capacity resources to its system in 2028 versus 2034 as identified in its previous IRP. The Company signed a power purchase agreement and ownership purchase agreement with Badger Wind, LLC for 150 MW of output capacity from the 250 MW Badger Wind Project which will reduce the Company's capacity and energy purchase requirements as identified in the 2024 IRP. Montana-Dakota will continue to monitor the progress of these changes, including the impacts associated with the implementation of MISO's direct loss of load accreditation in 2028, and assess the potential impacts they may have on its stakeholders, business processes, results of operations, cash flows and disclosures.

Revenues are impacted by both customer growth and usage, the latter of which is primarily impacted by weather, as well as impacts associated with commercial and industrial slow-downs, including economic recessions, and energy efficiencies. Very cold winters increase demand for natural gas and to a lesser extent, electricity, while warmer than normal summers increase demand for electricity, especially among residential and commercial customers. Average consumption among both electric and natural gas customers has tended to decline as more efficient appliances and furnaces are installed, and as the Company has implemented conservation programs. Natural gas weather normalization and decoupling mechanisms in certain jurisdictions have been implemented to largely mitigate the effect that would otherwise be caused by variations in volumes sold to these customers due to weather and changing consumption patterns on the Company's distribution margins.

In late summer and fall of 2023, electric fuel and purchased power prices increased across Montana-Dakota's integrated system. This was caused by transmission congestion in northwest North Dakota due to delays in additional SPP transmission line build-out, as well as additional load growth in the Bakken region. Electric fuel and purchased power prices remained elevated through January 2024. Montana-Dakota and MISO each filed a complaint with FERC against SPP, which were denied, along with rehearing requests which were also denied. In January 2025, Montana-Dakota and MISO each filed a petition for review of the FERC decision with the Eighth Circuit. Initial briefs with the Eighth Circuit were due June 25, 2025. To assist in the recovery of the higher electric fuel and purchased power costs, Montana-Dakota filed waiver requests with the NDPSC and SDPUC, which were approved deferring the increased costs to the annual fuel clause adjustment. In Montana, the waiver request is filed monthly and was unopposed by the MTPSC. Effective April 1, 2024, as approved by the NDPSC, Montana-Dakota started recovery in North Dakota of these increased costs over a period of two years rather than one year, which will lessen the impact to customers and allow more time for Montana-Dakota's FERC complaint to mature and have greater certainty of the outcome. In South Dakota and Montana, Montana-Dakota recovered these costs over a one-year period effective July 1, 2024. In July 2025, the NDPSC approved Montana-Dakota's request to defer external legal expenses related to this congestion litigation and record those deferred expenses into a regulatory asset.

The Company continues to proactively monitor and work with its manufacturers to reduce the effects of increased pricing and long lead times on delivery of certain raw materials and equipment used in electric generation, transmission and distribution system and natural gas pipeline projects. Long lead times are attributable to increased demand for steel products from pipeline companies as they continue pipeline system safety and integrity replacement projects driven by PHMSA regulations, as well as delays in the manufacturing and shipping of electrical equipment and increased demand for electrical equipment due to regulatory activity and grid expansion. The Company has been able to minimize the effects by working closely with suppliers or obtaining additional suppliers, as well as modifying project plans to accommodate extended lead times and increased costs. The Company expects these delays and inflationary pressures to continue. The Company also continues to monitor the impact tariffs will have on its costs. Tariff increases on raw materials could negatively affect the Company's construction projects and maintenance work. For additional discussion regarding risks and uncertainties, see Part II, Item 1A. Risk Factors in this quarterly report and Part I, Item 1A. Risk Factors in the 2024 Annual Report.

The ability to grow through acquisitions is subject to significant competition and acquisition premiums. In addition, the ability of the segments to grow their service territory and customer base is affected by regulatory constraints, the economic environment of the markets served, population changes and competition from other energy providers and fuel. The construction of new electric generating facilities, transmission lines and other service facilities is subject to increasing costs and lead times, extensive permitting procedures, and federal and state legislative and regulatory initiatives, which may necessitate increases in electric energy prices. As the industry continues to expand the use of renewable energy sources, the need for additional transmission infrastructure is growing. As part of MISO's long range transmission plan, in August 2022, the Company announced its intent to develop, construct and co-own JETx with Otter Tail Power Company in central North Dakota. In October 2023, the FERC issued an order approving the Company's request for CWIP Incentive Rate and Abandoned Plant Incentive treatment on this project. Montana-Dakota and Otter Tail Power Company received approval of a Certificate of Public Convenience and Necessity from the NDPSC in November 2024 on this project.

Earnings overview - The following information summarizes the performance of the electric segment.

