MDU Resources Group Annual Report 2020

FY2020 Annual Report · MDU Resources Group

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MDU Resources Group, Inc.Highlights

Years ended December 31,

Operating revenues
Operating income
Net Income
Earnings per share
Dividends declared per common share
Weighted average common shares outstanding — diluted
Total assets
Total equity
Total debt
Capitalization ratios:
Total equity
Total debt

Price/earnings from continuing operations ratio (12 months ended)
Book value per share
Market value as a percent of book value
Employees

2020

2019

(In millions, where applicable)

$5,532.7
$ 544.9
$ 390.2
1.95
$
.835
$
200.6
$ 8,053
$ 3,079
$ 2,263

57.6%
42.4
100%
13.5x
$ 15.36

171.5%
12,994

$5,336.8
$ 481.2
$ 335.5
1.69
$
.815
$
198.6
$ 7,683
$ 2,847
$ 2,243

55.9%
44.1
100%
17.6x
$ 14.21

209.1%

13,359

Forward-looking statements: This Annual Report contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934. Forward-looking
statements should be read with the cautionary statements and important factors included in “Part I, Forward-Looking Statements” and “Item 1A — Risk Factors” of the company’s
“2020 Form 10-K.” Forward-looking statements are all statements other than statements of historic fact, including without limitation those statements that are identified by the words
anticipates, estimates, expects, intends, plans, predicts and similar expressions.

MDU Resources Group, Inc.

Regulated Energy Delivery
Electric and Natural Gas Utilities
MDU Resources Group’s utility companies serve approximately 1.14 million customers.
Cascade Natural Gas Corporation distributes natural gas in Oregon and Washington.
Great Plains Natural Gas Co. distributes natural gas in western Minnesota and
southeastern North Dakota. Intermountain Gas Company distributes natural gas in
southern Idaho. Montana-Dakota Utilities Co. generates, transmits and distributes
electricity and distributes natural gas in Montana, North Dakota, South Dakota and
Wyoming. These operations also supply related value-added services.

2020 Key Statistics
Revenues (millions)
Electric
Natural gas
Net income (millions)
Electric
Natural gas
Electric retail sales (million kWh)
Natural gas distribution (MMdk)
Retail sales
Transportation sales

$332.0
$848.2

$55.6
$44.0
3,204.5

114.5
160.0

Electric and natural gas utility areas

Electric generating stations

States of operations

Our Businesses

Regulated Energy Delivery
Pipeline
WBI Energy provides natural gas transportation and underground storage services
through regulated pipeline systems primarily in the Rocky Mountain and northern Great
Plains regions of the United States. It also provides cathodic protection and other
energy-related services.

2020 Key Statistics
Revenues (millions)
Net income (millions)
Pipeline transportation (MMdk)

$143.9
$37.0
438.6

Company storage fields

Pipeline systems

States of operations

Interconnecting pipelines

Construction Materials and Services
Construction Materials and Contracting
Knife River Corporation mines aggregates and markets crushed stone, sand, gravel and
related construction materials, including ready-mixed concrete, cement, asphalt, liquid
asphalt and other value-added products. It also performs integrated contracting services.

Construction Materials and Services
Construction Services
MDU Construction Services Group provides inside and outside specialty contracting
services, including constructing and maintaining electric and communication lines,
gas pipelines, fire suppression systems, and external lighting and traffic signalization.
It also provides utility excavation and inside electrical and mechanical services, and
manufactures and distributes transmission line construction equipment and supplies.

2020 Key Statistics
Revenues (millions)
Net income (millions)

$2,095.7
$109.7

Construction services offices

Authorized states of operation

VAWV

AL GA

$2,178.0
$147.3

2020 Key Statistics
Revenues (millions)
Net income (millions)
Construction materials sales (thousands)
Aggregates (tons)
Asphalt (tons)
Ready-mixed concrete (cubic yards)
Construction materials aggregate
reserves (billion tons)

30,949
7,202
4,087

1.1

States of operation

Market areas

Note: The revenues and earnings noted on this page exclude discontinued operations, the Other category and intercompany eliminations.

MDU Resources Group, Inc.Report to Stockholders

2020 needs no explanation in terms

of the challenges it presented to
our country, our company, our

customers and our employees. Despite
the pandemic, economic disruptions,
social unrest and political turmoil, we
are extremely proud of how readily our
employees adapted and how well they
performed. In fact, MDU Resources
Group recorded its second-best earnings
on record in the company’s 97-year
history. We continued Building a Strong
America® by providing essential
products and services to our customers.
Earnings in 2020 were $390.2 million, or
$1.95 per share, which was a 16%
increase over 2019 earnings of $335.5
million, or $1.69 per share.

We are very pleased with how well our
corporation responded to the COVID-19
pandemic. Our management team
demonstrated its strong leadership skills
in executing our strategy while
navigating the additional challenges.
This included increasing the frequency
of consultations between our board and
management team. We also increased
communication with employees,
implementing new tools and channels to
reach a workforce that transitioned to
working at home when possible or under
additional safety precautions when not.

We also are proud that in 2020 we
increased our dividend for the 30th
consecutive year and have paid
dividends uninterrupted for 83 years.
Dividends are part of total returns you

2.0

$1.95

$1.69

$1.45

$1.38

$1.19

e
r
a
h
S
r
e
P
s
g
n
n
r
a
E

)
s
n
1.5
o
i
t
a
r
e
p
o
g
1.0
n
u
n
i
t
n
o
c
0.5
m
o
r
f
(

2016

2017

2018

2019

2020

0.0

receive on your investment in MDU
Resources stock. Our track record on
dividends is highlighted by our listing
on the S&P High-Yield Dividend
Aristocrats index.

Despite our outstanding financial and
operational performance, and our
continuing commitment to paying
dividends, shorter-term total
shareholder returns do not meet our
expectations. While we cannot control
fluctuations in the stock market, we are
working hard to gain better recognition
of the solid performance we are
delivering.

We expect 2021 to be another strong
year of growth and performance for
MDU Resources. We started the year
with record combined construction
backlog, many investment opportunities
for our electric and natural gas utilities
and preparations underway to begin
construction on our largest-ever natural
gas pipeline expansion project.

Construction materials
shatters earnings record

Knife River Corporation had record
earnings of $147.3 million in 2020, a 22%
increase compared to $120.4 million in
2019. We continue to experience strong
infrastructure-related demand for
construction materials and services. Knife
River had higher margins during 2020
with stronger pricing on most product
lines, particularly asphalt and asphalt-
related products as well as ready-mixed
concrete.

100

%
2
4

%
0
4

%
4
4

%
8
3

In 2020, Knife River acquired the assets of
a ready-mixed concrete and aggregates
%
operation in Wyoming and the assets of a
8
3
pre-stressed concrete business in
Washington. This marks eight
construction materials-related acquisitions
in the past three years, and these
%
8
operations have contributed to our
5
earnings growth. We continue to seek
acquisition opportunities that are a
strategic fit with our geographic footprint
2013
and existing operations.

2012

2015

2014

%
6
5

%
0
6

%
2
6

2016

As part of our overall corporate emphasis
on sustainability-related matters, Knife
River has expanded its research efforts
into environmentally friendlier
construction materials. It recently invested
in Blue Planet Systems Corp. to pursue a
commercial method of creating synthetic
limestone that would be produced using
sequestered carbon dioxide. Blue Planet is
working to develop construction-grade
rock and sand for use in concrete that
would have a net-zero or net-negative
carbon footprint. Also, in certain markets,
Knife River offers customers concrete that
incorporates injected carbon dioxide. The
carbon dioxide mineralizes and becomes
permanently embedded in the concrete.
This process also is intended to decrease
the amount of cement required in Knife
River’s concrete production, thereby
reducing carbon dioxide emissions from
suppliers’ cement production.

With reasonable weather conditions, Knife
River expects another strong year in 2021.
Our backlog of construction materials
work at December 31 was $673 million, on
par with year-end 2019’s $693 million
backlog.

Construction services hits
third year of record results

MDU Construction Services Group, Inc.
continues to grow at a rapid pace, with
record performance for the third
consecutive year. In 2020, revenues were a
record $2.10 billion compared to $1.85
billion in 2019; earnings were a record
$109.7 million, compared to $93.0 million
in 2019; and the backlog of work at
December 31 was a record $1.27 billion,
compared to $1.14 billion at year-end 2019.
MDU Construction Services Group also
experienced record workforce levels in
2020, proudly employing more than 7,200
people across America.

11%

EQUITY

DEBT

20 year

5 year

3 year

10 year

For perspective, MDU Construction
Services Group at the end of 2015 had
revenues of $926.4 million, earnings of
$23.8 million and an employee count of
about 3,400. In just five years, this business

-8%

1 year

MDU Resources Group, Inc.

has more than doubled its revenues and
employee base, and more than quadrupled
its earnings. These results would not be
possible without the hard work and
dedication of our team members.

In 2020, work increased for our outside
construction employees, particularly
utility-related projects, as they repaired
damage across the country caused by
natural disasters, including hurricanes,
winter storms and wildfires. Our inside
construction employees also stayed busy,
with strong demand from high-tech,
industrial and hospitality customers. The
e-commerce industry grew quickly as our
country responded and adapted to the
pandemic. We have a significant amount
of this type of work in MDU Construction
Service Group’s backlog.

MDU Construction Services Group
extended its market reach in the Mid-
Atlantic region in 2020 when it acquired
PerLectric, Inc., a leading electrical
construction company in Fairfax,
Virginia. PerLectric provides services to
government, high-tech, commercial and
health care clients. We continue to seek
acquisition opportunities such as
PerLectric that strategically grow market
share and geographic reach.

Utility business
experiences record year

Our electric and natural gas utility
businesses earned a record $99.6 million
in 2020, compared to $94.3 million in
2019. The increase was the result of
regulator-approved implemented rate
increases and lower operating costs. Our
rate base the past five years grew at a
compounded annual rate of 7.5%. At
year-end, we had revenue increase requests
pending before regulators in four states for
cost recovery. We expect to invest
approximately $1.6 billion over the next
five years, including about $350 million in
2021, in infrastructure improvements and
growth projects. We will continue to seek
cost recovery on these additional
investments.

While our utility business saw overall
customer growth of 1.8% in 2020, electric
sales volumes decreased approximately
3.3% and natural gas sales volumes
declined approximately 7.4%. We attribute
these declines to milder winter weather
across our eight states of operation as well
as the impact of the pandemic causing
many businesses to close — at least
temporarily — or shift employees to
working at home. Also attributable to the
pandemic, the utility companies
experienced operating cost savings due to
limiting staff travel and other activities
with higher virus contact risks.

Our electric utility continues on track to
retire its three wholly owned coal-fired
electric generating units, having a
combined generation capacity of 144
megawatts. Lewis & Clark Station in
Sidney, Montana, will be retired at the end
of March this year. The retirement of
Heskett Station Units I and II, located in
Mandan, North Dakota, are slated for
spring of 2022. When these coal-fired
plant retirements are complete, the carbon
dioxide emission intensity of our electric
generation fleet will have been reduced by
approximately 38% since 2005, bringing us
closer to our target of 45% reduction by
2030.

We received an advance determination of
prudence from the North Dakota Public
Service Commission in 2020 to construct
Heskett Unit IV, an 88-MW natural
gas-fired electric generating peaking unit.
We will begin construction on it late this
year and expect it to be operational in
early 2023.

We continue to upgrade portions of our
utility natural gas distribution system with
the safest and most-advanced materials
available. In 2020, we replaced 79.3 miles
of our distribution system, and we expect
to replace 92.6 miles in 2021. This helps
ensure we can continue safely and reliably
serving our customers well into the future.

Dennis W. Johnson
Chair of the Board

David L. Goodin
President and Chief Executive Officer

to customers. We produce RNG from the
Billings Regional Landfill utilizing a
facility we built in 2010 in an agreement
with the city of Billings, Montana.
Through the end of 2020, we produced
1.36 million dekatherms of RNG from the
landfill, which is roughly enough gas to
heat 15,100 homes for one year. In Idaho,
we are supporting development of dairy
digester projects by providing pipeline
services to transport and sell RNG. The
first of these projects provided biomethane
into our distribution system in late 2019,
with more added in 2020. Additional
projects are planned.

Pipeline business launching
largest expansion project

We also continue to examine
opportunities to expand the use of
renewable natural gas in our fuel supplies

Our pipeline business, WBI Energy, also
had a strong year with earnings of $37.0
million in 2020, compared to $29.6 million

MDU Resources Group, Inc.2.0

1.5

1.0

$1.19

0.5

0.0

2016

$1.95

$1.69

$1.38

in 2019. WBI Energy grew earnings
through higher transportation revenues
100
from completed organic growth projects
$1.45
and higher customer rates, which had
been approved by the Federal Energy
Regulatory Commission and were effective
60
May 1, 2019, as well as increased gas
storage demand, gains on the sales of
natural gas gathering assets and savings
on operating costs.

2018

2020

2019

WBI Energy experienced higher customer
demand for natural gas storage services in
2017
2020, with injected volumes increasing
approximately 85%. We believe WBI
Energy is ideally positioned to help
customers take advantage of commodity
price differentials and store seasonally
cheaper gas to be used during higher-
demand periods because it owns the
largest natural gas storage field in North
America, located adjacent to the Bakken
play.

During the year, WBI Energy divested two
natural gas gathering systems in eastern
and northern Montana, resulting in a
financial gain of approximately $3.1
million. With the sale of these assets, we
have essentially exited the natural gas
gathering business. This further reduces
operational risks associated with
commodity price swings.

Upon receipt of final regulatory
approvals, construction is slated to kick
off in the second quarter on WBI Energy’s
North Bakken Expansion project in
western North Dakota. This expansion,
which is the largest pipeline capital
investment project in our company’s
history, will add 250 million cubic feet of
natural gas transportation capacity per
day, bringing our total pipeline system
capacity to approximately 2.3 billion
cubic feet per day.

Integrity remains key
to serving communities

Given all the challenges across our
country in 2020, we realize maintaining
our corporate vision’s key tenet of doing

%
8
3

%
0
4

business “with integrity” is more
important than ever. We applaud our
employees for striving to do what is right
as they perform their work. Throughout
our company’s long history, there have
been numerous examples of employees
going above and beyond to serve our
customers and communities. That was
never truer than this past year.

%
4
4

%
8
3

%
2
4

%
2
6

%
8
5

%
0
6

%
6
5

%
2
6

DEBT

EQUITY

2013

2015

With a pandemic raging, our operations
remained focused on providing the
products and services that are essential to
2012
2014
2016
daily life — electricity, natural gas,
construction materials and services —
while trying to protect our employees,
contractors and customers. We are
extremely proud that we continued to
grow employment, topping out at nearly
16,000 employees. Also, as the coronavirus
began to take hold across the country, we
supported our communities’ relief efforts
with a $500,000 donation from the MDU
Resources Foundation, which was
additional to the more than $2 million in
grants already committed to charitable
organizations in 2020.

With social unrest occurring across our
country, we emphasized the value of
respect within the workplace and our
communities. Led by our board’s
Environmental and Sustainability
Committee, we renewed our company
focus on diversity, equity and inclusion.
We are examining our metrics for areas
that need attention. We have elevated our
communications and training efforts to
ensure each employee knows his or her
ideas and contributions are appreciated.

We were proud to again be named a
Winning “W” Company by 2020 Women
on Boards for having at least 20% of our
board of directors in 2019 comprised of
women. In fact, one-third of our
independent directors are women.
One-third of our executive management
team also is comprised of women. We
continue to prioritize director and
management diversity and skillsets that
align with our businesses.

11%

3 year

5 year

10 year

20 year

-8%

1 year

s
n
r
u
t
e
R
r
e
d
l
o
h
e
r
a
h
S

a
t
o
T

We also continue to enhance other areas
of our environmental, social and
governance practices and reporting. You
can read more about our efforts at
www.mdu.com/sustainability.

Despite all of 2020’s challenges, our results
for the year underscore that our business
model — with a balanced mix of regulated
energy and construction operations
providing essential products and services
— works well. We continue to focus on
growing these businesses, with capital
investments of more than $3 billion
planned over the next five years. Since
2015, earnings per share before
discontinued operations have grown at a
compounded annual rate of 17%.

Thank you for continuing to invest in
MDU Resources as we continue Building a
Strong America.®

Dennis W. Johnson
Chair of the Board

David L. Goodin
President and Chief Executive Officer

February 19, 2021

MDU Resources Group, Inc.

Board of Directors

Dennis W. Johnson
71 (20)
Dickinson, North Dakota

David L. Goodin
59 (8)
Bismarck, North Dakota

Thomas Everist
71 (26)
Sioux Falls, South Dakota

Karen B. Fagg
67 (16)
Billings, Montana

Mark A. Hellerstein
68 (8)
Denver, Colorado

Chair of MDU Resources Board
of Directors

President and Chief Executive
Officer of MDU Resources

Chair, president and chief executive
officer of TMI Group, an
architectural woodwork
manufacturer; former president of
the Dickinson City Commission; a
former director of Federal Reserve
Bank of Minneapolis.

Expertise: Business management,
specialty contracting, finance and
strategic planning.

Formerly president and chief
executive officer of Cascade
Natural Gas Corporation, Great
Plains Natural Gas Co.,
Intermountain Gas Company and
Montana-Dakota Utilities Co.

President and chair of The Everist
Co., formerly a construction
materials company; a director of
Raven Industries, Inc., a public
company.

Retired, formerly vice president
of DOWL HKM and formerly
chair, chief executive officer and
majority owner of HKM
Engineering Inc.

Retired, formerly chair, president
and chief executive officer of St.
Mary Land & Exploration Co.; a
former director of Transocean
Inc.

Expertise: Construction materials
and contracting industry, business
leadership and management.

Expertise: Engineering, natural
resource development, environment
and business management.

Expertise: Accounting, finance,
business leadership and public
company management.

Patricia L. Moss
67 (18)
Bend, Oregon

Edward A. Ryan
67 (3)
Washington, D.C.

David M. Sparby
66 (3)
Minneapolis, Minnesota

Chenxi Wang
50 (2)
Los Altos, California

John K. Wilson
66 (18)
Omaha, Nebraska

Formerly vice chair, president
and chief executive officer of
Cascade Bancorp and Bank of
the Cascades; a director of First
Interstate BancSystem Inc., a
public company.

Expertise: Finance, compliance
oversight, business development
and public company governance.

Formerly executive vice
president and general counsel of
Marriott International, a large
public company with
international operations.

Expertise: Corporate governance
and transactions, legal and public
company leadership.

Formerly senior vice president
and group president, Revenue at
Xcel Energy Inc. and president
and chief executive officer of
Northern States Power-
Minnesota.

Founder and managing general
partner of Rain Capital Fund LP,
a cybersecurity-focused venture
fund; formerly chief strategy
officer of Twistlock, a security
software company.

Expertise: Public utility, renewable
energy, finance, legal and public
company leadership.

Expertise: Technology,
cybersecurity, capital markets and
business development.

Formerly president of Durham
Resources LLC, a privately held
financial management company,
and formerly a director of a
mutual fund.

Expertise: Accounting, finance,
public utility and business
management.

Audit Committee
David M. Sparby, Chair
Mark A. Hellerstein
Edward A. Ryan
Chenxi Wang

Compensation
Committee
John K. Wilson, Chair
Thomas Everist
Karen B. Fagg
Patricia L. Moss

Environmental and
Sustainability Committee
Karen B. Fagg, Chair
Mark A. Hellerstein
Patricia L. Moss
Chenxi Wang

Nominating and
Governance Committee
Edward A. Ryan, Chair
Thomas Everist
David M. Sparby
John K. Wilson

Numbers indicate age and years of service ( ) on the MDU
Resources Board of Directors as of December 31, 2020.

MDU Resources Group, Inc.Corporate Management

David L. Goodin
59 (38)

David C. Barney
65 (35)

Trevor J. Hastings
47 (25)

Anne M. Jones
57 (39)

Nicole A. Kivisto
47 (26)

President and Chief Executive
Officer of MDU Resources

Serves on the company’s Board of
Directors and as chair of the
board of all major subsidiary
companies; formerly president
and chief executive officer of
Cascade Natural Gas
Corporation, Great Plains
Natural Gas Co., Intermountain
Gas Company and Montana-
Dakota Utilities Co.

President and Chief Executive
Officer of Knife River
Corporation

Formerly held executive and
management positions with
Knife River.

President and Chief Executive
Officer of WBI Holdings, Inc.

Vice President of Human
Resources of MDU Resources

Formerly vice president of
business development and
operations support of Knife River
Corporation.

Formerly vice president of
human resources, customer
service and safety of Cascade
Natural Gas Corporation, Great
Plains Natural Gas Co.,
Intermountain Gas Company
and Montana-Dakota Utilities
Co.

President and Chief Executive
Officer of Cascade Natural Gas
Corporation, Intermountain Gas
Company and Montana-Dakota
Utilities Co.

Formerly vice president of
operations of Great Plains
Natural Gas Co. and
Montana-Dakota Utilities.

Karl A. Liepitz
42 (18)

Peggy A. Link
54 (16)

Jeffrey S. Thiede
58 (17)

Jason L. Vollmer
43 (16)

Vice President, General Counsel
and Secretary of MDU Resources

Serves as general counsel and
secretary of all major subsidiary
companies; formerly assistant
general counsel of MDU
Resources.

Vice President and Chief
Information Officer of MDU
Resources

President and Chief Executive
Officer of MDU Construction
Services Group, Inc.

Vice President and Chief
Financial Officer of MDU
Resources

Formerly assistant vice president
of technology and cybersecurity
officer of MDU Resources.

Formerly held executive and
management positions with
MDU Construction Services
Group.

Formerly vice president, chief
accounting officer and treasurer
of MDU Resources.

Other Corporate and Senior Company Officers
Stephanie A. Barth, 48 (25)
Vice President, Chief Accounting Officer and Controller of MDU
Resources

Management Changes
Karl A. Lieptiz was named vice president, general counsel and
secretary of MDU Resources effective February 6, 2021. He replaces
Daniel S. Kuntz, who retired February 5, 2021.

Numbers indicate age and years of service ( ) as of December 31, 2020.

MDU Resources Group, Inc.Stockholder Return Comparison

Comparison of One-Year
Total Stockholder Return

(as of December 31, 2020)

Comparison of Five-Year Total Stockholder Return (in dollars)

$100 invested December 31, 2015, in MDU Resources was worth $167.84 at year-end 2020.

18%

-8%

S&P 500
Index

Peer
Group

MDU
Resources

$250

200

150

100

’15

’16

’17

’18

’19

’20

MDU Resources

S&P 500 Index

Peer Group

12/31/15

12/31/16

12/31/17

12/31/18 12/31/19

12/31/20

2009

2010

2011

2012

2013

250

200

150

100

Old Peer Group

New Peer Group

S&P 500 Index

MDU Resources Group, Inc.

MDU Resources Group, Inc. $100.00

$162.27

$156.00

$142.52

$183.05

$167.84

S&P 500 Index

Peer Group

100.00

111.96

136.40

130.42

171.49

203.04

100.00

130.63

147.11

139.58

184.09

186.00

An explanation of the peer group is provided on the
following page.

Comparison of 10-Year Total Stockholder Return (in dollars)

$100 invested December 31, 2010, in MDU Resources was worth $176.53 at year-end 2020.
$400

350

300

250

200

150

100

’10

’11

’12

’13

’14

’15

’16

’17

’18

’19

’20

MDU Resources

S&P 500 Index

Peer Group

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

MDU Resources Group, Inc. $100.00

$109.17

$111.43

$164.53

$129.66

$105.18

$170.67

$164.07

$149.90

$192.53

$176.53

S&P 500 Index

Peer Group

100.00

102.11

118.45

156.82

178.28

180.75

202.37

246.55

235.74

309.97

367.00

100.00

111.79

125.54

152.52

174.98

187.72

245.21

276.15

262.02

345.57

349.16

Numbers indicate age and years of service ( ) as of December 31, 2020.

300

250

200

150

100

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

Old Peer Group

New Peer Group

S&P 500

MDU Resources

MDU Resources Group, Inc.

Stockholder Return Comparison

Data is indexed to December 31, 2020, for
the one-year total stockholder return
comparison, December 31, 2015, for the
five-year total stockholder return
comparison and December 31, 2010, for the
10-year total stockholder return comparison
for MDU Resources, the S&P 500 and the
peer group. Total stockholder return is
calculated using the December 31 price for
each year. It is assumed that all dividends
are reinvested in stock at the frequency
paid, and the returns of each component
peer issuer of the group are weighted
according to the issuer’s stock market
capitalization at the beginning of the
period.

The peer group issuers are Alliant Energy
Corporation, Ameren Corporation, Atmos
Energy Corporation, Black Hills
Corporation, CMS Energy Corporation,
Dycom Industries, Inc., EMCOR Group,
Inc., Evergy, Inc., Granite Construction
Incorporated, Jacobs Engineering Group
Inc., KBR, Inc., Martin Marietta Materials,
Inc., MasTec, Inc., NiSource Inc., Pinnacle
West Capital Corporation, Portland General
Electric Company, Quanta Services, Inc.,
Southwest Gas Holding, Inc., Summit
Materials, Inc., Vulcan Materials Company
and WEC Energy Group, Inc.

MDU Resources Group, Inc. UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K

☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2020

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _____________ to ______________
Commission file number 1-03480

MDU RESOURCES GROUP INC
(Exact name of registrant as specified in its charter)

Delaware

(State or other jurisdiction of
incorporation or organization)

30-1133956

(I.R.S. Employer Identification No.)

1200 West Century Avenue
P.O. Box 5650
Bismarck, North Dakota 58506-5650
(Address of principal executive offices)
(Zip Code)

(701) 530-1000
(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class
Common Stock, par value $1.00 per share

Trading symbol(s)

Name of each exchange on which registered

MDU

New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ No ☐.

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒.

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes ☒ No ☐.

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of
Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such
files). Yes ☒ No ☐.

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an
emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company"
in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Non-accelerated filer

☒

☐

Accelerated filer

Smaller reporting company

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new
or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal
control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that
prepared or issued its audit report. ☒

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒.

State the aggregate market value of the voting common stock held by non-affiliates of the registrant as of June 30, 2020: $4,447,584,104.

Indicate the number of shares outstanding of the registrant's common stock, as of February 11, 2021: 200,522,277 shares.

DOCUMENTS INCORPORATED BY REFERENCE
Relevant portions of the registrant's 2021 Proxy Statement, to be filed no later than 120 days from December 31, 2020, are incorporated by reference in
Part III, Items 10, 11, 12, 13 and 14 of this Report.

Contents

Part I

Forward-Looking Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Items 1 and 2 Business and Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Electric . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Natural Gas Distribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Pipeline . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Construction Materials and Contracting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Construction Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Item 1A

Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Item 1B

Unresolved Staff Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Item 3

Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Item 4

Mine Safety Disclosures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Part II

Item 5

Market for the Registrant's Common Equity, Related
Stockholder Matters and Issuer Purchases of Equity Securities . . . . . . . . . . . . . . . . . . . . . . . .

Item 6

Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Item 7

Management's Discussion and Analysis of Financial Condition
and Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Item 7A

Quantitative and Qualitative Disclosures About Market Risk . . . . . . . . . . . . . . . . . . . . . . . . . .

Item 8 Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Consolidated Statements of Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Consolidated Statements of Comprehensive Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Consolidated Balance Sheets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Consolidated Statements of Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Consolidated Statements of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1. Basis of Presentation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2. Significant Accounting Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3. Revenue from Contracts with Customers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4. Business Combinations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

5. Property, Plant and Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

6. Regulatory Assets and Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

7. Goodwill and Other Intangible Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

8. Fair Value Measurements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

9. Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

10. Leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

11. Asset Retirement Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

12. Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

13. Stock-Based Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

14. Accumulated Other Comprehensive Income (Loss) . . . . . . . . . . . . . . . . . . . . . . . . . . .

15. Income Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

16. Cash Flow Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2 MDU Resources Group, Inc. Form 10-K

Page

Part II (continued)

17. Business Segment Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

18. Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

19. Jointly Owned Facilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

20. Regulatory Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

21. Commitments and Contingencies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Item 9

Changes in and Disagreements With Accountants on
Accounting and Financial Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Item 9A

Controls and Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Item 9B Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Part III

Item 10

Directors, Executive Officers and Corporate Governance . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Item 11

Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Item 12

Security Ownership of Certain Beneficial Owners and
Management and Related Stockholder Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Item 13

Certain Relationships and Related Transactions, and Director Independence . . . . . . . . . . . . . .

Item 14

Principal Accountant Fees and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Part IV

Item 15

Exhibits, Financial Statement Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3. Exhibits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Item 16

Form 10-K Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Contents

Page

100

101

102

108

109

110

114

116

117

MDU Resources Group, Inc. Form 10-K 3

Definitions

The following abbreviations and acronyms used in this Form 10-K are defined below:
Abbreviation or Acronym

AFUDC

Army Corps

ASC

ASU

Audit Committee

Bcf

Big Stone Station

Allowance for funds used during construction

U.S. Army Corps of Engineers

FASB Accounting Standards Codification

FASB Accounting Standards Update

Audit Committee of the board of directors of the Company

Billion cubic feet

475-MW coal-fired electric generating facility near Big Stone City, South Dakota (22.7 percent
ownership)

Brazilian Transmission Lines

Company's former investment in companies owning three electric transmission lines in Brazil

BSSE

Btu

CARES Act

Cascade

CDC

Centennial
Centennial Capital

Centennial's Consolidated EBITDA

345-kilovolt transmission line from Ellendale, North Dakota, to Big Stone City, South Dakota
(50 percent ownership)

British thermal unit

United States Coronavirus Aid, Relief, and Economic Security Act

Cascade Natural Gas Corporation, an indirect wholly owned subsidiary of MDU Energy Capital

Centers for Disease Control and Prevention

Centennial Energy Holdings, Inc., a direct wholly owned subsidiary of the Company

Centennial Holdings Capital LLC, a direct wholly owned subsidiary of Centennial

Centennial's consolidated net income from continuing operations plus the related interest
expense, taxes, depreciation, depletion, amortization of intangibles and any non-cash charge
relating to asset impairment for the preceding 12-month period

Centennial Resources

Centennial Energy Resources LLC, a direct wholly owned subsidiary of Centennial

CERCLA

Clean Air Act

Clean Water Act

Company

COVID-19

Coyote Creek

Coyote Station

CyROC

Comprehensive Environmental Response, Compensation and Liability Act

Federal Clean Air Act

Federal Clean Water Act

MDU Resources Group, Inc. (formerly known as MDUR Newco), which, as the context requires,
refers to the previous MDU Resources Group, Inc. prior to January 1, 2019, and the new holding
company of the same name after January 1, 2019

Coronavirus disease 2019

Coyote Creek Mining Company, LLC, a subsidiary of The North American Coal Corporation

427-MW coal-fired electric generating facility near Beulah, North Dakota (25 percent ownership)

Cyber Risk Oversight Committee

Dakota Prairie Refining

Dakota Prairie Refining, LLC, a limited liability company previously owned by WBI Energy and
Calumet Specialty Products Partners, L.P. (previously included in the Company's refining
segment)

Dodd-Frank Act

EBITDA

EIN

EPA

ERISA

ESA

Decatherm

Dodd-Frank Wall Street Reform and Consumer Protection Act

Earnings before interest, taxes, depreciation, depletion and amortization

Employer Identification Number

United States Environmental Protection Agency

Employee Retirement Income Security Act of 1974

Endangered Species Act

Exchange Act

Securities Exchange Act of 1934, as amended

FASB

FERC

Fidelity

FIP

GAAP

GHG

Great Plains

Financial Accounting Standards Board

Federal Energy Regulatory Commission

Fidelity Exploration & Production Company, a direct wholly owned subsidiary of WBI Holdings
(previously referred to as the Company's exploration and production segment)

Funding improvement plan

Accounting principles generally accepted in the United States of America

Greenhouse gas

Great Plains Natural Gas Co., a public utility division of the Company prior to the closing of the
Holding Company Reorganization and a public utility division of Montana-Dakota as of January 1,
2019

GVTC

Generation Verification Test Capacity

4 MDU Resources Group, Inc. Form 10-K

Definitions

Holding Company Reorganization

The internal holding company reorganization completed on January 1, 2019, pursuant to the
agreement and plan of merger, dated as of December 31, 2018, by and among Montana-Dakota,
the Company and MDUR Newco Sub, which resulted in the Company becoming a holding
company and owning all of the outstanding capital stock of Montana-Dakota.

IBEW

ICWU

Intermountain

IPUC

Item 8

Knife River

International Brotherhood of Electrical Workers

International Chemical Workers Union

Intermountain Gas Company, an indirect wholly owned subsidiary of MDU Energy Capital

Idaho Public Utilities Commission

Financial Statements and Supplementary Data

Knife River Corporation, a direct wholly owned subsidiary of Centennial

Knife River - Northwest

Knife River Corporation - Northwest, an indirect wholly owned subsidiary of Knife River

K-Plan

kWh

LIBOR

LWG

MD&A

Mdk

MDU Construction Services
MDU Energy Capital

MDUR Newco

MDUR Newco Sub

MEPP

MISO

MMBtu

MMcf

MMdk

MNPUC

Montana-Dakota

MPPAA

MTDEQ

MTPSC

NDDEQ

NDPSC

NERC

Non-GAAP

Oil

OPUC

PCBs

Proxy Statement

PRP

RCRA

RNG

ROD

SDPUC

SEC

Company's 401(k) Retirement Plan

Kilowatts

Kilowatt-hour
London Inter-bank Offered Rate

Lower Willamette Group

Management's Discussion and Analysis of Financial Condition and Results of Operations

Thousand dk

MDU Construction Services Group, Inc., a direct wholly owned subsidiary of Centennial

MDU Energy Capital, LLC, a direct wholly owned subsidiary of the Company
MDUR Newco, Inc., a public holding company created by implementing the Holding Company
Reorganization, now known as the Company

MDUR Newco Sub, Inc., a direct, wholly owned subsidiary of MDUR Newco, which was merged
with and into Montana-Dakota in the Holding Company Reorganization

Multiemployer pension plan

Midcontinent Independent System Operator, Inc.

