Otter Tail Corporation (NASDAQ:OTTR) Q4 2019 Earnings Conference Call - Final Transcript

Feb 18, 2020 • 11:00 am ET

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Otter Tail Corporation (NASDAQ:OTTR) Q4 2019 Earnings Conference Call - Final Transcript

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Executive
Charles S. MacFarlane

enough energy to power more than 65,000 homes. This is the largest capital project in Otter Tail Power history and we anticipate beginning commercial operation in the fourth quarter of 2020.

On Slide 17, Astoria Station construction also remains on time and on budget. We awarded the general work contract last quarter. Astoria will be a highly efficient 245 megawatt natural gas combustion turbine. It will complement our wind generation by providing a reliable backstop when the wind isn't blowing and it will have flexible operating options and low CO2 emissions.

We expect to invest approximately $158 million in this project and anticipate it will be online near the year end 2020. We completed the first of a two-phase transmission project to improve reliability for customers who live in the southern part of our service area. The first phase was a new 15-mile 115 KV transmission line that connects the expanded Hedland substation to the new Lake Northern substation in South Dakota. In August we began construction of a second phase of this project, a new 43-mile 115 KV transmission line in Lake Norden to Astoria South Dakota. Phase 2 engineering is 90% complete. We have attained 99% of project easements and we set approximately 18 of the 43 total miles of structures. We expect to energize the line in mid 2021.As shown on slide 19, we have the opportunity to add approximately $45 million of rate base associated with new generator interconnection upgrades as proposed by the MISO generator interconnection process.

Self fund in an election by the transmission owner, in this case, Otter Tail Power, to fund the initial network upgrades associated with new generator interconnections.To date FERC has approved eight facility service agreements, or FSAs, between interconnection customers and Otter Tail Power. We have another seven FSAs filed with FERC and MISO is preparing an additional 12. Otter Tail will fund and earn return on and return of the capital costs of these network upgrades over a 20-year period from the interconnection customers.Minnesota Public Utilities Commission approved an extension until September 1st of 2021 for filing of our next resource plan.Two key federal environmental regulations that may impact our Company are the Regional Haze Rule and the proposed Affordable Clean Energy Rule. Generation source is subject to [Indecipherable] of the Regional Haze Rule including Coyote Station will likely be required to undertake emission control measures, reasonably consistent with those required of sources [Indecipherable]. Delaying our resource planning will allow us to better understand the direction of environmental regulations and develop a more informed plan. I would like to give special recognition to Otter Tail Power Company employees who marked 2019 with the Company's best OSHA record -- rate on record and continue to put safety first.

BTD, our contract metal fabricator, had an excellent year, increasing sales 4% and net income by 14%. IN our Washington, Illinois plant, which has some protection of parts used in the oil and gas fracking industry, continues to be impacted by