NASDAQ: OTTR

Throughout the remainder of this report, we use the terms "Company," "us," "our," or "we" to refer to OTC and its subsidiaries collectively. We also refer to our Electric, Manufacturing and Plastics segments and our individual subsidiaries as indicated above.

INVESTMENT AND GROWTH STRATEGY

Our investment and growth strategy is driven by planned investments in our Electric segment and complemented by our strategic diversification. Otter Tail Power, our foundational business dating back to 1907, is a high-performing electric utility with a robust five-year capital investment and growth plan. Our electric operations are complemented by the long-term ownership of our Manufacturing and Plastics segment businesses (collectively, our Manufacturing Platform).

Our strategic diversification positions us to provide earnings, cash flow and dividend growth over long-term investment and economic cycles, and to produce shareholder returns above the utility industry average. We drive growth through rate base investments in our Electric segment and organic growth opportunities in our Manufacturing Platform. We are able to efficiently redeploy cash generated by our Manufacturing Platform to finance our Electric segment investments. Our strategy and risk profile are designed to provide a predictable earnings stream, investment grade credit ratings and continuous dividend payments to our shareholders.

Our long-term focus remains on executing our strategy to grow our business and achieving operational, commercial and talent excellence to strengthen our position in the markets we serve. Our long-term financial objectives include achieving a compounded annual growth rate in earnings per share in the range of 7 to 9%, with a long-term earnings mix target of approximately 70% from our Electric segment and 30% from our Manufacturing Platform. We also are targeting an annual increase in our dividend to be in the range of 6 to 8%. We expect our earnings growth and cash flow generation to be driven by rate base investments in our Electric segment and from recent investments within our Manufacturing and Plastics segments.

Since 2021, our earnings mix has diverged from our long-term target of 70% from our Electric segment and 30% from our Manufacturing Platform and our earnings growth rate has exceeded our long-term targeted growth rate primarily due to market conditions within the PVC pipe industry. These conditions have led to significant revenue, earnings and cash flow growth in our Plastics segment. Currently, we expect these industry conditions to gradually normalize through 2027. As they do, we expect earnings and cash flow generation within our Plastics segment to moderate from current levels. Once these industry conditions have normalized, we expect to achieve our long-term financial objectives as outlined above.

We regularly review our business portfolio to identify additional opportunities to improve our earnings and cash flow generation profile, reduce our risk profile, enhance our credit metrics and generate additional sources of cash to support the organic growth opportunities in our Electric, Manufacturing and Plastics segments. We will also evaluate opportunities to allocate capital to

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potential acquisitions. We are a committed long-term owner and do not acquire companies in pursuit of short-term gains. However, we will divest of businesses which no longer fit into our long-term strategy and risk profile.

We maintain a set of criteria used in evaluating the strategic fit of our operating businesses. The operating company should:

•Maintain a minimum level of net earnings and a return on invested capital in excess of the Company’s weighted-average cost of capital,

•Have a strategic differentiation from competitors and a sustainable cost advantage,

•Operate within a stable and growing industry and be able to quickly adapt to changing economic cycles, and

•Have a strong management team committed to operational and commercial excellence.

Our actual mix of earnings for the years ended December 31, 2025 and 2024 along with an historical average and long-term expectation are shown below:

HUMAN CAPITAL

Our employees are a critical resource for our business and an integral part of our success. We strive to provide an environment of opportunity and accountability where people are valued and empowered to do their best work. We are focused on the health and safety of our employees and creating a culture of inclusion, excellence and learning. We monitor various metrics and objectives associated with i) employee safety, ii) workforce stability, iii) management and workforce demographics, iv) leadership development and succession planning, v) productivity, and vi) employee engagement. We have established the following in furtherance of these efforts:

Safety - Safety is one of our core values. In managing our business, we focus on the safety of our employees and have implemented safety programs and management practices to promote a culture of safety. Safety is also a metric used and evaluated in determining annual incentive compensation. We continually monitor the Occupational Safety and Health Administration Total Recordable Incident Rate (number of work-related injuries per 100 employees for a one-year period) and Lost Time Incident Rate (number of employees who lost time due to work-related injuries per 100 employees for a one-year period). New cases are reported and evaluated for corrective action during monthly safety meetings attended by safety professionals at all locations. Our 2025 Total Recordable Incident Rate was 1.60, compared to 1.64 in 2024 and our Lost Time Incident Rate was 0.52 in 2025, compared to 0.16 in 2024.

Employee and Leadership Development, Succession Planning and Training Programs - We invest in training and professional development for employees, management and leaders throughout the Company to ensure all have the necessary training and skills to perform their work well, and to build enterprise-wide understanding of our culture, strategy and processes. Annual succession planning, individual development planning, mentoring, and supervisory and leadership development programs all play a role in ensuring a capable leadership team now and in the future. Our skill progression and technical training programs help to retain a stable and skilled workforce.

Workforce Stability - Recruiting, retaining and developing employees is an important factor in our continued success and growth. We regularly evaluate our recruiting programs, employee retention and turnover rates.

Employee Engagement - To enhance the effectiveness of our workforce and to help our companies continue to be places where our employees choose to work and thrive, we have undertaken a multi-year series of employee engagement surveys. We use the feedback to help shape the employee programs of our organization.

Human Rights - We are committed to the protection of our employee’s freedom of expression and freedom of organization and assembly.

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Inclusive Workplace - We hold every employee accountable for their behavior in maintaining a workplace free of discrimination and harassment. We have implemented educational initiatives for all employees aimed at inclusive leadership and a respectful workplace.

Code of Business Ethics - We require employees to complete training on several topics associated with our code of business ethics to reinforce our commitment to compliance with laws, regulations and values that guide who we are and how we do business.

As of December 31, 2025, we employed 2,198 full-time employees as shown in the table below:

Segment/OrganizationEmployees

Electric Segment

OTP (1)
726

Manufacturing Segment

BTD1,075

T.O. Plastics160

Segment Total1,235

Plastics Segment

Northern Pipe106

Vinyltech94

Segment Total200

Corporate37

Total2,198

(1) Includes all full-time employees of Otter Tail Power Company, including employees working at jointly owned facilities. Labor costs associated with employees working at jointly owned facilities are allocated to each of the co-owners based on their ownership interest.