Million Btu

Million cubic feet

Million dk

Minnesota Public Utilities Commission

Montana-Dakota Utilities Co. (formerly known as MDU Resources Group, Inc.), a public utility
division of the Company prior to the closing of the Holding Company Reorganization and a direct
wholly owned subsidiary of MDU Energy Capital as of January 1, 2019

Multiemployer Pension Plan Amendments Act of 1980

Montana Department of Environmental Quality

Montana Public Service Commission

Megawatt

North Dakota Department of Environmental Quality

North Dakota Public Service Commission

North American Electric Reliability Corporation
Not in accordance with GAAP

Includes crude oil and condensate

Oregon Public Utility Commission

Polychlorinated biphenyls
Company's 2021 Proxy Statement to be filed no later than April 30, 2021

Potentially Responsible Party

Resource Conservation and Recovery Act

Renewable Natural Gas

Record of Decision

Rehabilitation plan

South Dakota Public Utilities Commission

United States Securities and Exchange Commission

Securities Act

Securities Act of 1933, as amended

Securities Act Industry Guide 7

Description of Property by Issuers Engaged or to be Engaged in Significant Mining Operations

Sheridan System

A separate electric system owned by Montana-Dakota

MDU Resources Group, Inc. Form 10-K 5

Definitions

SOFR

TCJA

VIE

Washington DOE

WBI Energy

Secured Overnight Financing Rate

Tax Cuts and Jobs Act

United Association of Journeyman and Apprentices of the Plumbing and Pipefitting Industry of
the United States and Canada

Variable interest entity

Washington State Department of Ecology

WBI Energy, Inc., a direct wholly owned subsidiary of WBI Holdings

WBI Energy Transmission

WBI Energy Transmission, Inc., an indirect wholly owned subsidiary of WBI Holdings

WBI Holdings

WBI Holdings, Inc., a direct wholly owned subsidiary of Centennial

WUTC

Wygen III

WYPSC

ZRCs

Washington Utilities and Transportation Commission

100-MW coal-fired electric generating facility near Gillette, Wyoming (25 percent ownership)

Wyoming Public Service Commission

Zonal resource credits - a MW of demand equivalent assigned to generators by MISO for meeting
system reliability requirements

6 MDU Resources Group, Inc. Form 10-K

Part I

Forward-Looking Statements

This Form 10-K contains forward-looking statements within the meaning of Section 21E of the Exchange Act. Forward-looking statements are all
statements other than statements of historical fact, including without limitation those statements that are identified by the words "anticipates,"
"estimates," "expects," "intends," "plans," "predicts" and similar expressions, and include statements concerning plans, objectives, goals, strategies,
future events or performance, and underlying assumptions (many of which are based, in turn, upon further assumptions) and other statements that
are other than statements of historical facts. From time to time, the Company may publish or otherwise make available forward-looking statements of
this nature, including statements contained within Item 7 - MD&A - Business Segment Financial and Operating Data.

Forward-looking statements involve risks and uncertainties, which could cause actual results or outcomes to differ materially from those expressed.
The Company's expectations, beliefs and projections are expressed in good faith and are believed by the Company to have a reasonable basis,
including without limitation, the impact of COVID-19 on the Company's business, management's examination of historical operating trends, data
contained in the Company's records and other data available from third parties. Nonetheless, the Company's expectations, beliefs or projections may
not be achieved or accomplished.

Any forward-looking statement contained in this document speaks only as of the date on which the statement is made, and the Company undertakes
no obligation to update any forward-looking statement or statements to reflect events or circumstances that occur after the date on which the
statement is made or to reflect the occurrence of unanticipated events. New factors emerge from time to time and it is not possible for management
to predict all of the factors, nor can it assess the effect of each factor on the Company's business or the extent to which any factor, or combination of
factors, may cause actual results to differ materially from those contained in any forward-looking statement. All forward-looking statements, whether
written or oral and whether made by or on behalf of the Company, are expressly qualified by the risk factors and cautionary statements in this
Form 10-K, including statements contained within Item 1A - Risk Factors.

Items 1 and 2. Business and Properties

General
The Company is a regulated energy delivery and construction materials and services business. Its principal executive offices are located at
1200 West Century Avenue, P.O. Box 5650, Bismarck, North Dakota 58506-5650, telephone (701) 530-1000.

Montana-Dakota was incorporated under the state laws of Delaware in 1924. The Company was incorporated under the state laws of Delaware in
2018. On January 2, 2019, the Company announced the completion of the Holding Company Reorganization, which resulted in Montana-Dakota
becoming a subsidiary of the Company. Immediately after consummation of the Holding Company Reorganization, the Company had, on a
consolidated basis, the same assets, businesses and operations as immediately prior to the consummation of the Holding Company Reorganization.

The Company's strategy is to deliver superior value with a two-platform model, regulated energy delivery and construction materials and services
businesses, while also pursuing organic growth opportunities and using a disciplined approach to strategic acquisitions of well-managed companies
and properties.

The Company focuses on infrastructure and is Building a Strong America® by providing essential products and services through its regulated energy
delivery platform and its construction materials and services platform, which are both comprised of different operating segments. Most of these
segments experience seasonality related to the industries in which they operate. The two-platform approach helps balance this seasonality and the
risk associated with each type of industry. Through its regulated energy delivery platform, the Company generates, transmits and distributes
electricity and provides natural gas distribution, transportation and storage services. These businesses are regulated by state public service
commissions and/or the FERC. The construction materials and services platform provides construction services to a variety of industries, including
commercial, industrial and governmental customers, and provides construction materials through aggregate mining and marketing of related
products, such as ready-mixed concrete, asphalt and asphalt oil.

The Company is organized into five reportable business segments. These business segments include: electric, natural gas distribution, pipeline,
construction materials and contracting, and construction services. The Company's business segments are determined based on the Company's
method of internal reporting, which generally segregates the strategic business units due to differences in products, services and regulation. The
internal reporting of these segments is defined based on the reporting and review process used by the Company's chief executive officer.

The Company, through its wholly owned subsidiary, MDU Energy Capital, owns Montana-Dakota, Cascade and Intermountain. The electric segment is
comprised of Montana-Dakota while the natural gas distribution segment is comprised of Montana-Dakota, Cascade and Intermountain.

The Company, through its wholly owned subsidiary, Centennial, owns WBI Holdings, Knife River, MDU Construction Services and Centennial Capital.
WBI Holdings is the pipeline segment, Knife River is the construction materials and contracting segment, MDU Construction Services is the
construction services segment, and Centennial Capital is reflected in the Other category.

MDU Resources Group, Inc. Form 10-K 7

Part I

The financial results and data applicable to each of the Company's business segments, as well as their financing requirements, are set forth in
Item 7 - MD&A and Item 8 - Note 17.

The Company's material properties, which are of varying ages and are of different construction types, are generally in good condition, are well
maintained and are generally suitable and adequate for the purposes for which they are used.

Human Capital Management At the core of Building a Strong America® is building a strong team of employees with a focus on safety and a
commitment to diversity and inclusion. The Company's team consisted of 12,994 employees located in 40 states plus Washington D.C. as of
December 31, 2020. The number of employees fluctuates during the year due to the seasonality and the number and size of construction projects.
During 2020, the number of employees peaked at 15,668. Employees as of December 31, 2020, were as follows:

Company

MDU Resources Group, Inc.

MDU Energy Capital

WBI Holdings

Knife River

MDU Construction Services

Total employees

Number of
employees

250

1,592

323

3,582

7,247

12,994

Many of the Company's employees are represented by collective-bargaining agreements. The majority of the collective-bargaining agreements contain
provisions that prohibit work stoppages or strikes and provide for binding arbitration dispute resolution in the event of an extended disagreement. The
following information is as of December 31, 2020.

Company

Montana-Dakota

Intermountain

Cascade

WBI Energy Transmission

Knife River

MDU Construction Services

Total

Collective-
bargaining
agreement

IBEW

ICWU

IBEW
39 various
agreements
103 various
agreements

Number of
employees

129

336

represented Agreement status
Effective through
April 30, 2021
Effective through
March 31, 2023
Effective through
March 31, 2021
Effective through
March 31, 2022
2 agreements in
negotiations
2 agreements in
negotiations

5,927

190

555

7,204

Safety The Company is committed to safety and health in the workplace and subscribes to the principle that all injuries can be prevented. To ensure
safe work environments, the Company provides training, adequate resources and appropriate follow-up on any unsafe conditions or actions.

To facilitate a strong safety culture, the Company established its Safety Leadership Council which is charged with receiving and reviewing
information for the identification and adoption of best practices in the prevention of occupationally induced injuries and illness, as well as
monitoring the effectiveness of the Company's safety and environmental health programs.

In addition to the Safety Leadership Council, the Company has policies and training that support safety in the workplace including training on safety
matters through classroom and toolbox meetings on job sites. The Company utilizes safety compliance in the evaluation of employees, which includes
management, and recognizes employee safety through safety award programs. Accident and safety statistical information is gathered for each of the
business segments and regularly reported to management and the board of directors.

In response to COVID-19, the Company established a task force to monitor developments related to the pandemic and implemented procedures to
protect employees. The Company adopted recommended practices from the CDC and is following directives of each state and local jurisdiction in
which the Company operates. Some of these practices include, among other things, a daily COVID-19 self-assessment to access Company facilities;
social distancing; telecommuting; virtual meetings; designated entrances, exits and stairwells; restricted business travel; and increased access to
personal protective equipment.

Building People Employees are hired having the skills, abilities and motivation to achieve the results needed for their jobs. Each job is important and
part of a coordinated team effort to accomplish the organization's objectives. The Company provides opportunities for advancement through job
mobility, succession planning and promotions both within and between business segments.

The Company uses a variety of recruiting sources depending on the position, market and job requirements. All open positions across the Company's
businesses are posted on the Company's website www.jobs.mdu.com. Other sources for recruiting employees include team member referrals, union
workforce, direct recruitment and various forms of advertising, including social media. The Company also uses internship programs to introduce

8 MDU Resources Group, Inc. Form 10-K

Part I

individuals to the Company's business operations and provide a possible source of future employees. In markets where labor availability is tight, the
Company uses telecommuting, guaranteed hours, flexible schedules and work arrangements to fill open positions.

To attract and retain employees, the Company offers:

• Competitive salaries and wages based on the labor markets in which it operates.

• Employee growth through training in the form of technical, professional and leadership programs. The Company also provides formal and

informal mentoring and job shadowing programs to assist employees in their job and career goals.

• Incentive compensation opportunities based on the Company's performance.

• Comprehensive benefits including vacation, sick leave, health and wellness programs, retirement plans and discount programs.

Diversity and Inclusion To further its corporate vision, the Company is committed to an inclusive environment that respects the differences and
embraces the strengths of its diverse employees. Each business segment has an appointed diversity officer who serves as a conduit for diversity-
related issues by providing a voice to all employees. The Company has three strategic goals related to diversity:

• Increase productivity and profitability through the creation of a work environment which values all perspectives and methods of accomplishing

work.

• Enhance collaboration efforts through cooperation and sharing of best practices to create new ways of meeting employee, customer and

shareholder needs.

• Maintain a culture of integrity, respect and safety by ensuring employees understand these essential values which are part of the Company's

vision statement.

The Company provides training and has policies which speak to diversity and inclusion. Training for employees on diversity and inclusion topics
include equal employment opportunity, workplace harassment, respect and unconscious bias. In 2020, the Company implemented a telecommuting
policy to allow certain employees to work from home or other offsite locations. The flexibility of the policy may expand the potential applicant pool for
job openings beyond the Company's traditional geographic footprint.

The Company also promotes its strategic diversity goals through the following special recognition awards:

• The Einstein award recognizes the best process improvement ideas that contribute in a measurable way to improving the Company's bottom

line and are vital to the Company's success.

• The Community Spirit award recognizes employees who are actively involved in their community.

• The Summit award recognizes employees who make the Company a better place to work.

• The Environmental Integrity award recognizes an employee program, project or activity that reflects the Company's environmental policy and

philosophy.

• The Hero Award recognizes employees who go above and beyond the call of duty to save another's life.

Governmental Matters The operations of the Company and certain of its subsidiaries are subject to laws and regulations relating to air, water and
solid waste pollution control; state facility-siting regulations; zoning and planning regulations of certain state and local authorities; federal and state
health and safety regulations; and state hazard communication standards. The Company believes it is in substantial compliance with these
regulations, except as to what may be ultimately determined with regard to items discussed in Environmental matters in Item 8 - Note 21. There are
no pending CERCLA actions for any of the Company's material properties. However, the Company is involved in certain claims relating to the
Portland, Oregon, Harbor Superfund Site and the Bremerton Gasworks Superfund Site. For more information on the Company's environmental
matters, see Item 8 - Note 21.

The Company produces GHG emissions primarily from its fossil fuel electric generating facilities, as well as from natural gas pipeline and storage
systems, and operations of equipment and fleet vehicles. GHG emissions also result from customer use of natural gas for heating and other uses. As
interest in reductions in GHG emissions has grown, the Company has developed renewable generation with lower or no GHG emissions. Governmental
legislation and regulatory initiatives regarding environmental and energy policy are continuously evolving and could negatively impact the Company's
operations and financial results. Until legislation and regulation are finalized, the impact of these measures cannot be accurately predicted. The
Company will continue to monitor legislative and regulatory activity related to environmental and energy policy initiatives. Disclosure regarding
specific environmental matters applicable to each of the Company's businesses is set forth under each business description later. In addition, for a
discussion of the Company's risks related to environmental laws and regulations, see Item 1A - Risk Factors.

Technology The Company uses technology in substantially all aspects of its business operations and requires uninterrupted operation of information
technology systems and network infrastructure. These systems may be vulnerable to failures or unauthorized access. The Company has policies,
procedures and processes designed to strengthen and protect these systems, which include the Company’s enterprise information technology and
operation technology groups continually evaluating new tools and techniques to reduce the risk of a cyber breach.

The Company created CyROC to oversee its approach to cybersecurity. CyROC is responsible for supplying management and the Audit Committee
with analyses, appraisals, recommendations and pertinent information concerning cyber defense of the Company’s electronic information and

MDU Resources Group, Inc. Form 10-K 9

Part I

information technology systems. A quarterly cybersecurity report is provided to the Audit Committee. For a discussion of the Company's risks related
to cybersecurity, see Item 1A - Risk Factors.

Available Information This annual report on Form 10-K, the Company's quarterly reports on Form 10-Q and current reports on Form 8-K, and any
amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act are available free of charge through the
Company's website as soon as reasonably practicable after the Company has electronically filed such reports with, or furnished such reports to, the
SEC. The Company's website address is www.mdu.com. The information available on the Company's website is not part of this annual report on
Form 10-K. The SEC also maintains a website where the Company's filings can be obtained free of charge at www.SEC.gov.

Electric
General The Company's electric segment is operated through its wholly owned subsidiary, Montana-Dakota. Montana-Dakota provides electric service
at retail, serving residential, commercial, industrial and municipal customers in 185 communities and adjacent rural areas in Montana, North
Dakota, South Dakota and Wyoming. For more information on the retail customer classes served, see the table below. The material properties owned
by Montana-Dakota for use in its electric operations include interests in 16 electric generating units at 11 facilities and two small portable diesel
generators, as further described under System Supply, System Demand and Competition, approximately 3,400 and 4,900 miles of transmission and
distribution lines, respectively, and 81 transmission and 298 distribution substations. Montana-Dakota has obtained and holds, or is in the process
of renewing, valid and existing franchises authorizing it to conduct its electric operations in all of the municipalities it serves where such franchises
are required. Montana-Dakota intends to protect its service area and seek renewal of all expiring franchises. At December 31, 2020, Montana-
Dakota's net electric plant investment was $1.5 billion and its rate base was $1.3 billion.

The retail customers served and respective revenues by class for the electric business were as follows:

2020

2019

2018

Customers
Served

Revenues

Customers
Served

Revenues

Customers
Served

Revenues

(Dollars in thousands)

118,893 $

122,545

118,563 $

125,614

118,426 $

126,173

23,050

131,207

22,948

142,062

22,756

141,961

230

36,736

234

37,790

236

36,081

1,609

6,601

1,601

7,454

1,604

7,882

143,782 $

297,089

143,346 $

312,920

143,022 $

312,097

Residential

Commercial

Industrial

Other

Other electric revenues, which are largely transmission-related revenues, for Montana-Dakota were $34.9 million, $38.8 million and $23.0 million
for the years ended December 31, 2020, 2019 and 2018, respectively.

The percentage of electric retail revenues by jurisdiction was as follows:

North Dakota

Montana

Wyoming

South Dakota

2020

64 %

22 %

9 %

5 %

2019

65 %

22 %

8 %

5 %

2018

66 %

20 %

9 %

5 %

Retail electric rates, service, accounting and certain security issuances are subject to regulation by the MTPSC, NDPSC, SDPUC and WYPSC. The
interstate transmission and wholesale electric power operations of Montana-Dakota are also subject to regulation by the FERC under provisions of the
Federal Power Act, as are interconnections with other utilities and power generators, the issuance of certain securities, accounting, cybersecurity and
other matters.

Through MISO, Montana-Dakota has access to wholesale energy, ancillary services and capacity markets for its interconnected system. MISO is a
regional transmission organization responsible for operational control of the transmission systems of its members. MISO provides security center
operations, tariff administration and operates day-ahead and real-time energy markets, ancillary services and capacity markets. As a member of
MISO, Montana-Dakota's generation is sold into the MISO energy market and its energy needs are purchased from that market.

System Supply, System Demand and Competition Through an interconnected electric system, Montana-Dakota serves markets in portions of North
Dakota, Montana and South Dakota. These markets are highly seasonal and sales volumes depend largely on the weather. Additionally, the average
customer consumption has tended to decline due to increases in energy efficient lighting and appliances being installed. The interconnected system
consists of 15 electric generating units at 10 facilities and two small portable diesel generators, which have an aggregate nameplate rating
attributable to Montana-Dakota's interest of 750,318 kW and total net ZRCs of 512.3 in 2020. For 2020, Montana-Dakota's total ZRCs, including
its firm purchase power contracts, were 553.2. Montana-Dakota's planning reserve margin requirement within MISO was 531.4 ZRCs for 2020. The
maximum electric peak demand experienced to date attributable to Montana-Dakota's sales to retail customers on the interconnected system was
611,542 kW in August 2015. Montana-Dakota's latest forecast for its interconnected system indicates that its annual peak will continue to occur

10 MDU Resources Group, Inc. Form 10-K

Part I

during the summer. Montana-Dakota's interconnected system electric generating capability includes five steam-turbine generating units at four
facilities using coal for fuel, four natural gas combustion turbine units at three facilities, three wind electric generating facilities, two natural gas-
fired reciprocating internal combustion engines at one facility, a heat recovery electric generating facility and two small portable diesel generators.

Additional energy is purchased as needed, or in lieu of generation if more economical, from the MISO market, and in 2020, Montana-Dakota
purchased approximately 25 percent of its net kWh needs for its interconnected system through the MISO market.

Approximately 30 percent of the electricity delivered to customers from Montana-Dakota's owned generation in 2020 was from renewable resources.
Although Montana-Dakota's generation resource capacity has increased to serve the needs of its customers, the carbon dioxide emission intensity of
its electric generation resource fleet has been reduced by approximately 28 percent since 2005 through the addition of renewable generation and
MISO market purchases. Montana-Dakota's carbon dioxide emissions are expected to continue to decline through the retirement of aging coal-fired
electric generating units.

Through the Sheridan System, Montana-Dakota serves Sheridan, Wyoming, and neighboring communities. The maximum peak demand experienced
to date attributable to Montana-Dakota sales to retail customers on that system was approximately 64,129 kW in July 2020. Montana-Dakota has a
power supply contract with Black Hills Power, Inc. to purchase up to 49,000 kW of capacity annually through December 31, 2023. Wygen III also
serves a portion of the needs of Montana-Dakota's Sheridan-area customers.

The following table sets forth details applicable to the Company's electric generating stations:

Generating Station

Type

Interconnected System:

North Dakota:

Coyote (b)

Heskett

Glen Ullin

Cedar Hills

Thunder Spirit

South Dakota:

Big Stone (b)

Montana:

Lewis & Clark

Glendive

Miles City

Diamond Willow

Diesel Units

Steam

Combustion Turbine

Heat Recovery

Wind

Steam

Reciprocating Internal Combustion Engine

Combustion Turbine

Wind

Oil

Sheridan System:

Wyoming:

Wygen III (b)

Steam

Nameplate
Rating (kW)

2020 ZRCs (a)

2020 Net
Generation (kWh
in thousands)

103,647

86,000

89,038

7,500

19,500

155,500

92.7

87.9

77.9

4.8

4.0

24.2

552,839

469,765

1,331

29,813

55,889

600,626

94,111

105.7

394,021

44,000

18,700

75,522

23,150

30,000

3,650

—

17.6

67.6

21.2

5.5

3.2

232,433

1,613

853

349

98,781

750,318

512.3

2,438,323

28,000

N/A

209,423

778,318

512.3

2,647,746

(a) Interconnected system only. MISO requires generators to obtain their summer capability through the GVTC. The GVTC is then

converted to ZRCs by applying each generator's forced outage factor against its GVTC. Wind generator's ZRCs are calculated based
on a wind capacity study performed annually by MISO. ZRCs are used to meet supply obligations within MISO.

(b) Reflects Montana-Dakota's ownership interest.

Virtually all of the current fuel requirements of the Lewis & Clark and Heskett stations are met with coal supplied by wholly-owned subsidiaries of
Westmoreland Mining LLC under contracts that expire in March 2021 and December 2021, respectively. The Lewis & Clark and Heskett coal supply
agreements provide for the purchase of coal necessary to supply the coal requirements of these stations at contracted pricing. Montana-Dakota
estimates the Lewis & Clark coal requirement to be 60,000 tons through March 2021 and in the range of 400,000 to 425,000 tons per contract
year for Heskett.

In February 2019, Montana-Dakota announced the retirement of three aging coal-fired electric generating units, Unit 1 at Lewis & Clark Station and
Units 1 and 2 at Heskett Station. The retirements are expected to be completed in March 2021 for Lewis & Clark Station and early 2022 for Heskett
Station. Montana-Dakota also announced the intent to construct a new 88-MW simple-cycle natural gas-fired combustion turbine peaking unit at the
existing Heskett Station.

MDU Resources Group, Inc. Form 10-K 11

Part I

The owners of Coyote Station, including Montana-Dakota, have a contract with Coyote Creek for coal supply to the Coyote Station that expires
December 2040. Montana-Dakota estimates the Coyote Station coal supply agreement to be approximately 1.5 million tons per contract year. For
more information, see Item 8 - Note 21.

The owners of Big Stone Station, including Montana-Dakota, have a coal supply agreement with Peabody COALSALES, LLC to meet all of the Big
Stone Station's fuel requirements through 2022. Montana-Dakota estimates the Big Stone Station coal supply agreement to be approximately
1.5 million tons per contract year.

Montana-Dakota has a coal supply agreement with Wyodak Resources Development Corp., to supply the coal requirements of Wygen III at contracted
pricing through June 1, 2060. Montana-Dakota estimates the maximum annual coal consumption of the facility to be 594,000 tons.

The average cost of coal purchased, including freight, at Montana-Dakota's electric generating stations (including the Big Stone, Coyote and
Wygen III stations) was as follows:

Years ended December 31,

Average cost of coal per MMBtu

Average cost of coal per ton

2020

2019

2.10 $

2.15 $

2018

2.00

30.52 $

31.36 $

29.08

Montana-Dakota expects that it has secured adequate capacity available through existing baseload generating stations, renewable generation, turbine
peaking stations, demand reduction programs and firm contracts to meet the peak customer demand requirements of its customers through 2025.
Future capacity needs are expected to be met by constructing new generation resources or acquiring additional capacity through power purchase
contracts or the MISO capacity auction.

Montana-Dakota has major interconnections with its neighboring utilities and considers these interconnections adequate for coordinated planning,
emergency assistance, exchange of capacity and energy and power supply reliability.

Montana-Dakota is subject to competition resulting from customer demands, technological advances and other factors in certain areas, from rural
electric cooperatives, on-site generators, co-generators and municipally owned systems. In addition, competition in varying degrees exists between
electricity and alternative forms of energy such as natural gas.

Regulatory Matters and Revenues Subject to Refund In North Dakota, Montana, South Dakota and Wyoming, there are various recurring regulatory
mechanisms with annual true-ups that can impact Montana-Dakota's results of operations, which also reflect monthly increases or decreases in
electric fuel and purchased power costs (including demand charges). Montana-Dakota is deferring those electric fuel and purchased power costs that
are greater or less than amounts presently being recovered through its existing rate schedules. Examples of these recurring mechanisms include:
monthly Fuel and Purchased Power Tracking Adjustments, a fuel adjustment clause and an annual Electric Power Supply Cost Adjustment. Such
mechanisms generally provide that these deferred fuel and purchased power costs are recoverable or refundable through rate adjustments which are
filed annually. Montana-Dakota's results of operations reflect 95 percent of the increases or decreases from the base purchased power costs and also
reflect 85 percent of the increases or decreases from the base coal price, which is also recovered through the Electric Power Supply Cost Adjustment
in Wyoming. For more information on regulatory assets and liabilities, see Item 8 - Note 6.

All of Montana-Dakota's wind resources pertaining to electric operations in North Dakota are included in a renewable resource cost adjustment rider,
including the North Dakota investment in the Thunder Spirit Wind project. Montana-Dakota also has a transmission tracker in North Dakota to
recover transmission costs associated with MISO and the Southwest Power Pool, regional transmission organizations serving parts of Montana-
Dakota's system, along with certain of the transmission investments not recovered through retail rates. The tracking mechanism has an annual true-
up.

In South Dakota, Montana-Dakota recovers the South Dakota investment in the Thunder Spirit Wind project through an Infrastructure Rider tracking
mechanism that is subject to an annual true-up. Montana-Dakota also has in place in South Dakota a transmission tracker to recover transmission
costs associated with MISO and the Southwest Power Pool, regional transmission organizations serving parts of Montana-Dakota's system, along with
certain of the transmission investments not recovered through retail rates. This tracking mechanism also has an annual true-up.

In Montana, Montana-Dakota recovers in rates, through a tracking mechanism, its allocated share of Montana property-related taxes assessed to
electric operations on an after-tax basis.

For more information on regulatory matters, see Item 8 - Note 20.

Environmental Matters Montana-Dakota's electric operations are subject to federal, state and local laws and regulations providing for air, water and
solid waste pollution control; state facility-siting regulations; zoning and planning regulations of certain state and local authorities; federal and state
health and safety regulations; and state hazard communication standards. Montana-Dakota believes it is in substantial compliance with these
regulations.

12 MDU Resources Group, Inc. Form 10-K

Part I

Montana-Dakota's electric generating facilities have Title V Operating Permits, under the Clean Air Act, issued by the states in which they operate.
Each of these permits has a five-year life. Near the expiration of these permits, renewal applications are submitted. Permits continue in force beyond
the expiration date, provided the application for renewal is submitted by the required date, usually six months prior to expiration. The Title V
Operating Permit renewal application for Coyote Station was submitted timely to the North Dakota Department of Health in September 2017, and
the permit was issued on May 27, 2020. Wygen III is allowed to operate under the facility's construction permit until the Title V Operating Permit is
issued by the Wyoming Department of Environmental Quality. The Title V Operating Permit application for Wygen III was submitted timely in January
2011, with the permit issuance date not specified at this time. The Title V Operating Permit renewal application for Heskett Station was submitted
timely in June 2019 to the NDDEQ and the permit was issued on February 4, 2020. The Title V Operating Permit renewal application for Lewis &
Clark Station was submitted timely in December 2019 to the MTDEQ with the permit issuance date not specified at this time. The Title V Operating
Permit renewal applications for Miles City and Glendive Combustion Turbine facilities were submitted timely in December 2020 to the MTDEQ with
the permit issuance dates not specified at this time.

State water discharge permits issued under the requirements of the Clean Water Act are maintained for power production facilities on the
Yellowstone and Missouri rivers. These permits also have five-year lives. Montana-Dakota renews these permits as necessary prior to expiration. Other
permits held by these facilities may include an initial siting permit, which is typically a one-time, preconstruction permit issued by the state; state
permits to dispose of combustion by-products; state authorizations to withdraw water for operations; and Army Corps permits to construct water
intake structures. Montana-Dakota's Army Corps permits grant one-time permission to construct and do not require renewal. Other permit terms vary
and the permits are renewed as necessary.

Montana-Dakota's electric operations are very small-quantity generators of hazardous waste and subject only to minimum regulation under the RCRA.
Montana-Dakota routinely handles PCBs from its electric operations in accordance with federal requirements. PCB storage areas are registered with
the EPA as required.

Montana-Dakota incurred approximately $800,000 of environmental capital expenditures in 2020, mainly for an embankment stabilization project at
Lewis & Clark Station and coal ash management projects for Lewis & Clark Station and Coyote Station. Environmental capital expenditures are
estimated to be $600,000, $3.9 million and $4.1 million in 2021, 2022 and 2023, respectively, for various environmental projects, including a
coal ash impoundment closure project at Lewis & Clark Station and coal ash landfill closure project at Heskett Station. Montana-Dakota's capital and
operational expenditures could also be affected by future environmental requirements, such as regional haze emissions reductions. For more
information, see Item 1A - Risk Factors.

Natural Gas Distribution
General The Company's natural gas distribution segment is operated through its wholly owned subsidiaries, consisting of operations from Montana-
Dakota, Cascade and Intermountain. These companies sell natural gas at retail, serving residential, commercial and industrial customers in
340 communities and adjacent rural areas across eight states. They also provide natural gas transportation services to certain customers on the
Company's systems. For more information on the retail customer classes served, see the table below. These services are provided through distribution
systems aggregating approximately 20,600 miles. The natural gas distribution operations have obtained and hold, or are in the process of renewing,
valid and existing franchises authorizing them to conduct their natural gas operations in all of the municipalities they serve where such franchises are
required. These operations intend to protect their service areas and seek renewal of all expiring franchises. At December 31, 2020, the natural gas
distribution operations' net natural gas distribution plant investment was $2.0 billion and its rate base was $1.3 billion.

The retail customers served and respective revenues by class for the natural gas distribution operations were as follows:

2020

2019

2018

Customers
Served

Revenues

Customers
Served

Revenues

Customers
Served

Revenues

(Dollars in thousands)

Residential

Commercial

Industrial

887,429 $

480,466

868,821 $

479,673

850,595 $

464,697

108,788

281,175

107,741

293,201

106,297

279,566

929

26,217

906

26,570

835

24,555

997,146 $

787,858

977,468 $

799,444

957,727 $

768,818

Transportation and other revenues for the natural gas distribution operations were $60.3 million, $65.8 million and $54.4 million for the years
ended December 31, 2020, 2019 and 2018, respectively.

MDU Resources Group, Inc. Form 10-K 13

Part I

The percentage of the natural gas distribution operations' retail sales revenues by jurisdiction was as follows:

Idaho

Washington

North Dakota

Montana

Oregon

South Dakota

Minnesota

Wyoming

2020

30 %

13 %

8 %

6 %

3 %

2 %

2019

29 %

28 %

15 %

9 %

8 %

6 %

3 %

2 %

2018

30 %

26 %

15 %

9 %

8 %

7 %

3 %

2 %

The natural gas distribution operations are subject to regulation by the IPUC, MNPUC, MTPSC, NDPSC, OPUC, SDPUC, WUTC and WYPSC regarding
retail rates, service, accounting and certain security issuances.

System Supply, System Demand and Competition The natural gas distribution operations serve retail natural gas markets, consisting principally of
residential and firm commercial space and water heating users, in portions of Idaho, Minnesota, Montana, North Dakota, Oregon, South Dakota,
Washington and Wyoming. These markets are highly seasonal and sales volumes depend largely on the weather, the effects of which are mitigated in
certain jurisdictions by weather normalization mechanisms discussed later in Regulatory Matters. Additionally, the average customer consumption
has tended to decline as more efficient appliances and furnaces are installed and as the Company has implemented conservation programs. In
addition to the residential and commercial sales, the utilities transport natural gas for larger commercial and industrial customers who purchase their
own supply of natural gas.

Competition resulting from customer demands, technological advances and other factors exists between natural gas and other fuels and forms of
energy. The natural gas distribution operations have established various natural gas transportation service rates for their distribution businesses to
retain interruptible commercial and industrial loads. These rates have enhanced the natural gas distribution operations' competitive posture with
alternative fuels, although certain customers have bypassed the distribution systems by directly accessing transmission pipelines within close
proximity. These bypasses do not have a material effect on results of operations.

The natural gas distribution operations and various distribution transportation customers obtain natural gas for their system requirements directly
from producers, processors and marketers. The Company's purchased natural gas is supplied by a portfolio of contracts specifying market-based
pricing and is transported under transportation agreements with WBI Energy Transmission, Northern Border Pipeline Company, Northwest Pipeline
LLC, South Dakota Intrastate Pipeline, Northern Natural Gas, Gas Transmission Northwest LLC, Northwestern Energy, Viking Gas Transmission
Company, Enbridge Westcoast Pipeline, Inc., Ruby Pipeline LLC, Foothills Pipe Lines Ltd., NOVA Gas Transmission Ltd, TC Energy Corporation and
Northwest Natural. The natural gas distribution operations have contracts for storage services to provide gas supply during the winter heating season
and to meet peak day demand with various storage providers, including WBI Energy Transmission, Dominion Energy Questar Pipeline, LLC, Northwest
Pipeline LLC, Northwest Natural and Northern Natural Gas. In addition, certain of the operations have entered into natural gas supply management
agreements with various parties. Demand for natural gas, which is a widely traded commodity, has historically been sensitive to seasonal heating and
industrial load requirements, as well as changes in market price. The Company believes supplies are adequate for the natural gas distribution
operations to meet its system natural gas requirements for the next decade. This belief is based on current and projected domestic and regional
supplies of natural gas and the pipeline transmission network currently available through its suppliers and pipeline service providers.

Regulatory Matters The natural gas distribution operations' retail natural gas rate schedules contain clauses permitting adjustments in rates based
upon changes in natural gas commodity, transportation and storage costs. Current tariffs allow for recovery or refunds of under- or over-recovered gas
costs through rate adjustments which are filed annually.

In North Dakota and South Dakota, Montana-Dakota's natural gas tariffs contain weather normalization mechanisms applicable to certain firm
customers that adjust the distribution delivery charges to reflect weather fluctuations during the November 1 through May 1 billing periods.

In Montana, Montana-Dakota recovers in rates, through a tracking mechanism, its allocated share of Montana property-related taxes assessed to
natural gas operations on an after-tax basis.

In Minnesota and Washington, Great Plains and Cascade recover qualifying capital investments related to the safety and integrity of the pipeline
systems through cost recovery tracking mechanisms.

In Oregon, Cascade has a decoupling mechanism in place approved by the OPUC until January 1, 2025, with a review to be completed by
September 30, 2024. Cascade also has an earnings sharing mechanism with respect to its Oregon jurisdictional operations as required by the OPUC.

On July 7, 2016, the WUTC approved a full decoupling mechanism where Cascade is allowed recovery of an average revenue per customer regardless
of actual consumption. The mechanism also includes an earnings sharing component if Cascade earns beyond its authorized return. The decoupling
mechanism is being reviewed by an outside consultant which will provide a report to the WUTC in March 2021.

14 MDU Resources Group, Inc. Form 10-K

Part I

On December 22, 2016, the MNPUC approved a request by Great Plains to implement a full revenue decoupling mechanism pilot project for three
years. The decoupling mechanism reflects the period January 1 through December 31. The MNPUC has adopted the administrative law judge's
recommendation to extend the initial pilot period through the end of 2021. A final determination will be made as part of its pending rate case.

On May 4, 2020, Intermountain filed an application for authority to facilitate access for RNG producers to the Company's distribution system for the
purpose of moving RNG to the producer's end-use customers. The request was approved by the IPUC with an effective date of June 12, 2020. The
facilitation plan treats all RNG access as non-utility business and fully insulates utility customers from any impact. It allows Intermountain to charge
RNG producers for the cost of all infrastructure needed to serve the producer. It also provides a method to charge RNG producers for maintenance
costs associated with the RNG projects as well as an access fee that provides a return on Intermountain's involvement. The facilitation plan will be
vital in supporting the growth and development of the RNG industry in the state of Idaho.

On August 3, 2020, Intermountain filed an application for authority to implement a commercial energy efficiency program and funding mechanism.
The request was approved by the IPUC with an effective date of October 1, 2020. The purpose of the program is to encourage upgrades to, or use of,
high efficiency natural gas equipment. This will be achieved through the use of rebates, offered towards the purchase and installation of qualified
energy-efficient natural gas equipment.

