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MDU Resources Group reports earnings increase, tax benefit

BISMARCK—MDU Resources Group is reporting a $39.5 million tax benefit in the fourth quarter of 2017 from federal tax reform and is expected to return a portion to customers.

With the reduction of the corporate tax rate from 35 percent to 21 percent on Jan. 1, MDU's construction services and materials businesses saw $4.3 million and $41.9 million in tax benefits respectively. The company incurred charges of $6.4 million to its electric and natural gas utility company and $200,000 to its pipeline business, MDU stated in its annual earnings release.

Returns to customers could come in a number of forms yet to be determined: either through refunds or changes to current or future rate cases.

Company leaders are gauging how tax reform could affect their customers' spending and, ultimately, MDU's bottom line.

The company's 2017 earnings amounted to $280.4 million, or $1.43 per share, compared to 2016 earnings of $63.7 million, or 33 cents per share, in a year when the company was still reeling from losses at its former Dickinson diesel refinery. In the fourth quarter of 2017, earnings were $115.3 million, or 59 cents per share, compared to $65.5 million, or 33 cents per share, in 2016.

"We are very pleased with our strong finish to the year, irrespective of the benefit we saw from federal tax reform," CEO David Goodin said in a release. "We had a particularly strong fourth quarter, with our construction businesses successfully executing on projects under favorable weather conditions in October and November, and our regulated energy delivery businesses benefiting from colder weather at the end of the quarter .... In 2017, all our businesses performed very well, and we are optimistic about the momentum we have going into 2018."

MDU benefited from 2 percent higher electric retail sales volumes and 13 percent higher natural gas retail sales volumes. The company is expected to purchase the Thunder Spirit Wind Farm near Hettinger later this month, bringing renewables to 27 percent of its total energy production capacity.

In its pipeline business, MDU benefited from record natural gas transportation volumes as a result of line expansions. The company has two more expansions planned this year — the $55 million to $60 million Valley Expansion Project and the $27 million to $30 million Line Section 27 expansion project — which will bring total natural gas capacity to 1.8 billion cubic feet per day.

MDU's construction services business had record revenues of $1.37 billion. Going into 2018, the company has $708 million in backlogged work, 49 percent higher than 2016.

Lower asphalt product margins and lower construction margins hurt the construction materials business but $41.9 million in income tax benefits brought it ahead of earnings in 2016. Backlog going into 2018 is lower, at $486 million, down from $538 million in 2016 going into 2017.

MDU Resources expects earnings per share in the range of $1.25 to $1.45 in 2018.