As of December 31, 2025, 378 employees of OTP were represented by local unions of the International Brotherhood of Electrical Workers under two separate collective bargaining agreements expiring on August 31, 2026 and October 31, 2026. None of the employees of our other operating companies are represented by local unions.

ELECTRIC
Contribution to Operating Revenues: 43% (2025), 39% (2024), 39% (2023)

OTP, headquartered in Fergus Falls, Minnesota, is a vertically integrated, regulated utility with generation, transmission and distribution facilities to serve its approximately 134,000 residential, commercial and industrial customers in a service area encompassing approximately 70,000 square miles of western Minnesota, eastern North Dakota and northeastern South Dakota.

CUSTOMERS

Our service territory is predominantly rural and agricultural and includes over 400 communities, most of which have populations of less than 10,000. While our customer base includes relatively few large customers, sales to commercial and industrial customers are significant and in 2025 two customers combined accounted for 16% of segment operating revenues.

The following charts summarize our retail electric revenues by state and by customer segment for the years ended December 31, 2025 and 2024:

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In addition to retail revenues, our Electric segment also generates operating revenues from the transmission of electricity for others over the transmission assets we wholly or jointly own, and from the sale of electricity we generate and sell into the wholesale electricity market.

COMPETITIVE CONDITIONS

Our utility business operates as a regulated monopoly. Our retail customers reside within our assigned service territories, and most retail customers do not have the ability to choose their electric supplier. However, we are subject to extensive regulation, as further described below, along with certain public policies that promote competition and development of energy markets. Competition is present in some areas from municipally owned systems, rural electric cooperatives and, in certain respects, from on-site generators and co-generators. Electricity also competes with other forms of energy.

Competition also arises from customers supplying their own power through distributed generation, which is the generation of electricity on-site or close to where it is needed, designed to meet specific local needs. The adoption of distributed generation can be impacted by the availability of tax credits associated with the development and use of distributed energy. Distributed energy resources can include combined heat and power, solar photovoltaic, wind, battery storage, thermal storage and demand-response technologies.

The degree of competition may vary from time to time depending on relative costs and supplies of other forms of energy and advances in technology. Irrespective of the competitive environment, we are focused on providing value to our customers and ensuring our retail rates remain among the lowest in the region and in the nation. In 2025, our summer residential rates were 19% below the regional average and 34% below the national average.

The following table presents our average retail rate per kilowatt-hour (kwh) by customer class and in total for the years ended December 31, 2025 and 2024:

Revenue per kwh20252024

Residential11.23 ¢11.38 ¢

Commercial & Industrial7.27 ¢7.03 ¢

Total Retail8.18 ¢7.98 ¢

Wholesale electricity markets are competitive under the Federal Energy Regulatory Commission (FERC) open access transmission tariffs, which require utilities to provide nondiscriminatory access to all wholesale users. In addition, the FERC has established a competitive process for the construction and operation of certain new electric transmission facilities under federal regulations. Certain states, including the three states in our service territory, have laws which provide the incumbent transmission owner the right of first refusal to construct and own new transmission facilities. Future changes or legal challenges to the laws which provide for the right of first refusal could impact the competitive conditions related to the construction of new transmission facilities.

OTP has franchises to operate as an electric utility in substantially all of the incorporated municipalities it serves. Franchise rights generally require periodic renewal. No franchises are required to serve unincorporated communities in any of the three states OTP serves.

GENERATION AND PURCHASED POWER

OTP primarily uses its own generation facilities to supply energy to customers and supplements this with power purchase agreements. To balance supply and demand, OTP also buys and sells electricity on the wholesale market as needed. The decision to use either owned generation or wholesale market energy depends on current market prices and the cost-effectiveness of each source. Wholesale energy is used when it offers a benefit to customers.

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As of December 31, 2025, OTP’s wholly or jointly owned plants and facilities, as well as in place power purchase agreements, and their nameplate capacity were:

Capacity /

Purchased Power in kW

(Nameplate Rating)

Owned Generation:

Baseload Plants

Big Stone Plant(1)
256,025

Coyote Station(2)
149,450

Total Baseload Plants405,475

Combustion Turbine and Small Diesel Units

Astoria Station245,000

Solway
44,500

All Other72,208

Total Combustion Turbine and Small Diesel Units361,708

Owned Wind Facilities

Merricourt150,000

Ashtabula III62,400

Luverne 49,500

Ashtabula 48,000

Langdon 40,500

Total Owned Wind Facilities350,400

Hoot Lake Solar
49,900

Hydroelectric Facilities3,870

Total Owned Generation Capacity1,171,353

Power Purchase Agreements:

Purchased Wind Power (greater than 2,000 kW)

Edgeley21,000

Langdon19,500

Total Purchased Wind40,500

Total Generating Capacity1,211,853

(1) Reflects OTP's 53.9% ownership percentage of jointly owned facility.

(2) Reflects OTP's 35.0% ownership percentage of jointly owned facility.

The following charts summarize the percentage of our nameplate capacity by source, including owned and jointly owned facilities and through power purchase arrangements, as of December 31, 2025 and 2024:

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Under the Midcontinent Independent System Operator (MISO) requirements, OTP is required to provide sufficient capacity through wholly or jointly owned generating capacity or power purchase agreements to meet its monthly weather-normalized forecast demand, plus a reserve obligation. MISO operates under a seasonal resource adequacy construct in which generation resources are accredited and planning reserve margin requirements are implemented on a seasonal basis. Current planning reserve margin requirements range between 7.9% and 25.3%, depending on the season.

The following charts summarize the percentage of retail kwh sold by source during the years ended December 31, 2025 and 2024:

Our sources of energy to serve our retail customers include energy from our owned or contracted generation plus energy acquired through the wholesale market. Market energy is purchased to meet customer demand when energy from our owned and contracted generation is insufficient or when market prices are lower than our internal production cost and therefore it is more economical to serve our customers with wholesale energy.

Capacity and Storage Additions

As part of our investment plan to meet our future energy needs, the following projects were recently completed or are currently under development or construction:

Wind Energy Facility Upgrades consisted of the replacement or upgrade of hubs, gearboxes, blades, generators and other components of our Ashtabula, Ashtabula III, Langdon and Luverne wind facilities at a total cost of approximately $230 million. We expect the increased energy production from these facilities after the recently completed upgrades will be equivalent to an additional 40 megawatts (MW) of generation. Following the completion of these upgrades, the energy production from each of these facilities became eligible for production tax credits (PTCs) over a ten-year period. We expect these projects will lower customer costs through a combination of fuel and purchased power savings and the tax credit benefits afforded to our customers.