For more information on regulatory matters, see Item 8 - Note 20.

Environmental Matters The natural gas distribution operations are subject to federal, state and local environmental, facility-siting, zoning and
planning laws and regulations. The Company believes its natural gas distribution operations are in substantial compliance with those regulations.

The Company's natural gas distribution operations are very small-quantity generators of hazardous waste, and subject only to minimum regulation
under the RCRA. Washington state rule defines Cascade as a small-quantity generator, but regulation under the rule is similar to RCRA. Certain
locations of the natural gas distribution operations routinely handle PCBs from their natural gas operations in accordance with federal requirements.
PCB storage areas are registered with the EPA as required. Capital and operational expenditures for natural gas distribution operations could be
affected in a variety of ways by potential new GHG legislation or regulation. In particular, such legislation or regulation would likely increase capital
expenditures for energy efficiency and conservation programs and operational costs associated with GHG emissions compliance. Natural gas
distribution operations expect to recover the operational and capital expenditures for GHG regulatory compliance in rates consistent with the recovery
of other reasonable costs of complying with environmental laws and regulations.

The natural gas distribution operations did not incur any material environmental expenditures in 2020. Except as to what may be ultimately
determined with regard to the issues described in the following paragraph, the natural gas distribution operations do not expect to incur any material
capital expenditures related to environmental compliance with current laws and regulations through 2023.

Montana-Dakota has ties to six historic manufactured gas plants as a successor corporation or through direct ownership of the plant. Montana-Dakota
is investigating possible soil and groundwater impacts due to the operation of two of these former manufactured gas plant sites. To the extent not
covered by insurance, Montana-Dakota may seek recovery in its natural gas rates charged to customers for certain investigation and remediation costs
incurred for these sites. Cascade has ties to nine historic manufactured gas plants as a successor corporation or through direct ownership of the
plant. Cascade is involved in the investigation and remediation of one of these manufactured gas plants in Washington. To the extent not covered by
insurance, Cascade will seek recovery of investigation and remediation costs through its natural gas rates charged to customers.

See Item 8 - Note 21 for further discussion of certain manufactured gas plant sites.

Pipeline
General WBI Energy owns and operates both regulated and non-regulated businesses. The regulated business of this segment, WBI Energy
Transmission, owns and operates approximately 3,700 miles of natural gas transmission and storage lines in Minnesota, Montana, North Dakota,
South Dakota and Wyoming. WBI Energy Transmission's underground storage fields provide storage services to local distribution companies,
industrial customers, natural gas marketers and others, and serve to enhance system reliability. Its system is strategically located near four natural
gas producing basins, making natural gas supplies available to its transportation and storage customers. The system has 13 interconnecting points
with other pipeline facilities allowing for the receipt and/or delivery of natural gas to and from other regions of the country and from Canada. Under
the Natural Gas Act, as amended, WBI Energy Transmission is subject to the jurisdiction of the FERC regarding certificate, rate, service and
accounting matters, and at December 31, 2020, its net plant investment was $548.3 million.

The non-regulated business of this segment provides a variety of energy-related services, including cathodic protection and energy efficiency product
sales and installation services to large end-users.

In 2020, the Company divested its regulated and non-regulated natural gas gathering assets. With the completion of these sales, the Company has
exited the natural gas gathering business.

A majority of the pipeline business is transacted in the Rocky Mountain and northern Great Plains regions of the United States.

MDU Resources Group, Inc. Form 10-K 15

Part I

System Supply, System Demand and Competition Natural gas supplies emanate from traditional and nontraditional production activities in the region
from both on-system and off-system supply sources. Incremental supply from nontraditional sources, such as the Bakken area in Montana and North
Dakota, have helped offset declines in traditional regional supply sources and supports WBI Energy Transmission's transportation and storage
services. In addition, off-system supply sources are available through the Company's interconnections with other pipeline systems. WBI Energy
Transmission continues to look for opportunities to increase transportation and storage services through system expansion and/or other pipeline
interconnections or enhancements that could provide future benefits.

WBI Energy Transmission's underground natural gas storage facilities have a certificated storage capacity of approximately 350 Bcf, including
193 Bcf of working gas capacity, 83 Bcf of cushion gas and 74 Bcf of native gas. These storage facilities enable customers to purchase natural gas
throughout the year and meet winter peak requirements.

WBI Energy Transmission competes with several pipelines for its customers' transportation and storage business and at times may discount rates in
an effort to retain market share; however, the strategic location of its system near four natural gas producing basins and the availability of
underground storage services, along with interconnections with other pipelines, enhances its competitive position.

Although certain of WBI Energy Transmission's firm customers, including its largest firm customer Montana-Dakota, serve relatively secure
residential, commercial and industrial end-users, they generally all have some price-sensitive end-users that could switch to alternate fuels.

WBI Energy Transmission transports substantially all of Montana-Dakota's natural gas, primarily utilizing firm transportation agreements, which for
2020 represented 23 percent of WBI Energy Transmission's subscribed firm transportation contract demand. The majority of the firm transportation
agreements with Montana-Dakota expire in June 2022. In addition, Montana-Dakota has contracts, expiring in July 2035, with WBI Energy
Transmission to provide firm storage services to facilitate meeting Montana-Dakota's winter peak requirements.

The non-regulated business of this segment competes for existing customers in the areas in which it operates. Its focus on customer service and the
variety of services it offers serve to enhance its competitive position.

Environmental Matters The pipeline operations are subject to federal, state and local environmental, facility-siting, zoning and planning laws and
regulations.

Administration of certain provisions of federal environmental laws is delegated to the states where WBI Energy and its subsidiaries operate.
Administering agencies may issue permits with varying terms and operational compliance conditions. Permits are renewed and modified, as
necessary, based on defined permit expiration dates, operational demand, facility upgrades or modifications, and/or regulatory changes. The
Company believes it is in substantial compliance with these regulations.

Detailed environmental assessments and/or environmental impact statements as required by the National Environmental Policy Act are included in
the FERC's environmental review process for both the construction and abandonment of WBI Energy Transmission's natural gas transmission
pipelines, compressor stations and storage facilities.

The pipeline operations did not incur any material environmental expenditures in 2020 and do not expect to incur any material capital expenditures
related to environmental compliance with current laws and regulations through 2023.

Construction Materials and Contracting
General Knife River operates construction materials and contracting businesses headquartered in Alaska, California, Hawaii, Idaho, Iowa, Minnesota,
Montana, North Dakota, Oregon, South Dakota, Texas, Washington and Wyoming. Knife River mines, processes and sells construction aggregates
(crushed stone, sand and gravel); produces and sells asphalt mix; and supplies ready-mixed concrete. These products are used in most types of
construction, performed by Knife River and other companies, including roads, freeways and bridges, as well as homes, schools, shopping centers,
office buildings and industrial parks. Knife River focuses on vertical integration of its contracting services with its construction materials to support
the aggregate-based product lines including aggregate placement, asphalt and concrete paving, and site development and grading. Although not
common to all locations, other products include the sale of cement, liquid asphalt for various commercial and roadway applications, various finished
concrete products and other building materials and related contracting services.

During 2020, Knife River acquired the assets of Oldcastle Infrastructure Spokane, a prestressed-concrete business in Spokane, Washington, and
McMurry Ready-Mix Co., an aggregates and concrete supplier in Casper, Wyoming. For more information on business combinations, see Item 8 -
Note 4.

Competition Knife River's construction materials products and contracting services are marketed under competitive conditions. Price is the principal
competitive force to which these products and services are subject, with service, quality, delivery time and proximity to the customer also being
significant factors. Knife River focuses on markets located near aggregate sites to reduce transportation costs which allows Knife River to remain
competitive with the pricing of aggregate products. The number and size of competitors varies in each of Knife River's principal market areas and
product lines.

16 MDU Resources Group, Inc. Form 10-K

Part I

The demand for construction materials products and contracting services is significantly influenced by the cyclical nature of the construction
industry. In addition, activity in certain locations may be seasonal in nature due to the effects of weather. The key economic factors affecting product
demand are changes in the level of local, state and federal governmental spending on roads and infrastructure projects, general economic conditions
within the market area that influence the commercial and residential sectors, and prevailing interest rates.

Knife River's customers are a diverse group which includes federal, state and municipal government agencies, commercial and residential
developers, and private parties. The mix of sales by customer class varies each year depending on available work. Knife River is not dependent on any
single customer or group of customers for sales of its products and services, the loss of which would have a material adverse effect on its
construction materials businesses.

Reserve Information Aggregate reserve estimates are calculated based on the best available data. This data is collected from drill holes and other
subsurface investigations, as well as investigations of surface features such as mine high walls and other exposures of the aggregate reserves. Mine
plans, production history and geologic data are also utilized to estimate reserve quantities.

Estimates are based on analyses of the data described above by experienced internal mining engineers, operating personnel and geologists. Property
setbacks and other regulatory restrictions and limitations are identified to determine the total area available for mining. Data described previously are
used to calculate the thickness of aggregate materials to be recovered.

Topography associated with alluvial sand and gravel deposits is typically flat and volumes of these materials are calculated by applying the thickness
of the resource over the areas available for mining. Volumes are then converted to tons by using an appropriate conversion factor. Typically, 1.5 tons
per cubic yard in the ground is used for sand and gravel deposits.

Topography associated with hard rock reserves is typically much more diverse. Therefore, using available data, a final topography map is created and
computer software is utilized to compute the volumes between the existing and final topographies. Volumes are then converted to tons by using an
appropriate conversion factor. Typically, 2 tons per cubic yard in the ground is used for hard rock quarries.

Estimated reserves are probable reserves as defined in Securities Act Industry Guide 7. The reserve estimates include only salable tonnage and thus
exclude waste materials that are generated in the crushing and processing phases of the operation. Approximately 1.0 billion tons of Knife River's
1.1 billion tons of aggregate reserves are permitted reserves. Remaining reserves are based on estimates of volumes that can be economically
extracted and sold to meet current market and product applications. The remaining reserves are on properties that are expected to be permitted for
mining under current regulatory requirements. The data used to calculate the remaining reserves may require revisions in the future to account for
changes in customer requirements and unknown geological occurrences. The remaining reserve life (years) was calculated by dividing remaining
reserves by the three-year average sales, including estimated sales from acquired reserves prior to acquisition, from 2018 through 2020. Actual
useful lives of these reserves will be subject to, among other things, fluctuations in customer demand, customer specifications, geological conditions
and changes in mining plans.

MDU Resources Group, Inc. Form 10-K 17

Part I

The following table sets forth details applicable to the Company's aggregate reserves under ownership or lease as of December 31, 2020, and sales
for the years ended December 31, 2020, 2019 and 2018:

Production Area

Anchorage, AK

Hawaii

Northern CA

Southern CA

Portland, OR

Eugene, OR

Central OR/WA/ID

Southwest OR

Central MT

Northwest MT

Wyoming

Central MN

Northern MN

ND/SD

Eastern TX

Sales from other sources

Number of Sites
(Crushed Stone)

Number of Sites
(Sand & Gravel)

Tons Sold (000's)

owned

leased

owned

leased

2020

2019

2018

Estimated
Reserves
(000's tons)

Lease
Expiration

Reserve
Life
(years)

—

817

868

725

14,363

N/A

1,466

1,680

1,734

46,513 2023-2064

2,076

1,901

1,798

38,510 2028-2046

341

292

356

90,570

2035

Over 100

4,085

4,868

5,402

166,311 2025-2055

1,230

1,205

743

154,039 2021-2049

Over 100

3,119

2,700

2,362

82,061 2028-2077

2,194

1,932

2,395

111,749 2021-2053

1,074

822

1,081

13,344 2023-2027

2,007

2,084

1,965

57,794

N/A

840

837

626

104,894 2021-2085

62 *

3,233

3,477

2,890

64,902 2021-2028

483

330

369

20,046 2021-2024

4,528

3,747

1,506

63,069

2021-2031

984

1,378

1,094

76,722 2022-2029

15 *

2,472

4,193

4,749

30,949 32,314 29,795 1,104,887

* Includes estimate of three-year average sales for acquired reserves.

The 1.1 billion tons of estimated aggregate reserves at December 31, 2020, are comprised of 581 million tons on properties that are owned and
524 million tons that are leased. Approximately 40 percent of the tons under lease have lease expiration dates of 20 years or more. The weighted
average years remaining on all leases containing estimated probable aggregate reserves is approximately 20 years, including options for renewal that
are at Knife River's discretion. Based on a three-year average of sales from 2018 through 2020 of leased reserves, the average time necessary to
produce remaining aggregate reserves from such leases is approximately 45 years. Some sites have leases that expire prior to the exhaustion of the
estimated reserves. The estimated reserve life assumes, based on Knife River's experience, that leases will be renewed to allow sufficient time to
fully recover these reserves.

The changes in Knife River's aggregate reserves for the years ended December 31 were as follows:

Aggregate reserves:

Beginning of year

Acquisitions (a)

Sales volumes (b)

Other (c)

End of year

2020

2019

2018

(000's of tons)

1,054,186

1,014,431

965,036

114,666

71,157

81,004

(28,477)

(28,121)

(25,046)

(35,488)

(3,281)

(6,563)

1,104,887

1,054,186

1,014,431

(a) Includes reserves from recent business combinations.
(b) Excludes sales from other sources.
(c) Includes property sales, revisions of previous estimates and expiring leases.

Environmental Matters Knife River's construction materials and contracting operations are subject to regulation customary for such operations,
including federal, state and local environmental compliance and reclamation regulations. Except as to the issues described later, Knife River believes
it is in substantial compliance with these regulations. Individual permits applicable to Knife River's various operations are managed and tracked as
they relate to the statuses of the application, modification, renewal, compliance and reporting procedures.

Knife River's asphalt and ready-mixed concrete manufacturing plants and aggregate processing plants are subject to the Clean Air Act and the Clean
Water Act requirements for controlling air emissions and water discharges. Some mining and construction activities are also subject to these laws. In
most of the states where Knife River operates, these regulatory programs are delegated to state and local regulatory authorities. Knife River's facilities
are also subject to the RCRA as it applies to the management of hazardous wastes and underground storage tank systems. These programs are
generally delegated to the state and local authorities in the states where Knife River operates. Knife River's facilities must comply with requirements
for managing wastes and underground storage tank systems.

18 MDU Resources Group, Inc. Form 10-K

Part I

Certain activities of Knife River are directly regulated by federal agencies. For example, certain in-water mining operations are subject to provisions of
the Clean Water Act that are administered by the Army Corps. Knife River has several such operations, including gravel bar skimming and dredging
operations, and Knife River has the associated required permits. The expiration dates of these permits vary, with five years generally being the
longest term.

Knife River's operations are also occasionally subject to the ESA. For example, land use regulations often require environmental studies, including
wildlife studies, before a permit may be granted for a new or expanded mining facility or an asphalt or concrete plant. If endangered species or their
habitats are identified, ESA requirements for protection, mitigation or avoidance apply. Endangered species protection requirements are usually
included as part of land use permit conditions. Typical conditions include avoidance, setbacks, restrictions on operations during certain times of the
breeding or rearing season, and construction or purchase of mitigation habitat. Knife River's operations are also subject to state and federal cultural
resources protection laws when new areas are disturbed for mining operations or processing plants. Land use permit applications generally require
that areas proposed for mining or other surface disturbances be surveyed for cultural resources. If any are identified, they must be protected or
managed in accordance with regulatory agency requirements.

The most comprehensive environmental permit requirements are usually associated with new mining operations, although requirements vary widely
from state to state and even within states. In some areas, land use regulations and associated permitting requirements are minimal. However, some
states and local jurisdictions have very demanding requirements for permitting new mines. Environmental impact reports are sometimes required
before a mining permit application can be considered for approval. These reports can take up to several years to complete. The report can include
projected impacts of the proposed project on air and water quality, wildlife, noise levels, traffic, scenic vistas and other environmental factors. The
reports generally include suggested actions to mitigate the projected adverse impacts.

Provisions for public hearings and public comments are usually included in land use permit application review procedures in the counties where
Knife River operates. After considering environmental, mine plan and reclamation information provided by the permittee, as well as comments from
the public and other regulatory agencies, the local authority approves or denies the permit application. Denial is rare, but land use permits often
include conditions that must be addressed by the permittee. Conditions may include property line setbacks, reclamation requirements, environmental
monitoring and reporting, operating hour restrictions, financial guarantees for reclamation, and other requirements intended to protect the
environment or address concerns submitted by the public or other regulatory agencies.

Knife River has been successful in obtaining mining and other land use permits so sufficient permitted reserves are available to support its
operations. For mining operations, this often requires considerable advanced planning to ensure sufficient time is available to complete the
permitting process before the newly permitted aggregate reserve is needed to support Knife River's operations.

Knife River's Gascoyne surface coal mine last produced coal in 1995 but continues to be subject to reclamation requirements of the Surface Mining
Control and Reclamation Act, as well as the North Dakota Surface Mining Act. Portions of the Gascoyne Mine remain under reclamation bond until
the 10-year revegetation liability period has expired. A portion of the original permit has been released from bond and additional areas are currently
in the process of having the bond released. Knife River intends to request bond release as soon as it is deemed possible.

Knife River did not incur any material environmental expenditures in 2020 and, except as to what may be ultimately determined with regard to the
issues described in the following paragraph, Knife River does not expect to incur any material capital expenditures related to environmental
compliance with current laws and regulations through 2023.

In December 2000, Knife River - Northwest was named by the EPA as a PRP in connection with the cleanup of a commercial property site, acquired
by Knife River - Northwest in 1999, and part of the Portland, Oregon, Harbor Superfund Site. For more information, see Item 8 - Note 21.

Mine Safety The Dodd-Frank Act requires disclosure of certain mine safety information. For more information, see Item 4 - Mine Safety Disclosures.

Construction Services
General MDU Construction Services provides inside and outside specialty contracting services in 44 states plus Washington D.C. Its inside services
include design, construction and maintenance of electrical and communication wiring and infrastructure, fire suppression systems, and mechanical
piping and services. Its outside services include design, construction and maintenance of overhead and underground electrical distribution and
transmission lines, substations, external lighting, traffic signalization, and gas pipelines, as well as utility excavation and the manufacture and
distribution of transmission line construction equipment. This segment also constructs and maintains renewable energy projects. These specialty
contracting services are provided to utilities and large manufacturing, commercial, industrial, institutional and governmental customers.

During 2020, MDU Construction Services acquired PerLectric, Inc., an electrical construction company in Fairfax, Virginia. For more information on
business combinations, see Item 8 - Note 4.

Construction and maintenance crews are active year round. However, activity in certain locations may be seasonal in nature due to the effects of
weather. MDU Construction Services works with the National Electrical Contractors Association, the IBEW and other trade associations on hiring and
recruiting a qualified workforce.

MDU Resources Group, Inc. Form 10-K 19

Part I

MDU Construction Services operates a fleet of owned and leased trucks and trailers, support vehicles and specialty construction equipment, such as
backhoes, excavators, trenchers, generators, boring machines and cranes. In addition, as of December 31, 2020, MDU Construction Services owned
or leased facilities in 17 states. This space is used for offices, equipment yards, manufacturing, warehousing, storage and vehicle shops.

Competition MDU Construction Services operates in a highly competitive business environment. Most of MDU Construction Services' work is obtained
on the basis of competitive bids or by negotiation of either cost-plus or fixed-price contracts. Its workforce and equipment are highly mobile,
providing greater flexibility in the size and location of MDU Construction Services' market area. Competition is based primarily on price and
reputation for quality, safety and reliability. The size and location of the services provided, as well as the state of the economy, are factors in the
number of competitors that MDU Construction Services will encounter on any particular project. MDU Construction Services believes the
diversification of the services it provides, the markets it serves in the United States and the quality and management of its workforce enable it to
effectively operate in this competitive environment.

Utilities and independent contractors represent the largest customer base for this segment. Accordingly, utility and subcontract work accounts for a
significant portion of the work performed by MDU Construction Services and the amount of construction contracts is dependent on the level and
timing of maintenance and construction programs undertaken by customers. MDU Construction Services relies on repeat customers and strives to
maintain successful long-term relationships with its customers. The mix of sales by customer class varies each year depending on available work.
MDU Construction Services is not dependent on any single customer or group of customers for sales of its products and services, the loss of which
would have a material adverse effect on its business.

Environmental Matters MDU Construction Services' operations are subject to regulation customary for the industry, including federal, state and local
environmental compliance. MDU Construction Services believes it is in substantial compliance with these regulations.

The nature of MDU Construction Services' operations is such that few, if any, environmental permits are required. Operational convenience supports
the use of petroleum storage tanks in several locations, which are permitted under state programs authorized by the EPA. MDU Construction Services
has no ongoing remediation related to releases from petroleum storage tanks. MDU Construction Services' operations are conditionally exempt small-
quantity waste generators, subject to minimal regulation under the RCRA. Federal permits for specific construction and maintenance jobs that may
require these permits are typically obtained by the hiring entity, and not by MDU Construction Services.

MDU Construction Services did not incur any material environmental expenditures in 2020 and does not expect to incur any material capital
expenditures related to environmental compliance with current laws and regulations through 2023.

Item 1A. Risk Factors
The Company's business and financial results are subject to a number of risks and uncertainties, including those set forth below and in other
documents filed with the SEC. The factors and other matters discussed herein are important factors that could cause actual results or outcomes for
the Company to differ materially from those discussed in the forward-looking statements included elsewhere in this document. If any of the risks
described below actually occur, the Company's business, prospects, financial condition or financial results could be materially harmed. The following
are the most material risk factors applicable to the Company and are not necessarily listed in order of importance or probability of occurrence.

Economic Risks
The Company is subject to government regulations that may have a negative impact on its business and its results of operations and cash flows. Statutory and
regulatory requirements also may limit another party's ability to acquire the Company or impose conditions on an acquisition of or by the Company.
The Company's electric and natural gas transmission and distribution businesses are subject to comprehensive regulation by federal, state and local
regulatory agencies with respect to, among other things, allowed rates of return and recovery of investments and costs, financing, rate structures,
customer service, health care coverage and costs, taxes, franchises; recovery of purchased power and purchased natural gas costs; and construction
and siting of generation and transmission facilities. These governmental regulations significantly influence the Company's operating environment and
may affect its ability to recover costs from its customers. The Company is unable to predict the impact on operating results from future regulatory
activities of any of these agencies. Changes in regulations or the imposition of additional regulations could have an adverse impact on the Company's
results of operations and cash flows.

There can be no assurance that applicable regulatory commissions will determine that the Company's electric and natural gas transmission and
distribution businesses' costs have been prudent, which could result in the disallowance of costs in setting rates for customers. Also, the regulatory
process of approving rates for these businesses may not allow for timely and full recovery of the costs of providing services or a return on the
Company's invested capital. Changes in regulatory requirements or operating conditions may require early retirement of certain assets. While
regulation typically provides rate recovery for these retirements, there is no assurance regulators will allow full recovery of all remaining costs, which
could leave stranded asset costs. Rising fuel costs could increase the risk that the utility businesses will not be able to fully recover those fuel costs
from customers.

Approval from federal and state regulatory agencies would be needed for acquisition of the Company, as well as for certain acquisitions by the
Company. The approval process could be lengthy and the outcome uncertain, which may deter potential acquirers from approaching the Company or
impact the Company's ability to pursue acquisitions.

20 MDU Resources Group, Inc. Form 10-K

Part I

Economic volatility affects the Company's operations, as well as the demand for its products and services.
Unfavorable economic conditions can negatively affect the level of public and private expenditures on projects and the timing of these projects
which, in turn, can negatively affect demand for the Company's products and services, primarily at the Company's construction businesses. The level
of demand for construction products and services could be adversely impacted by the economic conditions in the industries the Company serves, as
well as in the general economy. State and federal budget issues affect the funding available for infrastructure spending.

Economic conditions and population growth affect the electric and natural gas distribution businesses' growth in service territory, customer base and
usage demand. Economic volatility in the markets served, along with economic conditions such as increased unemployment which could impact the
ability of the Company's customers to make payments, could adversely affect the Company's results of operations, cash flows and asset values.
Further, any material decreases in customers' energy demand, for economic or other reasons, could have an adverse impact on the Company's
earnings and results of operations.

The Company's operations involve risks that may result from catastrophic events.
The Company's operations, particularly those related to natural gas and electric transmission and distribution, include a variety of inherent hazards
and operating risks, such as product leaks; explosions; mechanical failures; vandalism; fires; pandemics; social or civil unrest; protests and riots;
natural disasters; acts of terrorism; and acts of war. These hazards and operating risks could result in loss of human life; personal injury; property
damage; environmental pollution; impairment of operations; and substantial financial losses. The Company maintains insurance against some, but
not all, of these risks and losses. A significant incident could also increase regulatory scrutiny and result in penalties and higher amounts of capital
expenditures and operational costs. Losses not fully covered by insurance could have an adverse effect on the Company’s financial position, results of
operations and cash flows.

A disruption of the regional electric transmission grid or interstate natural gas infrastructure could negatively impact the Company's business and
reputation. Because the Company's electric and natural gas utility and pipeline systems are part of larger interconnecting systems, a disruption could
result in a significant decrease in revenues and system repair costs negatively impacting the Company's financial position, results of operations and
cash flows.

The Company is subject to capital market and interest rate risks.
The Company's operations, particularly its electric and natural gas transmission and distribution businesses, require significant capital investment.
Consequently, the Company relies on financing sources and capital markets as sources of liquidity for capital requirements not satisfied by cash
flows from operations. If the Company is not able to access capital at competitive rates, including through its "at-the-market" offering program, the
ability to implement business plans, make capital expenditures or pursue acquisitions the Company would otherwise rely on for future growth may be
adversely affected. Market disruptions may increase the cost of borrowing or adversely affect the Company's ability to access one or more financial
markets. Such disruptions could include:

• A significant economic downturn.

• The financial distress of unrelated industry leaders in the same line of business.

• Deterioration in capital market conditions.

• Turmoil in the financial services industry.

• Volatility in commodity prices.

• Pandemics, including COVID-19.

• Terrorist attacks.

• Cyberattacks.

The issuance of a substantial amount of the Company's common stock, whether issued in connection with an acquisition or otherwise, or the
perception that such an issuance could occur, could have a dilutive effect on shareholders and/or may adversely affect the market price of the
Company's common stock. Higher interest rates on borrowings could also have an adverse effect on the Company's operating results.

Financial market changes could impact the Company’s pension and postretirement benefit plans and obligations.
The Company has pension and postretirement defined benefit plans for some of its employees and former employees. Assumptions regarding future
costs, returns on investments, interest rates and other actuarial assumptions have a significant impact on the funding requirements and expense
recorded relating to these plans. Adverse changes in economic indicators, such as consumer spending, inflation data, interest rate changes, political
developments and threats of terrorism, among other things, can create volatility in the financial markets. These changes could impact the
assumptions and negatively affect the value of assets held in the Company's pension and other postretirement benefit plans and may increase the
amount and accelerate the timing of required funding contributions for those plans.

Significant changes in energy prices could negatively affect the Company's businesses.
Fluctuations in oil and natural gas production, supplies and prices; fluctuations in commodity price basis differentials; political and economic
conditions in oil-producing countries; actions of the Organization of Petroleum Exporting Countries; demand for oil due to the economic slowdowns;
and other external factors impact the development of oil and natural gas supplies and the expansion and operation of natural gas pipeline systems.
The Company has benefited from associated natural gas production in the Bakken, which has provided opportunities for organic growth projects.

MDU Resources Group, Inc. Form 10-K 21

Part I

Depressed oil and natural gas prices, however, place pressure on the ability of oil exploration and production companies to meet credit requirements
and will continue to be a challenge if prices remain depressed long-term. Prolonged depressed prices for oil and natural gas could negatively affect
the growth, results of operations, cash flows and asset values of the Company's electric, natural gas and pipeline businesses.

If oil and natural gas prices increase significantly, customer demand could decline for utility, pipeline and construction materials, which could
impact the Company's results of operations and cash flows. While the Company has fuel clause recovery mechanisms for its utility operations in all of
the states where it operates, higher utility fuel costs could also significantly impact results of operations if such costs are not recovered. Delays in the
collection of utility fuel cost recoveries, as compared to expenditures for fuel purchases, could also negatively impact the Company's cash flows. High
oil prices also affect the cost and demand for asphalt products and related contracting services.

COVID-19 may have a negative impact on the Company's business operations, revenues, results of operations, liquidity and cash flows.
To the extent the COVID-19 pandemic adversely affects the Company's business, operations, revenues, liquidity or cash flows, it may also have the
effect of heightening many of the other risks described in this section. The degree to which COVID-19 will impact the Company depends on future
developments, including severity and duration of the outbreak, actions taken by governmental authorities, timing and effectiveness of vaccines being
administered, and timing of when relatively normal economic and operating conditions resume.

The Company's operations have experienced some disruptions due to its employees or third-party employees being diagnosed with COVID-19 or other
illnesses and required quarantine periods for those in close contact to COVID-19. Self-quarantine or actual viral health issues may have a negative
impact on the Company's employees and the ability to continue its work activities under a normal course of business. Moreover, the diagnosis of
COVID-19 or other illnesses could require the Company or its business partners to suspend projects, quarantine employees or institute more
aggressive preventive measures including closure of job sites. Mandated healthcare protocols could lead to a shortage of employees or altered
operations. If a significant percentage of the Company's workforce are unable to work because of illness, quarantine or government restrictions in
connection with the COVID-19 pandemic, the Company's operations may be negatively impacted, potentially adversely affecting its business,
operations, revenues, liquidity and cash flows.

A portion of the Company's workforce has been working remotely and the Company has delayed return to work processes for certain office employees
due to the rise in local COVID-19 cases in some operating regions. To date, the Company has not experienced any significant delays or information
technology disruptions. An increased amount of social engineering and attacks by bad actors taking advantage of the pandemic could affect the
Company's ability to maintain secure operations, communications and productivity in the future.

The regulated businesses have been deemed essential service providers and have seen some impacts on their businesses; however, the Company
could be materially affected if its businesses were no longer deemed essential service providers. Future actions of its regulatory commissions on
accounting for the impacts of the COVID-19 pandemic may also affect the Company's future operating results and cash flows. The Company has
experienced some impacts to its commercial and industrial electric and natural gas loads associated with reduced demand from those customers due
to the COVID-19 pandemic.

The construction businesses have generally been deemed essential service providers and have experienced some inefficiencies and interruptions on
its businesses from the pandemic; however, the Company could be materially impacted if its businesses were no longer deemed essential service
providers. These businesses could be further impacted in the future by site closures, government shut-down measures, additional inefficiencies due
to compliance with safety and social distancing measures, public and private sector budget changes and constraints, and the impact of overall macro
and local economic conditions on future construction projects.

Other factors associated with the COVID-19 pandemic that could impact the Company's businesses and future operating results, revenues and
liquidity include impacts related to the health, safety, and availability of its employees and contractors; continued flexible payment plans;
counterparty credit; costs and availability of supplies; capital construction and infrastructure operation and maintenance programs; financing plans;
pension valuations; travel restrictions; and legal and regulatory matters, including the potential for delayed regulatory filings and recovery of invested
capital.

Reductions in the Company's credit ratings could increase financing costs.
There is no assurance the Company's current credit ratings, or those of its subsidiaries, will remain in effect or that a rating will not be lowered or
withdrawn by a rating agency. Events affecting the Company's financial results may impact its cash flows and credit metrics, potentially resulting in a
change in the Company's credit ratings. The Company's credit ratings may also change as a result of the differing methodologies or changes in the
methodologies used by the rating agencies.

Increasing costs associated with health care plans may adversely affect the Company's results of operations.
The Company's self-insured costs of health care benefits for eligible employees continues to increase. Increasing quantities of large individual health
care claims and an overall increase in total health care claims could have an adverse impact on operating results, financial position and liquidity.
Legislation related to health care could also change the Company's benefit program and costs.

22 MDU Resources Group, Inc. Form 10-K

Part I

The Company is exposed to risk of loss resulting from the nonpayment and/or nonperformance by the Company's customers and counterparties.
If the Company's customers or counterparties experience financial difficulties, the Company could experience difficulty in collecting receivables.
Nonpayment and/or nonperformance by the Company's customers and counterparties, particularly customers and counterparties of the Company’s
construction materials and contracting and construction services businesses for large construction projects, could have a negative impact on the
Company's results of operations and cash flows. The Company could also have indirect credit risk from participating in energy markets such as MISO
in which credit losses are socialized to all participants.

Changes in tax law may negatively affect the Company's business.
Changes to federal, state and local tax laws have the ability to benefit or adversely affect the Company's earnings and customer costs. Significant
changes to corporate tax rates could result in the impairment of deferred tax assets that are established based on existing law at the time of deferral.
Changes to the value of various tax credits could change the economics of resources and the resource selection for the electric generation business.
Regulation incorporates changes in tax law into the rate-setting process for the regulated energy delivery businesses which could create timing delays
before the impact of changes are realized.

The Company's operations could be negatively impacted by import tariffs and/or other government mandates.
The Company operates in or provides services to capital intensive industries in which federal trade policies could significantly impact the availability
and cost of materials. Imposed and proposed tariffs could significantly increase the prices and delivery lead times on raw materials and finished
products that are critical to the Company and its customers, such as aluminum and steel. Prolonged lead times on the delivery of raw materials and
further tariff increases on raw materials and finished products could adversely affect the Company's business, financial condition and results of
operations.

Operational Risks
Significant portions of the Company’s natural gas pipelines and power generation and transmission facilities are aging. The aging infrastructure may require
significant additional maintenance or replacement that could adversely affect the Company’s results of operations.
The Company’s energy delivery infrastructure is aging, which increases certain risks, including breakdown or failure of equipment, pipeline leaks and
fires developing from power lines. Aging infrastructure is more prone to failure which increases maintenance costs, unplanned outages and the need
to replace facilities. Even if properly maintained, reliability may ultimately deteriorate and negatively affect the Company’s ability to serve its
customers, which could result in increased costs associated with regulatory oversight. The costs associated with maintaining the aging infrastructure
and capital expenditures for new or replacement infrastructure could cause rate volatility and/or regulatory lag in some jurisdictions. If, at the end of
its life, the investment costs of a facility have not been fully recovered, the Company may be adversely affected if commissions do not allow such
costs to be recovered in rates. Such impacts of an aging infrastructure, could adversely affect the Company’s results of operations and cash flows.

Additionally, hazards from aging infrastructure could result in serious injury, loss of human life, significant damage to property, environmental
impacts and impairment of operations, which in turn could lead to substantial financial losses. The location of facilities near populated areas,
including residential areas, business centers, industrial sites and other public gathering places, could increase the damages resulting from these
risks. A major incident involving another natural gas system could lead to additional capital expenditures, increased regulation, and fines and
penalties on natural gas utilities. The occurrence of any of these events could adversely affect the Company’s results of operations, financial position
and cash flows.

