$9.39
$14.22
bear $9.39
base $12.05
bull $14.22
margin of safety $8.00
market price* $19.00
MDU Resources is now a pure regulated utility and pipeline company. It completed the spin-off of Knife River (construction materials) in May 2023 and of Everus Construction in October 2024. What remains is Montana-Dakota Utilities (electricity in North Dakota, Montana, South Dakota and Wyoming), natural gas distribution through Montana-Dakota, Cascade Natural Gas (Washington and Oregon) and Intermountain Gas (Idaho), and the WBI Energy interstate pipeline in the Bakken region. In 2025 the electric business earned $64.9 million, gas distribution $56.1 million and the pipeline $68.2 million. State commissions set the prices: the company earns an allowed return (recent gas rate orders range from 9.5% to 9.65% on equity) on the plant it has invested, called its rate base. At the end of 2025 that was $1.8 billion for electric and $2.2 billion for gas. How we measured earnings. We start from operating cash flow, take out working-capital swings and stock compensation, and deduct the capital spending needed to keep the existing system intact. For a regulated utility we set that sustaining spending equal to depreciation. Spending above depreciation, such as the 49% stake in Badger Wind Farm bought in December 2025, grows the rate base, and customers pay a return on it. Measured this way, owner earnings were $158 million ($0.77 a share) in 2024 and $179 million ($0.87 a share) in 2025. Only 2024 and 2025 describe the business as it now exists, because earlier years carry spin-off costs and holding-company overhead. To value the business before its lenders, we add back cash interest. That gives $266 million in 2024 and $278 million in 2025, and we use the $272 million midpoint as the starting level. That figure rose 4.4% in 2025, and the base case assumes the same 4.4% for the first year. Growth we credit, and growth we don't. The company has grown its utility rate base 8.7% a year for five years and plans about $2.5 billion of utility spending over the next five. That growth is real, but it is paid for with new borrowing and new shares (the diluted share count rose from 205.3 million in 2025 to 211.7 million by mid-2026). At today's earned return of roughly 6% to 7% on invested capital, each new dollar invested earns about what we require, so it adds little value. The base case therefore credits only increases already approved or already paid for: the Washington gas rate step effective March 2026, the $13.0 million Idaho gas increase effective January 2026, and Badger Wind, which entered service in December 2025. Data-center load (Applied Digital at Ellendale, plus a further 350 MW approved in North Dakota) adds mostly transmission revenue, because the power is bought from the regional market. It is modest and already partly in 2025 results. We give no value to the proposed Bakken East pipeline, whose design and cost were still to be set after a 2026 open season, or to the contracted Line Section 32 expansion, which still awaits federal approval and has no disclosed cost. Debt. At June 30, 2026 the company owed $2,577 million. Most of it is fixed-rate notes averaging about 4.8%, below the 6% we require, and that cheap financing is worth about $213 million. Net debt is therefore about $2,365 million, or $11.17 a share. Maturities are manageable: $274.7 million in 2027 and less than $150 million a year from 2028 to 2030. In every case, business cash flow before growth spending covers interest more than twice. Base case: business cash flow rises 4.4% in the first year and 4% in the second as the approved rate orders take full effect, to about $296 million. It then holds flat in dollars, sustained by an exclusive regulated service territory where customers have grown 1% to 2% a year. The business is worth about $4.9 billion ($23.22 a share). Less net debt of $11.17, that leaves $12.05 a share.
Bear case: cash flow stays flat at $272 million for ten years, as in 2025 when higher operating costs (payroll and a Coyote Station outage) cut electric earnings by $9.9 million despite revenue growth. After year ten, Cascade's gas business in Washington and Oregon, where the Climate Commitment Act and Oregon's Climate Protection Program aim to cut gas use, fades to nothing over 20 years. The business is worth about $4.35 billion ($20.56 a share), leaving $9.39 a share after debt.
Bull case: approved rate increases and the new wind farm lift cash flow 8% in the first year, in line with the roughly 10% rise in pre-interest earnings in the first half of 2026, then another 3%. The five-year utility spending plan earns 7%, close to the allowed returns. The business is worth about $5.4 billion ($25.39 a share), leaving $14.22 a share. What could make this wrong. The pipeline produces about a third of earnings, so a sustained fall in Bakken drilling would hurt more than the bear case assumes. The company names wildfire liability, which insurers now cover less fully, and possible new pollution-control costs at the co-owned Coyote Station as risks. Neither can be sized from the filings, so neither is in the numbers. Operating cash flow fell in the first half of 2026 ($264 million against $336 million a year earlier), but the drop came from working-capital timing (mainly other current assets and payables) while earnings rose, so we did not treat it as a new run rate. Change from our previous analysis. Our earlier estimate ($0 bear, $6.00 base, $14.30 bull) assumed 6% to 8% growth in line with management's plan, followed by permanent growth, and then applied a higher, risk-adjusted discount rate. We now credit only growth that is approved or paid for, value all cases at a single 6% rate, and charge risk through the bear case. We also count the benefit of the company's low-cost fixed-rate debt. Together these raise the base and bear values, while the bull value is about unchanged. The margin-of-safety price is $8.00. That is about a third below the base value and below the bear value. The discount reflects heavy debt, slow per-share growth, and the pipeline concentration.