(In millions)

36

Index

Three Months Ended June 30, 2025, Compared to Three Months Ended June 30, 2024 Electric earnings decreased $5.1 million as a result of:

• Revenue decreased $1.1 million.
• Largely due to:
• Lower fuel and purchased power costs of $1.8 million recovered in customer rates and offset in expense, as described below.
• Lower renewable tracker revenues associated with higher production tax credits offset in income tax benefit, as described below.
• Partially offset by:
• Higher net transmission revenue of $1.1 million, including data center revenue.
• Rate relief of $500,000 in South Dakota.
• Electric fuel and purchased power decreased $1.8 million, largely the result of lower commodity prices, partially offset by higher retail sales volumes.
• Operation and maintenance increased $6.8 million.
• Largely the result of:
• Higher payroll-related costs of $2.5 million.
• Higher contract services related to electric generation station planned outage-related costs of $2.1 million.
• Increased software expense of $1.9 million.
• Higher insurance expense.
• Also reflected are higher costs associated with services provided to Everus as part of the TSA, offset in other income, as described below.
• Depreciation and amortization increased $1.1 million, largely due to increased property, plant, and equipment balances as a result of transmission projects placed in service to improve reliability and update aging infrastructure.
• Taxes, other than income increased $200,000, largely as a result of higher payroll tax.
• Other income increased $700,000, primarily resulting from higher TSA income, as described above, and higher returns on the Company's nonqualified benefit plan investments.
• Interest expense increased $400,000, largely the result of lower AFUDC.
• Income tax benefit increased $2.0 million, largely due to lower income before income taxes, and higher production tax credits of $400,000 driven by higher wind production.

Six Months Ended June 30, 2025, Compared to Six Months Ended June 30, 2024 Electric earnings decreased $8.0 million as a result of:

• Revenue increased $3.5 million.
• Largely due to:
• Higher fuel and purchased power costs of $2.2 million recovered in customer rates and offset in expense, as described below.
• Higher retail sales volumes of $1.8 million, driven primarily by higher residential volumes, largely due to colder weather in the first quarter of the year, and higher commercial volumes from the data center as further discussed in the Outlook section.
• Higher net transmission revenue of $1.5 million, including data center revenue.
• Rate relief of $900,000 in South Dakota.
• Partially offset by lower renewable tracker revenues, partly associated with higher production tax credits offset in income tax benefit, as described below.
• Electric fuel and purchased power increased $2.2 million, largely the result of higher retail sales volumes, partially offset by lower commodity prices.
• Operation and maintenance increased $11.8 million.
• Largely the result of:
• Higher payroll-related costs of $3.5 million.
• Higher contract services related to electric generation station outage-related costs of $3.0 million.
• Increased software expense of $2.9 million.
• Higher insurance expense.
• Also reflected are higher costs associated with services provided to Everus as part of the TSA, offset in other income, as described below.
• Depreciation and amortization increased $1.7 million, largely due to increased property, plant, and equipment balances as a result of transmission projects placed in service to improve reliability and update aging infrastructure.
• Taxes, other than income was comparable to the same period in the prior year.
• Other income decreased $300,000, primarily resulting from lower interest income from regulatory deferral balances and lower returns on the Company's nonqualified benefit plan investments, partially offset by TSA income as described above.
• Interest expense increased $800,000, largely the result of lower AFUDC.
• Income tax benefit increased $5.2 million, largely due to lower income before income taxes, and higher production tax credits of $2.3 million driven by higher wind production.

Earnings overview - The following information summarizes the performance of the natural gas distribution segment.

(In millions)

39

Three Months Ended June 30, 2025, Compared to Three Months Ended June 30, 2024 Natural gas distribution reported an increased seasonal loss of $2.4 million as a result of:

• Revenue increased $5.4 million.
• Largely due to:
• Rate relief of $3.2 million, primarily in Washington and Montana.
• Higher purchased natural gas sold of $2.4 million, including net environmental compliance costs, recovered in customer rates and offset in expense, as described below.
• Higher transportation revenues of $1.3 million.
• Partially offset by:
• Lower retail sales volumes of $1.0 million, which includes lower volumes to all customer classes, largely due to warmer weather in Idaho, offset in part by weather normalization and decoupling mechanisms in certain jurisdictions.
• Purchased natural gas sold increased $2.4 million, largely due to net environmental compliance costs of $10.3 million and higher commodity costs of $1.8 million. These increases were largely offset by lower volumes of natural gas purchased of $9.7 million.
• Operation and maintenance increased $5.5 million.
• Due in large part to:
• Higher payroll-related costs of $2.8 million.
• Higher software-related expense of $1.2 million.
• Higher costs associated with MAOP projects.
• Higher insurance expense.
• Also reflected are higher costs associated with services provided to Everus as part of the TSA, offset in other income, as described below.
• Depreciation and amortization increased $1.0 million, of which $1.6 million resulted from increased property, plant and equipment balances related to growth and replacement projects placed in service, partially offset by lower depreciation rates implemented from rates cases in North Dakota and Montana, and lower regulatory amortizations.
• Taxes, other than income increased $600,000, largely from higher revenue-based taxes recovered in rates.
• Other income decreased $300,000.
• Primarily due to:
• Lower interest income on regulatory deferral balances.
• Partially offset by:
• Higher TSA revenue, of $2.0 million as described above.
• Higher returns on the Company's nonqualified benefit plans.
• Interest expense decreased $1.6 million, primarily from lower long-term interest expense, largely due to lower long-term debt balances.
• Income tax benefit increased $400,000, primarily the result of higher seasonal loss before income taxes, partially offset by changes in permanent tax adjustments.