Solway Solar is a solar facility currently under construction and located adjacent to our existing Solway natural gas plant in northern Minnesota. The project is expected to add an additional 50 MW of generating capacity. We estimate the facility will be operational by the end of 2026 or early 2027. OTP's capital investment is estimated to be approximately $80 million. We expect the energy production from this facility will be eligible for PTCs over a ten-year period. The costs of this project will be allocated to customers in Minnesota and South Dakota and have been approved for recovery subject to certain terms and conditions.

Abercrombie Solar is solar facility currently under development in southeastern North Dakota. In October 2024, we entered into a purchase agreement to acquire the development assets of the project, including approximately 3,400 acres of land, interconnection agreements, state and local permits, and all other assets of the project. The acquisition of these assets was completed in January 2026, and we currently estimate the facility will be operational by the end of 2028. Once complete, the facility is expected to have a generating capacity of 295 MW. OTP's capital investment in the project is estimated to be approximately $450 million. We anticipate the energy production from this facility will be eligible for PTCs over a ten-year period. The costs of this project will be allocated to customers in Minnesota and South Dakota and have been approved for recovery subject to certain terms and conditions.

Hoot Lake Battery Energy Storage System is a battery storage project currently under development located near our Hoot Lake Solar facility in Minnesota. Once complete, the facility is expected to have a storage capacity of 75 MW and a storage duration of four hours. OTP's capital investment in the project is estimated to be approximately $120 million, and we expect the project to qualify for a 40% investment tax credit upon completion. The costs of this project have been deemed eligible for rider recovery in Minnesota. We currently expect the facility will be operational in 2028.

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ENERGY TRANSITION

OTP is committed to providing reliable and affordable electric service to its customers while transitioning to a lower-carbon and increasingly clean energy future. We are intent on satisfying the public policy priorities of each jurisdiction in which we operate, including renewable and clean energy milestones applicable in certain of our state jurisdictions.

The energy transition of our generation portfolio includes historical and planned future investments in renewable generation, including wind and solar facilities, the planned investment in a battery storage facility, and the retirement of our two remaining co-owned coal generation facilities.

From 2005 through 2025, we added 420 MW of owned or contracted renewable generation to our portfolio. We anticipate adding an additional 345 MW of owned renewable solar generation to our portfolio between 2026 and 2028, and we are analyzing the potential for up to an additional 200 MW of owned or contracted wind generation by 2029. In addition, we anticipate adding 75 MW of battery storage by 2028 to complement our renewable generation portfolio. Finally, we currently anticipate closing our two co-owned coal generation facilities in the 2040s upon reaching the end of their operating lives.

The transition of our energy generation portfolio has reduced our carbon dioxide (CO2) emissions from our owned generation portfolio by approximately 35% from 2005 to 2025. We are targeting to reduce our CO2 emissions from our owned generation portfolio by 90% by 2050 from 2005 levels.

In 2025, we modified our 2050 carbon reduction goal, previously a targeted 97% reduction from 2005 levels, and eliminated our 2030 goal in recognition of the evolving energy landscape. Our near-term carbon emission levels are significantly impacted by many external factors, including regional energy demand, market energy prices, actual and planned retirements of baseload energy generation within our region, and other factors. As a result, it is difficult to predict with reasonable certainty the operating levels of our baseload and peaking generation facilities and resulting CO2 emissions.

RESOURCE MATERIALS

Coal is the principal fuel burned at our jointly owned Big Stone Plant and Coyote Station generating plants. Coyote Station, a mine-mouth facility, burns North Dakota lignite coal. Big Stone Plant burns western subbituminous coal. We source coal for our coal-fired power plants through requirements contracts which do not include minimum purchase requirements but do require all coal necessary for the operation of the respective plant to be purchased from the counterparty. Our coal supply contracts for our Big Stone Plant and Coyote Station have expiration dates in 2026 and 2040, respectively.

The supply agreement between the Coyote Station owners, including OTP, and the coal supplier includes provisions requiring the Coyote Station owners to purchase the membership interests and pay off or assume loan and lease obligations of the coal supplier, as well as complete mine closing and post-mining reclamation. The supply agreement expires in 2040 but does provide for early termination under certain circumstances and with requirements to fulfill certain obligations. See below and Note 1 to our consolidated financial statements included in this report on Form 10-K for additional information.

Coal is transported to Big Stone Plant by rail and is provided under a common carrier rate which includes a mileage-based fuel surcharge.

We purchase natural gas for use at our combustion turbine facilities based on anticipated short-term resource needs. We procure natural gas from multiple vendors at spot prices in a liquid market primarily under firm delivery contracts.

TRANSMISSION AND DISTRIBUTION

Our transmission and distribution assets deliver energy from energy generation sources to our customers. In addition, we earn revenue from the transmission of electricity over our wholly or jointly owned transmission assets for others under approved rate tariffs. As of December 31, 2025, we were the sole or joint owner of approximately 14,000 miles of transmission and distribution lines.

Midcontinent Independent System Operator

MISO is an independent, non-profit organization that operates the transmission facilities owned by other entities, including OTP, within its regional jurisdiction and administers energy and generation capacity markets. MISO has operational control of our transmission facilities above 100 kilovolts (kV). MISO seeks to optimize the efficiency of the interconnected system, provide solutions to regional planning needs and minimize risk to reliability through its security coordination, long-term regional planning, market monitoring, scheduling and tariff administration functions.

Transmission Investments

As a utility and transmission owner operating as a member within MISO, we are participating in large transmission investments intended to improve system reliability and resilience, to promote a cost-effective regional and interregional transmission system,

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and to allow new generating capacity to access the electric grid. The following projects are in various stages of planning and development or construction:

MISO Tranche 1.0. In 2022, MISO approved several projects within the first tranche of its long-range transmission plan. Within the first tranche of projects, OTP will be a partial owner of two new 345 kV transmission projects. These projects will be developed and constructed over several years and OTP's total investment in these projects is estimated to be $475 million. The following is a brief overview of the two projects included in Tranche 1.0:

Jamestown-Ellendale includes the construction of a new 345 kV transmission line in southeastern North Dakota spanning approximately 95 miles from Jamestown, North Dakota to Ellendale, North Dakota. We continue project planning and development and expect material procurement and construction to commence in 2026. The project is expected to be completed in 2029.

