Good morning, everyone, and welcome to Otter Tail Corporation's 116th Annual Meeting of Shareholders. My name is Nathan Partain, and I am Chairman of the Otter Tail Corporation's Board of Directors. On behalf of the Board and Otter Tail Corporation's Executive Team and employees, I want to thank you for your investment and for your attending the annual meeting. Otter Tail Corporation produced strong financial results in 2025, showcasing our team members' hard work and commitment to our mission. We ended the year in a position of financial strength with a balance sheet capable of funding our customer-focused growth plan without any near-term external equity needs. Additionally, for the fifth year in a row, we received the Edison Electric Institute Index Award for the top-performing small capitalization utility. We produced a total shareholder return of 158% over the five-year period ended September 30th, 2025.
Our five-year total shareholder return was the highest of all EEI member companies. There's much to be proud of as it relates to the work accomplished and the results delivered for the benefit of our stakeholders in 2025. We look forward to providing an operational and financial update shortly. Before we get started with the business portion of the annual meeting, I'd like to go over a couple of the administrative items. First, the agenda for today's meeting is shown on the slide. If you'd like to submit a question during the meeting, you may do so at any time today. We will address any questions during the question and answer session, which immediately follows management's updates. In addition, please review the rules of conduct for the meeting, which have been made available to you at your welcome screen.
Lastly, if you haven't voted your shares and would like to change your vote, you will need to select the Vote Here button on the page to vote. The polls will remain open until the business portion of the meeting is concluded. All members of our Board of Directors who are shown on the slide are attending today's Annual Meeting. The Executive Team members shown on the slide are also in attendance. Chuck will provide an operational update shortly, with Todd providing a financial update soon after. In late 2025, we announced a few changes to the makeup of our Board of Directors with a planned retirement and two new members. Today marks Steve Fritze's last day as a member of the company's Board, following his intention to retire. Steve has served as an independent Board member since 2013, and we are grateful for him for his years of service.
His leadership as Chair of the Audit Committee, the focus he has placed on financial talent development, and his manufacturing expertise have been invaluable. We wish Steve the very best in his retirement. Chris Clark and Steve Rasche were appointed to the Otter Tail Corporation's Board of Directors effective January 1st, 2026. Chris Clark is the retired President of Northern States Power Company, a wholly-owned subsidiary of Xcel Energy Inc. Chris brings extensive knowledge and proven leadership within the regulated energy industry. His strategic foresight, regulatory insights, and collaborative approach will be instrumental as we continue to execute our strategy. Chris serves as a member of the Audit Committee and Governance Committee. Steve Rasche retired as Chief Financial Officer for Spire Inc. last year. Steve brings significant experience in utility finance and risk management to the Board.
His leadership experience and pragmatic approach to decision-making will play a key role in driving our strategic objectives. Steve serves as a member of the Audit and Compensation and Human Capital Management Committee. Following these changes to our board, we have 10 members with varying backgrounds, expertise, and skill sets. We look forward to the contributions Chris and Steve will make over the course of their terms. Brenna Vanderloop, Partner, and Jackie Schonecker, Senior Manager, are also in attendance as representatives of our independent auditor, Deloitte & Touche. Jan Costello, Representative of our distribution agent, Broadridge, is also in attendance. Ms. Costello serves as the Inspector of Elections for this meeting. Beth Eiken, Otter Tail Corporation's Manager of Investor Relations, is also in attendance and will be the moderator of our question and answer session.
Turning to the business portion of the meeting, I've been advised by our Corporate Secretary, Jennifer Smestad, that the notice of the Annual Meeting to shareholders was sent out about March 2nd, 2026, to all shareholders of record as of February 12th, 2026. I can report that holders of a majority of the total shares outstanding and eligible to vote as of the record date are present online or by proxy. Therefore, a quorum is present, and the meeting is duly constituted. The business portion of the meeting may now proceed. The polls will close following the introduction of the items of business. As a reminder, if you have not yet voted and would like to change your vote, you may do so online. If you have already voted, your vote has been counted. We will now consider the items of business described in the proxy statement.
The Board recommends that shareholders vote for each of the following proposals. The first item of business is the election of Directors. The terms of Jeanne Crain and John Erickson, along with my own term, expires at the time of the 2026 Annual Meeting. The Board of Directors, upon recommendation of the Corporate Governance Committee, nominates Jeanne Crain, John Erickson, and myself, Nathan Partain, for election to serve three-year terms ending at the time of the Annual Meeting of Shareholders in 2029, and until successors are duly elected and qualified.