Six Months Ended June 30, 2025, Compared to Six Months Ended June 30, 2024 Natural gas distribution earnings increased $2.3 million as a result of:

• Revenue increased $85.2 million.
• Largely due to:
• Higher purchased natural gas sold of $64.0 million, including net environmental compliance costs, recovered in customer rates and offset in expense, as described below.
• Rate relief of $10.0 million, primarily in Washington, Montana and South Dakota.
• Higher revenue-based taxes recovered in rates of $4.1 million offset in expense, as described below.
• Higher retail sales volumes of $2.3 million, which includes higher volumes to commercial and residential customer classes, largely due to colder weather in certain jurisdictions, and weather normalization and decoupling mechanisms in certain jurisdictions.
• Higher transportation revenues of $2.2 million.
• Higher conservation revenues of $2.0 million that were offset in expense, as described below.
• Purchased natural gas sold increased $64.0 million, largely due to net environmental compliance costs of $47.6 million, higher volumes of natural gas purchased of $11.1 million and higher commodity costs of $5.3 million.
• Operation and maintenance increased $9.8 million.
• Due in large part to:
• Higher payroll-related costs of $3.2 million.
• Higher conservation-related costs of $2.0 million which are recovered in rates, as discussed above.
• Higher software-related expense of $1.1 million.
• Higher costs associated with MAOP projects.
• Higher insurance expense.
• Also reflected are higher costs associated with services provided to Everus as part of the TSA, offset in other income, as described below.
• Depreciation and amortization increased $1.6 million, primarily resulting from growth and replacement projects placed in service of $3.3 million, largely offset by lower depreciation rates implemented from rate cases in North Dakota, Montana and South Dakota of $1.0 million, and lower regulatory amortizations.
• Taxes, other than income increased $3.6 million, primarily from higher revenue-based taxes, as described above.
• Other income decreased $5.1 million.
• Primarily due to:
• Lower interest on regulatory deferral balances.
• The absence of $2.2 million of interest income associated with prior year renewable natural gas projects.
• Lower returns of $800,000 on the Company's nonqualified benefit plans.
• Offset in part by higher TSA revenue, as described above.
• Interest expense decreased $2.4 million, primarily from lower long-term interest expense, largely due to lower long-term debt balances.
• Income tax expense increased $1.2 million, primarily the result of a change in permanent tax adjustments and higher income before income taxes.

Outlook In 2024, the utility business experienced rate base growth of 6.8 percent and expects these segments will grow rate base by approximately 7 percent to 8 percent annually over the next five years on a compound basis. Operations are spread across eight states where the Company expects customer growth to be higher than the national average. In 2024, these segments experienced retail customer growth of approximately 1.4 percent and the Company expects customer growth to continue to average 1 percent to 2 percent per year. This customer growth, along with system upgrades and replacements needed to supply safe and reliable service, will require investments in new and replacement electric and natural gas systems.

These segments are exposed to energy price volatility and may be impacted by changes in oil and natural gas exploration and production activity. Rate schedules in the jurisdictions in which the Company's natural gas distribution segment operates contain clauses that permit the Company to file for rate adjustments for changes in the cost of purchased natural gas. Although changes in the price of natural gas are passed through to customers and have minimal impact on the Company's earnings, the natural gas distribution segment's customers benefit from lower natural gas prices through the Company's utilization of storage and fixed price contracts.

The EPA's GHG and mercury emissions standards finalized in May 2024 would have required additional pollution controls for Coyote Station to operate beyond 2031 and 2027, respectively. In April 2025, the EPA granted a two year extension for Coyote Station to add pollution controls to comply with the mercury emissions standard. In June 2025, the EPA proposed rules to repeal both the mercury emissions standard and the electric generation GHG emissions standard. If the rules go into effect, it could require owners of Coyote station to incur significant new costs. These costs could, dependent on determination by state regulatory commissions on approval to recover such costs from customers, negatively impact the Company's results of operations, financial position and cash flows. In December 2024, the EPA issued a final decision on the NDDEQ's Regional Haze state implementation plan, maintaining the proposed disapproval of the state's conclusion that no additional controls are warranted during this implementation period. The EPA did not issue a federal implementation plan in place of the state plan and would have two years from the state plan disapproval to either propose a federal plan or approve a new state plan. Coyote Station co-owners filed a petition for review with the Eighth Circuit in January 2025, challenging EPA's NDDEQ state plan disapproval, and in February 2025, filed a petition for reconsideration with the EPA, which was granted in April 2025. In March 2025, the EPA announced the agency is restructuring the regulations for implementing the Regional Haze Program. In June 2025, the Eighth Circuit granted a request by the EPA to continue to hold the petition of review proceeding in abeyance so that the EPA could review the previous administration's findings and actions. The Company is one of four owners of Coyote Station and cannot make a unilateral decision on the plant's future; therefore, the Company could be negatively impacted by decisions of the other owners. The joint owners continue to collaborate in analyzing data and weighing decisions that impact the plant and its employees as well as each company's customers and communities served.

In February 2025, Montana-Dakota entered into a definitive purchase and sale agreement with Badger Wind, LLC, a subsidiary of Orsted Onshore North America, LLC. Pursuant to the terms of the agreement, Montana-Dakota will purchase a 49 percent undivided ownership interest in a wind project being constructed and located in North Dakota that is anticipated to have a net generating capacity of approximately 250 MW for a purchase price of $294.0 million, which would represent 122.5 MW of wind generation to be owned by Montana-Dakota. The purchase agreement is contingent on regulatory approval from the NDPSC for Advance Determination of Prudence, for which a hearing is scheduled on September 9, 2025. This transaction would reduce Montana-Dakota's purchase requirements under the existing power purchase agreement with Badger Wind, LLC, dated November 4, 2024.