The Company's utility and pipeline operations are subject to planning risks.
Most electric and natural gas utility investments, including natural gas transmission pipeline investments, are made with the intent of being used for
decades. In particular, electric transmission and generation resources are planned well in advance of when they are placed into service based upon
resource plans using assumptions over the planning horizon including sales growth, commodity prices, equipment and construction costs, regulatory
treatment, available technology and public policy. Public policy changes and technology advancements related to areas such as energy efficient
appliances and buildings, renewable and distributive electric generation and storage, carbon dioxide emissions, electric vehicle penetration,
restrictions on or disallowance of new or existing services, and natural gas availability and cost may significantly impact the planning assumptions.
Changes in critical planning assumptions may result in excess generation, transmission and distribution resources creating increased per customer
costs and downward pressure on load growth. These changes could also result in a stranded investment if the Company is unable to fully recover the
costs of its investments.

The regulatory approval, permitting, construction, startup and/or operation of pipelines, power generation and transmission facilities, and aggregate reserves
may involve unanticipated events, delays and unrecoverable costs.
The construction, startup and operation of natural gas pipelines and electric power generation and transmission facilities involve many risks, which
may include delays; breakdown or failure of equipment; inability to obtain required governmental permits and approvals; inability to obtain or renew
easements; public opposition; inability to complete financing; inability to negotiate acceptable equipment acquisition, construction, fuel supply, off-
take, transmission, transportation or other material agreements; changes in markets and market prices for power; cost increases and overruns; the
risk of performance below expected levels of output or efficiency; and the inability to obtain full cost recovery in regulated rates. Additionally, in a
number of states in which the Company operates, it can be difficult to permit new aggregate sites or expand existing aggregate sites due to
community resistance. Such unanticipated events could negatively impact the Company's business, its results of operations and cash flows.

MDU Resources Group, Inc. Form 10-K 23

Part I

Operating or other costs required to comply with current or potential pipeline safety regulations and potential new regulations under various agencies
could be significant. The regulations require verification of pipeline infrastructure records by pipeline owners and operators to confirm the maximum
allowable operating pressure of certain lines. Increased emphasis on pipeline safety and increased regulatory scrutiny may result in penalties and
higher costs of operations. If these costs are not fully recoverable from customers, they could have an adverse effect on the Company’s results of
operations and cash flows.

The backlogs at the Company's construction materials and contracting and construction services businesses may not accurately represent future revenue.
Backlog consists of the uncompleted portion of services to be performed under job-specific contracts. Contracts are subject to delay, default or
cancellation, and contracts in the Company's backlog are subject to changes in the scope of services to be provided, as well as adjustments to the
costs relating to the applicable contracts. Backlog may also be affected by project delays or cancellations resulting from weather conditions, external
market factors and economic factors beyond the Company's control. Accordingly, there is no assurance that backlog will be realized. The timing of
contract awards, duration of large new contracts and the mix of services can significantly affect backlog. Backlog at any given point in time may not
accurately represent the revenue or net income that is realized in any period. Also, the backlog as of the end of the year may not be indicative of the
revenue and net income expected to be earned in the following year and should not be relied upon as a stand-alone indicator of future revenues or
net income.

Environmental and Regulatory Risks
The Company's operations could be adversely impacted by climate change.
Severe weather events, such as tornadoes, hurricanes, rain, ice and snowstorms and high and low temperature extremes, occur in regions in which
the Company operates and maintains infrastructure. Climate change could change the frequency and severity of these weather events, which may
create physical and financial risks to the Company. Such risks could have an adverse effect on the Company's financial condition, results of
operations and cash flows.

Severe weather events may damage or disrupt the Company's electric and natural gas transmission and distribution facilities, which could result in
disruption of service and ability to meet customer demand, increased maintenance or capital costs to repair facilities and restore customer service.
The cost of providing service could increase to the extent the frequency of severe weather events increases because of climate change or otherwise.
The Company may not recover all costs related to mitigating these physical risks.

Increases in severe weather conditions or extreme temperatures may cause infrastructure construction projects to be delayed or canceled and limit
resources available for such projects resulting in decreased revenue or increased project costs at the construction materials and contracting and
construction services businesses. In addition, drought conditions could restrict the availability of water supplies, inhibiting the ability of the
construction businesses to conduct operations.

Utility customers’ energy needs vary with weather conditions, primarily temperature and humidity. For residential customers, heating and cooling
represent the largest energy use. To the extent weather conditions are affected by climate change, customers’ energy use could increase or decrease.
Increased energy use by its utility customers due to weather may require the Company to invest in additional generating assets, transmission and
other infrastructure to serve increased load. Decreased energy use due to weather may result in decreased revenues. Extreme weather conditions,
such as uncommonly long periods of high or low ambient temperature, in general require more system backup, adding to costs, and can contribute to
increased system stress, including service interruptions. Weather conditions outside of the Company's service territory could also have an impact on
revenues. The Company buys and sells electricity that might be generated outside its service territory, depending upon system needs and market
opportunities. Extreme temperatures may create high energy demand and raise electricity prices, which could increase the cost of energy provided to
customers.

Climate change may impact a region’s economic health, which could impact revenues at all of the Company's businesses. The Company's financial
performance is tied to the health of the regional economies served. The Company provides natural gas and electric utility service, as well as
construction materials and services, for some states and communities that are economically affected by the agriculture industry. Increases in severe
weather events or significant changes in temperature and precipitation patterns could adversely affect the agriculture industry and, correspondingly,
the economies of the states and communities affected by that industry.

The insurance industry may be adversely affected by severe weather events which may impact the availability of insurance coverage, insurance
premiums and insurance policy terms.

The Company may be subject to litigation related to climate change. Costs of such litigation could be significant, and an adverse outcome could
require substantial capital expenditures, changes in operations and possible payment of penalties or damages, which could affect the Company's
results of operations and cash flows if the costs are not recoverable in rates.

The price of energy also has an impact on the economic health of communities. The cost of additional regulatory requirements to combat climate
change, such as regulation of carbon dioxide emissions under the Clean Air Act, requirements to replace fossil-fuels with renewable energy or credits,
or other environmental regulation or taxes could impact the availability of goods and the prices charged by suppliers, which would normally be borne
by consumers through higher prices for energy and purchased goods, and could adversely impact economic conditions of areas served by the

24 MDU Resources Group, Inc. Form 10-K

Part I

Company. To the extent financial markets view climate change and emissions of GHGs as a financial risk, this could negatively affect the Company's
ability to access capital markets or cause less than ideal terms and conditions.

The Company's operations are subject to environmental laws and regulations that may increase costs of operations, impact or limit business plans, or expose
the Company to environmental liabilities.
The Company is subject to environmental laws and regulations affecting many aspects of its operations, including air and water quality, wastewater
discharge, the generation, transmission and disposal of solid waste and hazardous substances, aggregate permitting and other environmental
considerations. These laws and regulations can increase capital, operating and other costs; cause delays as a result of litigation and administrative
proceedings; and create compliance, remediation, containment, monitoring and reporting obligations, particularly relating to electric generation,
permitting and environmental compliance for construction material facilities, and natural gas transmission and storage operations. Environmental
laws and regulations can also require the Company to install pollution control equipment at its facilities, clean up spills and other contamination and
correct environmental hazards, including payment of all or part of the cost to remediate sites where the Company's past activities, or the activities of
other parties, caused environmental contamination. These laws and regulations generally require the Company to obtain and comply with a variety of
environmental licenses, permits, inspections and other approvals and may cause the Company to shut down existing facilities due to difficulties in
assuring compliance or where the cost of compliance makes operation of the facilities uneconomical. Although the Company strives to comply with
all applicable environmental laws and regulations, public and private entities and private individuals may interpret the Company's legal or regulatory
requirements differently and seek injunctive relief or other remedies against the Company. The Company cannot predict the outcome, financial or
operational, of any such litigation or administrative proceedings.

Existing environmental laws and regulations may be revised and new laws and regulations seeking to protect the environment may be adopted or
become applicable to the Company. These laws and regulations could require the Company to limit the use or output of certain facilities; restrict the
use of certain fuels; prohibit or restrict new or existing services; replace certain fuels with renewable fuels; retire and replace certain facilities; install
pollution controls; remediate environmental impacts; remove or reduce environmental hazards; or forego or limit the development of resources.
Revised or new laws and regulations that increase compliance costs or restrict operations, particularly if costs are not fully recoverable from
customers, could adversely affect the Company's results of operations and cash flows.

Initiatives related to global climate change and to reduce GHG emissions could adversely impact the Company's operation, costs of or access to capital and
impact or limit business plans.
Concern that GHG emissions contribute to global climate change has led to international, federal, state and local legislative and regulatory proposals
to reduce or mitigate the effects of GHG emissions. The Company’s primary GHG emission is carbon dioxide from fossil fuels combustion at
Montana-Dakota's electric generating facilities, particularly its coal-fired facilities. Approximately 46 percent of Montana-Dakota's owned generating
capacity and approximately 70 percent of the electricity it generated in 2020 was from coal-fired facilities.

Treaties, legislation or regulations to reduce GHG emissions in response to climate change may be adopted that affect the Company's utility
operations by requiring additional energy conservation efforts or renewable energy sources, limiting emissions, imposing carbon taxes or other
compliance costs; as well as other mandates that could significantly increase capital expenditures and operating costs or reduce demand for the
Company's utility services. If the Company’s utility operations do not receive timely and full recovery of GHG emission compliance costs from
customers, then such costs could adversely impact the results of operations and cash flows. Significant reductions in demand for the Company's
utility services as a result of increased costs or emissions limitations could also adversely impact the results of operations and cash flows.

The Company monitors, analyzes and reports GHG emissions from its other operations as required by applicable laws and regulations. The Company
will continue to monitor GHG regulations and their potential impact on operations.

Due to the uncertain availability of technologies to control GHG emissions and the unknown obligations that potential GHG emission legislation or
regulations may create, the Company cannot determine the potential financial impact on its operations.

There have also been recent efforts to discourage the investment community from investing in equity and debt securities of companies engaged in
fossil fuel related business and pressuring lenders to limit funding to such companies. Additionally, some insurance carriers have indicated an
unwillingness to insure assets and operations related to certain fossil fuels. Although the Company has not experienced difficulties in accessing the
capital markets or insurance; such efforts, if successfully directed at the Company, could increase the costs of or access to capital and interfere with
business operations and ability to make capital expenditures.

Other Risks
The Company's various businesses are seasonal and subject to weather conditions that can adversely affect the Company's operations, revenues and cash
flows.
The Company's results of operations can be affected by changes in the weather. Weather conditions influence the demand for electricity and natural
gas and affect the price of energy commodities. Utility operations have historically generated lower revenues when weather conditions are cooler than
normal in the summer and warmer than normal in the winter particularly in jurisdictions that do not have weather normalization mechanisms in
place. Where weather normalization mechanisms are in place, there is no assurance the Company will continue to receive such regulatory protection
from adverse weather in future rates.

MDU Resources Group, Inc. Form 10-K 25

Part I

Adverse weather conditions, such as heavy or sustained rainfall or snowfall, storms, wind and colder weather may affect the demand for products and
the ability to perform services at the construction businesses and affect ongoing operation and maintenance and construction activities for the
electric and natural gas transmission and distribution businesses. In addition, severe weather can be destructive, causing outages and property
damage, which could require additional remediation costs. The Company could also be impacted by drought conditions, which may restrict the
availability of water supplies and inhibit the ability of the construction businesses to conduct operations. As a result, unusual or adverse weather
conditions could negatively affect the Company's results of operations, financial position and cash flows.

Competition exists in all of the Company's businesses.
The Company's businesses are subject to competition. Construction services' competition is based primarily on price and reputation for quality, safety
and reliability. Construction materials products are marketed under highly competitive conditions and are subject to competitive forces such as price,
service, delivery time and proximity to the customer. The electric utility and natural gas industries also experience competitive pressures as a result
of consumer demands, technological advances and other factors. The pipeline business competes with several pipelines for access to natural gas
supplies and for transportation and storage business. New acquisition opportunities are subject to competitive bidding environments which impact
prices the Company must pay to successfully acquire new properties to grow its business. The Company's failure to effectively compete could
negatively affect the Company's results of operations, financial position and cash flows.

The Company's operations may be negatively affected if it is unable to obtain, develop and retain key personnel and skilled labor forces.
The Company must attract, develop and retain executive officers and other professional, technical and skilled labor forces with the skills and
experience necessary to successfully manage, operate and grow the Company's businesses. Competition for these employees is high, and in some
cases competition for these employees is on a regional or national basis. At times of low unemployment or economic downturns, it can be difficult for
the Company to attract and retain qualified and affordable personnel. A shortage in the supply of skilled personnel creates competitive hiring
markets, increased labor expenses, decreased productivity and potentially lost business opportunities to support the Company's operating and growth
strategies. Additionally, if the Company is unable to hire employees with the requisite skills, the Company may be forced to incur significant training
expenses. As a result, the Company's ability to maintain productivity, relationships with customers, competitive costs, and quality services is limited
by the ability to employ, retain and train the necessary skilled personnel and could negatively affect the Company's results of operations, financial
position and cash flows.

The Company's construction materials and contracting and construction services businesses may be exposed to warranty claims.
The Company, particularly its construction businesses, may provide warranties guaranteeing the work performed against defects in workmanship and
material. If warranty claims occur, they may require the Company to re-perform the services or to repair or replace the warranted item, at a cost to
the Company and could also result in other damages if the Company is not able to adequately satisfy warranty obligations. In addition, the Company
may be required under contractual arrangements with customers to warrant any defects or failures in materials the Company purchased from third
parties. While the Company generally requires suppliers to provide warranties that are consistent with those the Company provides to customers, if
any of the suppliers default on their warranty obligations to the Company, the Company may nonetheless incur costs to repair or replace the defective
materials. Costs incurred as a result of warranty claims could adversely affect the Company's results of operations, financial condition and cash
flows.

The Company is a holding company and relies on cash from its subsidiaries to pay dividends.
The Company is a holding company as a result of the Holding Company Reorganization in 2019. The Company's investments in its subsidiaries
comprise the Company's primary assets. The Company depends on earnings, cash flows and dividends from its subsidiaries to pay dividends on its
common stock. Regulatory, contractual and legal limitations, as well as their capital requirements, affect the ability of the subsidiaries to pay
dividends to the Company and thereby could restrict or influence the Company's ability or decision to pay dividends on its common stock, which
could adversely affect the Company's stock price.

Costs related to obligations under MEPPs could have a material negative effect on the Company's results of operations and cash flows.
Various operating subsidiaries of the Company participate in approximately 68 MEPPs for employees represented by certain unions. The Company is
required to make contributions to these plans in amounts established under numerous collective bargaining agreements between the operating
subsidiaries and those unions.

The Company may be obligated to increase its contributions to underfunded plans that are classified as being in endangered, seriously endangered or
critical status as defined by the Pension Protection Act of 2006. Plans classified as being in one of these statuses are required to adopt RPs or FIPs
to improve their funded status through increased contributions, reduced benefits or a combination of the two. Based on available information, the
Company believes that approximately 31 percent of the MEPPs to which it contributes are currently in endangered, seriously endangered or critical
status.

The Company may also be required to increase its contributions to MEPPs if the other participating employers in such plans withdraw from the plans
and are not able to contribute amounts sufficient to fund the unfunded liabilities associated with their participation in the plans. The amount and
timing of any increase in the Company's required contributions to MEPPs may depend upon one or more factors including the outcome of collective
bargaining; actions taken by trustees who manage the plans; actions taken by the plans' other participating employers; the industry for which
contributions are made; future determinations that additional plans reach endangered, seriously endangered or critical status; newly-enacted
government laws or regulations and the actual return on assets held in the plans; among others. The Company could experience increased operating

26 MDU Resources Group, Inc. Form 10-K

Part I

expenses as a result of required contributions to MEPPs, which could have an adverse effect on the Company's results of operations, financial
position or cash flows.

In addition, pursuant to ERISA, as amended by MPPAA, the Company could incur a partial or complete withdrawal liability upon withdrawing from a
plan, exiting a market in which it does business with a union workforce or upon termination of a plan. The Company could also incur additional
withdrawal liability if its withdrawal from a plan is determined by that plan to be part of a mass withdrawal.

Information technology disruptions or cyber-attacks could adversely impact the Company's operations.
The Company uses technology in substantially all aspects of its business operations and requires uninterrupted operation of information technology
systems, including disaster recovery and backup systems and network infrastructure. While the Company has policies, procedures and processes in
place designed to strengthen and protect these systems, they may be vulnerable to failures or unauthorized access, due to hacking, human error,
theft, sabotage, malicious software, acts of terrorism, acts of war, acts of nature or other causes. If these systems fail or become compromised, and
they are not recovered in a timely manner, the Company may be unable to fulfill critical business functions. This may include interruption of electric
generation, transmission and distribution facilities, natural gas storage and pipeline facilities and facilities for delivery of construction materials or
other products and services, any of which could adversely affect the Company's reputation, business, cash flows and results of operations or subject
the Company to legal or regulatory liabilities and increased costs. Additionally, because electric generation and transmission systems and natural gas
pipelines are part of interconnected systems with other operators’ facilities, a cyber-related disruption in another operator’s system could negatively
impact the Company's business.

The Company’s accounting systems and its ability to collect information and invoice customers for products and services could be disrupted. If the
Company’s operations are disrupted, it could result in decreased revenues or remediation costs that could adversely affect the Company's results of
operations and cash flows.

The Company is subject to cybersecurity and privacy laws and regulations of many government agencies, including FERC and NERC. NERC issues
comprehensive regulations and standards surrounding the security of bulk power systems and continually updates these requirements, as well as
establishing new requirements with which the utility industry must comply. As these regulations evolve, the Company may experience increased
compliance costs and may be at higher risk for violating these standards. Experiencing a cybersecurity incident could cause the Company to be non-
compliant with applicable laws and regulations, causing the Company to incur costs related to legal claims or proceedings and regulatory fines or
penalties.

The Company, through the ordinary course of business, requires access to sensitive customer, employee and Company data. While the Company has
implemented extensive security measures, a breach of its systems could compromise sensitive data and could go unnoticed for some time. Such an
event could result in negative publicity and reputational harm, remediation costs, legal claims and fines that could have an adverse effect on the
Company's financial results. Third-party service providers that perform critical business functions for the Company or have access to sensitive
information within the Company also may be vulnerable to security breaches and information technology risks that could adversely affect the
Company.

The Company’s information systems experience on-going and often sophisticated cyber-attacks by a variety of sources with the apparent aim to
breach the Company's cyber-defenses. As cyber-attacks continue to increase in frequency and sophistication, the Company may be unable to prevent
all such attacks in the future. The Company is continuously reevaluating the need to upgrade and/or replace systems and network infrastructure.
These upgrades and/or replacements could adversely impact operations by imposing substantial capital expenditures, creating delays or outages, or
experiencing difficulties transitioning to new systems. Systems implementation disruption and any other information technology disruption, if not
anticipated and appropriately mitigated, could adversely affect the Company.

General risk factors that could impact the Company's businesses.
The following are additional factors that should be considered for a better understanding of the risks to the Company. These factors may negatively
impact the Company's financial results in future periods.

• Acquisition, disposal and impairments of assets or facilities.

• Changes in present or prospective electric generation.

• Population decline and demographic patterns in the Company's areas of service.

• The cyclical nature of large construction projects at certain operations.

• Labor negotiations or disputes.

• Inability of the contract counterparties to meet their contractual obligations.

• The inability to effectively integrate the operations and the internal controls of acquired companies.

Item 1B. Unresolved Staff Comments

The Company has no unresolved comments with the SEC.

MDU Resources Group, Inc. Form 10-K 27

Part I

Item 3. Legal Proceedings
SEC regulations require the Company to disclose certain information about proceedings arising under federal, state or local environmental provisions
if the Company reasonably believes that such proceedings may result in monetary sanctions above a stated threshold. Pursuant to SEC regulations,
the Company has adopted a threshold of $1.0 million for purposes of determining whether disclosure of any such proceedings is required.

For information regarding legal proceedings required by this item, see Item 8 - Note 21, which is incorporated herein by reference.

Item 4. Mine Safety Disclosures

For information regarding mine safety violations or other regulatory matters required by Section 1503(a) of the Dodd-Frank Act and Item 104 of
Regulation S-K, see Exhibit 95 to this Form 10-K, which is incorporated herein by reference.

28 MDU Resources Group, Inc. Form 10-K

Part II

Item 5. Market for the Registrant's Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities

The Company's common stock is listed on the New York Stock Exchange under the symbol "MDU."

As of December 31, 2020, the Company's common stock was held by approximately 10,400 stockholders of record.

The Company depends on earnings and dividends from its subsidiaries to pay dividends on common stock. The Company has paid uninterrupted
dividends to stockholders for 83 consecutive years with an increase in the payout amount for the last 30 consecutive years. The declaration and
payment of dividends is at the sole discretion of the board of directors, subject to limitations imposed by the Company's credit agreements, federal
and state laws, and applicable regulatory limitations. For more information on factors that may limit the Company's ability to pay dividends, see
Item 8 - Note 12.

The following table includes information with respect to the Company's purchase of equity securities:

ISSUER PURCHASES OF EQUITY SECURITIES

Period

October 1 through October 31, 2020

November 1 through November 30, 2020

December 1 through December 31, 2020

Total

(a)
Total Number
of Shares
(or Units)
Purchased (1)

(b)
Average Price Paid
per Share
(or Unit)

—

45,273

—

45,273

—

$25.40

—

(d)
Maximum Number (or
Approximate Dollar
Value) of Shares (or
Units) that May Yet Be
Purchased Under the
Plans or Programs (2)

—

(1) Represents shares of common stock purchased on the open market in connection with annual stock grants made to the Company's non-employee directors.
(2) Not applicable. The Company does not currently have in place any publicly announced plans or programs to purchase equity securities.

MDU Resources Group, Inc. Form 10-K 29

Part II

Item 6. Selected Financial Data

Selected Financial Data

Operating revenues (000's):

Electric

Natural gas distribution

Pipeline

2020

2019

2018

2017

2016

2015

332,029

351,725

335,123

342,805

322,356

280,615

848,185

143,877

865,222

140,444

823,247

128,923

848,388

122,213

766,115

141,602

817,419

154,904

Construction materials and contracting

2,178,002

2,190,717

1,925,854

1,812,529

1,874,270

1,904,282

Construction services

Other

Intersegment eliminations

Operating income (loss) (000's):

Electric

Natural gas distribution

Pipeline

Construction materials and contracting

Construction services

Other

Intersegment eliminations

Earnings (loss) on common stock (000's):

Electric

Natural gas distribution

Pipeline

Construction materials and contracting

Construction services

Other

Intersegment eliminations

Earnings on common stock before income (loss) from

discontinued operations

Income (loss) from discontinued operations, net of tax*

Loss from discontinued operations attributable to

noncontrolling interest

Earnings per common share before discontinued operations -

diluted

Discontinued operations attributable to the Company, net of

tax

Common Stock Statistics

Weighted average common shares outstanding - diluted

(000's)

Dividends declared per common share

Book value per common share

Market price per common share (year end)

Market price ratios:

Dividend payout**

Yield

Market value as a percent of book value

2,095,723

1,849,266

1,371,453

1,367,602

1,073,272

926,427

11,903

16,551

11,259

7,874

8,643

9,191

(76,969)

(77,149)

(64,307)

(58,060)

(57,430)

(78,786)

$ 5,532,750

$ 5,336,776

$ 4,531,552

$ 4,443,351

$ 4,128,828

$ 4,014,052

63,434

64,039

65,148

79,902

67,929

59,915

73,082

49,436

214,498

147,644

69,188

42,796

179,955

126,426

72,336

36,128

84,239

36,004

66,166

42,864

54,974

30,218

141,426

143,230

178,753

148,312

86,764

81,292

53,546

(3,169)

(1,184)

—

(79)

—

(619)

—

(349)

—

43,678

(8,414)

(2,942)

544,925

481,220

401,723

424,048

408,909

325,741

55,601

54,763

47,000

49,366

42,222

35,914

44,049

37,012

147,325

109,721

(3,181)

—

39,517

29,603

120,371

92,998

(2,086)

—

37,732

28,459

92,647

64,309

(761)

—

32,225

20,493

27,102

23,435

123,398

102,687

53,306

(1,422)

6,849

33,945

(3,231)

6,251

23,607

13,250

89,096

23,762

(14,941)

5,016

390,527

335,166

269,386

284,215

232,411

175,704

(322)

—

287

—

2,932

(3,783)

(300,354)

(834,080)

—

(131,691)

(35,256)

390,205

335,453

272,318

280,432

63,748

(623,120)

1.95

1.69

1.38

1.45

1.19

.90

—

.01

(.02)

(.86)

1.95

1.69

1.39

1.43

.33

(4.10)

(3.20)

200,571

198,626

196,150

195,687

195,618

194,986

.8350

15.36

26.34

.8150

14.21

29.71

.7950

13.09

23.84

.7750

12.44

26.88

.7550

11.78

28.77

.7350

12.83

18.32

43%

171%

48%

209%

58%

182%

53%

216%

63%

244%

82%

143%

* Reflects oil and natural gas properties noncash write-downs of $315.3 million (after tax) in 2015 and fair value impairments of assets held for sale of $157.8 million

(after tax) and $475.4 million (after tax) in 2016 and 2015, respectively.

** Based on continuing operations.

30 MDU Resources Group, Inc. Form 10-K

Part II

Item 6. Selected Financial Data (continued)

General

Total assets (000's)

Total long-term debt (000's)

Capitalization ratios:

Total equity

Total debt

Electric

2020

2019

2018

2017

2016

2015

$ 8,053,372

$ 7,683,059

$ 6,988,110

$ 6,334,666

$ 6,284,467

$ 6,565,154

$ 2,213,130

$ 2,243,107

$ 2,108,695

$ 1,714,853

$ 1,790,159

$ 1,796,163

58%

100 %

56%

100 %

55%

100 %

59%

100 %

56%

100 %

58%

100 %

Retail sales (thousand kWh)

3,204,523

3,314,307

3,354,401

3,306,470

3,258,537

3,316,017

Electric system summer and firm purchase contract ZRCs

(Interconnected system)

Electric system peak demand obligation, including firm

purchase contracts, planning reserve margin requirement
(Interconnected system)

553.2

591.3

574.5

553.1

559.7

547.3

531.4

537.2

530.2

559.7

547.3

All-time demand peak - kW (Interconnected system)

611,542

Electricity produced (thousand kWh)

2,647,746

2,792,770

2,840,353

2,630,640

2,626,763

1,898,160

Electricity purchased (thousand kWh)

890,054

891,539

831,039

955,687

904,702

1,658,002

Average cost of electric fuel and purchased power per kWh

.019

.023

.022

.021

.024

Natural Gas Distribution

Retail sales (Mdk)

Transportation sales (Mdk)

Pipeline

Transportation (Mdk)

Gathering (Mdk)

Customer natural gas storage balance (Mdk)

Construction Materials and Contracting

Sales (000's):

Aggregates (tons)

Asphalt (tons)

Ready-mixed concrete (cubic yards)

114,543

160,010

123,675

166,077

112,566

149,497

112,551

144,477

99,296

95,559

147,592

154,225

438,615

429,660

351,498

312,520

285,254

290,494

8,611

25,451

13,900

16,223

14,882

13,928

16,064

22,397

20,049

26,403

33,441

16,600

30,949

32,314

29,795

28,213

27,580

26,959

7,202

4,087

6,707

4,123

6,838

3,518

6,237

3,548

7,203

3,655

6,705

3,592

Aggregate reserves (000's tons)

1,104,887

1,054,186

1,014,431

965,036

989,084

1,022,513

MDU Resources Group, Inc. Form 10-K 31

Part II

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
The Company focuses on infrastructure and is Building a Strong America® by providing essential products and services through its regulated energy
delivery and construction materials and services businesses. The Company and its employees work hard to keep the economy of the United States
moving with the products and services provided, which include powering and connecting homes, factories, offices and stores; and building roads,
highways, data infrastructure and airports.

The Company's two-platform business model, regulated energy delivery and construction materials and services, are each comprised of different
operating segments. Most of these segments experience seasonality related to the industries in which they operate. The two-platform approach helps
balance this seasonality and the risks associated with each type of industry. The Company is authorized to conduct business in 45 states and during
peak times has over 15,600 employees. The Company’s organic investments are strong drivers of high-quality earnings growth and continue to be an
important part of the Company’s growth story. Management believes the Company is well positioned in the industries and markets in which it
operates.

Impact of the COVID-19 pandemic on the Company
In March 2020, the World Health Organization declared the outbreak of COVID-19 a pandemic, and the President of the United States declared the
COVID-19 outbreak as a national emergency. Most of the Company's products and services are considered essential to our country and our
communities; therefore, operations have generally been permitted to proceed with increased social distancing measures and hygiene practices for its
employees. While the Company has experienced some inefficiency impacts, including operation suspensions and interruptions at some locations to
carry out preventative measures or in response to instances of positive tests, the impacts have not been material. For more information on specific
impacts to each of the Company's business segments, see the following discussions in each business segment's Outlook section.

In March 2020, the President of the United States signed into law the CARES Act in response to the COVID-19 pandemic. The CARES Act provided
economic relief and stimulus to support the national economy during the pandemic, including support for individuals and businesses affected by the
pandemic and economic downturn. The CARES Act allowed businesses to defer payment of the employer portion of social security taxes incurred
through the end of 2020. At December 31, 2020, the Company had deferred approximately $56.7 million in payroll taxes related to this provision.
The Company is required to pay 50 percent of the payroll taxes deferred under this provision by the end of 2021 and the remaining balance by the
end of 2022.

The Company evaluated its planned capital projects and delayed certain expenditures in 2020 to provide additional financial flexibility and to ensure
projects will provide acceptable returns on investment. In addition, the Company established a task force to monitor developments related to the
pandemic and implemented procedures to protect employees. Many employees that have the capacity to work from home continue to do so as the
Company has delayed return to work processes for certain office employees due to COVID-19 cases in some operating regions. The Company has also
enacted additional physical and cybersecurity measures to safeguard systems for remote work locations.

Although there have been logistical and other challenges as a result of COVID-19, there were no material adverse impacts on the Company's results
of operations for the year ended December 31, 2020. The Company continues to adjust its business in response to the pandemic while positioning
for an economic rebound and potential opportunities to enhance its competitive position. The situation surrounding COVID-19 remains fluid and the
potential for a material adverse impact on the Company increases the longer the virus impacts the level of economic activity in the United States.
Due to the uncertainty of the economic outlook resulting from the COVID-19 pandemic, the Company continues to monitor the situation closely. For
more information on the possible impacts, see Item 1A - Risk Factors.

32 MDU Resources Group, Inc. Form 10-K

Consolidated Earnings Overview
The following table summarizes the contribution to the consolidated income by each of the Company's business segments.

Part II

Years ended December 31,

Electric

Natural gas distribution

Pipeline

Construction materials and contracting

Construction services

Other

Income from continuing operations

Income (loss) from discontinued operations, net of tax

Net income

Earnings per share - basic:

Income from continuing operations

Discontinued operations, net of tax

Earnings per share - basic

Earnings per share - diluted:

Income from continuing operations

Discontinued operations, net of tax

Earnings per share - diluted

2020

2019

2018

(In millions, except per share amounts)

55.6 $

54.8 $

44.0

37.0

147.3

109.7

(3.1)

39.5

29.6

120.4

93.0

(2.1)

47.0

37.7

28.5

92.6

64.3

(.7)

390.5

335.2

269.4

(.3)

2.9

390.2 $

335.5 $

272.3

1.95 $

1.69 $

—

1.95 $

1.69 $

1.95 $

1.69 $

—

1.95 $

1.69 $

1.38

.01

1.39

1.38

.01

1.39

2020 compared to 2019 The Company's consolidated earnings increased $54.7 million or 16 percent in 2020 as compared to 2019.

The Company's earnings were positively impacted by increased earnings across all of the Company's businesses in 2020. The construction materials
and contracting business experienced an increase in gross margin, primarily resulting from favorable weather conditions and higher realized materials
margins on asphalt and asphalt-related products and ready-mixed concrete, as well as most other product lines. The construction services business
also experienced an increase in gross margin as a result of higher inside and outside specialty contracting workloads, partially due to the businesses
acquired, as well as hospitality projects, high-tech projects and natural disaster recovery work. The pipeline business experienced increased
transportation volumes and revenues, largely related to organic growth projects, as well as higher storage-related revenues as a result of stronger
demand for storage services. In addition, approved rate recovery positively impacted earnings at the electric and natural gas distribution businesses.

2019 compared to 2018 The Company's consolidated earnings increased $63.2 million or 23 percent in 2019 as compared to 2018.

Positively impacting the Company's earnings was an increase in gross margin at the construction services business, largely resulting from higher
inside and outside specialty contracting workloads. Also contributing to the increase in earnings was an increase in gross margin at the construction
materials and contracting business as a result of strong economic environments in certain states, as well as contributions from the businesses
acquired and an increase in gains recognized on asset sales. The electric business also positively impacted earnings primarily due to approved rate
relief in Montana and recovery of the investment in the BSSE project placed into service in the first quarter of 2019. Higher returns on the
Company's benefit plan investments also increased earnings across all businesses. At the pipeline business, increased rates and volumes of natural
gas being transported through its pipeline were mostly offset by the absence of a $4.2 million income tax benefit recorded in 2018 relating to the
reversal of a regulatory liability recorded in 2017 based on a FERC final accounting order and higher depreciation, depletion and amortization
expense.

A discussion of key financial data from the Company's business segments follows.

Business Segment Financial and Operating Data
Following are key financial and operating data for each of the Company's business segments. Also included are highlights on key growth strategies,
projections and certain assumptions for the Company and its subsidiaries and other matters of the Company's business segments. Many of these
highlighted points are "forward-looking statements." For more information, see Part I - Forward-Looking Statements. There is no assurance that the
Company's projections, including estimates for growth and changes in earnings, will in fact be achieved. Please refer to assumptions contained in
this section, as well as the various important factors listed in Item 1A - Risk Factors. Changes in such assumptions and factors could cause actual
future results to differ materially from the Company's growth and earnings projections.

For information pertinent to various commitments and contingencies, see Item 8 - Notes to Consolidated Financial Statements. For a summary of the
Company's business segments, see Item 8 - Note 17.

MDU Resources Group, Inc. Form 10-K 33

Part II

Electric and Natural Gas Distribution
Strategy and challenges The electric and natural gas distribution segments provide electric and natural gas distribution services to customers, as
discussed in Items 1 and 2 - Business Properties. Both segments strive to be top performing utility companies measured by integrity, employee
safety and satisfaction, customer service and shareholder return, while providing safe, environmentally friendly, reliable and competitively priced
energy and related services to customers. The Company is focused on cultivating organic growth while managing operating costs and monitoring
opportunities for these segments to retain, grow and expand their customer base through extensions of existing operations, including building and
upgrading electric generation, transmission and distribution, and natural gas systems, and through selected acquisitions of companies and properties
with similar operating and growth objectives at prices that will provide stable cash flows and an opportunity to earn a competitive return on
investment. The continued efforts to create operational improvements and efficiencies across both segments promotes the Company's business
integration strategy. The primary factors that impact the results of these segments are the ability to earn authorized rates of return, the cost of
natural gas, cost of electric fuel and purchased power, weather, competitive factors in the energy industry, population growth and economic
conditions in the segments' service areas.