The second item of business is the proposal to approve, in a non-binding advisory vote, the compensation provided to the Named Executive Officers as described in the proxy statement. The third item of business is the proposal to ratify the appointment of Deloitte & Touche LLP to act as Otter Tail Corporation's independent registered public accounting firm for the year 2026.
The fourth and final item of business is the proposal to amend and restate Otter Tail Corporation's bylaws to include an exclusive forum provision. No other items of business have been brought to the attention of the corporation. I hereby declare that the polls are now closed. The final vote totals include ballots properly submitted today, will be reported in a Form 8-K to be filed with the Securities and Exchange Commission within four business days following this meeting.
We'll also post the Form 8-K on the website at ottertail.com. I've received the preliminary voting report from our Inspector of Elections, and based on that report, all proposals have passed. The preliminary voting results are as follows. All Director nominees received at least a plurality of votes cast, and all were elected to serve as Directors for a term of three years.
The Corporation's executive compensation program was approved on an advisory basis by the required majority of the votes cast. The appointment of Deloitte & Touche LLP as auditors for the year 2026 have been ratified by the required majority of the votes cast. Lastly, the amendment and restatement of Otter Tail Corporation's bylaws to include the exclusive forum provision was approved by the required majority of the votes cast. This concludes the business portion of our meeting. Before I turn it over to Chuck MacFarlane for an operational update, I'd like to thank the entire management team for the hard work and dedication in 2025, in particular to Chuck for his strong leadership. As shareholders, we should be proud of the excellent job they have done, which is reflected in the overall results for last year.
Thank you, Nathan. Good morning, everyone, and thank you for joining our 2026 annual meeting. Before I begin, I want to take a moment to remind everyone that we may make forward-looking statements during the course of these meetings. These statements represent current views and expectations of future events. They are subject to risks and uncertainties which may cause actual results to differ from those presented here. Please be advised against placing undue reliance on any of these statements. Our forward-looking statements are described in more detail in our filings with the SEC, which we encourage you to review. Otter Tail Corporation employs a diversified business model with a regulated electric utility at our core, complemented by manufacturing and plastic pipe businesses.
Our strategic diversification has enabled us to produce above-average returns over the long term compared to the broader utility industry, and we are well positioned to execute our customer-focused strategy and vision going forward. Otter Tail Corporation remains committed to our mission, building top-performing companies in a diversified organization for the benefit of our shareholders, customers, and employees. To our shareholders, thank you for your investment. Your ongoing confidence in us allows us to serve customers well. To our customers, thank you for your continued trust in us. We are honored to serve you. To our employees, you are what fuels our success. Thank you for your ongoing efforts, dedication to our shareholders and customers, and for the ways you live out our values. Turning now to my operational update. Otter Tail Power navigated a full agenda in 2025, and our team members rose to the occasion.
We delivered on our regulatory priorities and significant rate base growth plan, all while providing low-cost electric service to our customers. We filed rate cases in South Dakota and Minnesota for the first time since 2018 and 2020, respectively. Both requests were largely driven by increased infrastructure investments and the impact of inflation since our previous rate reviews. A general rate case proceeding is complex and often long in duration, but important for our business. I appreciate our team's effort and persistence in these matters, and I also appreciate the working relationship we have fostered with the utility commissions and staff in each of our state jurisdictions. We are mindful of the impact general rate cases have on our customers' electric rates.
Even with the requested increases, Otter Tail Power will continue to have some of the lowest electric rates in the region and country, a topic that I will touch on in more detail later. Otter Tail Power's rate-base growth plan remains robust. Our five-year capital spending plan for 2026-2030 totals $1.9 billion and is expected to produce a rate-base compounded annual growth rate of 10%. We anticipate Otter Tail Power will convert this rate-base growth into electric earnings per share growth near a 1/1 ratio over the long term, a sign of a high-performing regulated electric utility. Turning now to some of Otter Tail Power's large capital projects, our two solar development projects are in the early stages of construction. Our 50 MW facility, Solway Solar, is expected to come online either later this year or early next.
Our 295 MW facility, Abercrombie Solar, is expected to be fully operational in 2028. Our total capital investment associated with these projects is approximately $530 million, and they are expected to qualify for full production tax credits. We look forward to adding additional cost-effective solar generation to our portfolio. Earlier this year, we announced our Hoot Lake Battery project. In our latest approved Minnesota Integrated Resource Plan, we were authorized to add up to 75 MW of battery storage by 2029. We advanced this project to ensure it became operational in the approved timeline, as well as qualify for available tax credits, making it more economical for our Minnesota customers. The battery facility is expected to have a storage capacity of 75 MW and a storage duration of four hours.