In March 2023, the Company began to provide power for Applied Digital's data center near Ellendale, North Dakota. At full capacity, the data center requires 180 MW of electricity, which is the equivalent of about 28 percent of the Company's generation portfolio. Applied Digital's load is purchased from the MISO market and does not impact other customers' power supply. An electric service agreement to serve an additional 350 MW data center load with Applied Digital in the Company's service territory was approved by the NDPSC. 100 MW of the additional data center load is expected to be online in the fourth quarter of 2025.

In August 2024, the Company filed a request with the SDPUC seeking approval on an electric service agreement to provide up to 50 MW of electricity to a data center near Leola, South Dakota. Construction of the data center and approval of the electric service agreement which had been pending development of new local siting requirements for data center loads by McPherson County in South Dakota, were effective August 5, 2025. Approval of the electric service agreement with the SDPUC is still pending final approvals of the data center siting with McPherson County.

The Infrastructure Investment and Jobs Act, commonly known as the Bipartisan Infrastructure Law, was enacted in the fourth quarter of 2021 designating funds for investments such as upgrades to electric and grid infrastructure, transportation systems, and electric vehicle infrastructure. In addition, the IRA provided new funding for clean energy programs. The Company is pursuing various opportunities under the Grid Resilience and Innovative Partnerships Program, which is part of the Infrastructure Investment and Jobs Act, and is also pursuing a biogas property at the Knott Landfill site in Bend, Oregon which may qualify for an investment tax credit and clean fuel production credits as part of the IRA. As discussed in Note 18, the Company is evaluating the impact the One Big Beautiful Bill Act may have on these projects.

Legislation and rulemaking The Company continues to monitor legislation and rulemaking related to clean energy standards that may impact its segments. Below are some of the specific actions the Company is monitoring.

• In May 2024, the EPA published four final rules, three of which will impose stricter standards on GHG emissions from existing coal-fired and new natural gas-fired generation units, require a further reduction of mercury emissions from coal-fired generation units, and impose additional regulations around the storage and management of coal ash. In March 2025, the EPA announced reconsideration of the Electric Generation and Greenhouse Gas Rule, Mercury and Air Toxics Standards Rule, and Effluent Limitations Guidelines Rule.

The Electric Generation and Greenhouse Gas Rule establishes GHG emissions standards for new natural gas-fired electric generating units and existing coal units. In June 2025, the EPA proposed a rule repealing and replacing the 2024 GHG emission standards with one of two proposed options. The primary option would exclude the power sector from Clean Air Act regulation for GHG emissions requirements while a secondary option would repeal the carbon capture and sequestration and natural gas co-fire-based pollution control standards for existing coal units. Under either proposed option, early retirement of coal-fired units and significant pollution control expenditures are not anticipated. Comments on the proposed rule are due August 7, 2025.

The Mercury and Air Toxics Standards Rule tightens mercury emissions and non-mercury metals emissions standards for coal-fired generation facilities. In June 2025, the EPA proposed repealing the 2024 Mercury and Air Toxics Standard Rule, including the stricter mercury standards for lignite-fired coal units and filterable particulate matter continuous emissions monitoring system installation. Comments on the proposed rule are due August 11, 2025.

If the costs to comply with these rules are not fully recoverable from customers, they could have a material adverse effect on the Company's results of operations and cash flows.

• In July 2025, the EPA released a new proposed rule, Reconsideration of 2009 Endangerment Finding and Greenhouse Gas Vehicle Standards, to repeal the EPA's 2009 determination. This proposal would undo the basis for federal regulation of GHG's under the Clean Air Act. The Company is evaluating the proposal.
• In July 2024, the ODEQ released the Climate Protection Program Rule, which was adopted by the Oregon Environmental Quality Commission in November 2024. The Company intends to meet its obligations through surrendering no cost emissions allowances and will fill remaining compliance obligations by investing in additional customer conservation and energy efficiency programs, purchasing community climate investment credits, and low carbon fuel projects such as RNG and purchasing associated environmental attributes. Compliance costs for these regulations are being recovered through customer rates. Due to the timing of regulatory recovery, future compliance obligation purchases could impact the Company's operating cash flow.
• In Washington, the Climate Commitment Act was effective in 2023. Compliance costs for these regulations are being recovered through customer rates. Due to the timing of regulatory recovery, the purchase of allowances could impact the Company's operating cash flow.
• The Washington SBCC in November and December 2023, adopted residential and commercial building code amendments that will significantly limit the use of natural gas for space and water heating in new and retrofitted commercial and multifamily buildings and proposed the review of similar restrictions in the future for residential buildings. In May 2024, the Company filed a joint complaint seeking declaratory and injunctive relief under federal law against the Washington SBCC's adoption of the Washington State Energy Code. This complaint was dismissed by the federal district court. Petitioners have appealed this decision to the United States Court of Appeals for the Ninth Circuit. The Company's opening brief was filed July 17, 2025.