Big Stone South-Alexandria-Big Oaks includes the construction of a new 345 kV transmission line in eastern South Dakota and western Minnesota and the addition of a second circuit to an existing 345 kV line in central Minnesota. The new transmission line will span approximately 100 miles between Big Stone, South Dakota and Alexandria, Minnesota. A second circuit will be added to the existing transmission line spanning from Alexandria, Minnesota to Big Oaks, Minnesota. We continue project planning and development. Line construction on the second circuit has commenced. We expect construction to commence on the Big Stone South-Alexandria portion of the line in 2028. The project is expected to be completed in 2030.

MISO Tranche 2.1. In December 2024, MISO approved several projects within the second tranche of its long-range transmission plan. Within this second tranche of projects, OTP will be a partial owner of three projects, including the addition of a second circuit to an existing 345 kV transmission line, a new 345 kV transmission line, and a new 765 kV transmission line. These projects will be developed and constructed over several years, and OTP's total investment in these projects is currently estimated to be $800 million to $1.0 billion. The following is a brief overview of the three projects included in Tranche 2.1:

Bison-Alexandria includes the construction of a second 345 kV circuit, which is being added to an existing transmission line in eastern North Dakota and western Minnesota, as well as upgrades to an existing 230 kV line and substation. This project is in the initial stages of development and is expected to be completed in 2032.

Maple River-Cuyuna includes the construction of a new 345 kV transmission line in eastern North Dakota and western Minnesota, as well as investment in substation expansion. This project is in the initial stages of development and is expected to be completed in 2033.

Big Stone South-Brookings County includes the construction of a new 765 kV transmission line in eastern South Dakota, as well as investment in substation expansion. This project is in the initial stages of development and is expected to be completed in 2034.

Joint Targeted Interconnection Queue (JTIQ). In December 2024, MISO and Southwest Power Pool (SPP) approved a set of transmission projects that are part of a collaboration between MISO and SPP to construct high-voltage transmission lines along the MISO and SPP seam, which spans seven states - Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota and South Dakota. These projects will improve reliability and resolve constraints in the transmission system to allow for up to 30 gigawatts of new generation to be added to the system.

Bison-Hankinson-Big Stone South is a two-part new transmission line project. OTP is the sole owner of a new 345 kV transmission line spanning from Big Stone, South Dakota to Hankinson, North Dakota, and a partial owner of a new 345 kV line spanning from Hankinson, North Dakota to Mapleton, North Dakota. These projects, which are expected to be completed in 2034, are in the early stages of development. The U.S. Department of Energy (DOE) has approved a grant to partially fund the construction of these projects in an amount up to 25% of the total JTIQ project costs. OTP's capital investment in these projects, after the impact of the 25% DOE grant, is currently estimated to be $450 to $500 million.

SEASONALITY

Electricity demand is affected by seasonal weather differences, with peak demand occurring in the summer and winter months. As a result, our Electric segment operating results regularly fluctuate on a seasonal basis. In addition, fluctuations in electricity demand within the same season but between years can impact our operating results. We monitor the level of heating and cooling degree days in a period to assess the impact of weather-related effects on our operating results between periods.

PUBLIC UTILITY REGULATION

OTP is subject to regulation of rates and other matters in each of the three states in which it operates and by the federal government for, among other matters, the interstate transmission of electricity. OTP operates under approved retail electric tariff rates in all three states it serves. Tariff rates are designed to recover plant investments, a return on those investments and operating costs. In addition to determining rate tariffs, state regulatory commissions also authorize return on equity (ROE), capital structure

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and depreciation rates of our capital investments. Decisions by our regulators significantly impact our operating results, financial position and cash flows.

Below is a summary of the regulatory agencies with jurisdiction over OTP and the areas of regulation covered by each agency:

Regulatory

AgencyAreas of Regulation

Minnesota Public Utilities Commission

(MPUC)

Retail rates, issuance of securities, depreciation rates, capital structure, public utility services, construction of major facilities, establishment of exclusive assigned service areas, contracts with subsidiaries and other affiliated interests and other matters.

Selection or designation of sites for new generating plants (5,000 kW or more for wind generating facilities; 50,000 kW or more for non-wind generating facilities) and routes for transmission lines (100 kV or more and exceeding 1,500 feet).

Certificates of Need for generating plants and transmission assets.

Review and approval of fifteen-year Integrated Resource Plan.

North Dakota Public Service Commission

(NDPSC)
Retail rates, certain issuances of securities, construction of major utility facilities and other matters.

Approval of site and routes for new electric generating facilities (exceeding 500 kW for wind generating facilities; exceeding 50,000 kW for non-wind generating facilities) and high voltage transmission lines (exceeding 115 kV).

Certificates of Convenience and Necessity for service territory expansions.

Review and approval of fifteen-year Integrated Resource Plan.

South Dakota Public Utilities Commission

(SDPUC)
Retail rates, public utility services, construction of major facilities, establishment of assigned service areas and other matters.

Approval of sites and routes for new electric generating facilities (100,000 kW or more) and most transmission lines (exceeding 115 kV).

Federal Energy Regulatory Commission

(FERC)
Wholesale electricity sales, the transmission and sale of electric energy in interstate commerce, interconnection of facilities to the interstate transmission system, certain mergers and acquisitions, and corporate transactions, hydroelectric licensing and accounting policies and practices.

Compliance with North American Electric Reliability Corporation (NERC) reliability standards, including standards on cybersecurity and protection of critical infrastructure.

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In addition to base rates, which are established through periodic rate case proceedings within each state jurisdiction, there are other mechanisms for recovery of our capital investments and operating costs between rate cases. The following table summarizes the significant recovery mechanisms:

Recovery MechanismJurisdiction(s)Additional Information

Fuel Clause Adjustment (FCA)MN, ND, SD
Provides for periodic billing adjustments for changes in prudently incurred costs of fuel and purchased power. In North and South Dakota, fuel and purchased power costs are generally adjusted on a monthly basis. In Minnesota, fuel and purchased power costs are estimated on an annual basis and the accumulated difference between actual and estimated cost is refunded or recovered, subject to regulatory approval, in subsequent periods.