The electric and natural gas distribution segments are subject to extensive regulation in the jurisdictions where they conduct operations with respect
to costs, timely recovery of investments and permitted returns on investment, as well as certain operational, environmental and system integrity
regulations. Legislative and regulatory initiatives to increase renewable energy resources and reduce GHG emissions could impact the price and
demand for electricity and natural gas, as well as increase costs to produce electricity and natural gas. The segments continue to invest in facility
upgrades to be in compliance with the existing and future regulations. To assist in the reduction of regulatory lag in obtaining revenue increases to
align with increased investments, tracking mechanisms have been implemented in certain jurisdictions, as further discussed in Items 1 and 2 -
Business Properties and Item 8 - Note 20.

In September 2019, the Pipeline and Hazardous Materials Safety Administration issued a rule for additional regulations to strengthen the safety of
natural gas transmission and storage facilities and hazardous liquid pipelines. The natural gas segment has implemented procedure changes for the
initial requirements and continues to evaluate procedure changes necessary for the additional requirements effective July 1, 2021.

State implementation of pollution control plans to improve visibility at Class I areas, such as national parks, under the EPA's Regional Haze Rule
could require the owners of Coyote Station to incur significant new costs. If the owners decide to incur such costs, the costs could, dependent on
determination by state regulatory commissions on approval to recover such costs from customers, negatively impact the Company's results of
operations, financial position and cash flows. The NDDEQ's state implementation plan is due to be submitted to the EPA by July 2021. The
Company expects the NDDEQ to draft a state implementation plan and share its controls selection with federal land managers of the National Park
Service and the United States Fish and Wildlife Service in early 2021. Additionally, the Company is one of four owners of Coyote Station and cannot
make a unilateral decision on the plant's future. The Company could be negatively impacted by the decisions of the other owners.

The electric and natural gas distribution segments are facing increased lead times on delivery of certain raw materials used in electric transmission
and natural gas pipeline projects. Long lead times are attributable to increased demand for steel products from pipeline companies as they respond
to the United States Department of Transportation Pipeline System Safety and Integrity Plan, as well as delays in the manufacturing of electrical
equipment as a result of the COVID-19 pandemic, including delays in trucking times and issuance of permits for large and heavy loads. The
Company continues to monitor the material lead times and is working with manufacturers to proactively order such materials to help mitigate the risk
of delays due to extended lead times.

The ability to grow through acquisitions is subject to significant competition and acquisition premiums. In addition, the ability of the segments to
grow their service territory and customer base is affected by regulatory constraints, the economic environment of the markets served and competition
from other energy providers and fuels. The construction of any new electric generating facilities, transmission lines and other service facilities is
subject to increasing costs and lead times, extensive permitting procedures, and federal and state legislative and regulatory initiatives, which will
likely necessitate increases in electric energy prices.

Revenues are impacted by both customer growth and usage, the latter of which is primarily impacted by weather, as well as impacts associated with
commercial and industrial slow-downs, including economic recessions, and energy efficiencies. Very cold winters increase demand for natural gas
and to a lesser extent, electricity, while warmer than normal summers increase demand for electricity, especially among residential and commercial
customers. Average consumption among both electric and natural gas customers has tended to decline as more efficient appliances and furnaces are
installed, and as the Company has implemented conservation programs. Natural gas weather normalization and decoupling mechanisms in certain
jurisdictions have been implemented to largely mitigate the effect that would otherwise be caused by variations in volumes sold to these customers
due to weather and changing consumption patterns on the Company's distribution margins, as further discussed in Items 1 and 2 - Business
Properties.

34 MDU Resources Group, Inc. Form 10-K

Earnings overview - The following information summarizes the performance of the electric segment.

Years ended December 31,

2020

2019

2018

% change

(Dollars in millions, where applicable)

2020 vs. 2019 2019 vs. 2018

Part II

Operating revenues

Electric fuel and purchased power

Taxes, other than income

Adjusted gross margin

Operating expenses:

Operation and maintenance

Depreciation, depletion and amortization

Taxes, other than income

Total operating expenses

Operating income

Other income

Interest expense

Income before income taxes

Income tax benefit

Net income

Operating statistics

Retail sales (million kWh):

Residential

Commercial

Industrial

Other

$ 332.0 $ 351.7 $ 335.1

66.9

86.6

80.7

264.5

253.7

121.3

125.7

123.0

63.0

16.8

58.7

16.1

51.0

14.5

201.1

200.5

188.5

63.4

64.0

7.2

26.7

43.9

3.4

25.3

42.1

65.2

1.2

25.9

40.5

(11.7)

(12.7)

(6.5)

55.6 $

54.8 $

47.0

2020

2019

2018

1,170.9 1,177.9 1,196.6

1,419.4 1,499.9 1,513.9

532.1

549.4

551.0

82.1

87.1

92.9

3,204.5 3,314.3 3,354.4

(5.6) %

(22.7) %

— %

(3.5) %

7.3 %

4.3 %

.3 %

(.9) %

5.0 %

7.3 %

(14.3) %

4.3 %

2.2 %

15.1 %

11.0 %

6.4 %

(1.8) %

111.8 %

183.3 %

5.5 %

4.3 %

(7.9) %

1.5 %

(2.3) %

4.0 %

95.4 %

16.6 %

Average cost of electric fuel and purchased power per kWh

.019 $

.023 $

.022

Adjusted gross margin is a non-GAAP financial measure. For additional information and reconciliation of the non-GAAP adjusted gross margin
attributable to the electric segment, see the Non-GAAP Financial Measures section later in this Item.

2020 compared to 2019 Electric earnings increased $800,000 as a result of:

Adjusted gross margin: Comparable to the prior year. The adjusted gross margin was positively impacted by higher rates of $2.8 million, including
approved rate relief resulting in $2.0 million additional revenue. These increases were offset by lower retail sales volumes of 3.3 percent across all
customer classes due to warmer weather and slow-downs as a result of the COVID-19 pandemic.

Operation and maintenance: Decrease of $4.4 million, largely due to lower generation station expenses of $3.5 million and lower payroll and other
employee-related costs of approximately $1.5 million. Partially offsetting the decreases were increased bad debt expense of $500,000 as a result
of the COVID-19 pandemic, as discussed later.

Depreciation, depletion and amortization: Increase of $4.3 million, largely from an increase in asset base driven by capital expenditures, which
include transmission projects, and higher depreciation rates implemented from a Montana rate case of $1.2 million.

Taxes, other than income: Increase of $700,000, from higher property taxes in certain jurisdictions.

Other income: Increase of $3.8 million, largely attributable to an out-of-period adjustment of $2.5 million in the fourth quarter of 2020 related to
previously overstated benefit plan expense, as discussed in Item 8 - Note 1, and the absence of the write-down of a non-utility investment in the
second quarter of 2019 for $1.2 million, as discussed in Item 8 - Note 8. Lower 2020 pension expense also contributed to the increase in other
income.

Interest expense: Increase of $1.4 million driven by higher short-term debt balances.

Income tax benefit: Decrease of $1.0 million, largely due to higher income before income taxes.

2019 compared to 2018 Electric earnings increased $7.8 million as a result of:

Adjusted gross margin: Increase of $10.8 million, primarily due to an increase in revenues. The revenue increase was driven by implemented
regulatory mechanisms, which include approved Montana interim and final rates and recovery of the investment in the BSSE project placed into
service in the first quarter of 2019. Also contributing to the increase was the absence in 2019 of a transmission formula rate adjustment

MDU Resources Group, Inc. Form 10-K 35

Part II

recognized in the third quarter of 2018 for decreased costs on the BSSE project. These increases were partially offset by lower retail sales volumes
of 1.2 percent across all major customer classes.

Operation and maintenance: Increase of $2.7 million, primarily resulting from higher payroll-related costs, partially offset by lower material
expenses across all locations.

Depreciation, depletion and amortization: Increase of $7.7 million as a result of increased property, plant and equipment balances including the
BSSE project, as previously discussed, and other capital projects, as well as a reserve for certain costs related to the retirement of three aging
coal-fired electric generating units, as discussed in Item 8 - Note 6, which is offset in income taxes.

Taxes, other than income: Increase of $1.6 million, primarily from higher property taxes in certain jurisdictions.

Other income: Increase of $2.2 million, largely the result of higher returns on the Company's benefit plan investments, partially offset by the write-
down of a non-utility investment in the second quarter of 2019, as discussed in Item 8 - Note 8.

Interest expense: Decrease of $600,000 driven by higher AFUDC, which resulted in more interest being capitalized on regulated construction
projects.

Income tax benefit: Increase of $6.2 million, largely due to increased production tax credits, as well as increased excess deferred tax amortization.

Earnings overview - The following information summarizes the performance of the natural gas distribution segment.

Years ended December 31,

2020

2019

2018

% change

(Dollars in millions, where applicable)

2020 vs. 2019 2019 vs. 2018

Operating revenues

Purchased natural gas sold

Taxes, other than income

Adjusted gross margin

Operating expenses:

Operation and maintenance

Depreciation, depletion and amortization

Taxes, other than income

Total operating expenses

Operating income

Other income

Interest expense

Income before income taxes

Income tax expense

Net income

* NM - not meaningful

$ 848.2 $ 865.2 $ 823.2

448.1

477.6

454.8

32.4

30.3

28.5

367.7

357.3

339.9

185.4

185.0

173.4

84.6

24.6

79.6

23.5

72.5

21.7

294.6

288.1

267.6

73.1

13.5

36.8

49.8

5.8

69.2

72.3

7.2

35.5

40.9

1.4

30.7

41.8

4.1

44.0 $

39.5 $

37.7

(2.0) %

(6.2) %

6.9 %

2.9 %

.2 %

6.3 %

4.7 %

2.3 %

5.6 %

87.5 %

3.7 %

21.8 %

11.4 %

5.1 %

5.0 %

6.3 %

5.1 %

6.7 %

9.8 %

8.3 %

7.7 %

(4.3) %

15.6 %

(2.2) %

(65.9) %

4.8 %

36 MDU Resources Group, Inc. Form 10-K

Part II

Operating statistics

Volumes (MMdk)

Retail sales:

Residential

Commercial

Industrial

Transportation sales:

Commercial

Industrial

Total throughput

2020

2019

2018

65.5

44.2

4.8

69.4

49.1

5.2

63.7

44.4

4.5

114.5

123.7

112.6

2.0

2.2

158.0

163.9

147.3

160.0

166.1

149.5

274.5

289.8

262.1

Average cost of natural gas per dk

3.91 $

3.86 $

4.04

Adjusted gross margin is a non-GAAP financial measure. For additional information and reconciliation of the non-GAAP adjusted gross margin
attributable to the natural gas distribution segment, see the Non-GAAP Financial Measures section later in this Item.

2020 compared to 2019 Natural gas distribution earnings increased $4.5 million as a result of:

Adjusted gross margin: Increase of $10.4 million, largely the result of $6.8 million in approved rate recovery in certain jurisdictions, higher basic
service charges of $2.1 million due to customer growth of 2 percent and increased property tax tracker revenue of $1.7 million, which offsets the
property tax expense below. Slightly offsetting the increases was a decrease in retail sales volumes of 7.4 percent across all customer classes due
to warmer weather and slow-downs as a result of the COVID-19 pandemic, which was largely offset by weather normalization and decoupling
mechanisms in certain jurisdictions.

Operation and maintenance: Increase of $400,000, primarily related to increased contract services, largely $1.2 million for the write-off of an
abandoned project in the third quarter of 2020, and increased software expenses. Partially offsetting the increase was lower employee-related
costs of $1.6 million as a result of the COVID-19 pandemic.

Depreciation, depletion and amortization: Increase of $5.0 million, primarily from an increase in asset base driven by capital expenditures, which
include system safety and reliability enhancements and other growth projects.

Taxes, other than income: Increase of $1.1 million due to higher property taxes in certain jurisdictions of $1.7 million, partially offset by lower
payroll taxes.

Other income: Increase of $6.3 million, largely driven by an out-of-period adjustment of $4.4 million in the fourth quarter of 2020 related to
previously overstated benefit plan expenses, as discussed in Item 8 - Note 1, and lower 2020 benefit plan expenses of approximately $2.2
million. The absence of the write-down of a non-utility investment of approximately $800,000 in the second quarter of 2019, as discussed in Item
8 - Note 8, also contributed to the increase in other income. Partially offsetting the increases was a decrease in interest income of $1.5 million
related to the recovery of purchased gas cost adjustment balances.

Interest expense: Increase of $1.3 million, primarily attributable to increased long-term debt balances, partially offset by lower short-term
borrowings.

Income tax expense: Increase of $4.4 million, as a result of the increase in income before taxes and permanent tax adjustments.

2019 compared to 2018 Natural gas distribution earnings increased $1.8 million as a result of:

Adjusted gross margin: Increase of $17.4 million, primarily driven by an increase in retail sales volumes of 9.9 percent related to all customer
classes due to colder weather, partially offset by weather normalization and conservation adjustments in certain jurisdictions, and approved rate
recovery in certain jurisdictions. The adjusted gross margin was also positively impacted by higher rate realization due to higher conservation
revenue, which offsets the conservation expense in operation and maintenance expense.

Operation and maintenance: Increase of $11.6 million, largely related to higher payroll-related costs, as well as higher conservation expenses
being recovered in revenue. The increase was partially offset by lower contract services, which includes the absence of the prior year's recognition
of a non-recurring expense related to the approved WUTC general rate case settlement in the second quarter 2018.

Depreciation, depletion and amortization: Increase of $7.1 million, primarily as a result of increased property, plant and equipment balances.

Taxes, other than income: Increase of $1.8 million due to higher property taxes in certain jurisdictions and increased payroll taxes.

Other income: Increase of $7.0 million, largely resulting from higher returns on the Company's benefit plan investments and increased interest
income related to higher gas costs to be collected from customers. Partially offsetting these increases was a write-down of a non-utility investment
in the second quarter of 2019, as discussed in Item 8 - Note 8.

Interest expense: Increase of $4.8 million, largely resulting from increased debt balances to finance higher gas costs to be collected from
customers.

Income tax expense: Decrease of $2.7 million, largely due to increased permanent tax benefits related to the Company's benefit plan investments.

MDU Resources Group, Inc. Form 10-K 37

Part II

Outlook The Company continues to assess the impacts of the COVID-19 pandemic on its operations and is committed to providing safe and reliable
service while ensuring the health and safety of its employees, customers and the communities in which it operates. In response to the pandemic, the
Company instituted certain measures to help protect its employees from exposure to COVID-19 and to curb potential spread of the virus in customer
homes and facilities, including suspension of disconnects due to nonpayment of bills. The Company also waived late payment fees effective April 1,
2020, to help customers experiencing financial hardships. As a consequence of the suspended disconnects and waived late fees, the Company's
cash flows and collection of receivables have been affected. The Company reinstated disconnects and late payment fees in five of its eight states
effective September 1, 2020, and the Company reinstated disconnects and late payment fees to certain customer classes in another two states
effective January 1, 2021. The Company has experienced some impacts to its commercial and industrial electric and natural gas loads associated
with reduced economic activity due to the COVID-19 pandemic and oil price impacts, as further discussed below. The Company expects this
downward trend on demand to continue throughout the pandemic. The Company temporarily implemented cost containment measures in response to
the COVID-19 pandemic, including reduced employee travel and temporary delays in training for employees, as well as delays in filling open
positions and contract work. The Company has filed requests for the use of deferred accounting for costs related to the COVID-19 pandemic in most
of the jurisdictions in which it operates; the Company has deferred an immaterial amount related to the pandemic to date. The Company's
outstanding filings by jurisdiction related to the COVID-19 pandemic are discussed in Item 8 - Note 20.

The Company expects these segments will grow rate base by approximately 5 percent annually over the next five years on a compound basis.
Operations are spread across eight states where the Company expects customer growth to be higher than the national average. In 2020 and 2019,
these segments experienced retail customer growth of approximately 1.8 percent each year and expects customer growth to continue to average
1 percent to 2 percent per year. This customer growth, along with system upgrades and replacements needed to supply safe and reliable service, will
require investments in new and replacement electric and natural gas systems.

These segments are exposed to energy price volatility. Rate schedules in the jurisdictions in which the Company's natural gas distribution segment
operates contain clauses that permit the Company to file for rate adjustments for changes in the cost of purchased gas. Although changes in the
price of natural gas are passed through to customers and have minimal impact on the Company's earnings, the natural gas distribution segment's
customers benefit from lower natural gas prices through the Company's utilization of storage and fixed price contracts. Additionally, the Company has
implemented risk mitigation measures to minimize the price volatility associated with natural gas costs through derivative contracts at Cascade. For
further discussion on the Company's derivative instruments, see Item 8 - Note 2. Demand for the Company's regulated energy delivery services could
be impacted by reduced oil and natural gas exploration and production activity. The Company continues to monitor natural gas prices, as well as the
oil and natural gas production levels.

In February 2019, the Company announced that it intends to retire three aging coal-fired electric generating units, resulting from the Company's
analysis showing that the plants are no longer expected to be cost competitive for customers. The retirements are expected to be in March 2021 for
Unit 1 at Lewis & Clark Station in Sidney, Montana, and in early 2022 for Units 1 and 2 at Heskett Station near Mandan, North Dakota. In addition,
the Company announced that it intends to construct Heskett Unit 4, an 88-MW simple-cycle natural gas-fired combustion turbine peaking unit at the
existing Heskett Station near Mandan, North Dakota. Heskett Unit 4 production costs coupled with the MISO market purchases are expected to be
about half the total cost of continuing to run the coal-fired electric generating units at Heskett and Lewis & Clark stations. Heskett Unit 4 was
included in the Company's integrated resource plan submitted to the NDPSC in July 2019. On August 28, 2019, the Company filed for an advanced
determination of prudence with the NDPSC for Heskett Unit 4. This request was approved by the NDPSC on August 5, 2020. Heskett Unit 4 is
expected to be placed into service in 2023. The Company filed, and the commissions approved, requests with the NDPSC, MTPSC and SDPUC for
the usage of deferred accounting for the costs related to the retirement of Unit 1 at Lewis & Clark Station and Units 1 and 2 at Heskett Station.

In December 2020, the governor of Washington outlined a climate policy package that included House Bill 1084, which would eliminate all onsite
fossil fuel emissions in new buildings by 2030 and eliminate fossil fuels from existing buildings by 2050, among other things. A public hearing on
House Bill 1084 was held February 17, 2021, in the House Committee on Appropriations. The Company is monitoring the status of the proposed
legislation.

The Company continues to be focused on the regulatory recovery of its investments by filing for rate adjustments to seek recovery of operating costs
and capital investments, as well as reasonable returns as allowed by regulators. The Company's most recent cases by jurisdiction are discussed in
Item 8 - Note 20.

38 MDU Resources Group, Inc. Form 10-K

Part II

Pipeline
Strategy and challenges The pipeline segment provides natural gas transportation, underground storage and energy-related services, as discussed in
Items 1 and 2 - Business Properties. The segment focuses on utilizing its extensive expertise in the design, construction and operation of energy
infrastructure and related services to increase market share and profitability through optimization of existing operations, organic growth and
investments in energy-related assets within or in close proximity to its current operating areas. The segment focuses on the continual safety and
reliability of its systems, which entails building, operating and maintaining safe natural gas pipelines and facilities. The segment continues to
evaluate growth opportunities including the expansion of natural gas facilities; incremental pipeline projects; and expansion of energy-related
services leveraging on its core competencies. In support of this strategy, the Company completed and placed into service the following organic growth
projects in 2020 and 2019:

• In September 2020 and November 2019, Phase II and Phase I, respectively, of the Line Section 22 Expansion project in the Billings,

Montana, area. The total project increased capacity by 22.5 MMcf per day.

• In February 2020, the Demicks Lake Expansion project in McKenzie County, North Dakota, increased capacity by 175 MMcf per day.

• In September 2019, the Demicks Lake project in McKenzie County, North Dakota, increased capacity by 175 MMcf per day.

The segment is exposed to energy price volatility which is impacted by the fluctuations in pricing, production and basis differentials of the energy
market's commodities. Legislative and regulatory initiatives to increase pipeline safety regulations and reduce methane emissions could also impact
the price and demand for natural gas.

The segment regularly experiences extended lead times on raw materials that are critical to the segment's construction and maintenance work. Long
lead times on materials could delay maintenance work and project construction potentially causing lost revenues and/or increased costs. The
Company continues to proactively monitor and plan for the material lead times, as well as work with manufacturers and suppliers to help mitigate the
risk of delays due to extended lead times.

The pipeline segment is subject to extensive regulation including certain operational, environmental and system integrity regulations, as well as
various permit terms and operational compliance conditions. In September 2019, the Pipeline and Hazardous Materials Safety Administration issued
a rule for additional regulations to strengthen the safety of natural gas transmission and storage facilities and hazardous liquid pipelines. The
segment has implemented procedure changes for the initial requirements and continues to evaluate procedure changes and implementation of
physical modifications to existing facilities necessary for additional requirements effective July 1, 2021. The segment reviews and secures existing
permits and easements, as well as new permits and easements as necessary, to meet current demand and future growth opportunities on an ongoing
basis. Groups opposing pipelines could also cause negative impacts on the segment with increased costs, potential delays to project completion or
cancellation of prospective projects.

The segment focuses on the recruitment and retention of a skilled workforce to remain competitive and provide services to its customers. The
industry in which it operates relies on a skilled workforce to construct energy infrastructure and operate existing infrastructure in a safe manner. A
shortage of skilled personnel can create a competitive labor market which could increase costs incurred by the segment. Competition from other
pipeline companies can also have a negative impact on the segment.

Earnings overview - The following information summarizes the performance of the pipeline segment.

Years ended December 31,

2020

2019

2018

% change

2020 vs. 2019 2019 vs. 2018

Operating revenues

Operating expenses:

Operation and maintenance

Depreciation, depletion and amortization

Taxes, other than income

Total operating expenses

Operating income

Other income

Interest expense

Income before income taxes

Income tax expense

Net income

(Dollars in millions)

$ 143.9 $ 140.4 $ 128.9

2.5 %

8.9 %

59.9

21.7

12.9

63.1

21.2

13.3

94.5

97.6

49.4

42.8

2.9

7.6

1.2

7.2

44.7

36.8

7.7

7.2

62.2

17.9

12.7

92.8

36.1

1.0

5.9

31.2

2.7

37.0 $

29.6 $

28.5

(5.1) %

2.4 %

(3.0) %

(3.2) %

15.4 %

141.7 %

5.6 %

21.5 %

6.9 %

25.0 %

1.4 %

18.4 %

4.7 %

5.2 %

18.6 %

20.0 %

22.0 %

17.9 %

166.7 %

3.9 %

MDU Resources Group, Inc. Form 10-K 39

Part II

Operating statistics

Transportation volumes (MMdk)

Natural gas gathering volumes (MMdk)

Customer natural gas storage balance (MMdk):

Beginning of period

Net injection (withdrawal)

End of period

2020

2019

2018

438.6

429.7

351.5

8.6

13.9

14.9

16.2

13.9

22.4

9.3

2.3

(8.5)

25.5

16.2

13.9

2020 compared to 2019 Pipeline earnings increased $7.4 million as a result of:

Revenues: Increase of $3.5 million, largely attributable to increased transportation volumes and demand revenue of $6.2 million largely from
organic growth projects, as previously discussed, and increased storage-related revenues of $4.6 million as a result of stronger demand for storage
services. Also contributing to the increase was additional revenues of $2.4 million primarily from increased rates effective May 1, 2019, due to
the FERC rate case finalized in September 2019. These increases were partially offset by lower non-regulated project revenues of $5.3 million and
lower volumes associated with the sale of the Company's natural gas gathering assets in 2020, as discussed later, and lower gathering rates
resulting in a decrease in revenues of $4.3 million.

Operation and maintenance: Decrease of $3.2 million, primarily from decreased non-regulated project costs of $3.7 million associated with lower
non-regulated project revenue and $1.5 million gain on the sale of the Company's non-regulated natural gas gathering assets in 2020, as
discussed later, partially offset by higher payroll-related costs.

Depreciation, depletion and amortization: Increase of $500,000, primarily due to additional expense of $1.3 million associated with increased
property, plant and equipment balances as a result of organic growth projects that have been placed into service, and higher depreciation rates
effective May 1, 2019, due to the FERC rate case finalized in September 2019. The sale of the Company's natural gas gathering assets in 2020,
as discussed later, reduced the increases by $1.5 million.

Taxes, other than income: Decrease of $400,000 driven by the sale of the Company's natural gas gathering assets, partially offset by higher
property taxes in certain jurisdictions of $300,000.

Other income: Increase of $1.7 million, as a result of higher AFUDC of $1.1 million, a positive impact of $700,000 related to the sale of the
Company's regulated gathering assets and an out-of-period adjustment of $500,000 in the fourth quarter of 2020 related to previously overstated
benefit plan expense, as discussed in Item 8 - Note 1. Partially offsetting these increases was the write-off of unrecovered gas costs and project
expenses of $1.2 million.

Interest expense: Increase of $400,000, largely resulting from higher debt balances to finance organic growth projects, as previously discussed.

Income tax expense: Increase of $500,000, directly resulting from an increase in income before taxes, largely offset by the reversal of excess
deferred taxes of $1.5 million associated with the sale of the Company's regulated natural gas gathering assets.

2019 compared to 2018 Pipeline earnings increased $1.1 million as a result of:

Revenues: Increase of $11.5 million, largely attributable to increased volumes of natural gas transported through its system as a result of organic
growth projects, as previously discussed, and increased rates effective May 1, 2019, due to the FERC rate case finalized in September 2019.

Operation and maintenance: Increase of $900,000, primarily from higher payroll-related costs and materials costs.

Depreciation, depletion and amortization: Increase of $3.3 million, primarily due to increased property, plant and equipment balances, largely the
result of organic growth projects that have been placed into service, and higher depreciation rates effective May 1, 2019, due to the FERC rate
case finalized in September 2019.

Taxes, other than income: Increase of $600,000 driven by higher property taxes in certain jurisdictions.

Other income: Comparable to the prior year.

Interest expense: Increase of $1.3 million, largely resulting from higher debt balances to finance organic growth projects, as previously discussed.

Income tax expense: Increase of $4.5 million, primarily driven by the absence in 2019 of a $4.2 million income tax benefit recorded in 2018
related to the reversal of a regulatory liability recorded in 2017 based on a FERC final accounting order issued.

Outlook The Company continues to successfully manage the impacts of the COVID-19 pandemic on its operations and is committed to providing
safe, reliable and compliant service while ensuring the health and safety of its employees, customers and the communities in which it operates. The
Company experienced minor delays on capital and maintenance projects during the first quarter of 2020 but resumed project activities in the second
quarter of 2020. Work has progressed on these projects as scheduled through the fourth quarter of 2020. The Company does not expect delays to its
regulatory filings due to the pandemic.

The Company has continued to experience the effect of associated natural gas production in the Bakken, which has provided opportunities for
organic growth projects and increased demand. The completion of organic growth projects has contributed to the increased volumes of natural gas
the Company transports through its system. Reduced global oil demand due to the COVID-19 pandemic and disagreements in oil supply levels
between the Organization of the Petroleum Exporting Countries and other countries led to record low oil prices during the first quarter of 2020;

40 MDU Resources Group, Inc. Form 10-K

Part II

however, oil prices started to recover after the first quarter of 2020 as states and other countries started to reopen. Although low oil prices have
slowed drilling activities and led to the shut-in of certain wells, producers continue to bring wells back online and the Company continues to focus on
growth and improving existing operations through organic projects in all areas in which it operates. The national record levels of natural gas supply
over the last few years have moderated the need for storage services and put downward pressure on natural gas prices and minimized price volatility.
While the Company believes there will continue to be varying pressures on natural gas production levels and prices due to these circumstances, low
natural gas prices provide growth opportunity for industrial supply related projects and seasonal pricing differentials provide opportunities for storage
services.

In January 2019, the Company announced the North Bakken Expansion project, which includes construction of a new pipeline, compression and
ancillary facilities to transport natural gas from core Bakken production areas near Tioga, North Dakota, to a new connection with Northern Border
Pipeline in McKenzie County, North Dakota. Construction is expected to begin in the second quarter of 2021 with an estimated in-service date late
in 2021, which is dependent on regulatory and environmental permitting. On February 14, 2020, the Company filed with the FERC its application
for this project. On July 28, 2020, the Company filed an amendment to its application with the FERC reflecting a decrease to the design capacity
from 350 MMcf per day to 250 MMcf per day by reducing compression due to delays in forecasted growth levels of natural gas production in the
Bakken region. Further, as a result of the forecasted Bakken oil and associated natural gas production delays driven by COVID-19 pandemic-related
demand decreases and commodity price impacts, the Company negotiated adjustments to certain long-term customer commitments. A portion of the
first-year committed volumes have been delayed one year and, through a combination of rate, volume and term adjustments, the overall project
return profile remains unchanged and is expected to be accretive to earnings of the Company. These long-term take or pay customer contracts
support the project at a design capacity of 250 MMcf per day, which can be readily expanded when forecasted growth levels rebound. On
December 17, 2020, the FERC issued its environment assessment for the project. FERC approval of the project is anticipated in early 2021.

In December 2019, the Company entered into a purchase and sale agreement to divest of the Company's regulated natural gas gathering assets
located in Montana and North Dakota, which included approximately 400 miles of natural gas gathering pipelines and associated compression and
ancillary facilities. On January 8, 2020, the Company filed an application with the FERC to authorize abandonment by sale of the assets and
received FERC approval on April 2, 2020. The sale closed in April 2020 with an effective date of January 1, 2020. Pursuant to the FERC's approval
of the abandonment by sale, the proposed accounting treatment was filed with the FERC in October 2020 and approved in November 2020.

In October 2020, the Company entered into a purchase and sale agreement to divest of the Company's non-regulated natural gas gathering assets
located in northern Montana, which included approximately 800 miles of natural gas gathering pipelines and associated compression and ancillary
facilities. The sale closed in November 2020 with an effective date of December 1, 2020. With the completion of this sale, the Company has exited
the natural gas gathering business.

Construction Materials and Contracting
Strategy and challenges The construction materials and contracting segment provides an integrated set of aggregate-based construction services, as
discussed in Items 1 and 2 - Business Properties. The segment focuses on high-growth strategic markets located near major transportation corridors
and desirable mid-sized metropolitan areas; strengthening the long-term, strategic aggregate reserve position through available purchase and/or lease
opportunities; enhancing profitability through cost containment, margin discipline and vertical integration of the segment's operations; development
and recruitment of talented employees; and continued growth through organic and acquisition opportunities.

A key element of the Company's long-term strategy for this business is to further expand its market presence in the higher-margin materials business
(rock, sand, gravel, liquid asphalt, asphalt concrete, ready-mixed concrete and related products), complementing and expanding on the segment's
expertise. The Company's continued acquisition activity supports this strategy.

As one of the country's largest sand and gravel producers, the segment continues to strategically manage its approximately 1.1 billion tons of
aggregate reserves in all its markets, as well as take further advantage of being vertically integrated. The segment's vertical integration allows the
segment to manage operations from aggregate mining to final lay-down of concrete and asphalt, with control of and access to permitted aggregate
reserves being significant. The Company's aggregate reserves are naturally declining and as a result, the Company seeks acquisition opportunities to
replace the reserves. In the fourth quarter of 2020, the Company acquired the assets of McMurry Ready-Mix Co., an aggregates and concrete
supplier located in Casper, Wyoming. The acquisition included nearly 100 million tons of aggregate reserves. In the first quarter of 2019, the
Company purchased additional aggregate deposits in Texas that were estimated to contain a 40-year supply of high-quality aggregates for projected
local market needs. Also during 2019, the Company increased aggregate reserves by approximately 40 million tons largely due to strategic asset
purchases.

The construction materials and contracting segment faces challenges that are not under the direct control of the business. The segment operates in
geographically diverse and highly competitive markets. Competition can put negative pressure on the segment's operating margins. The segment is
also subject to volatility in the cost of raw materials such as diesel fuel, gasoline, liquid asphalt, cement and steel. Such volatility can have an
impact on the segment's margins, including fixed-price construction contracts that are particularly vulnerable to the volatility of energy and material
prices. Other variables that can impact the segment's margins include adverse weather conditions, the timing of project starts or completion and
declines or delays in new and existing projects due to the cyclical nature of the construction industry and governmental infrastructure spending.
Accordingly, operating results in any particular period may not be indicative of the results that can be expected for any other period.

MDU Resources Group, Inc. Form 10-K 41

Part II

The segment also faces challenges in the recruitment and retention of employees. Trends in the labor market include an aging workforce and
availability issues. The segment continues to face increasing pressure to control costs, as well as recruit and train a skilled workforce to meet the
needs of increasing demand and seasonal work.

Earnings overview - The following information summarizes the performance of the construction materials and contracting segment.

Years ended December 31,

2020

2019

2018

% change

2020 vs. 2019 2019 vs. 2018

Operating revenues

Cost of sales:

(Dollars in millions)

$ 2,178.0 $ 2,190.7 $ 1,925.9

(.6) %

13.7 %

Operation and maintenance

1,733.1 1,798.3 1,601.7

Depreciation, depletion and amortization

Taxes, other than income

Total cost of sales

Gross margin

Selling, general and administrative expense:

Operation and maintenance

Depreciation, depletion and amortization

Taxes, other than income

84.8

46.0

74.3

44.1

59.0

39.7

1,863.9 1,916.7 1,700.4

314.1

274.0

225.5

89.9

86.3

77.6

4.8

4.9

3.1

4.6

2.2

4.3

Total selling, general and administrative expense

99.6

94.0

84.1

Operating income

Other income (expense)

Interest expense

Income before income taxes

Income tax expense

Net income

214.5

180.0

141.4

1.6

(3.1)

20.6

23.8

17.3

194.7

157.8

121.0

47.4

37.4

28.4

$ 147.3 $ 120.4 $

92.6

(3.6) %

14.1 %

4.3 %

(2.8) %

14.6 %

4.2 %

54.8 %

6.5 %

6.0 %

19.2 %

(50.0) %

(13.4) %

23.4 %

26.7 %

22.3 %

12.3 %

25.9 %

11.1 %

12.7 %

21.5 %

11.2 %

40.9 %

7.0 %

11.8 %

27.3 %

151.6 %

37.6 %

30.4 %

31.7 %

30.0 %

Operating statistics

Sales (000's):

Aggregates (tons)

Asphalt (tons)

Ready-mixed concrete (cubic yards)

2020

2019

2018

30,949 32,314 29,795

7,202

6,707

6,838

4,087

4,123

3,518

2020 compared to 2019 Construction materials and contracting's earnings increased $26.9 million as a result of:

Revenues: Decrease of $12.7 million driven by lower contracting revenues partially due to lower materials pricing as a result of decreased energy-
related costs. This decrease was offset in part by higher material sales on most product lines due to an early start to the season, favorable weather
conditions in certain regions and additional revenues associated with the businesses acquired.

Gross margin: Increase of $40.1 million, largely resulting from higher material revenues and margins and higher contracting margins. Asphalt and
asphalt-related product margins increased $21.3 million overall. Strong pricing for ready-mixed concrete in most markets resulted in 1.9 percent
higher margins. Contracting bid margins positively impacted gross margin by $6.5 million partially resulting from lower direct costs associated
with having a longer construction season due to favorable weather conditions. The Company also benefited across all product lines from lower fuel
costs. Partially offsetting these increases was lower gains on asset sales in certain regions of approximately $6.8 million.

Selling, general and administrative expense: Increase of $5.6 million, primarily related to higher payroll-related costs of $2.2 million and
increased amortization of intangible assets associated with the businesses acquired.