Initiative Measure No. 2066, which was approved by voters, prohibits the Washington State Energy Code from "in any way prohibit, penalize, or discourage the use of gas for any form of heating, or for uses related to any appliance or equipment, in any building." On May 9, 2025, the King County Superior Court filed an order ruling Initiative Measure No. 2066 unconstitutional. On May 27, 2025, the Building Industry Association of Washington filed a notice of appeal with the King County Superior Court.

• In March 2024, the SEC issued Final Rule 33-11275 - The Enhancement and Standardization of Climate-Related Disclosures for Investors. In April 2024, the SEC announced that it would voluntarily stay its final climate disclosure rules pending judicial review. In March 2025, the SEC withdrew its defense of the rules. In July 2025, the SEC asked the Eighth Circuit to issue a ruling on the abandoned climate regulations.

Pipeline

Strategy and challenges The pipeline segment provides natural gas transportation, underground storage and energy-related services, including cathodic protection, as discussed in Note 14. The segment focuses on utilizing its extensive expertise in the design, construction and operation of energy infrastructure and related services to increase market share and profitability through optimization of existing operations, organic growth and investments in energy-related assets within or in close proximity to its current operating areas. The segment focuses on the continual safety and reliability of its systems, which entails building, operating and maintaining safe natural gas pipelines and facilities. The segment continues to evaluate growth opportunities including the expansion of natural gas facilities; incremental pipeline projects; and expansion of energy-related services leveraging on its core competencies. In support of this strategy, the Company completed the following growth projects in 2024:

• In March 2024, the 2023 Line Section 27 Expansion project was placed in service and increased system capacity by 175 MMcf of natural gas per day.
• In July 2024, the Line Section 28 Expansion project was placed in service and increased system capacity by 137 MMcf of natural gas per day.
• In November 2024, the Company closed on the purchase of a 28-mile natural gas pipeline lateral in northwestern North Dakota.
• In December 2024, the Wahpeton Expansion Project was placed in service and increased system capacity by approximately 20 MMcf of natural gas per day.

The segment is exposed to natural gas and oil price volatility including fluctuations in basis differentials. Legislative and regulatory initiatives on increased pipeline safety regulations and environmental matters such as the reduction of methane emissions could also impact the price and demand for natural gas.

The pipeline segment is subject to extensive regulation related to certain operational and environmental compliance, cybersecurity, permit terms and system integrity. The Company continues to actively evaluate cybersecurity processes and procedures, including changes in the industry's cybersecurity regulations, for opportunities to further strengthen its cybersecurity protections. Implementation of enhancements and additional requirements is ongoing. The segment reviews and secures existing permits and easements, as well as new permits and easements as necessary, to meet current demand and future growth opportunities on an ongoing basis.

Tariff increases on raw materials could negatively affect the Company's construction projects and maintenance work. The Company continues to monitor the impact tariffs will have on its costs. The Company continues to actively manage the national supply chain challenges by working with its manufacturers and suppliers to help mitigate some of these risks on its business. The segment regularly experiences extended lead times on raw materials that are critical to the segment's construction and maintenance work which could delay maintenance work and construction projects potentially causing lost revenues and/or increased costs. The Company is partially mitigating these challenges by planning for extended lead times further in advance. The segment is currently experiencing inflationary pressures with increased raw material and contract services costs. The Company expects supply chain challenges and inflationary pressures to continue. For additional discussion regarding risks and uncertainties, see Part II, Item 1A. Risk Factors in this quarterly report and Part I, Item 1A. Risk Factors in the 2024 Annual Report.

The segment focuses on the recruitment and retention of a skilled workforce to remain competitive and provide services to its customers. The industry in which it operates relies on a skilled workforce to construct energy infrastructure and operate existing infrastructure in a safe manner. A shortage of skilled personnel can create a competitive labor market which could increase costs incurred by the segment. Competition from other pipeline companies can also have a negative impact on the segment.

Earnings overview - The following information summarizes the performance of the pipeline segment.

(In millions)

Three Months Ended June 30, 2025, Compared to Three Months Ended June 30, 2024 Pipeline earnings decreased $1.9 million as a result of:

• Revenues increased $3.4 million as a result of:
• Increased demand revenue, largely due to:
• Growth projects placed in service throughout 2024 of $2.9 million.
• Increased usage of short-term natural gas transportation contracts of $700,000.
• Partially offset by the expiration of certain contracts.
• Higher non-regulated project revenue of $900,000.
• Partially offset by lower storage-related revenues of $500,000.
• Operation and maintenance increased $3.1 million.
• Primarily from:
• Higher payroll-related costs of $900,000.
• Higher non-regulated project costs of $900,000, associated with increased non-regulated project revenue as previously discussed.
• Also reflected are higher costs associated with services provided to Everus as part of TSA, offset in other income, as described below.
• Higher other costs including contract services and insurance.
• Depreciation and amortization increased $600,000 driven largely by higher property, plant and equipment balances related to growth projects placed in service as previously discussed.
• Taxes, other than income increased $600,000, largely due to higher property tax valuations in Montana.
• Other income decreased $1.4 million, primarily due to the absence of proceeds received in 2024 from a customer settlement of $2.0 million, partially offset by higher TSA income, as described above.
• Interest expense increased $500,000, primarily from higher debt balances to fund capital expenditures.
• Income tax expense decreased $900,000, largely due to lower income before taxes and a decrease in the state effective tax rate largely due to growth in North Dakota.