Transmission Cost Recovery Rider (TCR)MN, ND, SD
Provides for the recovery of costs outside of a general rate case for investments in new or modified electric transmission assets and certain MISO transmission services and related costs.

Renewable Resource Rider (RRR)MN, NDProvides for the recovery of costs outside of a general rate case for investments in certain new renewable energy projects.

Energy Conservation and Optimization Rider (ECO)MNUnder Minnesota law, OTP is required to save 1.75% of its gross retail energy revenues through the energy conservation and optimization program. Recovery of these costs outside of a general rate case occurs through the ECO rider.

Electric Utility Infrastructure Costs Rider (EUIC)MNProvides for the recovery of costs for investments made to replace or modify existing infrastructure if the replacement or modification conserves energy or uses energy more efficiently.

Metering and Distribution Technology Cost Recovery Rider (MDT)NDProvides for the recovery of costs for advanced metering infrastructure, outage management systems and demand response projects.

Generation Cost Recovery Rider (GCR)NDProvides for the recovery of costs outside of a general rate case for investments in new generation facilities.

Energy Efficiency Plan (EEP)SDProvides for the recovery of costs from energy efficiency investments.

Phase-In Rider (PIR)SDProvides for the recovery of costs outside of a general rate case for investments in new generation facilities and advanced grid infrastructure.

Resource Planning

Under Minnesota law, utilities are required to submit for approval by the Minnesota Public Utilities Commission (MPUC) a 15-year advance Integrated Resource Plan (IRP) every two years. An IRP is a set of resource options a utility could use to meet the service needs of its customers over the forecast period, including an explanation of the utility’s supply and demand circumstances, and the extent to which each resource option would be used to meet those service needs. The MPUC’s findings of fact and conclusions regarding IRPs are considered to be prima facie evidence, subject to rebuttal, in future rate reviews and other proceedings. OTP will file their next IRP in Minnesota in 2026.

Under North Dakota law, utilities are required to submit a 15-year advance IRP every three years for approval by the North Dakota Public Service Commission (NDPSC). OTP will file their next IRP in North Dakota in 2027.

South Dakota does not have a formal advance IRP process.

Capital Structure Petition

Minnesota law requires an annual filing of a capital structure petition with the MPUC. In this filing, the MPUC reviews and approves OTP's capital structure. Once approved, OTP may issue securities without further petition or approval, provided the issuance is consistent with the purposes and amounts set forth in the approved petition. OTP’s current capital structure, approved by the MPUC on December 12, 2025, allows for an equity-to-total-capitalization ratio between 46.7% and 57.1%, with total capitalization not to exceed $2.4 billion.

Renewable Energy Standard

Minnesota has adopted a renewable energy standard requiring utilities to generate or procure sufficient renewable generation such that the following percentages of total retail electric sales to Minnesota customers come from qualifying renewable sources: 25% by 2025 and 55% by 2035. Qualifying renewable sources are classified as solar, wind, hydropower, hydrogen and certain biomass generation. We met the current renewable sources requirements with a combination of owned renewable generation and purchases from renewable generation sources. We were in compliance with the 2025 target established by the standard, and we plan to comply with the future requirements of this standard through a combination of our existing and projected renewable generation fleet.

Minnesota law also requires 1.5% of total Minnesota retail electric sales by public utilities to be supplied by solar energy. For a public utility with between 50,000 and 200,000 retail electric customers, such as OTP, at least 10% of the 1.5% requirement must be met by

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solar energy generated by or procured from solar photovoltaic devices with a nameplate capacity of 40 kW or less. We met the overall solar requirement in 2025, with a combination of owned solar generation and solar renewable energy certificate (REC) purchases, but we were not compliant with the requirement that 10% of the 1.5% be met by solar energy generated by or procured from solar photovoltaic devices with a nameplate capacity of 40 kW or less.

Minnesota Clean Energy Law

Minnesota's Clean Energy Law requires electric utilities to generate or procure sufficient electricity from carbon-free resources to provide retail customers in Minnesota with at least the following percentages of carbon-free electric energy: 80% by 2030, 90% by 2035, and 100% by 2040. Carbon-free resources include wind, solar, hydropower and nuclear generation. To provide flexibility, the law allows electric utilities to use RECs to offset carbon emissions and for the MPUC to consider whether a regulated utility's requirement to meet established standards should be delayed due to affordability or reliability impacts. We anticipate at least 80% of our Minnesota retail sales will be served with carbon-free generation by 2030, in compliance with Minnesota's clean energy requirements.

ENVIRONMENTAL REGULATION

OTP is subject to stringent federal and state environmental standards and regulations regarding, among other things, air, water and solid waste pollution. OTP's facilities have been designed, constructed and, as necessary, updated, to operate in compliance with applicable environmental regulations. However, new or amended laws and regulations or changes in interpretations of current laws and regulations may require additional pollution control equipment or other emission reduction measures which may require future capital investments or ongoing operating and monitoring costs.

Financial Impacts

For the five-year period ended December 31, 2025, OTP invested approximately $6.3 million in environmental control equipment, including $1.9 million in 2025. Our capital budget for the next five years includes approximately $9.3 million of capital investments in environmental control equipment. The timing and amount of our expenditures may change as the regulatory environment changes.

Emerging Regulation

Regional Haze Rule (RHR). The Environmental Protection Agency (EPA) adopted the RHR in an effort to improve visibility in national parks and wilderness areas. The RHR requires states, in coordination with the EPA and other governmental agencies, to develop and implement state implementation plans (SIPs) that work towards achieving natural visibility conditions by the year 2064; to set goals to ensure reasonable progress is being made; and to periodically evaluate whether those goals and progress are on track or whether additional emission reductions are necessary. RHR compliance is to be monitored through several implementation periods, the second of which covers the years 2018-2028.

Coyote Station, OTP's jointly owned coal-fired power plant in North Dakota, is subject to assessment in the second implementation period under the North Dakota SIP. The North Dakota Department of Environmental Quality (NDDEQ) submitted its SIP to the EPA in August 2022. In its plan, the NDDEQ concluded it is not reasonable to require additional emission controls during this planning period.