Other income: Decrease of $800,000, largely the result of an out-of-period adjustment to benefit expense in the fourth quarter of 2020, as
discussed in Item 8 - Note 1.

Interest expense: Decrease of $3.2 million, from lower average debt balances in 2020 along with lower average interest rates.

Income tax expense: Increase of $10.0 million directly resulting from an increase in income before taxes.

2019 compared to 2018 Construction materials and contracting's earnings increased $27.8 million as a result of:

Revenues: Increase of $264.8 million driven by higher contracting services and material sales due to strong economic environments in certain
states, as well as additional material volumes associated with the businesses acquired.

42 MDU Resources Group, Inc. Form 10-K

Part II

Gross margin: Increase of $48.5 million, largely resulting from higher revenues due to strong economic environments in certain states, as
previously discussed, higher contracting bid margins and higher realized material prices. Also contributing to the increased gross margin was an
increase in gains on asset sales in certain regions of approximately $7.5 million.

Selling, general and administrative expense: Increase of $9.9 million, primarily related to the businesses acquired and higher payroll-related costs.

Other income (expense): Increase of $4.7 million, largely the result of higher returns on the Company's benefit plan investments.

Interest expense: Increase of $6.5 million, largely resulting from higher debt balances as a result of recent acquisitions, capital expenditures and
higher average interest rates.

Income tax expense: Increase of $9.0 million directly resulting from an increase in income before taxes.

Outlook The Company continues to assess the impacts of the COVID-19 pandemic on its operations and is committed to the health and safety of its
employees, customers and the communities in which it operates. The Company has implemented safety and social distancing measures for its
employees that are not able to work from home and has experienced some inefficiencies and additional costs in relation to these measures but, for
the most part, has been able to continue business processes with minimal interruptions. The Company also continues to monitor job progress and
service work and at this time has not experienced significant delays, cancellations or disruptions due to the pandemic. The Company will continue to
monitor the demand for construction materials and contracting services as such services may be reduced by recessionary impacts of the pandemic as
the traditional customers for these services reduce capital expenditures. State and local mandates were issued in response to the COVID-19
pandemic requiring individuals to stay in place, leading to a reduction in fuel consumption in the United States, which directly reduces fuel tax
collections. In addition, states, cities and counties across the country are experiencing low sales tax and other revenues as a result of the COVID-19
pandemic. The reduction in tax collections may impact funds available for public infrastructure projects, which in turn could have a material adverse
impact on the Company's results of operations, financial position and cash flows. Meanwhile, a comprehensive infrastructure funding program, if
adopted, by the United States Congress could positively impact the segment.

The segment's vertically integrated aggregate-based business model provides the Company with the ability to capture margin throughout the sales
delivery process. The aggregate products are sold internally and externally for use in other products such as ready-mixed concrete, asphaltic concrete
and public and private construction markets. The contracting services and construction materials are sold in connection with street, highway and
other public infrastructure projects, as well as private commercial and residential development projects. The public infrastructure projects have
traditionally been more stable markets as public funding is more secure during periods of economic decline. The public projects are, however,
dependent on federal and state funding such as appropriations to the Federal Highway Administration. Spending on private development is highly
dependent on both local and national economic cycles, providing additional sales during times of strong economic cycles.

During 2020 and 2019, the Company made strategic asset purchases and completed several acquisitions that support the Company's long-term
strategy to expand its market presence. In the first quarter of 2020, the Company acquired the assets of Oldcastle Infrastructure Spokane, a
prestressed-concrete business located in Spokane, Washington. In the fourth quarter of 2020, the Company acquired the assets of McMurry Ready-
Mix Co., an aggregates and concrete supplier located in Casper, Wyoming. The Company continues to evaluate additional acquisition opportunities.
For more information on the Company's business combinations, see Item 8 - Note 4.

The construction materials and contracting segment's backlog remained strong at December 31, 2020, at $673 million, which was comparable to
backlog at December 31, 2019, of $693 million. A significant portion of the Company's backlog relates to street and highway construction. The
Company expects to complete a significant amount of backlog at December 31, 2020, during the next 12 months.

Construction Services
Strategy and challenges The construction services segment provides inside and outside specialty contracting, as discussed in Items 1 and 2 -
Business Properties. The construction services segment focuses on safely executing projects; providing a superior return on investment by building
new and strengthening existing customer relationships; ensuring quality service; effectively controlling costs; retaining, developing and recruiting
talented employees; growing through organic and acquisition opportunities; and focusing efforts on projects that will permit higher margins while
properly managing risk. The growth experienced by the segment in recent years is due in part to its ability to support national customers in most of
the regions in which it operates.

The construction services segment faces challenges in the highly competitive markets in which it operates. Competitive pricing environments, project
delays, changes in management's estimates of variable consideration and the effects from restrictive regulatory requirements have negatively
impacted revenues and margins in the past and could affect revenues and margins in the future. Additionally, margins may be negatively impacted
on a quarterly basis due to adverse weather conditions, as well as timing of project starts or completions; disruptions to the supply chain due to
transportation delays, travel restrictions, raw material cost increases and shortages and closures of businesses or facilities; declines or delays in new
projects due to the cyclical nature of the construction industry; and other factors. These challenges may also impact the risk of loss on certain
projects. Accordingly, operating results in any particular period may not be indicative of the results that can be expected for any other period.

The need to ensure available specialized labor resources for projects also drives strategic relationships with customers and project margins. These
trends include an aging workforce and labor availability issues, increasing pressure to reduce costs and improve reliability, and increasing duration

MDU Resources Group, Inc. Form 10-K 43

Part II

and complexity of customer capital programs. Due to these and other factors, the Company believes overall customer and competitor demand for
labor resources will continue to increase, possibly surpassing the supply of industry resources.

Earnings overview - The following information summarizes the performance of the construction services segment.

Years ended December 31,

2020

2019

2018

% change

2020 vs. 2019 2019 vs. 2018

Operating revenues

Cost of sales:

(In millions)

$ 2,095.7 $ 1,849.3 $ 1,371.5

13.3 %

34.8 %

Operation and maintenance

1,747.5 1,555.4 1,150.4

Depreciation, depletion and amortization

Taxes, other than income

Total cost of sales

Gross margin

Selling, general and administrative expense:

15.7

74.2

15.0

58.8

14.3

42.0

1,837.4 1,629.2 1,206.7

258.3

220.1

164.8

Operation and maintenance

98.1

87.0

72.2

Depreciation, depletion and amortization

Taxes, other than income

7.8

4.8

2.0

4.7

Total selling, general and administrative expense

110.7

93.7

1.4

4.4

78.0

86.8

1.1

3.6

84.3

20.0

147.6

126.4

2.0

4.1

1.9

5.3

145.5

123.0

35.8

30.0

$ 109.7 $

93.0 $

64.3

Operating income

Other income

Interest expense

Income before income taxes

Income tax expense

Net income

* NM - not meaningful

12.4 %

4.7 %

26.2 %

12.8 %

17.4 %

12.8 %

2.1 %

18.1 %

16.8 %

5.3 %

(22.6) %

18.3 %

19.3 %

18.0 %

35.2 %

4.9 %

40.0 %

35.0 %

33.6 %

20.5 %

42.9 %

6.8 %

20.1 %

45.6 %

72.7 %

47.2 %

45.9 %

50.0 %

44.6 %

2020 compared to 2019 Construction services earnings increased $16.7 million as a result of:

Revenues: Increase of $246.4 million, primarily resulting from higher inside and outside specialty contracting workloads. Inside workloads
contributed $127.2 million, or 10.0 percent more compared to 2019, largely from higher revenues of $71.4 million due to the addition of
Perlectric, Inc. and increased customer demand for high-tech, hospitality and industrial projects. Outside workloads contributed $108.0 million,
or 18.1 percent more compared to 2019, as a result of strong demand for utility projects including storm-related power line repair and wildfire
restoration work.

Gross margin: Increase of $38.2 million, primarily from the higher volume of work resulting in an increase in revenues, as previously discussed,
partially offset by an increase in operation and maintenance expense as a direct result of the expenses related to the increased workloads.

Selling, general and administrative expense: Increase of $17.0 million, largely from increased costs of $8.3 million associated with the addition of
PerLectric, Inc. operations, allowance for uncollectible accounts of $3.6 million, payroll-related costs of $3.1 million and office expenses.

Other income: Comparable to the prior year.

Interest expense: Decrease of $1.2 million, related to lower debt balances due to lower working capital needs as a result of payroll tax deferrals
and increased cash collections.

Income tax expense: Increase of $5.8 million, directly resulting from an increase in income before taxes.

2019 compared to 2018 Construction services earnings increased $28.7 million as a result of:

Revenues: Increase of $477.8 million, largely resulting from higher inside specialty contracting workloads from an increase in customer demand
for hospitality, data center and high-tech projects. Also contributing to the increase was higher outside specialty contracting workloads, primarily
resulting from increased utility customer demand.

Gross margin: Increase of $55.3 million, primarily due to the higher volume of work resulting in an increase in revenues, as previously discussed,
partially offset by an increase in operation and maintenance expense as a direct result of the increased workloads.

Selling, general and administrative expense: Increase of $15.7 million, resulting from increased payroll-related costs, as well as higher office
expense and outside professional service costs.

Other income: Increase of $800,000, largely resulting from higher returns on the Company's benefit plan investments.

Interest expense: Increase of $1.7 million, related to higher debt balances as a result of additional working capital needs from the increase in
contracting workloads in 2019.

44 MDU Resources Group, Inc. Form 10-K

Part II

Income tax expense: Increase of $10.0 million, directly resulting from an increase in income before taxes.

The Company continues to have bidding opportunities for both inside and outside specialty contracting work in 2021. Although bidding remains
highly competitive in all areas, the Company expects the segment's skilled workforce, quality of service and effective cost management will continue
to provide a benefit in securing and executing profitable projects.

The construction services segment's backlog at December 31 was as follows:

2020

2019

(In millions)

Inside specialty contracting

1,059 $

Outside specialty contracting

214

908

236

1,273 $

1,144

The increase in backlog at December 31, 2020, as compared to backlog at December 31, 2019, was largely attributable to the new project
opportunities that the Company continues to be awarded across its diverse operations, particularly inside specialty electrical and mechanical
contracting in the hospitality, high-tech and public industries. The Company's outside power, communications and natural gas specialty contracting
also have a high volume of available work. The Company expects to complete a significant amount of the backlog at December 31, 2020, during the
next 12 months. Additionally, the Company continues to further evaluate potential acquisition opportunities that would be accretive to earnings of
the Company and continue to grow the Company's backlog.

In support of the Company's strategic plan to grow through acquisitions, the Company acquired PerLectric, Inc., an electrical construction company
in Fairfax, Virginia, in the first quarter of 2020. For more information on the Company's business combinations, see Item 8 - Note 4.

Other

Years ended December 31,

2020

2019

2018

% change

2020 vs. 2019 2019 vs. 2018

Operating revenues

Operating expenses:

Operation and maintenance

Depreciation, depletion and amortization

Taxes, other than income

Total operating expenses

Operating loss

Other income

Interest expense

Loss before income taxes

Income tax benefit

Net loss

* NM - not meaningful

(In millions)

11.9 $

16.6 $

11.3

(28.3) %

46.9 %

12.2

15.6

2.7

2.1

9.3

2.0

15.0

17.8

11.4

(3.1)

(1.2)

(3.5)

(.4)

1.9

(2.2)

(.1)

(3.1) $

(2.1) $

(.1)

1.0

2.8

(1.9)

(1.2)

(.7)

(21.8) %

28.6 %

— %

(15.7) %

(158.3) %

(55.6) %

(57.9) %

(59.1) %

(47.6) %

67.7 %

5.0 %

— %

56.1 %

(10.0) %

(32.1) %

(15.8) %

91.7 %

Included in Other is insurance activity at the Company's captive insurer and general and administrative costs and interest expense previously
allocated to the exploration and production and refining businesses that do not meet the criteria for income (loss) from discontinued operations.

Other was negatively impacted in 2020 as a result of higher insurance claims as compared to 2019, whereas 2019 had higher insurance premiums
which increased both operating revenues and operation and maintenance expense.

MDU Resources Group, Inc. Form 10-K 45

Part II

Intersegment Transactions
Amounts presented in the preceding tables will not agree with the Consolidated Statements of Income due to the Company's elimination of
intersegment transactions. The amounts related to these items were as follows:

Years ended December 31,

2020

2019

2018

(In millions)

Intersegment transactions:

Operating revenues

77.0 $

77.1 $

Operation and maintenance

Purchased natural gas sold

19.1

57.9

21.1

56.0

64.3

13.7

50.6

For more information on intersegment eliminations, see Item 8 - Note 17.

Liquidity and Capital Commitments
At December 31, 2020, the Company had cash and cash equivalents of $59.6 million and available borrowing capacity of $736.3 million under the
outstanding credit facilities of the Company's subsidiaries. During the first quarter of 2020, short-term capital markets were disrupted as a result of
the COVID-19 pandemic. Consequently, the Company temporarily borrowed under its revolving credit agreements in addition to accessing the
commercial paper markets and maintained higher than normal cash balances to ensure liquidity during this volatile period. At December 31, 2020,
all borrowings under the revolving credit agreements for Montana-Dakota and Centennial had been repaid. The Company expects to meet its
obligations for debt maturing within 12 months and its other operating and capital requirements from various sources, including internally generated
funds; credit facilities and commercial paper of the Company's subsidiaries, as described later in Capital resources; and the issuance of debt and
equity securities if necessary.

Cash flows
Operating activities The changes in cash flows from operating activities generally follow the results of operations as discussed in Business Segment
Financial and Operating Data and are also affected by changes in working capital. Changes in cash flows for discontinued operations are related to
the Company's former exploration and production and refining businesses.

Cash flows provided by operating activities in 2020 was $768.4 million compared to $542.3 million in 2019. The increase in cash flows provided
by operating activities is reflective of the increased earnings across all businesses. The increase in cash flows provided by operating activities was
largely driven by stronger collection of accounts receivable at the construction services business and decreased receivables at the construction
materials and contracting business as compared to the prior period as a result of lower contracting revenues. Also contributing to the increase in cash
flows provided by operating activities was the decrease in natural gas purchases in 2020 as a result of milder temperatures and lower gas costs and
recovery of purchased gas cost adjustment balances at the natural gas distribution business. The Company also benefited from the deferral of payroll
taxes related to the CARES Act and the absence of pension contributions at all of its businesses. Partially offsetting these increases was higher cash
needs due to decreased bonus depreciation for tax purposes taken on qualified property in 2020 as compared to 2019 and a decrease in deferred
taxes as a result of the purchased gas cost adjustment recorded in 2019.

Cash flows provided by operating activities in 2019 were $542.3 million compared to $499.9 million in 2018. The increase in cash flows provided
by operating activities was largely driven by increased earnings from higher workloads at the construction businesses, which were partially offset by
an increase in accounts receivable as a result of the higher workloads. Lower inventory balances due to higher workloads at the construction materials
and contracting business in 2019 as compared to the increase in inventory balances in 2018 due to the activity of acquired businesses also
contributed to the increase. Partially offsetting these increases were higher natural gas purchases including the effects of colder weather, higher gas
costs and timing of collection of such balances from customers at the natural gas distribution business, as well as higher pension contributions at all
of the businesses.

Investing activities Cash flows used in investing activities in 2020 were $630.2 million compared to $603.9 million in 2019. The increase in cash
used was primarily related to additional cash needs for acquisition activity in 2020 compared to 2019 at the construction businesses, increased
capital expenditures in 2020 at the electric business and lower proceeds on asset sales in 2020 at the construction materials and contracting
business. Partially offsetting these increases were decreased capital expenditures in 2020 at the construction materials and contracting business,
proceeds on the natural gas gathering asset sales at the pipeline business and higher proceeds on asset sales in 2020 at the construction services
businesses.

Cash flows used in investing activities in 2019 was $603.9 million compared to $710.9 million in 2018. The decrease in cash used was primarily
related to $112.1 million lower cash used in acquisition activity in 2019 compared to 2018 at the construction materials and contracting business
and higher proceeds on asset sales at the construction businesses in 2019.

Financing activities Cash flows used in financing activities in 2020 was $145.1 million compared to cash flows provided by financing activities of
$74.1 million in 2019. The change was largely the result of a decrease in net long-term and short-term debt borrowings in 2020 as compared to

46 MDU Resources Group, Inc. Form 10-K

Part II

2019 due to lower working capital needs. In addition, the Company had decreased net proceeds of $103.5 million in 2020 due to the absence of
common stock issuance under its "at-the-market" offering and 401(k) plan.

Cash flows provided by financing activities in 2019 were $74.1 million compared to $230.4 million in 2018. The decrease in cash provided by
financing activities was largely due to the higher repayment of long-term debt in 2019 on debt issued in 2018 for acquisitions at the construction
materials and contracting business. The Company also borrowed and repaid short-term borrowings in 2019. Partially offsetting the decrease in cash
provided by financing activities was the receipt of proceeds from the issuance of common stock. The Company issued common stock for net proceeds
of $106.8 million under its "at-the-market" offering and 401(k) plan in 2019.

Defined benefit pension plans
The Company has noncontributory qualified defined benefit pension plans for certain employees. Plan assets consist of investments in equity and
fixed-income securities. Various actuarial assumptions are used in calculating the benefit expense (income) and liability (asset) related to the
pension plans. Actuarial assumptions include assumptions about the discount rate and expected return on plan assets. At December 31, 2020, the
pension plans' accumulated benefit obligations exceeded these plans' assets by approximately $53.5 million. Pretax pension income reflected in the
Consolidated Statements of Income for the year ended December 31, 2020, was $684,000. Pretax pension expense reflected in the Consolidated
Statements of Income for the years ended December 31, 2019 and 2018, was $2.5 million and $843,000, respectively. The Company's pension
income is currently projected to be approximately $1.7 million in 2021. Funding for the pension plans is actuarially determined. The Company has
no minimum funding requirements for its defined benefit pension plans for 2021 due to an additional contribution of $20.0 million in 2019. There
were no minimum required contributions for the year ended December 31, 2020, and the minimum required contributions for the years ended
December 31, 2019 and 2018, were approximately $4.9 million and $6.1 million, respectively. For more information on the Company's pension
plans, see Item 8 - Note 18.

Capital expenditures
The Company's capital expenditures for 2018 through 2020 and as anticipated for 2021 through 2023 are summarized in the following table.

Capital expenditures:

Electric

Actual*

Estimated

2018

2019

2020

2021

2022

2023

(In millions)

$ 186 $

99 $ 115

$ 141 $ 182 $ 109

Natural gas distribution

206

207

193

215

225

188

Pipeline

230

110

Construction materials and contracting

280

190

191

189

154

150

Construction services

Other

Total capital expenditures

$ 769 $ 636 $ 648

$ 826 $ 673 $ 595

* Capital expenditures for 2020, 2019 and 2018 include noncash transactions such as the issuance of the

Company's equity securities in connection with acquisitions, capital expenditure-related accounts payable, AFUDC
and accrual of holdback payments in connection with acquisitions totaling $(15.7) million, $4.8 million and
$33.4 million, respectively.

The 2020 capital expenditures include the completed business combinations at the construction materials and contracting and construction services
segments, as discussed in Item 8 - Note 4. The 2020 capital expenditures were funded by internal sources and borrowings under credit facilities and
issuance of commercial paper of the Company's subsidiaries. The Company has included in the estimated capital expenditures for 2021 through
2023 the North Bakken Expansion project and construction of Heskett Unit 4, as previously discussed in Business Segment Financial and Operating
Data.

Estimated capital expenditures for the years 2021 through 2023 include those for:

• System upgrades

• Routine replacements

• Service extensions

• Routine equipment maintenance and replacements

• Buildings, land and building improvements

• Pipeline and natural gas storage projects

• Power generation and transmission opportunities

• Environmental upgrades

• Other growth opportunities

MDU Resources Group, Inc. Form 10-K 47

Part II

The Company continues to evaluate potential future acquisitions and other growth opportunities that would be incremental to the outlined capital
program; however, they are dependent upon the availability of economic opportunities and, as a result, capital expenditures may vary significantly
from the estimates in the preceding table. It is anticipated that all of the funds required for capital expenditures for the years 2021 through 2023
will be funded by various sources, including internally generated funds; credit facilities and commercial paper of the Company's subsidiaries, as
described later; and issuance of debt and equity securities if necessary.

Capital resources
Certain debt instruments of the Company's subsidiaries, including those discussed later, contain restrictive and financial covenants and cross-default
provisions. In order to borrow under the debt agreements, the subsidiary companies must be in compliance with the applicable covenants and certain
other conditions, all of which the subsidiaries, as applicable, were in compliance with at December 31, 2020. In the event the subsidiaries do not
comply with the applicable covenants and other conditions, alternative sources of funding may need to be pursued. For more information on the
covenants, certain other conditions and cross-default provisions, see Item 8 - Note 9.

The following table summarizes the outstanding revolving credit facilities of the Company's subsidiaries at December 31, 2020:

Company

Facility

Montana-Dakota Utilities Co.

Commercial paper/Revolving credit agreement (a)

Cascade Natural Gas Corporation

Revolving credit agreement

Intermountain Gas Company

Revolving credit agreement

Centennial Energy Holdings, Inc.

Commercial paper/Revolving credit agreement (e)

Facility
Limit

Amount
Outstanding

Letters
of Credit

Expiration
Date

175.0

100.0 (b) $

85.0 (d) $

600.0

(In millions)

87.7 $

54.0 $

41.9 $

37.9 $

—

12/19/24

2.2 (c)

—

6/7/24

12/19/24

(a) The commercial paper program is supported by a revolving credit agreement with various banks (provisions allow for increased borrowings, at the option of Montana-

Dakota on stated conditions, up to a maximum of $225.0 million). There were no amounts outstanding under the revolving credit agreement.

(b) Certain provisions allow for increased borrowings, up to a maximum of $125.0 million.
(c) Outstanding letter(s) of credit reduce the amount available under the credit agreement.
(d) Certain provisions allow for increased borrowings, up to a maximum of $110.0 million.
(e) The commercial paper program is supported by a revolving credit agreement with various banks (provisions allow for increased borrowings, at the option of Centennial

on stated conditions, up to a maximum of $700.0 million). There were no amounts outstanding under the revolving credit agreement.

The respective commercial paper programs are supported by revolving credit agreements. While the amount of commercial paper outstanding does
not reduce available capacity under the respective revolving credit agreements, Montana-Dakota and Centennial do not issue commercial paper in an
aggregate amount exceeding the available capacity under their credit agreements. The commercial paper borrowings may vary during the period,
largely the result of fluctuations in working capital requirements due to the seasonality of certain operations of the Company's subsidiaries.

Total equity as a percent of total capitalization was 58 percent and 56 percent at December 31, 2020 and 2019, respectively. This ratio is
calculated as the Company's total equity, divided by the Company's total capital. Total capital is the Company's total debt, including short-term
borrowings and long-term debt due within 12 months, plus total equity. This ratio is an indicator of how the Company is financing its operations, as
well as its financial strength. As of December 31, 2020, the Company had investment grade credit ratings at all entities issuing debt.

The Company currently has a shelf registration statement on file with the SEC, under which the Company may issue and sell any combination of
common stock and debt securities. The Company may sell such securities if warranted by market conditions and the Company's capital requirements.
Any public offer and sale of such securities will be made only by means of a prospectus meeting the requirements of the Securities Act and the rules
and regulations thereunder.

In August 2020, the Company amended the Distribution Agreement dated February 22, 2019, with J.P. Morgan Securities LLC and MUFG Securities
Americas Inc., as sales agents. The Distribution Agreement allows the offering, issuance and sale of up to 6.4 million shares of the Company's
common stock in connection with an “at-the-market” offering. The common stock may be offered for sale, from time to time, in accordance with the
terms and conditions of the agreement. Proceeds from the sale of shares of common stock under the agreement have been and are expected to be
used for general corporate purposes, which may include, among other things, working capital, capital expenditures, debt repayment and the
financing of acquisitions.

The Company did not issue any shares of common stock for the year ended December 31, 2020, pursuant to the “at-the-market” offering. As of
December 31, 2020, the Company had capacity to issue up to 6.4 million additional shares of common stock under the "at-the-market" offering
program. For more information on the Company's "at-the-market" offering, see Item 8 - Note 12.

Certain of the Company's debt instruments use LIBOR as a benchmark for establishing the applicable interest rate. LIBOR is the subject of recent
national, international and other regulatory guidance and proposals for reform. These reforms and other pressures may cause LIBOR to disappear
entirely or to perform differently than in the past. The Company has been proactive to anticipate the reform of LIBOR by replacing it with SOFR in
certain of its new debt instruments, as well as those that are being renewed. The Company continues to evaluate the impact the reform will have on
its debt instruments and, at this time, does not anticipate a significant impact.

48 MDU Resources Group, Inc. Form 10-K

Part II

The following includes information related to the preceding table.

Montana-Dakota On January 1, 2019, the Company's revolving credit agreement and commercial paper program became Montana-Dakota's revolving
credit agreement and commercial paper program as a result of the Holding Company Reorganization. The outstanding balance of the revolving credit
agreement was also transferred to Montana-Dakota. All of the related terms and covenants of the credit agreements remained the same.

On December 19, 2019, Montana-Dakota amended and restated its revolving credit agreement extending the maturity date to December 19, 2024.
Montana-Dakota's revolving credit agreement supports its commercial paper program. Commercial paper borrowings under this agreement are
classified as long-term debt as they are intended to be refinanced on a long-term basis through continued commercial paper borrowings. Montana-
Dakota's objective is to maintain acceptable credit ratings in order to access the capital markets through the issuance of commercial paper.
Historically, downgrades in credit ratings have not limited, nor are currently expected to limit, Montana-Dakota's ability to access the capital markets.
If Montana-Dakota were to experience a downgrade of its credit ratings in the future, it may need to borrow under its credit agreement and may
experience an increase in overall interest rates with respect to its cost of borrowings. Prior to the maturity of the credit agreement, Montana-Dakota
expects that it will negotiate the extension or replacement of this agreement. If Montana-Dakota is unable to successfully negotiate an extension of,
or replacement for, the credit agreement, or if the fees on this facility become too expensive, which Montana-Dakota does not currently anticipate, it
would seek alternative funding.

On April 8, 2020, Montana-Dakota entered into a $75.0 million term loan agreement with a LIBOR-based variable interest rate and a maturity date
of April 7, 2021. At December 31, 2020, Montana-Dakota had $50.0 million outstanding under this agreement. On February 16, 2021, Montana-
Dakota repaid the remaining $50.0 million outstanding.

Cascade On June 7, 2019, Cascade amended its revolving credit agreement to increase the borrowing limit to $100.0 million and extend the
maturity date to June 7, 2024. Any borrowings under the revolving credit agreement are classified as long-term debt as they are intended to be
refinanced on a long-term basis through continued borrowings.

On October 30, 2020, Cascade issued $25.0 million of senior notes under a note purchase agreement with a maturity date of October 30, 2060, at
an interest rate of 3.34 percent.

Intermountain On June 7, 2019, Intermountain amended its revolving credit agreement to extend the maturity date to June 7, 2024. Any borrowings
under the revolving credit agreement are classified as long-term debt as they are intended to be refinanced on a long-term basis through continued
borrowings.

Centennial On December 19, 2019, Centennial amended and restated its revolving credit agreement to increase the borrowing capacity to
$600.0 million and extend the maturity date to December 19, 2024. Centennial's revolving credit agreement supports its commercial paper
program. Commercial paper borrowings under this agreement are classified as long-term debt as they are intended to be refinanced on a long-term
basis through continued commercial paper borrowings. Centennial's objective is to maintain acceptable credit ratings in order to access the capital
markets through the issuance of commercial paper. Historically, downgrades in Centennial's credit ratings have not limited, nor are currently
expected to limit, Centennial's ability to access the capital markets. If Centennial were to experience a downgrade of its credit ratings in the future, it
may need to borrow under its credit agreement and may experience an increase in overall interest rates with respect to its cost of borrowings. Prior to
the maturity of the Centennial credit agreement, Centennial expects that it will negotiate the extension or replacement of this agreement, which
provides credit support to access the capital markets. In the event Centennial is unable to successfully negotiate this agreement, or in the event the
fees on this facility become too expensive, which Centennial does not currently anticipate, it would seek alternative funding.

Dividend restrictions
For information on the Company's dividends and dividend restrictions, see Item 8 - Note 12.

Off balance sheet arrangements
As of December 31, 2020, the Company had no material off balance sheet arrangements as defined by the rules of the SEC.

MDU Resources Group, Inc. Form 10-K 49

Part II

Contractual obligations and commercial commitments
For more information on the Company's contractual obligations on long-term debt, operating leases and purchase commitments, see
Item 8 - Notes 9, 10 and 21. At December 31, 2020, the Company's commitments under these obligations were as follows:

Less than 1
year

1-3 years

3-5 years

(In millions)

More than 5
years

Total

Long-term debt maturities*

1.6 $

225.9 $

460.7 $

1,530.7 $

2,218.9

Estimated interest payments**

Operating leases

Purchase commitments

90.8

36.6

173.5

156.4

770.3

1,191.0

41.8

20.0

48.8

147.2

458.4

409.2

223.6

691.6

1,782.8

587.4 $

850.4 $

860.7 $

3,041.4 $

5,339.9

* Unamortized debt issuance costs and discount are excluded from the table.

** Represents the estimated interest payments associated with the Company's long-term debt outstanding at

December 31, 2020, assuming current interest rates and consistent amounts outstanding until their respective
maturity dates over the periods indicated in the table above.

At December 31, 2020, the Company had total liabilities of $446.9 million related to asset retirement obligations that are excluded from the table
above. Of the total asset retirement obligations, the current portion was $6.6 million at December 31, 2020, and was included in other accrued
liabilities on the Consolidated Balance Sheets. Due to the nature of these obligations, the Company cannot determine precisely when the payments
will be made to settle these obligations. For more information, see Item 8 - Note 11.

Not reflected in the previous table are $1.3 million in uncertain tax positions at December 31, 2020.

The Company has no minimum funding requirements for its defined benefit pension plans for 2021 due to an additional contribution of
$20.0 million in 2019.

The Company's MEPP contributions are based on union employee payroll, which cannot be determined in advance for future periods. The Company
may also be required to make additional contributions to its MEPPs as a result of their funded status. For more information, see Item 1A - Risk
Factors and Item 8 - Note 18.

New Accounting Standards
For information regarding new accounting standards, see Item 8 - Note 2, which is incorporated herein by reference.

Critical Accounting Estimates
The Company has prepared its financial statements in conformity with GAAP. The preparation of its financial statements requires management to
make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities, at the
date of the financial statements, as well as the reported amounts of revenues and expenses during the reporting period. Management reviews these
estimates and assumptions based on historical experience, changes in business conditions and other relevant factors believed to be reasonable under
the circumstances.

Critical accounting estimates are defined as estimates that require management to make assumptions about matters that are uncertain at the time
the estimate was made and changes in the estimates could have a material impact on the Company's financial position or results of operations. The
Company's critical accounting estimates are subject to judgments and uncertainties that affect the application of its significant accounting policies
discussed in Item 8 - Note 2. As additional information becomes available, or actual amounts are determinable, the recorded estimates are revised.
Consequently, the Company's financial position or results of operations may be materially different when reported under different conditions or when
using different assumptions in the application of the following critical accounting estimates.

Goodwill
The Company performs its goodwill impairment testing annually in the fourth quarter. In addition, the test is performed on an interim basis whenever
events or circumstances indicate that the carrying amount of goodwill may not be recoverable. Examples of such events or circumstances may
include a significant adverse change in business climate, weakness in an industry in which the Company's reporting units operate or recent
significant cash or operating losses with expectations that those losses will continue.

50 MDU Resources Group, Inc. Form 10-K

Part II

amount that the carrying value of the reporting unit, including goodwill, exceeds the fair value of the reporting unit. For the years ended
December 31, 2020, 2019 and 2018, there were no impairment losses recorded. At October 31, 2020, the fair value substantially exceeded the
carrying value at all reporting units.

Determining the fair value of a reporting unit requires judgment and the use of significant estimates which include assumptions about the Company's
future revenue, profitability and cash flows, amount and timing of estimated capital expenditures, inflation rates, risk adjusted capital cost,
operational plans, and current and future economic conditions, among others. The fair value of each reporting unit is determined using a weighted
combination of income and market approaches. The Company uses a discounted cash flow methodology for its income approach. Under the income
approach, the discounted cash flow model determines fair value based on the present value of projected cash flows over a specified period and a
residual value related to future cash flows beyond the projection period. Both values are discounted using a rate which reflects the best estimate of
the risk adjusted capital cost at each reporting unit. Risk adjusted capital cost, which varies by reporting unit and was in the range of 4 percent to
8 percent, was utilized in the goodwill impairment test performed in the fourth quarter of 2020. The goodwill impairment test also utilized a long-
term growth rate projection, which varies by reporting unit and was in the range of approximately 1 percent to 3 percent, in the goodwill impairment
test performed in the fourth quarter of 2020. Under the market approach, the Company estimates fair value using various multiples derived from
enterprise value to EBITDA for comparative peer companies for each respective reporting unit. These multiples are applied to operating data for each
reporting unit to arrive at an indication of fair value. In addition, the Company adds a reasonable control premium when calculating the fair value
utilizing the peer multiples, which is estimated as the premium that would be received in a sale in an orderly transaction between market
participants. The Company believes that the estimates and assumptions used in its impairment assessments are reasonable and based on available
market information.

Business combinations
The Company accounts for acquisitions on the Consolidated Financial Statements starting from the date of the acquisition, which is the date that
control is obtained. The acquisition method of accounting requires acquired assets and liabilities assumed be recorded at their respective fair values
as of the date of the acquisition. The excess of the purchase price over the fair value of the assets acquired and liabilities assumed is recorded as
goodwill. The estimation of fair values of acquired assets and liabilities assumed by the Company requires significant judgment and requires various
assumptions. Although independent appraisals may be used to assist in the determination of the fair value of certain assets and liabilities, the
appraised values may be based on significant estimates provided by management. The amounts and useful lives assigned to depreciable and
amortizable assets compared to amounts assigned to goodwill, which is not amortized, can affect the results of operations in the period of and
periods subsequent to a business combination.

In determining fair values of acquired assets and liabilities assumed, the Company uses various observable inputs for similar assets or liabilities in
active markets and various unobservable inputs, which includes the use of valuation models. Fair values are based on various factors including, but
not limited to, age and condition of property, maintenance records, auction values for equipment with similar characteristics, recent sales and
listings of comparable properties, data collected from drill holes and other subsurface investigations and geologic data. The Company primarily uses
the market and cost approaches in determining the fair value of land and property, plant and equipment. A combination of the market and income
approaches are used for aggregate reserves and intangibles, primarily a discounted cash flow model.

There is a measurement period after the acquisition date during which the Company may adjust the amounts recognized for a business combination.
Any such adjustments are recorded in the period the adjustment is determined with the corresponding offset to goodwill. These adjustments are
typically based on obtaining additional information that existed at the acquisition date regarding the assets acquired and the liabilities assumed. The
measurement period ends once the Company has obtained all necessary information that existed as of the acquisition date, but does not extend
beyond one year from the date of the acquisition. Once the measurement period has ended, any adjustments to assets acquired or liabilities assumed
are recorded in income from continuing operations.