Six Months Ended June 30, 2025, Compared to Six Months Ended June 30, 2024 Pipeline earnings increased $300,000 as a result of:

• Revenues increased $8.8 million as a result of:
• Increased demand revenue, largely due to:
• Growth projects placed in service throughout 2024 of $6.7 million.
• Increased usage of short-term natural gas transportation contracts of $2.5 million.
• Higher storage related revenue of $800,000.
• Partially offset by the expiration of certain contracts.
• Operation and maintenance increased $4.0 million.
• Primarily from:
• Higher payroll-related costs of $2.2 million.
• Higher costs associated with services provided to Everus as part of the TSA, offset in other income, as described below.
• Higher other costs including insurance and contract services.
• Depreciation and amortization increased $1.5 million driven largely by higher property, plant and equipment balances related to growth projects placed in service, as previously discussed.
• Taxes, other than income increased $800,000, largely due to higher property tax valuations in Montana.
• Other income decreased $1.8 million, primarily due to the absence of proceeds received in 2024 from a customer settlement of $2.0 million and lower interest income, partially offset by higher TSA income of $900,000, as described above.
• Interest expense increased $700,000, primarily from higher debt balances to fund capital expenditures.
• Income tax expense decreased $300,000, primarily from a decrease in the state effective tax rate largely due to growth in North Dakota.

Outlook The Company has continued to experience the effect of associated natural gas production in the Bakken, which has provided opportunities for organic growth projects and increased transportation demand. The completion of organic growth projects has contributed to higher volumes of natural gas the Company transports through its system. Bakken natural gas production is currently at or near record levels and the outlook remains positive with continued growth expected due to new oil wells and increasing gas to oil ratios.

Increases in national and global natural gas supply have moderated pressure on natural gas prices and price volatility. While the Company believes there will continue to be varying pressures on natural gas production levels and prices, the long-term outlook for natural gas prices continues to provide growth opportunities for supply and demand related projects and seasonal pricing differentials provide opportunities for natural gas storage services.

The Company continues to monitor, evaluate and implement additional GHG emissions reduction strategies, including increased monitoring frequency and emission source control technologies to minimize potential risk.

In 2024, the EPA published several final rules related to GHG emissions from the oil and natural gas industry. These rules update, strengthen and expand standards to reduce GHG emissions and other air pollutants from new and existing oil and gas facilities, revise the GHG reporting rules and incorporate the Waste Emissions Charge provisions from the IRA. In first quarter 2025, Congress passed a resolution of disapproval overturning the Waste Emissions Charge regulations and President Trump signed the resolution, eliminating the rule. Also, the EPA Administrator announced "31 Historic Actions to Power the Great American Comeback" which includes plans for reconsideration of several EPA rules related to GHG emissions from the oil and natural gas industry. The Company continues to comply with rules as they remain effective, and to monitor and assess these rulemakings and the potential impacts they may have on its business processes, current and future projects, results of operations and disclosures.

The Company continues to focus on improving existing operations and on growth opportunities through organic expansion projects in all areas in which it operates, which includes additional projects with local distribution companies, Bakken area producers, electric generation customers and industrial customers in various stages of development, including:

• Began construction in May 2025 on the Minot Expansion Project, to meet the needs of a local distribution company in north central North Dakota. The project will add approximately 7 MMcf of natural gas transportation capacity per day. The project is supported by a long-term customer agreement and is expected to be in service in the fourth quarter of 2025.
• Line Section 32 Expansion project which will serve a new electric generation facility in northwest North Dakota. The project consists of approximately 20 miles of pipe and ancillary facilities and is designed to increase natural gas transportation capacity by 190 MMcf per day, which is supported by a long-term customer agreement. The project is dependent on regulatory approvals and targeted to be in service in late 2028.
• Potential Bakken East Pipeline project, which could consist of 350 miles of pipeline construction from western North Dakota to the eastern part of the state, plus additional pipeline laterals. The Company is continuing negotiations with interested parties with a focus on project timing and volumes to determine the feasibility of the project and is actively working with landowners to conduct environmental and civil surveys along the potential route.
• A binding open season for a potential Baker Storage Field Enhancement and associated transportation expansion project concluded in May 2025. The Company is reviewing results and based on initial feedback is evaluating a smaller project to align with the customer interest received during the open season.

See Capital Expenditures within this section for information on the expenditures related to these growth projects.

Other

(In millions)

On October 31, 2024, the company completed the separation of Everus, its former construction services business, into a new independent publicly-traded company. As a result of the separation, the historical results of operations for Everus are shown in discontinued operation, net of tax, except for allocated general corporate overhead costs of the Company which did not meet the criteria for discontinued operations. Also included in discontinued operations are strategic initiative costs associated with the separation of Everus.

Three and Six Months Ended June 30, 2025, Compared to Three and Six Months Ended June 30, 2024, respectively.

For the quarter and year to date, Other reported decreased net income compared to the same periods in 2024. The decreases were primarily due to the absence of income from discontinued operations in 2025 and income tax adjustments related to the Company's annualized estimated tax rate. Partially offsetting the decreases were lower operation and maintenance expenses, primarily a result of corporate overhead costs classified as continuing operations allocated to Everus in 2024, which are not included in Other in 2025.