On December 2, 2024, the EPA published its final ruling on North Dakota's SIP, approving certain aspects of the plan and disapproving other aspects of the plan. As part of its partial disapproval, the EPA found that North Dakota failed to submit a long-term strategy that includes enforceable emissions limitations, compliance schedules and other measures necessary to make reasonable progress on national visibility goals. Specific to Coyote Station, the EPA found that North Dakota relied on non-statutory visibility modeling to reject the installation of additional nitrogen oxides and sulfur dioxide emission controls.

Having disapproved, in part, the North Dakota SIP, the EPA must promulgate a Federal Implementation Plan within two years from the issuance of its final decision. The Federal Implementation Plan may include emission controls required to satisfy the requirements of the RHR. In March 2025, the EPA announced it would begin restructuring the RHR to streamline requirements for states, and on April 30, 2025, the EPA granted a request to reconsider the December 2024 partial disapproval of the North Dakota SIP.

At this time, the final resolution of regional haze compliance in North Dakota, and specifically the impact, if any, on the operations of Coyote Station is uncertain.

Clean Air Act. In May 2024, the EPA finalized new regulations under Section 111 of the Clean Air Act to regulate greenhouse gas (GHG) emissions from existing and new fossil fuel-based power plants. The final rule establishes subcategories for new combustion turbines and existing coal-fired power plants to achieve certain CO2 emission reduction levels based on the respective subcategory. For existing coal-fired power plants, the applicable subcategory is based upon the date at which the plant will cease operations.

For existing coal-fired power plants anticipated to be operated after January 2039, the regulation set a Best System of Emission Reduction (BSER) based on 90% capture and sequestration of CO2 emissions with a compliance date of January 2032. For existing

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coal-fired power plants anticipated to be operated after January 2032 but planned to cease operations before January 2039, the regulation set a BSER of 40% co-firing with natural gas, which would result in a 16% reduction in CO2 emissions rate with a compliance date of January 2030. Coal-fired power plants with federally enforceable plans to cease operations by January 2032 are not subject to this regulation.

Following the issuance of the new regulations, several states and industry groups filed lawsuits challenging the regulation, arguing the EPA overstepped its authority under the Clean Air Act.

In June 2025, the EPA published a proposed rule that would repeal the existing GHG emission standards for fossil fuel-fired power plants. The proposal includes a finding that GHG emissions from such sources do not significantly contribute to dangerous air pollution, which the EPA asserts is a necessary legal predicate for regulation under the Clean Air Act. As an alternative, the EPA is also proposing to repeal only the emission guidelines applicable to existing fossil fuel-fired steam generating units. The proposed rule has not yet been finalized.

Coal Combustion Residual (CCR) Regulation. In May 2024, the EPA published a final rule amending CCR regulations, which introduced new requirements for the management of coal ash at active coal-fired power plants and inactive coal-fired power plants with a legacy surface impoundment. The regulations impose new requirements including groundwater monitoring, closure standards, post-closure care obligations and potential remediation activities. In 2025, the EPA proposed several delays for coal ash disposal and plant closure requirements to address electric grid reliability concerns. We anticipate we may incur costs related to coal ash removal and groundwater monitoring in the future as a result of the amended regulation. We continue to review and evaluate the overall impact this regulation may have on our business, including potential impacts on our operating results, financial condition and liquidity.

Mercury and Air Toxics Standards (MATS). In May 2024, the EPA published final regulations to strengthen and update MATS for coal-fired power plants, tightening the emission standards for both particulate matter and for mercury from existing lignite-fired sources. Currently, OTP's coal-fired power plants would be required to comply with these regulations in 2029. However, in June 2025, the EPA published a proposed rule to repeal the May 2024 MATS for coal-fired power plants. Multiple environmental organizations have filed legal challenges to the proposed rule. These legal challenges remain pending but are currently held in abeyance while the EPA undertakes its reconsideration of the MATS amendments. We continue to review and evaluate the overall impact this regulation may have on our business, including potential impacts on our operating results, financial condition and liquidity.

Climate Change and Greenhouse Gas Regulation

Global climate change presents a significant energy and environmental policy challenge. Combustion of fossil fuels for the generation of electricity is a considerable source of CO2 emissions, which is the primary GHG emitted by our utility operations. The federal government, state governments and international organizations have periodically pursued, and may continue to pursue, climate policies to regulate GHG emissions as part of a broad-based effort to limit global warming.

The implementation of climate change programs, such as the Minnesota Clean Energy Law, regulations under the Clean Air Act, if not repealed, and other existing or future federal or state regulations targeting GHG emissions, may have a significant impact on our utility business.

MANUFACTURING
Contribution to Operating Revenues: 24% (2025), 26% (2024), 30% (2023)

Our Manufacturing businesses are engaged in the production of metal or plastics parts and products sold to commercial customers. The following is a brief description of each of these businesses:

BTD Manufacturing, Inc. (BTD), founded in 1979 and acquired by Otter Tail Corporation in 1995, provides metal fabrication services for custom machine parts and metal components through its facilities in Detroit Lakes and Lakeville, Minnesota, Washington, Illinois and Dawsonville, Georgia.

T.O. Plastics, Inc. (T.O. Plastics), founded in 1948 and acquired by Otter Tail Corporation in 2001, manufactures thermoformed plastics products, including horticulture containers and custom packaging for medical and industrial markets through its facilities in Otsego and Clearwater, Minnesota.

OVERVIEW

BTD is a value-added metal fabricator that produces custom machine parts and metal components for its original equipment manufacturer (OEM) customers. Through our manufacturing facilities in Minnesota, Illinois, and Georgia, with more than a million square feet of manufacturing capacity, we provide a comprehensive suite of capabilities to produce highly engineered metal parts and components to serve our OEM customers. Our metal fabrication services include:

Research and development resources to design and produce product prototypes quickly and cost-effectively;

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Tool design and construction specializing in both short- and long-run tooling, providing cost effective tools tailored to customer specifications;

Fabrication and welding including advanced fabrication and welding, including robotic welding, using the latest technologies to deliver high-quality products;

Stamping is the cornerstone service of our business, with presses ranging from 45 to 800 tons, providing cost-effective solutions and flexible options for short and long production runs;

Tubing including precise forming and bending operations to manufacture tubular products tailored to customer requirements;

Assembly capabilities to provide a full-service experience for our customers;

Finishing and painting services including liquid primers and powder coating to meet customer specifications; and

Inventory management services include warehousing, packaging, kitting and product sequencing to ensure we deliver the right products to our customers when they need them.