Our total capital investment associated with the project is approximately $120 million, and we currently expect the facility to be operational in 2028. Development work continues on our large regional transmission projects. As Todd will discuss later, we have a significant amount of regional transmission investment opportunity in the coming years, with nearly $900 million included in our current five-year capital spending plan. These projects are anticipated to have a limited impact on our retail customer bills, as most of the costs will be allocated to other MISO customers, generators, or new interconnections. While these projects will take years to complete, we look forward to the many reliability-related benefits that they will provide to our customers. We continue to engage with companies looking to add new large loads to our system.
We have and will continue to be prudent in our negotiations to appropriately mitigate potential adverse implications of adding new large loads to our existing customers. Adding new loads, if appropriately managed, would not only benefit us but our existing customers as it enables us to spread out fixed costs. We remain committed to providing low-cost electric service to our customers and have demonstrated the ability to do so for many years. Otter Tail Power's electric rates have remained well below the national and regional averages for many years. Our 2025 residential electric rates were 34% below the national average and 19% below our regional peers. Looking ahead, we are deeply focused on managing customer bills. We currently project these bills to increase between 3% and 4% on a compound annual growth rate over the current five-year planning period.
This is made possible by MISO system-wide transmission recovery, tax credits from renewable projects, reduced energy costs, and other factors. There could be variability in terms of annual bill increases, with some years experiencing a higher increase and others lower. This is due to the timing of rate case filings, capital spend, and related recovery. We also expect that the five-year compound annual growth rate may vary between jurisdictions. Transitioning to our manufacturing platform, our manufacturing businesses continue to face soft end-market demand as sales volumes remain below historical levels. However, towards the end of 2025, we began to see customer order activity pick up, allowing us to enter 2026 with momentum. We are cautiously optimistic about the year as industry conditions remain varied and demand is still being negatively impacted by higher levels of dealer inventory for some end markets.
Our team members remain very focused on cost management efforts and did an excellent job aligning our cost structure with the current demand environment to mitigate the impact of lower sales volumes on earnings in 2025. Next, I'll provide an overview of our Plastics segment pricing and volume trends. Our average sales price of PVC pipe continues to decline throughout 2025, decreasing 15% from the 2024 average. The rate of decline accelerated during the fourth quarter of 2025, with our average sales price being 20% lower than the same time last year. Sales volumes increased 8% from 2024 levels. The increase was largely driven by the incremental capacity added at Vinyltech in late 2024. We continued to reaffirm our long-term Plastics segment earnings profile of $45 million-$50 million. We believe Plastics segment earnings will continue to decline throughout 2026 and 2027 before reaching this level in 2028.
This assumption is based on the average sales price of our PVC pipe continuing to decline at a rate similar to what we have experienced towards the end of 2025, higher sales volumes due to our expanded production capacity, and cost changes generally in line with the rate of inflation. While these expectations reflect our current best estimates, there are many market dynamics that could materially impact our results and cause them to vary from our projections. Our manufacturing platform remains well-positioned to support future growth opportunities. Our BTD Georgia facility addition is ready to support our customers in the southeast part of the United States, and phase two of our Vinyltech expansion project was completed in the first quarter of this year.
Further, Northern Pipe Products is also pursuing a project to increase their nameplate production capacity by approximately 20 million lbs by enhancing the efficiency of an existing line. We expect this incremental capacity to be available beginning in 2028. I am proud of how our team performed in 2025 and look forward to the exciting opportunities ahead. On behalf of the employees across our organization, I want to thank you again for your continued support.
Thank you, Chuck. Todd Wahlund will now provide an update on the company's financial performance and condition.
Thanks, Nathan. Good morning, everyone, and thank you for attending our 2026 annual shareholder meeting. Our 2025 financial results exceeded our expectations for the year, even as our Plastics segment earnings receded from a historic high last year. Collectively, our businesses produced earnings of $276 million, or $6.55 per share, and we generated $386 million of cash from operations. We ended the year in a position of financial strength with $386 million of cash on hand. We produced a utility sector leading return on equity of 16% on an equity layer of 63%. Our balance sheet continues to be capable of funding our significant customer-focused growth plan without external equity through at least 2030. Our five-year capital spending plan includes $2 billion of investments with $1.9 billion allocated to Otter Tail Power. This plan will be a key driver of earnings growth for our Electric segment over this time period.