Also included in Other is insurance activity at the company's captive insurer, and general and administrative costs and interest expense previously allocated to the exploration and production and refining business that did not meet the criteria for discontinued operations.

Intersegment Transactions

Amounts presented in the preceding tables will not agree with the Consolidated Statements of Income due to the Company's elimination of intersegment transactions. The amounts related to these items were as follows:

(In millions)

For more information on intersegment eliminations, see Note 14.

Liquidity and Capital Commitments

At June 30, 2025, the Company had cash, cash equivalents and restricted cash of $58.8 million and available borrowing capacity of $602.7 million under the outstanding credit facilities of the Company and its subsidiaries. The Company expects to meet its obligations for debt maturing within one year and its other operating and capital requirements from various sources, including internally generated funds; credit facilities and commercial paper of the Company and its subsidiaries, as described in Capital resources; and issuance of debt and equity securities if necessary.

Cash flows

(In millions)

47

Operating activities

(In millions)

The changes in cash flows from operating activities generally follow the results of operations, as discussed in Business Segment Financial and Operating Data, and are affected by changes in working capital.

The increase in cash flows provided by operating activities in 2025 from 2024 was largely driven by the collection of purchased gas cost balances, including net environmental compliance costs, at the natural gas distribution business. Also contributing was an increase of cash from accounts receivable, largely due to higher gas costs in December 2024 at the natural gas distribution business.

Investing activities

(In millions)

The cash used in investing activities decreased as compared to 2024, primarily due to lower capital expenditures at the natural gas distribution and pipeline businesses and the absence of cash used in discontinued operations in 2024.

Financing activities

(In millions)

The increase in cash used in financing activities in 2025 from 2024 was largely due to lower issuance and higher repayment of long-term debt, primarily related to the absence of the 2024 issuance at the pipeline business, as well as repayment of the revolving credit agreements at the natural gas distribution business. Partially offsetting these items was the absence of the 2024 repayment of short-term borrowings at the natural gas distribution business.

Capital expenditures

Capital expenditures for the first six months of 2025 and 2024 were $179.4 million and $231.3 million, respectively. Capital expenditures at the Company's business segments are estimated to be approximately $539.0 million for 2025, which is comparable to what was previously reported in the 2024 Annual Report. Capital expenditure estimates have been updated to accommodate project timeline and scope changes made thus far in 2025.

Planned utility investments in the Company's estimated capital expenditures for 2025 include construction of electric transmission lines and substations, as well as natural gas delivery infrastructure, to serve a customer base that is expected to continue growing at 1 percent to 2 percent annually over the next five years, construction of JETx, power generation projects, and replacement and modernization of existing electric and natural gas utility infrastructure to ensure continued safe and reliable service to customers. At the pipeline business, the Company will focus on system growth to expand natural gas transmission capacity. For more information on the Company's growth projects, see Business Segment Financial and Operating Data. Other estimated capital expenditures include those for system upgrades, routine replacements, service extensions, RNG infrastructure projects, routine equipment maintenance and replacements, land and building improvements, pipeline and natural gas storage projects, transmission opportunities, environmental upgrades, and other growth opportunities.

The Company continues to evaluate potential future acquisitions and other growth opportunities that would be incremental to the outlined capital program; however, they are dependent upon the availability of economic opportunities and, as a result, capital expenditures may vary significantly from the estimate previously discussed. The Company continuously monitors its capital expenditures for project delays and changes in economic viability and adjusts as necessary. It is anticipated that all of the funds required for capital expenditures for 2025 will be funded by various sources, including internally generated funds; credit facilities and commercial paper of the Company and its subsidiaries, as described later; and issuance of debt and equity securities if necessary.

Capital resources

The Company requires significant cash to support and grow its businesses. The primary sources of cash other than cash generated from operating activities are cash from revolving credit facilities, the issuance of long-term debt and the sale of equity securities.

Debt resources

Certain debt instruments of the Company and its subsidiaries contain restrictive and financial covenants and cross-default provisions. In order to borrow under the respective debt instruments, the Company and its subsidiaries must be in compliance with the applicable covenants and certain other conditions, all of which the Company and its subsidiaries, as applicable, were in compliance with at June 30, 2025. In the event the Company and its subsidiaries do not comply with the applicable covenants and other conditions, alternative sources of funding may need to be pursued. As of June 30, 2025, the Company had investment grade credit ratings at all entities issuing debt. For more information on the covenants, certain other conditions and cross-default provisions, see Part II, Item 6 in this document and Part II, Item 8 in the 2024 Annual Report.

The following table summarizes the outstanding revolving credit facilities of the Company and its subsidiaries at June 30, 2025:

(In millions)

(a) The commercial paper program is supported by a revolving credit agreement with various banks (provisions allow for increased borrowings, at the option of Montana-Dakota on stated conditions, up to a maximum of $250.0 million). At June 30, 2025, there were no amounts outstanding under the revolving credit agreement. (b)Certain provisions allow for increased borrowings, up to a maximum of $225.0 million. (c)Outstanding letter(s) of credit reduce the amount available under the credit agreement. (d)Certain provisions allow for increased borrowings, up to a maximum of $250.0 million.