Through these capabilities, BTD manufacturers over 30,000 unique parts, including products ranging from welded frames and chassis, roll cages, heat shields, support brackets, handles and railings, and tube and pipe components. Our facilities are ISO 9001:2015 certified, which is the international standard for quality management systems.

Our strategy emphasizes utilizing the above set of capabilities from development through inventory management to provide highly engineered metal parts and components at a competitive cost. Leveraging our engineering expertise and technical proficiency, BTD creates value during the entire development, manufacturing and logistics cycle.

T.O. Plastics provides custom and proprietary thermoforming solutions for the horticulture, medical, industrial and various other markets. Our proprietary horticulture products are manufactured through a vertically integrated process of raw material pelletizing, extrusion and thermoforming to produce plastic products that serve the early-growth horticulture market. Our proprietary products include round and square pots, plug, carrying and specialty trays, propagation sheets and various other products used in the germination and early growth horticulture industry. The applications for our products include greenhouses and nurseries, microgreen development and vertical farming.

T.O. Plastics also provides custom thermoformed plastic packing and parts to serve customers in the medical, industrial, recreational, electronic and other markets. We offer a full suite of capabilities including design, prototyping, tooling construction and thermoforming production to meet our customers' packaging and other plastic parts needs. Our products include various medical device packaging, shipping trays, laboratory trays, housing enclosures and consumer packaging.

Both our Clearwater and Otsego facilities in Minnesota are ISO 9001:2015 certified. In addition, our Otsego facility is certified under ISO 13485:2016, which is the international standard for quality management systems in the design and manufacture of medical devices. In addition, we maintain two Class 8 cleanrooms at our Otsego facility used in the production of plastic packaging and parts for the medical industry.

Our strategy is focused on producing horticulture products through our integrated manufacturing capabilities to deliver high-quality products at a competitive cost. We also strive to provide custom plastics packaging and parts to our medical and industrial customers through our end-to-end service offering from discovery and design to tooling and manufacturing while meeting all customer product specifications.

CUSTOMERS

Our metal fabrication business primarily serves OEMs operating in the Midwest and Southeastern U.S. The primary end markets we serve include recreational vehicle (powersports), lawn and garden, agricultural, construction, industrial, energy equipment and certain other markets. Our customers include some of the largest vehicle and equipment manufacturers operating in the U.S., including Caterpillar Inc., CNH Industrial N.V., Cummins Inc., Deere & Company, Honda Motor Co., Kawasaki Heavy Industries, Polaris Inc. and The Toro Company.

We have developed long-standing business relationships with our OEM customers, many of which span decades. In many cases, we are an integral component of our customers' supply chains and strive to maintain strong strategic alignment. We have not historically experienced high rates of customer attrition given high customer switching costs resulting from our embedded relationships driven by our broad capabilities and scale.

The principal method of product distribution is by direct shipment to our customers through direct customer pick-up or common carrier ground transportation.

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Our plastic products business primarily serves U.S. customers in the horticulture, medical and life sciences, industrial, recreational and electronics industries. Most of our horticulture products are sold through distributors. Our custom packaging and other plastic products are manufactured to customer specifications and sold to other manufacturers or end customers.

The following presents our revenue by end market for each of the five years ended December 31:

Although we sell our products to a large number of customers across a diverse group of end markets, three customers combined to account for approximately 44% of segment operating revenues in 2025.

COMPETITIVE CONDITIONS

The metal fabrication market is highly fragmented with competition primarily from domestic entities. Most competition is comprised of privately owned small-scale fabrication shops that specialize in a single or limited set of production capabilities or focus on certain end markets or geographical service territories. Some larger competitors bring broad manufacturing capabilities and greater geographical reach. Competition can be geographically regionalized as customers procure products locally to manage costs and minimize logistical complexities. Competitive dynamics we face within the industry include breadth of product offerings, competitive cost structures and product pricing, and manufacturing capacity and distribution capabilities.

BTD competes on its full breadth of value-add services from research and development, to tool and die design and manufacturing, to its full suite of fabrication and machining capabilities, and its finishing services and inventory management capabilities. Our end-to-end solution reduces customer logistics burden, compresses cycle times and improves quality. We have invested in automation and robotics to improve productivity, increase process repeatability, manage skilled labor constraints and enhance product quality.

The diversity of end markets BTD serves, its full suite of manufacturing capabilities, and its geographical reach from the Midwest to the Southeast of the U.S. provides resilience against fluctuations in individual sector or geographical demand. When demand shifts, we can adapt by reallocating production to align with changing conditions.

The plastic thermoforming market for horticultural products is highly fragmented with competition from domestic and international entities. Our competitors vary in size, production capabilities, geographical reach and customer focus. Competition varies by sales channel, with some competitors primarily selling through horticulture focused distribution, while other competitors implement a direct sales strategy to the horticulture grower customer. Low-cost import competition from Southeast Asia has expanded with these competitors primarily targeting the direct to grower sales channel.

Competition in the custom plastic packaging and parts industry is highly fragmented with competition from domestic and international entities. Many competitors are larger in size with greater manufacturing capabilities and geographical reach.

Overall, the principal competitive factors in our Manufacturing segment are product quality, price competitiveness, breadth of product line and customer service. We intend to continue to compete based on high-quality products, innovative production technologies, cost-effective manufacturing techniques, close customer relations and support, and increasing product offerings.

RESOURCE MATERIALS

We use raw materials in the products we manufacture, including, among others, steel, aluminum, and polystyrene and other plastics resins. Steel is our most significant raw material input. We obtain nearly all of our steel inventory from large domestic suppliers. Managing price volatility and ensuring raw material availability are important aspects of our business.

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Consistent with industry practice, our contracts with our metal fabrication customers incorporate steel cost pass-through mechanisms or indexed pricing that mitigates commodity volatility and its impact on profitability.

Additionally, a certain amount of residual material (scrap) is a by-product of the manufacturing and production processes. We are able to sell nearly all scrap material in the scrap market. Declines in commodity prices for these scrap materials due to weakened demand or excess supply can negatively impact the profitability of our Manufacturing segment.