Regulatory accounting
The Company is subject to rate regulation by state public service commissions and/or the FERC. The Company's regulated businesses account for
certain income and expense items under the provisions of regulatory accounting, which require these businesses to defer as regulatory assets or
liabilities certain items that would have otherwise been reflected as expense or income, respectively, based on the expected regulatory treatment in
future rates. Regulatory assets generally represent incurred or accrued costs that have been deferred and are expected to be recovered in rates
charged to customers. Regulatory liabilities generally represent amounts that are expected to be refunded to customers in future rates or amounts
collected in current rates for future costs.

Management continually assesses the likelihood of recovery in future rates of incurred costs and refunds to customers associated with regulatory
assets and liabilities. Decisions made by the various regulatory agencies can directly impact the amount and timing of these items. Therefore,
expected recovery or flowback of these deferred items generally is based on specific ratemaking decisions or precedent for each item. If future
recovery of costs is no longer probable, the Company would be required to include those costs in the statement of income or accumulated other
comprehensive income (loss) in the period in which it is no longer deemed probable. The Company believes that the accounting subject to rate
regulation remains appropriate and its regulatory assets are probable of recovery in current rates or in future rate proceedings. At December 31,
2020 and 2019, the Company's regulatory assets were $447.9 million and $417.4 million, respectively, and regulatory liabilities were
$459.5 million and $490.3 million, respectively.

MDU Resources Group, Inc. Form 10-K 51

Part II

Revenue recognition
Revenue is recognized to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the
entity expects to be entitled in exchange for those goods or services. The recognition of revenue requires the Company to make estimates and
assumptions that affect the reported amounts of revenue. The accuracy of revenues reported on the Consolidated Financial Statements depends on,
among other things, management's estimates of total costs to complete projects because the Company uses the cost-to-cost measure of progress on
construction contracts for revenue recognition.

To determine the proper revenue recognition method for contracts, the Company evaluates whether two or more contracts should be combined and
accounted for as one single contract and whether the combined or single contract should be accounted for as more than one performance obligation.
This evaluation requires significant judgment and the decision to combine a group of contracts or separate the combined or single contract into
multiple performance obligations could change the amount of revenue and profit recorded in a given period. For most contracts, the customer
contracts with the Company to provide a significant service of integrating a complex set of tasks and components into a single project. Hence, the
Company's contracts are generally accounted for as one performance obligation.

The Company recognizes construction contract revenue over time using an input method based on the cost-to-cost measure of progress for contracts
because it best depicts the transfer of assets to the customer which occurs as the Company incurs costs on the contract. Under the cost-to-cost
measure of progress, the costs incurred are compared with total estimated costs of a performance obligation. Revenues are recorded proportionately
to the costs incurred. This method depends largely on the ability to make reasonably dependable estimates related to the extent of progress toward
completion of the contract, contract revenues and contract costs. Inasmuch as contract prices are generally set before the work is performed, the
estimates pertaining to every project could contain significant unknown risks such as volatile labor, material and fuel costs, weather delays, adverse
project site conditions, unforeseen actions by regulatory agencies, performance by subcontractors, job management and relations with project
owners. Changes in estimates could have a material effect on the Company's results of operations, financial position and cash flows. For the years
ended December 31, 2020 and 2019, the Company's total construction contract revenue was $3.1 billion and $2.8 billion, respectively.

Several factors are evaluated in determining the bid price for contract work. These include, but are not limited to, the complexities of the job, past
history performing similar types of work, seasonal weather patterns, competition and market conditions, job site conditions, work force safety,
reputation of the project owner, availability of labor, materials and fuel, project location and project completion dates. As a project commences,
estimates are continually monitored and revised as information becomes available and actual costs and conditions surrounding the job become
known. If a loss is anticipated on a contract, the loss is immediately recognized.

Contracts are often modified to account for changes in contract specifications and requirements. The Company considers contract modifications to
exist when the modification either creates new or changes the existing enforceable rights and obligations. Generally, contract modifications are for
goods or services that are not distinct from the existing contract due to the significant integration of services provided in the context of the contract
and are accounted for as if they were part of that existing contract. The effect of a contract modification on the transaction price and the measure of
progress for the performance obligation to which it relates, is recognized as an adjustment to revenue on a cumulative catch-up basis.

The Company's construction contracts generally contain variable consideration including liquidated damages, performance bonuses or incentives,
claims, unapproved/unpriced change orders and penalties or index pricing. The variable amounts usually arise upon achievement of certain
performance metrics or change in project scope. The Company estimates the amount of revenue to be recognized on variable consideration using
estimation methods that best predict the most likely amount of consideration the Company expects to be entitled to or expects to incur. The
Company includes variable consideration in the estimated transaction price to the extent it is probable that a significant reversal of cumulative
revenue recognized will not occur or when the uncertainty associated with the variable consideration is resolved. Changes in circumstances could
impact management's estimates made in determining the value of variable consideration recorded. The Company updates its estimate of the
transaction price each reporting period and the effect of variable consideration on the transaction price is recognized as an adjustment to revenue on
a cumulative catch-up basis.

The Company believes its estimates surrounding the cost-to-cost method are reasonable based on the information that is known when the estimates
are made. The Company has contract administration, accounting and management control systems in place that allow its estimates to be updated
and monitored on a regular basis. Because of the many factors that are evaluated in determining bid prices, it is inherent that the Company's
estimates have changed in the past and will continually change in the future as new information becomes available for each job.

Pension and other postretirement benefits
The Company has noncontributory defined benefit pension plans and other postretirement benefit plans for certain eligible employees. Various
actuarial assumptions are used in calculating the benefit expense (income) and liability (asset) related to these plans. Costs of providing pension and
other postretirement benefits bear the risk of change, as they are dependent upon numerous factors based on assumptions of future conditions.

The Company makes various assumptions when determining plan costs, including the current discount rates and the expected long-term return on
plan assets, the rate of compensation increases, actuarially determined mortality data and health care cost trend rates. In selecting the expected
long-term return on plan assets, which is considered to be one of the key variables in determining benefit expense or income, the Company considers
historical returns, current market conditions, the mix of investments and expected future market trends, including changes in interest rates and

52 MDU Resources Group, Inc. Form 10-K

Part II

equity and bond market performance. Another key variable in determining benefit expense or income is the discount rate. In selecting the discount
rate, the Company matches forecasted future cash flows of the pension and postretirement plans to a yield curve which consists of a hypothetical
portfolio of high-quality corporate bonds with varying maturity dates, as well as other factors, as a basis. The Company's pension and other
postretirement benefit plan assets are primarily made up of equity and fixed-income investments. Fluctuations in actual equity and bond market
returns, as well as changes in general interest rates, may result in increased or decreased pension and other postretirement benefit costs in the
future. Management estimates the rate of compensation increase based on long-term assumed wage increases and the health care cost trend rates
are determined by historical and future trends. The Company estimates that a 50-basis point decrease in the discount rate or in the expected return
on plan assets would each increase expense by approximately $2.0 million (after-tax) for the year ended December 31, 2020.

The Company believes the estimates made for its pension and other postretirement benefits are reasonable based on the information that is known
when the estimates are made. These estimates and assumptions are subject to a number of variables and are expected to change in the future.
Estimates and assumptions will be affected by changes in the discount rate, the expected long-term return on plan assets, the rate of compensation
increase and health care cost trend rates. The Company plans to continue to use its current methodologies to determine plan costs. For more
information on the assumptions used in determining plan costs, see Item 8 - Note 18.

Income taxes
The Company is required to make judgments regarding the potential tax effects of various financial transactions and ongoing operations to estimate
the Company's obligation to taxing authorities. These tax obligations include income, real estate, franchise and sales/use taxes. Judgments related to
income taxes require the recognition in the Company's financial statements that a tax position is more-likely-than-not to be sustained on audit.

Judgment and estimation is required in developing the provision for income taxes and the reporting of tax-related assets and liabilities and, if
necessary, any valuation allowances. The interpretation of tax laws can involve uncertainty, since tax authorities may interpret such laws differently.
Actual income tax could vary from estimated amounts and may result in favorable or unfavorable impacts to net income, cash flows and tax-related
assets and liabilities. In addition, the effective tax rate may be affected by other changes including the allocation of property, payroll and revenues
between states.

The Company assesses the deferred tax assets for recoverability taking into consideration historical and anticipated earnings levels; the reversal of
other existing temporary differences; available net operating losses and tax carryforwards; and available tax planning strategies that could be
implemented to realize the deferred tax assets. Based on this assessment, management must evaluate the need for, and amount of, a valuation
allowance against the deferred tax assets. As facts and circumstances change, adjustment to the valuation allowance may be required.

Non-GAAP Financial Measures
The Business Segment Financial and Operating Data includes financial information prepared in accordance with GAAP, as well as another financial
measure, adjusted gross margin, that is considered a non-GAAP financial measure as it relates to the Company's electric and natural gas distribution
segments. The presentation of adjusted gross margin is intended to be a useful supplemental financial measure for investors’ understanding of the
segments' operating performance. This non-GAAP financial measure should not be considered as an alternative to, or more meaningful than, GAAP
financial measures such as operating income (loss) or net income (loss). The Company's non-GAAP financial measure, adjusted gross margin, is not
standardized; therefore, it may not be possible to compare this financial measure with other companies’ gross margin measures having the same or
similar names.

In addition to operating revenues and operating expenses, management also uses the non-GAAP financial measure of adjusted gross margin when
evaluating the results of operations for the electric and natural gas distribution segments. Adjusted gross margin for the electric and natural gas
distribution segments is calculated by adding back adjustments to operating income (loss). These add-back adjustments include: operation and
maintenance expense; depreciation, depletion and amortization expense; and certain taxes, other than income.

Adjusted gross margin includes operating revenues less the cost of electric fuel and purchased power, purchased natural gas sold and certain taxes,
other than income. These taxes, other than income, included as a reduction to adjusted gross margin relate to revenue taxes. These segments pass
on to their customers the increases and decreases in the wholesale cost of power purchases, natural gas and other fuel supply costs in accordance
with regulatory requirements. As such, the segments' revenues are directly impacted by the fluctuations in such commodities. Revenue taxes, which
are passed back to customers, fluctuate with revenues as they are calculated as a percentage of revenues. For these reasons, period over period, the
segments' operating income (loss) is generally not impacted. The Company's management believes the adjusted gross margin is a useful
supplemental financial measure as these items are included in both operating revenues and operating expenses. The Company's management also
believes that adjusted gross margin and the remaining operating expenses that calculate operating income (loss) are useful to investors in assessing
the Company's utility performance as management has the ability to influence control over the remaining operating expenses.

MDU Resources Group, Inc. Form 10-K 53

Part II

The following information reconciles operating income to adjusted gross margin for the electric segment.

Years ended December 31,

2020

2019

2018

Operating income

Adjustments:

Operating expenses:

(In millions)

63.4 $

64.0 $

65.2

Operation and maintenance

121.3

125.7

123.0

Depreciation, depletion and amortization

Taxes, other than income

Total adjustments

Adjusted gross margin

63.0

16.8

58.7

16.1

51.0

14.5

201.1

200.5

188.5

264.5 $

253.7

The following information reconciles operating income to adjusted gross margin for the natural gas distribution segment.

Years ended December 31,

2020

2019

2018

Operating income

Adjustments:

Operating expenses:

(In millions)

73.1 $

69.2 $

72.3

Operation and maintenance

185.4

185.0

173.4

Depreciation, depletion and amortization

Taxes, other than income

Total adjustments

Adjusted gross margin

84.6

24.6

79.6

23.5

72.5

21.7

294.6

288.1

267.6

367.7 $

357.3 $

339.9

Effects of Inflation
Inflation did not have a significant effect on the Company's operations in 2020, 2019 or 2018.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

The Company is exposed to the impact of market fluctuations associated with commodity prices and interest rates. The Company has policies and
procedures to assist in controlling these market risks and from time to time has utilized derivatives to manage a portion of its risk.

Interest rate risk
The Company uses fixed and variable rate long-term debt to partially finance capital expenditures, including acquisitions, and mandatory debt
retirements. These debt agreements expose the Company to market risk related to changes in interest rates. The Company manages this risk by
taking advantage of market conditions when timing the placement of long-term financing. The Company from time to time has utilized interest rate
swap agreements to manage a portion of the Company's interest rate risk and may take advantage of such agreements in the future to minimize such
risk. For additional information on the Company's long-term debt, see Item 8 - Notes 8 and 9. At December 31, 2020 and 2019, the Company had
no outstanding interest rate hedges.

The following table shows the amount of long-term debt, which excludes unamortized debt issuance costs and discount, and related weighted
average interest rates, both by expected maturity dates, as of December 31, 2020.

2021

2022

2023

2024

2025

Thereafter

Total

Fair
Value

(Dollars in millions)

Long-term debt:

Fixed rate

Weighted average interest rate

Variable rate

1.6

$ 148.0

77.9

61.4

$ 177.8

$ 1,530.7

$ 1,997.4

$ 2,321.6

1.1 %

4.5 %

3.7 %

4.2 %

4.0 %

4.5 %

4.4 %

—

$ 221.5

—

$ 221.5

221.5

Weighted average interest rate

— %

1.0 %

— %

1.0 %

Commodity price risk
The Company enters into commodity price derivative contracts to minimize the price volatility associated with natural gas costs at its natural gas
distribution segment. At December 31, 2020 and 2019, these contracts were not material. For more information on the Company's derivatives, see
Item 8 - Note 2.

54 MDU Resources Group, Inc. Form 10-K

Part II

Item 8. Financial Statements and Supplementary Data

Management's Report on Internal Control Over Financial Reporting

The management of MDU Resources Group, Inc. is responsible for establishing and maintaining adequate internal control over financial reporting as
defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934. The Company's internal control system is designed to provide
reasonable assurance regarding the reliability of financial reporting and the preparation of the Company's financial statements for external purposes
in accordance with generally accepted accounting principles in the United States of America.

All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can
provide only reasonable assurance with respect to financial statement preparation and presentation. Because of its inherent limitations, internal
control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are
subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or
procedures may deteriorate.

Management assessed the effectiveness of the Company's internal control over financial reporting as of December 31, 2020. In making this
assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal
Control-Integrated Framework (2013).

Based on our evaluation under the framework in Internal Control-Integrated Framework (2013), management concluded that the Company's internal
control over financial reporting was effective as of December 31, 2020.

The effectiveness of the Company's internal control over financial reporting as of December 31, 2020, has been audited by Deloitte & Touche LLP,
an independent registered public accounting firm, as stated in their report.

David L. Goodin

Jason L. Vollmer

President and Chief Executive Officer

Vice President and Chief Financial Officer

MDU Resources Group, Inc. Form 10-K 55

Part II

Report of Independent Registered Public Accounting Firm

To the Stockholders and the Board of Directors of MDU Resources Group, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of MDU Resources Group, Inc. and subsidiaries (the "Company") as of December 31,
2020 and 2019, the related consolidated statements of income, comprehensive income, equity, and cash flows for each of the three years in the
period ended December 31, 2020, and the related notes and the financial statement schedules listed in the Index at Item 15 (collectively referred to
as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company
as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the three years in the period ended
December 31, 2020, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's
internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control-Integrated Framework (2013)
issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 19, 2021, expressed an
unqualified opinion on the Company's internal control over financial reporting.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's
financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with
respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange
Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included
performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing
procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the
financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as
evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current-period audit of the financial statements that were communicated
or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements
and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way
our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate
opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Revenue from Contracts with Customers-Construction Contract Revenue-Refer to Notes 2 and 3 to the financial statements
Critical Audit Matter Description

The Company recognizes construction contract revenue over time using an input method based on the cost-to-cost measure of progress as it best
depicts the transfer of assets to the customer. Under this method of measuring progress, costs incurred are compared with total estimated costs of
the performance obligation and revenues are recorded proportionately to the costs incurred. Ordinarily the Company’s contracts represent a single
distinct performance obligation due to the highly interdependent and interrelated nature of the underlying goods or services. For the year ended
December 31, 2020, the Company recognized $3.1 billion of construction contract revenue.

Given the judgments necessary to estimate total costs and profit for the performance obligations used to recognize revenue for construction
contracts, auditing such estimates required extensive audit effort due to the volume and complexity of construction contracts and a high degree of
auditor judgment when performing audit procedures and evaluating the results of those procedures.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to management’s estimates of total costs and profit for the performance obligations used to recognize revenue for
certain construction contracts included the following, among others:

• We tested the design and operating effectiveness of management's controls over construction contract revenue, including those over

management’s estimation of total costs and profit for the performance obligations.

56 MDU Resources Group, Inc. Form 10-K

Part II

• We developed an expectation of the amount of construction contract revenues for certain performance obligations based on prior year markups,
and taking into account current year events, applied to the construction contract costs in the current year and compared our expectation to the
amount of construction contract revenues recorded by management.

• We selected a sample of construction contracts and performed the following:

• Evaluated whether the contracts were properly included in management’s calculation of construction contract revenue based on the terms
and conditions of each contract, including whether continuous transfer of control to the customer occurred as progress was made toward
fulfilling the performance obligation.

• Compared the transaction prices to the consideration expected to be received based on current rights and obligations under the contracts

and any modifications that were agreed upon with the customers.

• Evaluated management’s identification of distinct performance obligations by evaluating whether the underlying goods, services, or both

were highly interdependent and interrelated.

• Tested the accuracy and completeness of the costs incurred to date for the performance obligation.

• Evaluated the estimates of total cost and profit for the performance obligation by:

◦ Comparing total costs incurred to date to the costs management estimated to be incurred to date and selecting specific cost types to

compare costs incurred to date to management's estimated costs at completion.

◦ Evaluating management’s ability to achieve the estimates of total cost and profit by performing corroborating inquiries with the

Company’s project managers and engineers, and comparing the estimates to management’s work plans, engineering specifications,
and supplier contracts.

◦ Comparing management’s estimates for the selected contracts to costs and profits of similar performance obligations, when

applicable.

• Tested the mathematical accuracy of management’s calculation of construction contract revenue for the performance obligation.

• We evaluated management’s ability to estimate total costs and profits accurately by comparing actual costs and profits to management’s

historical estimates for performance obligations that have been fulfilled.

Regulatory Matters-Impact of Rate Regulation on the Financial Statements-Refer to Notes 2 and 20 to the financial statements
Critical Audit Matter Description

Through the Company’s regulated utility businesses, it provides electric and natural gas services to customers, and generates, transmits, and
distributes electricity. The Company is subject to rate regulation by federal and state utility regulatory agencies (collectively, the “Commissions”),
which have jurisdiction with respect to the rates of electric and natural gas distribution companies in states where the Company operates. The
Company’s regulated utility businesses account for certain income and expense items under the provisions of regulatory accounting, which requires
these businesses to defer as regulatory assets or liabilities certain items that would have otherwise been reflected as expense or income, respectively,
based on the expected regulatory treatment in future rates. The expected recovery or flowback of these deferred items generally is based on specific
ratemaking decisions or precedent for each item.

Rates are determined and approved in regulatory proceedings based on an analysis of the Company’s costs to provide utility service and a return on
the Company’s investment in the regulated utility businesses. Regulatory decisions can have an impact on the recovery of costs, the rate of return
earned on investment, and the timing and amount of assets to be recovered by rates. The regulation of rates is premised on the full recovery of
prudently incurred costs and a reasonable rate of return on invested capital. Decisions to be made by the Commissions in the future will impact the
accounting for regulated operations.

Accounting for the economics of rate regulation impacts multiple financial statement line items and disclosures, such as property, plant, and
equipment; regulatory assets and liabilities; operating revenues; operation and maintenance expense; and depreciation expense. We identified the
impact of rate regulation as a critical audit matter due to the significant judgments made by management to support its assertions about impacted
account balances and disclosures and the degree of subjectivity involved in assessing the impact of future regulatory orders on the financial
statements. Management judgments include assessing the likelihood of (1) recovery in future rates of incurred costs and (2) refunds to customers.
Given management’s accounting judgments are based on assumptions about the outcome of future decisions by the Commissions, auditing these
judgments requires specialized knowledge of accounting for rate regulation due to its inherent complexities.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the uncertainty of future decisions by the Commissions included the following, among others:

• We tested the design and operating effectiveness of management’s controls over the evaluation of the likelihood of (1) the recovery in future

rates of costs incurred as property, plant, and equipment and deferred as regulatory assets; and (2) a refund or a future reduction in rates that
should be reported as regulatory liabilities. We tested management’s controls over the initial recognition of amounts as regulatory assets or
liabilities; and the monitoring and evaluation of regulatory developments that may affect the likelihood of recovering costs in future rates or of
a future reduction in rates.

• We evaluated the Company’s disclosures related to the impacts of rate regulation, including the balances recorded and regulatory

developments.

MDU Resources Group, Inc. Form 10-K 57

Part II

• We read relevant regulatory orders issued by the Commissions for the Company and other public utilities in the Company’s significant
jurisdictions, regulatory statutes, interpretations, procedural memorandums, filings made by interveners, and other publicly available
information to assess the likelihood of recovery in future rates or of a future reduction in rates based on precedents of the treatment of similar
costs under similar circumstances. We evaluated the external information and compared to management’s recorded regulatory asset and
liability balances for completeness.

• For regulatory matters in process, we inspected the Company’s filings with the Commissions and the filings with the Commissions by

intervenors that may impact the Company’s future rates, for any evidence that might contradict management’s assertions.

• We obtained an analysis from management regarding probability of recovery for regulatory assets or refund or future reduction in rates for
regulatory liabilities not yet addressed in a regulatory order to assess management’s assertion that amounts are probable of recovery, or a
future reduction in rates.

Minneapolis, Minnesota

February 19, 2021

We have served as the Company's auditor since 2002.

58 MDU Resources Group, Inc. Form 10-K

Part II

Report of Independent Registered Public Accounting Firm

To the Stockholders and the Board of Directors of MDU Resources Group, Inc.

Opinion on Internal Control over Financial Reporting

We have audited the internal control over financial reporting of MDU Resources Group, Inc. and subsidiaries (the "Company") as of December 31,
2020, based on criteria established in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the
Treadway Commission (COSO). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as
of December 31, 2020, based on criteria established in Internal Control-Integrated Framework (2013) issued by COSO.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the
consolidated financial statements and financial statement schedules as of and for the year ended December 31, 2020, of the Company and our
report dated February 19, 2021, expressed an unqualified opinion on those consolidated financial statements and financial statement schedules.

Basis for Opinion

The Company's management is responsible for maintaining effective internal control over financial reporting and for its assessment of the
effectiveness of internal control over financial reporting, included in the accompanying Management's Report on Internal Control Over Financial
Reporting. Our responsibility is to express an opinion on the Company's internal control over financial reporting based on our audit. We are a public
accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal
securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included
obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the
design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary
in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s
internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable
detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions
are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that
receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and
(3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets
that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any
evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that
the degree of compliance with the policies or procedures may deteriorate.

Minneapolis, Minnesota

February 19, 2021

MDU Resources Group, Inc. Form 10-K 59

Part II

Consolidated Statements of Income

Years ended December 31,

Operating revenues:

2020

2019

2018

(In thousands, except per share amounts)

Electric, natural gas distribution and regulated pipeline

1,249,146 $

1,279,304 $

1,213,227

Non-regulated pipeline, construction materials and contracting, construction

services and other

Total operating revenues

Operating expenses:

Operation and maintenance:

4,283,604

4,057,472

3,318,325

5,532,750

5,336,776

4,531,552

Electric, natural gas distribution and regulated pipeline

353,184

356,132

340,331

Non-regulated pipeline, construction materials and contracting, construction

services and other

Total operation and maintenance

Purchased natural gas sold

Depreciation, depletion and amortization

Taxes, other than income

Electric fuel and purchased power

Total operating expenses

Operating income

Other income (expense)

Interest expense
Income before income taxes

Income taxes
Income from continuing operations

Income (loss) from discontinued operations, net of tax

Net income

Earnings per share - basic:

Income from continuing operations

Discontinued operations, net of tax

Earnings per share - basic

Earnings per share - diluted:

Income from continuing operations

Discontinued operations, net of tax

Earnings per share - diluted

Weighted average common shares outstanding - basic

Weighted average common shares outstanding - diluted

The accompanying notes are an integral part of these consolidated financial statements.

3,675,078

3,539,162

2,915,790

4,028,262
390,269
285,100
217,253
66,941

3,895,294

3,256,121

421,545

256,017

196,143

86,557

404,153

220,205

168,638

80,712

4,987,825

4,855,556

4,129,829

544,925
26,711
96,519

475,117
84,590

390,527
(322)

481,220

401,723

15,812

98,587

398,445

63,279

(238)

84,614

316,871

47,485

335,166

269,386

287

2,932

390,205 $

335,453 $

272,318

1.95 $
—

1.95 $

1.95 $
—

1.95 $

1.69 $

—

1.69 $

—

1.69 $

1.38

.01

1.39

1.38

.01

1.39

200,502

198,612

195,720

200,571

198,626

196,150

60 MDU Resources Group, Inc. Form 10-K

Consolidated Statements of Comprehensive Income

Years ended December 31,

Net income

Other comprehensive income (loss):

Reclassification adjustment for loss on derivative instruments included in net
income, net of tax of $145, $(140) and $429 in 2020, 2019 and 2018,
respectively

Postretirement liability adjustment:

Postretirement liability gains (losses) arising during the period, net of tax of
$(2,606), $(2,012) and $1,471 in 2020, 2019 and 2018, respectively

Amortization of postretirement liability losses included in net periodic benefit

cost, net of tax of $630, $476 and $721 in 2020, 2019 and 2018,
respectively

Postretirement liability adjustment

Foreign currency translation adjustment:

Foreign currency translation adjustment recognized during the period, net of tax

of $0, $0 and $(14) in 2020, 2019 and 2018, respectively

Reclassification adjustment for foreign currency translation adjustment included

in net income, net of tax of $0, $0 and $75 in 2020, 2019 and 2018,
respectively

Foreign currency translation adjustment

Net unrealized gain (loss) on available-for-sale investments:

Net unrealized gain (loss) on available-for-sale investments arising during the

period, net of tax of $0, $35 and $(38) in 2020, 2019 and 2018, respectively

Reclassification adjustment for loss on available-for-sale investments included in

net income, net of tax of $14, $10 and $35 in 2020, 2019 and 2018,
respectively

Net unrealized gain (loss) on available-for-sale investments

Other comprehensive income (loss)

Part II

2020

2019

2018

(In thousands)

390,205 $

335,453 $

272,318

446

731

162

(8,395)

(6,151)

4,441

1,922

(6,473)

1,486

(4,665)

2,173

6,614

—

(61)

—

249

188

(1)

134

(144)

174

131

(13)

(5,976)

(3,760)

6,951

Comprehensive income attributable to common stockholders

384,229 $

331,693 $

279,269

The accompanying notes are an integral part of these consolidated financial statements.

MDU Resources Group, Inc. Form 10-K 61

Part II

Consolidated Balance Sheets

December 31,

Assets
Current assets:

Cash and cash equivalents

Receivables, net

Inventories

Current regulatory assets

Prepayments and other current assets

Total current assets

Noncurrent assets:

Property, plant and equipment

Less accumulated depreciation, depletion and amortization

Net property, plant and equipment

Goodwill

Other intangible assets, net

Regulatory assets
Investments

Operating lease right-of-use assets

Other

Total noncurrent assets

Total assets

Liabilities and Stockholders' Equity

Current liabilities:

Short-term borrowings

Long-term debt due within one year

Accounts payable

Taxes payable

Dividends payable

Accrued compensation

Regulatory liabilities due within one year

Operating lease liabilities due within one year

Other accrued liabilities

Total current liabilities

Noncurrent liabilities:

Long-term debt

Deferred income taxes

Regulatory liabilities

Asset retirement obligations

Operating lease liabilities
Other

Total noncurrent liabilities
Commitments and contingencies

Stockholders' equity:

Common stock
Authorized - 500,000,000 shares, $1.00 par value
Shares issued - 201,061,198 at December 31, 2020 and 200,922,790 at December 31, 2019

Other paid-in capital

Retained earnings
Accumulated other comprehensive loss
Treasury stock at cost - 538,921 shares

Total stockholders' equity

Total liabilities and stockholders' equity

The accompanying notes are an integral part of these consolidated financial statements.

62 MDU Resources Group, Inc. Form 10-K

(In thousands, except shares and per share amounts)

2020

2019

59,547 $

873,986

291,167

68,527

44,120

66,459

836,605

278,407

63,613

52,617

1,337,347

1,297,701

8,300,770

7,908,628

3,133,831

2,991,486

5,166,939

4,917,142

714,963

25,496

379,381

165,022
120,113

144,111

681,358

15,246

353,784

148,656

115,323

153,849

6,716,025

6,385,358

8,053,372 $

7,683,059

50,000 $

1,555

426,264

88,844

42,611

90,629

31,450

33,655

198,514
963,522

—

16,540

403,391

48,970

41,580

99,269

42,935

31,664

182,078
866,427

2,211,575

2,226,567

516,098

428,075

440,356

86,868

327,773

506,583

447,370

413,298

83,742

291,826

4,010,745

3,969,386

201,061

200,923

1,371,385

1,355,404

1,558,363

1,336,647

(48,078)

(3,626)

(42,102)

(3,626)

3,079,105

2,847,246

8,053,372 $

7,683,059

Consolidated Statements of Equity

Years ended December 31, 2020, 2019 and 2018

Common Stock

Amount

Other
Paid-in Capital

Retained
Earnings

Accumu-
lated
Other
Compre-
hensive
Loss

Treasury Stock

Amount

Total

At December 31, 2017

195,843,297 $ 195,843 $ 1,233,412 $ 1,040,748 $ (37,334) (538,921) $ (3,626) $ 2,429,043

Cumulative effect of adoption of ASC 606

—

(970)

—

(970)

Adjusted Balance at January 1,2018

195,843.297 195,843

1,233,412 1,039,778 (37,334) (538.921) (3,626) 2,428,073

Part II

Net income

Other comprehensive income

Reclassification of certain prior period tax effects

from accumulated other comprehensive loss

Dividends declared on common stock

Stock-based compensation

Repurchase of common stock
Issuance of common stock upon vesting of stock-
based compensation, net of shares used for tax
withholdings

Issuance of common stock

At December 31, 2018

Net Income

Other comprehensive loss

Dividends declared on common stock

Stock-based compensation
Issuance of common stock upon vesting of stock-
based compensation, net of shares used for tax
withholdings

At December 31, 2019

Net income

Other comprehensive loss

Dividends declared on common stock

Stock-based compensation
Issuance of common stock upon vesting of stock-
based compensation, net of shares used for tax
withholdings

Issuance of common stock

—

272,318

—

— 6,951

—

272,318

—

6,951

—

7,959

(7,959)

—

(156,453)

5,060

—

(156,453)

—

5,060

— (182,424) (5,020)

(5,020)

— 182,424 5,020

(2,330)

—

18,176

—

(7,350)

721,610

722

17,454

196,564,907 196,565

1,248,576 1,163,602 (38,342) (538,921) (3,626) 2,566,775

—

335,453

—

(3,760)

—

(162,408)

7,353

—

335,453

—

(3,760)

—

(162,408)

—

7,353

—

(3,015)

—

106,848

—

390,205

—

(5,976)

—

(168,489)

—

13,096

—

(362)

3,385

—

390,205

—

(5,976)

—

(168,489)

13,096

—

26,406

112,002

112

(388)

3,273

—

Issuance of common stock

4,111,669

4,112

102,736

246,214

246

(3,261)

200,922,790 200,923

1,355,404 1,336,647 (42,102) (538,921) (3,626) 2,847,246

At December 31, 2020

201,061,198 $ 201,061 $ 1,371,385 $ 1,558,363 $ (48,078) (538,921) $ (3,626) $ 3,079,105

The accompanying notes are an integral part of these consolidated financial statements.

MDU Resources Group, Inc. Form 10-K 63

Part II

Consolidated Statements of Cash Flows

Years ended December 31,

Operating activities:

Net income

Income (loss) from discontinued operations, net of tax

Income from continuing operations

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation, depletion and amortization

Deferred income taxes

Changes in current assets and liabilities, net of acquisitions:

Receivables

Inventories

Other current assets

Accounts payable

Other current liabilities

Other noncurrent changes

Net cash provided by continuing operations

Net cash provided by (used in) discontinued operations

Net cash provided by operating activities

Investing activities:

Capital expenditures

Acquisitions, net of cash acquired

Net proceeds from sale or disposition of property and other

Investments

Net cash used in continuing operations

Net cash provided by discontinued operations

Net cash used in investing activities

Financing activities:

Issuance of short-term borrowings

Repayment of short-term borrowings

Issuance of long-term debt

Repayment of long-term debt

Proceeds from issuance of common stock

Payments of stock issuance costs

Dividends paid

Repurchase of common stock

Tax withholding on stock-based compensation

Net cash provided by (used in) financing activities

Effect of exchange rate changes on cash and cash equivalents

Increase (decrease) in cash and cash equivalents

Cash and cash equivalents - beginning of year

Cash and cash equivalents - end of year

The accompanying notes are an integral part of these consolidated financial statements.

64 MDU Resources Group, Inc. Form 10-K

2020

2019

2018

(In thousands)

390,205 $

335,453 $

272,318

(322)
390,527

287

2,932

335,166

269,386

285,100
(1,801)

256,017

220,205

63,415

59,735

7,796
(7,221)
31,601
15,955
35,591

12,201
769,749

(1,375)

(104,374)

9,331

(38,283)

30,079

51,278

28,234

(46,796)

(31,814)

21,109

22,285

(60,813)

(38,521)

541,816

503,823

464

(3,942)

768,374

542,280

499,881

(558,007)
(105,979)
35,557

(1,814)
(630,243)

(576,065)

(568,230)

(55,597)

(167,692)

29,812

26,100

(2,011)

(2,321)

(603,861)

(712,143)

—

1,236

(630,243)

(603,861)

(710,907)

75,000
(25,000)
116,973
(148,634)
3,385
—
(166,405)
—

169,977

(170,000)

—

599,455

566,829

(468,917)

(174,520)

106,848

—

(10)

(160,256)

(154,573)

(362)

(3,015)

—

(5,020)

(2,330)

(145,043)

74,092

230,376

—

(1)

(6,912)

12,511

66,459

53,948

19,349

34,599

59,547 $

66,459 $

53,948

Part II

Notes to Consolidated Financial Statements

Note 1 - Basis of Presentation
The abbreviations and acronyms used throughout are defined following the Notes to Consolidated Financial Statements. The consolidated financial
statements of the Company include the accounts of the following businesses: electric, natural gas distribution, pipeline, construction materials and
contracting, construction services and other. The electric and natural gas distribution businesses, as well as a portion of the pipeline business, are
regulated. Construction materials and contracting, construction services and the other businesses, as well as a portion of the pipeline business, are
non-regulated. For further descriptions of the Company's businesses, see Note 17.

On January 2, 2019, the Company announced the completion of the Holding Company Reorganization, which resulted in Montana-Dakota becoming
a subsidiary of the Company. The purpose of the reorganization was to make the public utility division into a subsidiary of the holding company, just
as the other operating companies are wholly owned subsidiaries.