The Montana-Dakota commercial paper program is supported by a revolving credit agreement. While the amount of commercial paper outstanding does not reduce available capacity under the revolving credit agreement, Montana-Dakota does not issue commercial paper in an aggregate amount exceeding the available capacity under the credit agreement. The commercial paper and revolving credit agreement borrowings may vary during the period, largely the result of fluctuations in working capital requirements due to the seasonality of certain operations of Montana-Dakota.

Total equity as a percent of total capitalization was 56 percent at both June 30, 2025 and 2024 and 54 percent at December 31, 2024. This ratio is calculated as the Company's total equity, divided by the Company's total capital. Total capital is the Company's total debt, including debt in discontinued operations, short-term borrowings and long-term debt due within 12 months, plus total equity. Management believes this ratio is an indicator of how the Company is financing its operations, as well as its financial strength.

Intermountain On July 15, 2025, Intermountain entered into a note purchase agreement to issue $50.0 million of senior notes, with a maturity date of July 15, 2055, at an interest rate of 6.39 percent. $25.0 million of these notes were issued on July 15, 2025, and the remaining $25.0 million is expected to be issued in October 2025. The agreement contains customary covenants and provisions, including a covenant of Intermountain not to permit, at any time, the ratio of debt to total capitalization to be greater than 65 percent. Other covenants include a minimum interest coverage ratio and restrictions on the sale of certain assets.

Material cash requirements

There were no material changes in the Company's remaining contractual obligations related to estimated interest payments, asset retirement obligations and uncertain tax positions for 2025 from those reported in the 2024 Annual Report except for decreases in purchase commitments due to an anticipated decrease in electric supply contracts at the Company's electric segment. For more information on the Company's contractual obligations on long-term debt and operating leases, see Part II, Item 7 in the 2024 Annual Report. For more information on the Company's purchase commitments, see Note 17.

Material short-term cash requirements of the Company include repayment of outstanding borrowings and interest payments on those agreements, payments on operating lease agreements, payment of obligations on purchase commitments and asset retirement obligations.

Material long-term cash requirements of the Company include repayment of outstanding borrowings and interest payments on those agreements, payments on operating lease agreements, payment of obligations on purchase commitments and asset retirement obligations.

Defined benefit pension plans

The Company has noncontributory qualified defined benefit pension plans for certain employees. Various actuarial assumptions are used in calculating the benefit expense (income) and liability (asset) related to these plans, as such costs of providing these benefits bear the risk of changes as they are dependent upon assumptions of future conditions.

There were no material changes to the Company's noncontributory qualified defined benefit pension plans from those reported in the 2024 Annual Report other than the Company now expects to contribute approximately $3.4 million to its pension plans in 2025, largely resulting from acceleration of contributions in order to decrease costs. For more information, see Note 15 and Part II, Item 7 in the 2024 Annual Report.

New Accounting Standards

For information regarding new accounting standards, see Note 2, which is incorporated by reference.

Critical Accounting Estimates

The Company's critical accounting estimates include impairment testing of goodwill; regulatory assets expected to be recovered in rates charged to customers; actuarially determined pension and other postretirement benefit costs; and income taxes. There were no material changes in the Company's critical accounting estimates from those reported in the 2024 Annual Report, except for the estimate related to construction contract revenue recognition, which is no longer a critical accounting estimate subsequent to the separation of Everus in 2024. For more information on critical accounting estimates, see Part II, Item 7 in the 2024 Annual Report.

Evaluation of disclosure controls and procedures

The term "disclosure controls and procedures" is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. The Company's disclosure controls and other procedures are designed to provide reasonable assurance that information required to be disclosed in the reports that the Company files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms. The Company's disclosure controls and other procedures are designed to provide reasonable assurance that information required to be disclosed is accumulated and communicated to management, including the Company's chief executive officer and chief financial officer, to allow timely decisions regarding required disclosure. The Company's management, with the participation of the Company's chief executive officer and chief financial officer, has evaluated the effectiveness of the Company's disclosure controls and other procedures as of the end of the period covered by this report. Based upon that evaluation, the chief executive officer and the chief financial officer have concluded that, as of the end of the period covered by this report, such controls and procedures were effective at a reasonable assurance level.

Changes in internal controls

No change in the Company's internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) occurred during the three months ended June 30, 2025, that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting.

Please refer to the Company's risk factors that are disclosed in Part I, Item 1A. Risk Factors in the 2024 Annual Report that could be materially harmful to the Company's business, prospects, financial condition or financial results if they occur. At June 30, 2025, there were no material changes to the Company's risk factors provided in Part I, Item 1A. Risk Factors in the 2024 Annual Report other than as set forth below.

Tariffs and changes in trade policy could negatively impact the Company's operations.

The United States government has recently implemented changes to trade policy and introduced tariffs on a range of products from certain countries, in addition to applying baseline tariffs on imports from most countries. These actions have created uncertainty in global markets and have increased and may continue to increase the cost of raw materials, commodities, supplies and equipment purchased by the Company. Additionally, the tariff and trade policy changes could cause supply chain disruptions and delays in sourcing materials and equipment which could delay large capital projects and negatively impact the Company’s financial condition and results of operations. If the Company's regulators do not determine the increased costs are prudent, or otherwise disallow certain costs, it could affect the Company’s ability to recover the cost increases through rates or on a timely basis which could adversely affect the Company's financial condition and results of operations.