Otter Tail Power's capital plan includes investments in new solar generation, battery storage, and large-scale transmission projects. In addition to the base capital plan, we project up to $750 million of incremental investment opportunity at Otter Tail Power, comprised of additional wind generation and accelerating transmission investment due to potential changes in the timing of planned spend. Additionally, our capital spending plan does not include any investment for the addition of new large loads. If we were to secure a new large load, the capital investment required to serve this load would be incremental to our already significant plan. We estimate that for every $100 million of incremental capital investment, our rate base compound annual growth rate would increase by approximately 65 basis points.
Overall, we are excited about the organic growth opportunities across our portfolio and are pleased that we are in a position to finance our investments without any external equity needs. 2025 marked the 87th consecutive year in which we've paid dividends to our shareholders without reduction or interruption. Earlier this year, we announced a 10% increase to our dividend, producing a 2026 annual indicated dividend of $2.31 per share. This double-digit increase reflects our commitment to delivering shareholder value while maintaining our balanced capital allocation strategy. We remain focused on investing in Electric segment rate base growth while returning capital to our shareholders. Underpinned by the significant growth in our Electric segment, we continue to target a long-term earnings per share growth rate of 7%-9%, resulting in a targeted total shareholder return of 10%-12%.
As we continue to execute on our customer-focused growth plan, we are well-positioned to deliver on our investment targets over the long term. Otter Tail Power continues to be a high-performing electric utility, converting its rate base growth into earnings per share growth at near a 1/1 ratio. Our manufacturing and plastic pipe businesses consistently produce accretive returns and incremental cash, enabling us to fund our rate base growth plan without any external equity needs through at least 2030. As I conclude, we are grateful for your interest and investment in Otter Tail Corporation. We look forward to what the future holds as our strategic diversification and growth plans will continue to provide outstanding shareholder returns to you, our investors.
That concludes the formal presentations for today. I'm now pleased to move to the question and answer portion of the meeting. As a reminder, to ask a question, please submit it in the Ask Question box found on your screen. If you submit a question, please identify yourself so that we know who asked the question and are able to follow up as needed. Also, please be mindful of the Rules of Conduct which were made available to you. We will take questions for up to 30 minutes this morning. To give as many people as possible a chance to participate, each shareholder is limited to two questions. I'll now ask our Moderator, Beth Eiken, to read the questions that have been submitted.
Good morning, everyone. My name is Beth Eiken, and I'm Otter Tail Corporation's Manager of Investor Relations. As Nathan said, we are going to now transition to the Q&A portion of today's meeting, and we do have a couple of questions in the queue, starting with the first one.
The question is, do you ever think about separating the Corporation into two pieces, a manufacturing one and a utility one?
Well, good morning. This is Chuck MacFarlane. Thanks for the question. We do review our portfolio of companies with assistance from an independent third party. We do this each year as part of our strategic planning process. This process includes reviewing each company and their fit within our organization and if they're meeting the financial targets we have established. We also review potential acquisition and divestiture options, and the Board reviews this analysis. At this point, we have concluded that our current diversified business model serves us and our shareholders. It provides a predictable and steady earnings growth from our utility with the opportunity to generate excess returns and solid cash generation from our non-utility businesses.
Okay. Moving to the second question that we have in the queue. The question is, do you ever change auditors? Do you bid the cost of the job?
Good morning. This is Todd Wahlund, CFO. Thanks for the questions. As far as do we ever change auditors, we have not changed auditors in recent history. That would be a significant high-impact decision. We do look for industry knowledge, service quality, audit efficiency. Audit firms do have to rotate the lead auditor every few years. As far as bidding the cost of the job, we do benchmark the cost against other companies. We do not bid the work. We also benchmark it against other leading audit firms just to make sure the costs are reasonable.
With the end of that question, I guess, or the response to that question, we don't have any other questions in the queue. I'll go ahead and transition the call to Nathan for his closing remarks.
Okay. Thank you, Beth, appreciate it. Seeing there's no other questions in the queue, our 2026 Annual Shareholder Meeting is now concluded. I want to thank you again for attending. I appreciate your continued support and investment in Otter Tail Corporation. We hope you join us again next year and wish you nothing but the best.
Thank you for joining us today. The meeting is now concluded. Have a good day.