SEASONALITY

Demand for our products can be impacted by the seasonality of the demand for our customers' products and our customers' production schedules. Generally, sales volumes and earnings are lower in the fourth quarter.

ENVIRONMENTAL REGULATION

Our manufacturing businesses are subject to environmental, health and safety laws and regulations, including those governing discharges to air and water, the management and disposal of hazardous substances, the cleanup of contaminated sites and health and safety matters.

PLASTICS
Contribution to Operating Revenues: 32% (2025), 35% (2024), 31% (2023)

Our Plastics businesses produce PVC pipe at plants in North Dakota and Arizona. The following is a brief description of these businesses:

Northern Pipe Products, Inc. (Northern Pipe), founded in 1979 and acquired by Otter Tail Corporation in 1995, located in Fargo, North Dakota, manufactures and sells PVC pipe for municipal water, rural water, wastewater, storm drainage systems and other uses in the northern, midwestern, south-central and western regions of the United States as well as central and western Canada.

Vinyltech Corporation (Vinyltech), founded in 1983 and acquired by Otter Tail Corporation in 2000, located in Phoenix, Arizona, manufactures and sells PVC pipe for municipal water, wastewater, water reclamation systems and other uses in the western, northwest and south-central regions of the United States.

OVERVIEW

Our Plastics segment businesses manufacture PVC pipe primarily used in municipal water infrastructure, which encompasses potable water distribution, wastewater collection and distribution, and water reclamation systems. Potable water systems use PVC pressure pipe for transmission and distribution lines delivering treated water to residential and commercial developments. Wastewater and water reclamation systems use PVC pipe to transport non-potable water to treatment facilities or for reuse applications within municipal systems. Our Plastics segment businesses also manufacture PVC pipe for use within residential and commercial structures and rural water systems.

The end markets and uses of our PVC pipe generally approximate the following: 90% Municipal; 5% Residential and Commercial; 5% Rural Water.

PVC pipe is manufactured through an extrusion process, during which PVC resin compound (a dry powder-like substance) is blended with other materials and introduced into an extrusion machine, where it is heated to a molten state and then forced through a sizing apparatus to produce the pipe. The newly extruded pipe is pulled through a series of water-cooling tanks, marked to identify the type of pipe and cut to finished lengths. We produce pipe in a variety of diameters ranging from 3/4" to 24" and in varying lengths, generally from 10 feet to 20 feet, and up to 45 feet for certain types of pipe.

All PVC pipe is manufactured to applicable standards and specifications defined by the American Water Works Association or ASTM International standards and are subject to rigorous internal quality assurances and third-party inspections for ongoing compliance.

We have approximately 400 million pounds of annual nameplate production capacity between our facilities in Fargo, North Dakota and Phoenix, Arizona, with over 250,000 square feet of manufacturing and warehousing space.

Our strategy is aimed at providing market-leading reliability and responsiveness, delivering quality products when our customers need them. Our agile operations provide us the flexibility to respond to customer needs and allow us to deliver the needed products in a timely manner.

CUSTOMERS

Substantially all of our products are sold through distributors, which range from large, national distributors to smaller regional or local distributors. In total, we sell to over 200 distribution customers, but do have a large volume of sales activity with two national distributors. In 2025, these two distributor customers combined to account for 47% of segment operating revenues.

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Our distributor customers serve contractors, municipalities and other local governmental entities engaged in public infrastructure projects and residential and commercial development. Demand for our products is influenced by new construction development, as growth in residential and commercial building activity drives municipal water infrastructure, and system rehabilitation and replacement as aging municipal systems require upgrades or replacement.

Our sales and service territory generally includes the western half of the U.S. and western Canada. We market our products through a combination of independent sales representatives, company salespeople and customer service representatives. The principal method for the distribution of our products is by common carrier ground transportation.

COMPETITIVE CONDITIONS

Competition in the PVC pipe industry is characterized by a limited number of domestic PVC pipe manufacturers, with the three largest competitors capturing a significant portion of the overall market. These large competitors have a broader geographical reach, integration with PVC resin producers, greater manufacturing capacity and national relationships with key distributors. Competition is generally geographically regionalized as shipping costs are typically cost prohibitive to compete on a national basis.

The principal factors of competition are price, customer service, product availability, shipping costs and product performance. We compete on a regional basis, serving our core markets with strong customer service and high-quality products.

In addition to competition with other PVC pipe manufacturers, our PVC pipe products compete with other products that serve the same end markets, including ductile iron, high-density polyethylene (HDPE), steel and concrete pipe products.

We will continue to compete based on our high level of service and quality, including being a responsive and reliable partner to our customers through maintaining product availability, by producing high-quality products and by using cost-effective production techniques.

RESOURCE MATERIALS

There are four domestic manufacturers of PVC resin, the primary material input used in the manufacturing of PVC pipe. In 2025, we utilized all four vendors to source our PVC resin. We maintain contractual arrangements with certain PVC resin manufacturers. These multi-year agreements include estimated annual order quantities, with no required minimum purchases, and negotiated pricing based on the market price of resin.

The supply of PVC resin may be limited at times due to insufficient manufacturing capacity or limited availability of feedstock products. Most U.S. resin production facilities are located in the Gulf Coast region. These facilities are subject to the risk of damage or production shutdowns because of exposure to hurricanes or other extreme weather events.

We acquire PVC resin in bulk, shipped by rail to our facilities. We have the capability to store a limited supply of resin at our manufacturing plants.

Due to the commodity nature of PVC resin and the dynamic supply and demand factors worldwide, the market for PVC resin can be subject to significant fluctuations in price.

In addition to PVC resin, we use certain other materials, such as stabilizers, waxes, gaskets and lumber, in the process of manufacturing and shipping our PVC pipe products. We generally source these materials from a limited number of suppliers.

SEASONALITY

Demand for our PVC pipe products can be impacted by seasonal weather differences, with generally lower sales volumes realized in the first and fourth quarters of the year when cold temperatures and frozen ground across the northern portion of our footprint can delay or prevent construction activity and consequently delay or prevent customer orders of PVC pipe.

ENVIRONMENTAL REGULATION

Our plastics businesses are subject to environmental, health and safety laws and regulations including those governing discharges to air and water, the management and disposal of hazardous substances, the cleanup of contaminated sites and health and safety matters.