In March 2020, the World Health Organization declared the outbreak of COVID-19 a pandemic, and the President of the United States declared the
COVID-19 outbreak as a national emergency. Governmental restrictions and guidelines implemented to control the spread of COVID-19 reduced
commercial and interpersonal activity throughout the Company's areas of operation. Most of the Company's products and services are considered
essential and accordingly operations have been generally allowed to continue. The Company has experienced some inefficiency impacts, including
operation suspensions and interruptions at some locations to carry out preventive measures or in response to instances of positive tests or
quarantines. The Company has assessed the impacts of the COVID-19 pandemic on its results of operations for the twelve months ended
December 31, 2020, and determined there were no material adverse impacts.

In the first quarter of 2020, the Company recorded an out-of-period adjustment to correct the recognition of revenue on a construction contract,
which was the result of an overstatement of operating revenue and receivables of $7.7 million and an understatement of operating expense and
accounts payable of $1.2 million in the year ended December 31, 2019. This adjustment resulted in an after-tax reduction to net income of
$6.7 million in the first quarter of 2020. The Company evaluated the impact of the out-of-period adjustment and concluded it was not material to
any previously issued interim and annual consolidated financial statements and the adjustment was not material to the three months ended
March 31, 2020, or the twelve months ended December 31, 2020.

In the fourth quarter of 2020, the Company recorded an out-of-period adjustment to correct the recognition of net periodic benefit cost and other
comprehensive income associated with the Company's benefit plans, which was the result of the previous overstatement of benefit plan expenses of
$6.5 million, understatement of accumulated other comprehensive loss of $2.7 million and overstatement of regulatory liabilities of $3.8 million
from 2006 through 2020. This adjustment resulted in an after-tax increase to net income of $4.4 million in the fourth quarter of 2020. The
Company evaluated the impact of the out-of-period adjustment, individually and in the aggregate with the previously mentioned out-of-period
adjustment, and concluded it was not material to any previously issued interim and annual consolidated financial statements and the adjustment was
not material to the three and twelve months ended December 31, 2020.

Effective January 1, 2020, the Company adopted the requirements of the ASU on the measurement of credit losses on certain financial instruments
following a modified retrospective approach, as further discussed in Note 2. As such, results for reporting periods beginning on January 1, 2020, are
presented under the new guidance, while prior period amounts are not adjusted and continue to be reported in accordance with historic accounting.
The Company's adoption of this guidance did not have a material impact on its financial reporting.

The assets and liabilities of the Company's discontinued operations have been classified as held for sale and are included in prepayments and other
current assets, noncurrent assets - other and other accrued liabilities on the Consolidated Balance Sheets and are not material to the financial
statements for any period presented. The results and supporting activities are shown in income (loss) from discontinued operations on the
Consolidated Statements of Income. Unless otherwise indicated, the amounts presented in the accompanying notes to the consolidated financial
statements relate to the Company's continuing operations.

Management has also evaluated the impact of events occurring after December 31, 2020, up to the date of issuance of these consolidated financial
statements.

Principles of consolidation
The consolidated financial statements were prepared in accordance with GAAP and include the accounts of the Company and its wholly-owned
subsidiaries. All intercompany balances and transactions have been eliminated in consolidation, except for certain transactions related to the
Company's regulated operations in accordance with GAAP. For more information on intercompany revenues, see Note 17.

The statements also include the Company's ownership interests in the assets, liabilities and expenses of jointly owned electric transmission and
generating facilities. See Note 19 for additional information.

MDU Resources Group, Inc. Form 10-K 65

Part II

Use of estimates
The preparation of financial statements in conformity with GAAP requires the Company to make estimates and assumptions that affect the reported
amounts of assets and liabilities, and disclosure of contingent assets and liabilities, at the date of the financial statements, as well as the reported
amounts of revenues and expenses during the reporting period. Estimates are used for items such as long-lived assets and goodwill; fair values of
acquired assets and liabilities under the acquisition method of accounting; aggregate reserves; property depreciable lives; tax provisions; revenue
recognized using the cost-to-cost measure of progress for contracts; expected credit losses; environmental and other loss contingencies; regulatory
assets expected to be recovered in rates charged to customers; costs on construction contracts; unbilled revenues; actuarially determined benefit
costs; asset retirement obligations; lease classification; present value of right-of-use assets and lease liabilities; and the valuation of stock-based
compensation. As additional information becomes available, or actual amounts are determinable, the recorded estimates are revised. Consequently,
operating results can be affected by revisions to prior accounting estimates.

Note 2 - Significant Accounting Policies
New accounting standards
Recently adopted accounting standards
ASU 2016-13 - Measurement of Credit Losses on Financial Instruments In June 2016, the FASB issued guidance on the measurement of credit losses on
certain financial instruments. The guidance introduced a new impairment model known as the current expected credit loss model that replaced the
incurred loss impairment methodology previously included under GAAP. This guidance required entities to present certain investments in debt
securities, trade accounts receivable and other financial assets at their net carrying value of the amount expected to be collected on the financial
statements. The Company adopted the guidance on January 1, 2020, using a modified retrospective approach.

The Company formed an implementation team to review and assess existing financial assets to identify and evaluate the financial assets subject to
the new current expected credit loss model. The Company assessed the impact of the guidance on its processes and internal controls and has
identified and updated existing internal controls and processes to ensure compliance with the new guidance; such modifications were deemed
insignificant. During the assessment phase, the Company identified the complete portfolio of assets subject to the current expected credit loss
model. The Company determined the guidance did not have a material impact on its results of operations, financial position, cash flows or
disclosures and did not record a material cumulative effect adjustment upon adoption. See Receivables and allowance for expected credit losses
within this note for additional information on the Company's expected credit losses.

ASU 2018-13 - Changes to the Disclosure Requirements for Fair Value Measurement In August 2018, the FASB issued guidance on modifying the
disclosure requirements on fair value measurements as part of the disclosure framework project. The guidance modified, among other things, the
disclosures required for Level 3 fair value measurements, including the range and weighted average of significant unobservable inputs. The guidance
removed, among other things, the disclosure requirement to disclose transfers between Levels 1 and 2. The Company adopted the guidance on
January 1, 2020, and determined it did not have a material impact on its disclosures.

Recently issued accounting standards not yet adopted
ASU 2018-14 - Changes to the Disclosure Requirements for Defined Benefit Plans In August 2018, the FASB issued guidance on modifying the
disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans as part of the disclosure framework project.
The guidance removed disclosures that are no longer considered cost beneficial, clarifies the specific requirements of disclosures and added
disclosure requirements identified as relevant. The guidance added, among other things, the requirement to include an explanation for significant
gains and losses related to changes in benefit obligations for the period. The guidance removed, among other things, the disclosure requirement to
disclose the amount of net periodic benefit costs to be amortized over the next fiscal year from accumulated other comprehensive income (loss) and
the effects a one percentage point change in assumed health care cost trend rates will have on certain benefit components. The guidance was
effective for the Company on January 1, 2021, and must be applied on a retrospective basis. The Company determined the new guidance will not
materially impact its consolidated financial statement disclosures.

ASU 2019-12 - Simplifying the Accounting for Income Taxes In December 2019, the FASB issued guidance on simplifying the accounting for income
taxes by removing certain exceptions in ASC 740 and providing simplification amendments. The guidance removed exceptions on intraperiod tax
allocations and reporting and provided simplification on accounting for franchise taxes, tax basis goodwill and tax law changes. The Company
adopted the guidance on January 1, 2021, and determined it did not have a material impact on its results of operations, financial position, cash
flows and disclosures.

ASU 2020-04 - Reference Rate Reform In March 2020, the FASB issued optional guidance to ease the facilitation of the effects of reference rate
reform on financial reporting. The guidance applies to certain contract modifications, hedging relationships and other transactions that reference
LIBOR or another reference rate expected to be discontinued because of reference rate reform. LIBOR is expected to be retired with a full phase-out
by the end of 2021 and replaced by new reference rates, which includes SOFR. The guidance can be applied beginning in the interim period that
includes March 12, 2020, and cannot be applied to contract modifications or hedging relationships entered into or evaluated after December 31,
2022. The Company has updated its credit agreements to include language regarding the successor or alternate rate to LIBOR, and a review of other
contracts and agreements is on-going. The Company does not expect the guidance to have a material impact on its results of operations, financial
position, cash flows or disclosures.

66 MDU Resources Group, Inc. Form 10-K

Part II

Cash and cash equivalents
The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents.

Revenue recognition
Revenue is recognized when a performance obligation is satisfied by transferring control over a product or service to a customer. Revenue is
measured based on consideration specified in a contract with a customer and excludes any sales incentives and amounts collected on behalf of third
parties. The Company is considered an agent for certain taxes collected from customers. As such, the Company presents revenues net of these taxes
at the time of sale to be remitted to governmental authorities, including sales and use taxes.

The electric and natural gas distribution segments generate revenue from the sales of electric and natural gas products and services, which includes
retail and transportation services. These segments establish a customer's retail or transportation service account based on the customer's application/
contract for service, which indicates approval of a contract for service. The contract identifies an obligation to provide service in exchange for
delivering or standing ready to deliver the identified commodity; and the customer is obligated to pay for the service as provided in the applicable
tariff. The product sales are based on a fixed rate that includes a base and per-unit rate, which are included in approved tariffs as determined by
state or federal regulatory agencies. The quantity of the commodity consumed or transported determines the total per-unit revenue. The service
provided, along with the product consumed or transported, are a single performance obligation because both are required in combination to
successfully transfer the contracted product or service to the customer. Revenues are recognized over time as customers receive and consume the
products and services. The method of measuring progress toward the completion of the single performance obligation is on a per-unit output method
basis, with revenue recognized based on the direct measurement of the value to the customer of the goods or services transferred to date. For
contracts governed by the Company’s utility tariffs, amounts are billed monthly with the amount due between 15 and 22 days of receipt of the
invoice depending on the applicable state’s tariff. For other contracts not governed by tariff, payment terms are net 30 days. At this time, the
segment has no material obligations for returns, refunds or other similar obligations.

The pipeline segment generates revenue from providing natural gas transportation, gathering and underground storage services, as well as other
energy-related services to both third parties and internal customers, largely the natural gas distribution segment. The pipeline segment establishes a
contract with a customer based upon the customer’s request for firm or interruptible natural gas transportation, storage or gathering service(s). The
contract identifies an obligation for the segment to provide the requested service(s) in exchange for consideration from the customer over a specified
term. Depending on the type of service(s) requested and contracted, the service provided may include transporting, gathering or storing an identified
quantity of natural gas and/or standing ready to deliver or store an identified quantity of natural gas. Natural gas transportation, gathering and storage
revenues are based on fixed rates, which may include reservation fees and/or per-unit commodity rates. The services provided by the segment are
generally treated as single performance obligations satisfied over time simultaneous to when the service is provided and revenue is recognized. Rates
for the segment’s regulated services are based on its FERC approved tariff or customer negotiated rates, and rates for its non-regulated services are
negotiated with its customers and set forth in the contract. For contracts governed by the company’s tariff, amounts are billed on or before the ninth
business day of the following month and the amount is due within 12 days of receipt of the invoice. For gathering contracts not governed by the
tariff, amounts are due within 20 days of invoice receipt. For other contracts not governed by the tariff, payment terms are net 30 days. At this time,
the segment has no material obligations for returns, refunds or other similar obligations.

The construction materials and contracting segment generates revenue from contracting services and construction materials sales. This segment
focuses on the vertical integration of its contracting services with its construction materials to support the aggregate-based product lines. This
segment provides contracting services to a customer when a contract has been signed by both the customer and a representative of the segment
obligating a service to be provided in exchange for the consideration identified in the contract. The nature of the services this segment provides
generally includes integrating a set of services and related construction materials into a single project to create a distinct bundle of goods and
services, which the Company evaluates to determine whether a separate performance obligation exists. The transaction price is the original contract
price plus any subsequent change orders and variable consideration. Examples of variable consideration that exist in this segment's contracts include
liquidated damages; performance bonuses or incentives and penalties; claims; unapproved/unpriced change orders; and index pricing. The variable
amounts usually arise upon achievement of certain performance metrics or change in project scope. The Company estimates the amount of revenue
to be recognized on variable consideration using estimation methods that best predict the most likely amount of consideration the Company expects
to be entitled to or expects to incur. The Company includes variable consideration in the estimated transaction price to the extent it is probable that
a significant reversal of cumulative revenue recognized will not occur or when the uncertainty associated with the variable consideration is resolved.
Changes in circumstances could impact management's estimates made in determining the value of variable consideration recorded. The Company
updates its estimate of the transaction price each reporting period and the effect of variable consideration on the transaction price is recognized as
an adjustment to revenue on a cumulative catch-up basis. Revenue is recognized over time using an input method based on the cost-to-cost measure
of progress on a project. This is the preferred method of measuring revenue because the costs incurred have been determined to represent the best
indication of the overall progress toward the transfer of such goods or services promised to a customer. This segment also sells construction materials
to third parties and internal customers. The contract for material sales is the use of a sales order or an invoice, which includes the pricing and
payment terms. All material contracts contain a single performance obligation for the delivery of a single distinct product or a distinct separately
identifiable bundle of products and services. Revenue is recognized at a point in time when the performance obligation has been satisfied with the
delivery of the products or services. The warranties associated with the sales are those consistent with a standard warranty that the product meets
certain specifications for quality or those required by law. For most contracts, amounts billed to customers are due within 30 days of receipt. There
are no material obligations for returns, refunds or other similar obligations.

MDU Resources Group, Inc. Form 10-K 67

Part II

The construction services segment generates revenue from specialty contracting services which also includes the sale of construction equipment and
other supplies. This segment provides specialty contracting services to a customer when a contract has been signed by both the customer and a
representative of the segment obligating a service to be provided in exchange for the consideration identified in the contract. The nature of the
services this segment provides generally includes multiple promised goods and services in a single project to create a distinct bundle of goods and
services, which the Company evaluates to determine whether a separate performance obligation exists. The transaction price is the original contract
price plus any subsequent change orders and variable consideration. Examples of variable consideration that exist in this segment's contracts include
claims, unapproved/unpriced change orders, bonuses, incentives, penalties and liquidated damages. The variable amounts usually arise upon
achievement of certain performance metrics or change in project scope. The Company estimates the amount of revenue to be recognized on variable
consideration using estimation methods that best predict the most likely amount of consideration the Company expects to be entitled to or expects to
incur. The Company includes variable consideration in the estimated transaction price to the extent it is probable that a significant reversal of
cumulative revenue recognized will not occur or when the uncertainty associated with the variable consideration is resolved. Changes in
circumstances could impact management's estimates made in determining the value of variable consideration recorded. The Company updates its
estimate of the transaction price each reporting period and the effect of variable consideration on the transaction price is recognized as an
adjustment to revenue on a cumulative catch-up basis. Revenue is recognized over time using the input method based on the measurement of
progress on a project. The input method is the preferred method of measuring revenue because the costs incurred have been determined to represent
the best indication of the overall progress toward the transfer of such goods or services promised to a customer. This segment also sells construction
equipment and other supplies to third parties and internal customers. The contract for these sales is the use of a sales order or invoice, which
includes the pricing and payment terms. All such contracts include a single performance obligation for the delivery of a single distinct product or a
distinct separately identifiable bundle of products and services. Revenue is recognized at a point in time when the performance obligation has been
satisfied with the delivery of the products or services. The warranties associated with the sales are those consistent with a standard warranty that the
product meets certain specifications for quality or those required by law. For most contracts, amounts billed to customers are due within 30 days of
receipt. There are no material obligations for returns, refunds or other similar obligations.

The Company recognizes all other revenues when services are rendered or goods are delivered.

Legal costs
The Company expenses external legal fees as they are incurred.

Business combinations
For all business combinations, the Company preliminarily allocates the purchase price of the acquisitions to the assets acquired and liabilities
assumed based on their estimated fair values as of the acquisition dates and are considered provisional until final fair values are determined or the
measurement period has passed. The Company expects to record adjustments as it accumulates the information needed to estimate the fair value of
assets acquired and liabilities assumed, including working capital balances, estimated fair value of identifiable intangible assets, property, plant and
equipment, total consideration and goodwill. The excess of the purchase price over the aggregate fair values is recorded as goodwill. The Company
calculated the fair value of the assets acquired in 2020 and 2019 using a market or cost approach (or a combination of both). Fair values for some
of the assets were determined based on Level 3 inputs including estimated future cash flows, discount rates, growth rates, sales projections,
retention rates and terminal values, all of which require significant management judgment and are susceptible to change. The final fair value of the
net assets acquired may result in adjustments to the assets and liabilities, including goodwill, and will be made as soon as practical, but no later
than 12 months from the respective acquisition dates. Any subsequent measurement period adjustments are not expected to have a material impact
on the Company's results of operations.

Receivables and allowance for expected credit losses
Receivable consists primarily of trade receivables from the sale of goods and services, which are recorded at the invoiced amount, and contract
assets, net of expected credit losses. For more information on contract assets, see Note 3. The Company's trade receivables are all due in 12 months
or less. The total balance of receivables past due 90 days or more was $43.9 million and $46.7 million at December 31, 2020 and 2019,
respectively.

The Company's expected credit losses are determined through a review using historical credit loss experience, changes in asset specific
characteristics, current conditions and reasonable and supportable future forecasts, among other specific account data, and is performed at least
quarterly. The Company develops and documents its methodology to determine its allowance for expected credit losses at each of its reportable
business segments. Risk characteristics used by the business segments may include customer mix, knowledge of customers and general economic
conditions of the various local economies, among others. Specific account balances are written off when management determines the amounts to be
uncollectible.

The Company conducted additional analysis of its receivables and allowance for expected credit losses due to the impacts of COVID-19. As more
customer balances enter arrears, further analysis supported increasing the uncollectible factors used in determining the expected credit losses of
certain segments during 2020. Management has reviewed the balance reserved through the allowance for expected credit losses and believes it is
reasonable.

68 MDU Resources Group, Inc. Form 10-K

Part II

Details of the Company's expected credit losses were as follows:

Electric

Natural gas
distribution

Pipeline

Construction
materials
and
contracting

Construction
services

Total

(In thousands)

At January 1, 2020

328 $

1,056 $

— $

5,357 $

1,756 $

8,497

Current expected credit loss provision

1,517

3,187

Less write-offs charged against the allowance

1,289

2,511

Credit loss recoveries collected

343

839

—

1,447

4,832

10,985

640

—

866

—

5,306

1,182

At December 31, 2020

899 $

2,571 $

2 $

6,164 $

5,722 $

15,358

The Company's allowance for doubtful accounts at December 31, 2019, was $8.5 million.

Receivables also consist of accrued unbilled revenue representing revenues recognized in excess of amounts billed. Accrued unbilled revenue at
MDU Energy Capital was $94.0 million and $100.8 million at December 31, 2020 and 2019, respectively.

Amounts representing balances billed but not paid by customers under retainage provisions in contracts at December 31 were as follows:

Short-term retainage*

Long-term retainage**

Total retainage

2020

2019

(In thousands)

100,054 $

75,590

2,761

14,228

102,815 $

89,818

* Expected to be paid within 12 months or less and included in receivables, net.

** Included in noncurrent assets - other.

Inventories and natural gas in storage
Natural gas in storage for the Company's regulated operations is generally valued at lower of cost or market using the last-in, first-out method or lower
of cost or net realizable value using the average cost or first-in, first-out method. The majority of all other inventories are valued at the lower of cost
or net realizable value using the average cost method. The portion of the cost of natural gas in storage expected to be used within 12 months was
included in inventories. Inventories at December 31 consisted of:

2020

2019

(In thousands)

Aggregates held for resale

175,782 $

147,723

Asphalt oil

Materials and supplies

Merchandise for resale

Natural gas in storage (current)

Other

Total

28,238

25,142

21,087

21,919

18,999

41,912

22,512

22,232

22,058

21,970

291,167 $

278,407

The remainder of natural gas in storage, which largely represents the cost of gas required to maintain pressure levels for normal operating purposes,
was included in noncurrent assets - other and was $47.5 million and $48.4 million at December 31, 2020 and 2019, respectively.

MDU Resources Group, Inc. Form 10-K 69

Part II

Property, plant and equipment
Additions to property, plant and equipment are recorded at cost. When regulated assets are retired, or otherwise disposed of in the ordinary course of
business, the original cost of the asset is charged to accumulated depreciation. With respect to the retirement or disposal of all other assets, the
resulting gains or losses are recognized as a component of income. The Company is permitted to capitalize AFUDC on regulated construction projects
and to include such amounts in rate base when the related facilities are placed in service. In addition, the Company capitalizes interest, when
applicable, on certain construction projects associated with its other operations. The amount of AFUDC for the years ended December 31 was as
follows:

2020

2019

2018

(In thousands)

AFUDC - borrowed

AFUDC - equity

2,640 $

2,807 $

1,270 $

698 $

2,290

1,897

Generally, property, plant and equipment are depreciated on a straight-line basis over the average useful lives of the assets, except for depletable
aggregate reserves, which are depleted based on the units-of-production method. The Company collects removal costs for plant assets in regulated
utility rates. These amounts are recorded as regulatory liabilities on the Consolidated Balance Sheets.

Impairment of long-lived assets
The Company reviews the carrying values of its long-lived assets, excluding goodwill, whenever events or changes in circumstances indicate that such
carrying values may not be recoverable. The determination of whether an impairment has occurred is based on an estimate of undiscounted future
cash flows attributable to the assets, compared to the carrying value of the assets. If impairment has occurred, the amount of the impairment
recognized is determined by estimating the fair value of the assets and recording a loss if the carrying value is greater than the fair value. The
impairments are recorded in operation and maintenance expense on the Consolidated Statements of Income.

No significant impairment losses were recorded in 2020, 2019 or 2018. Unforeseen events and changes in circumstances could require the
recognition of impairment losses at some future date.

Regulatory assets and liabilities
The Company's regulated businesses are subject to various state and federal agency regulations. The accounting policies followed by these
businesses are generally subject to the Uniform System of Accounts of the FERC as well as the provisions of ASC 980 - Regulated Operations. These
accounting policies differ in some respects from those used by the Company's non-regulated businesses.

The Company's regulated businesses account for certain income and expense items under the provisions of regulatory accounting, which requires
these businesses to defer as regulatory assets or liabilities certain items that would have otherwise been reflected as expense or income, respectively.
The Company records regulatory assets or liabilities at the time the Company determines the amounts to be recoverable in current or future rates.
Regulatory assets and liabilities are being amortized consistently with the regulatory treatment established by the FERC and the applicable state
public service commission. See Note 6 for more information regarding the nature and amounts of these regulatory deferrals.

Natural gas costs recoverable or refundable through rate adjustments
Under the terms of certain orders of the applicable state public service commissions, the Company is deferring natural gas commodity, transportation
and storage costs that are greater or less than amounts presently being recovered through its existing rate schedules. Such orders generally provide
that these amounts are recoverable or refundable through rate adjustments. Natural gas costs refundable through rate adjustments were
$18.6 million and $23.8 million at December 31, 2020 and 2019, respectively, which was included in regulatory liabilities due within one year on
the Consolidated Balance Sheets. Natural gas costs recoverable through rate adjustments were $64.0 million and $89.2 million at December 31,
2020 and 2019, respectively, which was included in current regulatory assets and noncurrent assets - regulatory assets on the Consolidated Balance
Sheets.

Goodwill
Goodwill represents the excess of the purchase price over the fair value of identifiable net tangible and intangible assets acquired in a business
combination. Goodwill is required to be tested for impairment annually, which the Company completes in the fourth quarter, or more frequently if
events or changes in circumstances indicate that goodwill may be impaired.

The Company has determined that the reporting units for its goodwill impairment test are its operating segments, or components of an operating
segment, that constitute a business for which discrete financial information is available and for which segment management regularly reviews the
operating results. For more information on the Company's operating segments, see Note 17. Goodwill impairment, if any, is measured by comparing
the fair value of each reporting unit to its carrying value. If the fair value of a reporting unit exceeds its carrying value, the goodwill of the reporting
unit is not impaired. If the carrying value of a reporting unit exceeds its fair value, the Company must record an impairment loss for the amount that
the carrying value of the reporting unit, including goodwill, exceeds the fair value of the reporting unit. For the years ended December 31, 2020,
2019 and 2018, there were no impairment losses recorded. The Company performed its annual goodwill impairment test in the fourth quarter of
2020 and determined the fair value substantially exceeded the carrying value at all reporting units at October 31, 2020.

70 MDU Resources Group, Inc. Form 10-K

Part II

Investments
The Company's investments include the cash surrender value of life insurance policies, an insurance contract, mortgage-backed securities and U.S.
Treasury securities. The Company measures its investment in the insurance contract at fair value with any unrealized gains and losses recorded on
the Consolidated Statements of Income. The Company has not elected the fair value option for its mortgage-backed securities and U.S. Treasury
securities and, as a result, the unrealized gains and losses on these investments are recorded in accumulated other comprehensive income (loss). For
more information, see Notes 8 and 18.

Derivative instruments
The Company enters into commodity price derivative contracts in order to minimize the price volatility associated with natural gas costs at its natural
gas distribution segment. These derivatives are not designated as hedging instruments and are recorded in the Consolidated Balance Sheets at fair
value, as discussed in Note 8. Changes in the fair value of these derivatives along with any contract settlements are recorded each period in
regulatory assets or liabilities in accordance with regulatory accounting. The Company does not enter into any derivatives for trading or other
speculative purposes.

In 2017, the WUTC issued a requirement for gas providers to implement robust, risk-responsive hedging programs in order to minimize volatility in
natural gas prices for natural gas utility customers and in 2019, the Company implemented policies and procedures that met these requirements.
During 2020 and 2019, the Company entered into commodity price derivative contracts securing the purchase of 1.4 million MMBtu and 535,000
MMBtu of natural gas, respectively.

Leases
Lease liabilities and their corresponding right-of-use assets are recorded based on the present value of lease payments over the expected lease term.
The Company recognizes leases with an original lease term of 12 months or less in income on a straight-line basis over the term of the lease and
does not recognize a corresponding right-of-use asset or lease liability. The Company determines the lease term based on the non-cancelable and
cancelable periods in each contract. The non-cancelable period consists of the term of the contract that is legally enforceable and cannot be
canceled by either party without incurring a significant penalty. The cancelable period is determined by various factors that are based on who has the
right to cancel a contract. If only the lessor has the right to cancel the contract, the Company will assume the contract will continue. If the lessee is
the only party that has the right to cancel the contract, the Company looks to asset, entity and market-based factors. If both the lessor and the lessee
have the right to cancel the contract, the Company assumes the contract will not continue.

The discount rate used to calculate the present value of the lease liabilities is based upon the implied rate within each contract. If the rate is
unknown or cannot be determined, the Company uses an incremental borrowing rate, which is determined by the length of the contract, asset class
and the Company's borrowing rates, as of the commencement date of the contract.

Asset retirement obligations
The Company records the fair value of a liability for an asset retirement obligation in the period in which it is incurred. When the liability is initially
recorded, the Company capitalizes a cost by increasing the carrying amount of the related long-lived asset. Over time, the liability is accreted to its
present value each period and the capitalized cost is depreciated over the useful life of the related asset. Upon settlement of the liability, the
Company either settles the obligation for the recorded amount or incurs a gain or loss at its non-regulated operations or incurs a regulatory asset or
liability at its regulated operations.

Stock-based compensation
The Company determines compensation expense for stock-based awards based on the estimated fair values at the grant date and recognizes the
related compensation expense over the vesting period. The Company uses the straight-line amortization method to recognize compensation expense
related to restricted stock, which only has a service condition. This method recognizes stock compensation expense on a straight-line basis over the
requisite service period for the entire award. The Company recognizes compensation expense related to performance awards that vest based on
performance metrics and service conditions on a straight-line basis over the service period. Inception-to-date expense is adjusted based upon the
determination of the potential achievement of the performance target at each reporting date. The Company recognizes compensation expense related
to performance awards with market-based performance metrics on a straight-line basis over the requisite service period.

The Company records the compensation expense for performance share awards using an estimated forfeiture rate. The estimated forfeiture rate is
calculated based on an average of actual historical forfeitures. The Company also performs an analysis of any known factors at the time of the
calculation to identify any necessary adjustments to the average historical forfeiture rate. At the time actual forfeitures become more than estimated
forfeitures, the Company records compensation expense using actual forfeitures.

MDU Resources Group, Inc. Form 10-K 71

Part II

Earnings per share
Basic earnings per share were computed by dividing net income by the weighted average number of shares of common stock outstanding during the
year. Diluted earnings per share were computed by dividing net income by the total of the weighted average number of shares of common stock
outstanding during the year, plus the effect of nonvested performance share awards and restricted stock units. Common stock outstanding includes
issued shares less shares held in treasury. Net income was the same for both the basic and diluted earnings per share calculations. A reconciliation
of the weighted average common shares outstanding used in the basic and diluted earnings per share calculation was as follows:

Weighted average common shares outstanding - basic

200,502

198,612

195,720

Effect of dilutive performance share awards

430

Weighted average common shares outstanding - diluted

200,571

198,626

196,150

Shares excluded from the calculation of diluted earnings per share

164

2020

2019

2018

(In thousands)

Income taxes
The Company provides deferred federal and state income taxes on all temporary differences between the book and tax basis of the Company's assets
and liabilities by using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on
deferred tax assets and liabilities is recognized in income in the period that includes the enactment date. Excess deferred income tax balances
associated with the Company's rate-regulated activities have been recorded as a regulatory liability and are included in other liabilities. These
regulatory liabilities are expected to be reflected as a reduction in future rates charged to customers in accordance with applicable regulatory
procedures.

The Company uses the deferral method of accounting for investment tax credits and amortizes the credits on regulated electric and natural gas
distribution plant over various periods that conform to the ratemaking treatment prescribed by the applicable state public service commissions.

The Company records uncertain tax positions in accordance with accounting guidance on accounting for income taxes on the basis of a two-step
process in which (1) the Company determines whether it is more-likely-than-not that the tax position will be sustained on the basis of the technical
merits of the position and (2) for those tax positions that meet the more-likely-than-not recognition threshold, the Company recognizes the largest
amount of the tax benefit that is more than 50 percent percent likely to be realized upon ultimate settlement with the related tax authority. Tax
positions that do not meet the more-likely-than-not criteria are reflected as a tax liability. The Company recognizes interest and penalties accrued
related to unrecognized tax benefits in income taxes.

Variable interest entities
The Company evaluates its arrangements and contracts with other entities to determine if they are VIEs and if so, if the Company is the primary
beneficiary. GAAP provides a framework for identifying VIEs and determining when a company should include the assets, liabilities, noncontrolling
interest and results of activities of a VIE in its consolidated financial statements.

A VIE should be consolidated if a party with an ownership, contractual or other financial interest in the VIE (a variable interest holder) has the power
to direct the VIE's most significant activities and the obligation to absorb losses or right to receive benefits of the VIE that could be significant to the
VIE. A variable interest holder that consolidates the VIE is called the primary beneficiary. Upon consolidation, the primary beneficiary generally must
initially record all of the VIE's assets, liabilities and noncontrolling interests at fair value and subsequently account for the VIE as if it were
consolidated.

The Company's evaluation of whether it qualifies as the primary beneficiary of a VIE involves significant judgments, estimates and assumptions and
includes a qualitative analysis of the activities that most significantly impact the VIE's economic performance and whether the Company has the
power to direct those activities, the design of the entity, the rights of the parties and the purpose of the arrangement.

Note 3 - Revenue from Contracts with Customers
Revenue is recognized when a performance obligation is satisfied by transferring control over a product or service to a customer. Revenue is
measured based on consideration specified in a contract with a customer and excludes any sales incentives and amounts collected on behalf of third
parties. The Company is considered an agent for certain taxes collected from customers. As such, the Company presents revenues net of these taxes
at the time of sale to be remitted to governmental authorities, including sales and use taxes.

As part of the adoption of ASC 606 - Revenue from Contracts with Customers, the Company elected the practical expedient to recognize the
incremental costs of obtaining a contract as an expense when incurred if the amortization period of the asset that the Company otherwise would have
recognized is 12 months or less.

72 MDU Resources Group, Inc. Form 10-K

Part II

Disaggregation
In the following table, revenue is disaggregated by the type of customer or service provided. The Company believes this level of disaggregation best
depicts how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors. The table also includes a
reconciliation of the disaggregated revenue by reportable segments. For more information on the Company's business segments, see Note 17.

Year ended December 31, 2020

Electric

Natural gas
distribution

Pipeline

Construction
materials and
contracting

(In thousands)

Construction
services

Other

Total

Residential utility sales

Commercial utility sales

Industrial utility sales

Other utility sales

Natural gas transportation

Natural gas gathering

Natural gas storage

Contracting services

Construction materials

Intrasegment eliminations

Inside specialty contracting

Outside specialty contracting

Other

Intersegment eliminations

Revenues from contracts with

customers

Revenues out of scope

122,663 $

476,388 $

131,477

277,873

36,744

26,243

6,634

—

— $

—

45,546

111,686

—

4,865

14,918

—

32,452

10,753

12,216

— $

599,051

—

1,069,665

1,659,152

(550,815)

—

1,397,124

649,486

—

409,350

62,987

6,634

157,232

4,865

14,918

1,069,665

1,659,152

(550,815)

1,397,124

649,486

1,541

11,903

68,865

(491)

(534)

(58,531)

(417)

(5,038)

(11,958)

(76,969)

329,479

836,269

85,154

2,177,585

2,043,113

(55)

5,471,545

2,059

11,382

192

—

47,572

—

61,205

Total external operating revenues

331,538 $

847,651 $

85,346 $ 2,177,585 $ 2,090,685 $

(55) $ 5,532,750

Year ended December 31, 2019

Electric

Natural gas
distribution

Pipeline

Construction
materials and
contracting

(In thousands)

Construction
services

Other

Total

Residential utility sales

Commercial utility sales

Industrial utility sales

Other utility sales

Natural gas transportation

Natural gas gathering

Natural gas storage

Contracting services

Construction materials

Intrasegment eliminations

Inside specialty contracting

Outside specialty contracting

Other

Intersegment eliminations

Revenues from contracts with

customers

Revenues out of scope

125,369 $

483,452 $

141,596

296,835

37,765

26,895

7,408

—

— $

—

45,449

101,665

—

9,164

11,708

—

35,574

12,726

17,687

— $

608,821

—

1,088,633

1,627,833

(525,749)

—

1,266,196

531,882

—

438,431

64,660

7,408

147,114

9,164

11,708

1,088,633

1,627,833

(525,749)

1,266,196

531,882

131

16,551

82,669

—

(56,252)

(1,066)

(3,370)

(16,461)

(77,149)

347,712

865,357

83,972

2,189,651

1,794,839

5,281,621

4,013

(135)

220

—

51,057

—

55,155

Total external operating revenues

351,725 $

865,222 $

84,192 $ 2,189,651 $ 1,845,896 $

90 $ 5,336,776

MDU Resources Group, Inc. Form 10-K 73

Part II

Year ended December 31, 2018

Electric

Natural gas
distribution

Pipeline

Construction
materials and
contracting

(In thousands)

Construction
services

Other

Total

Residential utility sales

Commercial utility sales

Industrial utility sales

Other utility sales

Natural gas transportation

Natural gas gathering

Natural gas storage

Contracting services

Construction materials

Intrasegment eliminations

Inside specialty contracting

Outside specialty contracting

Other

Intersegment eliminations

Revenues from contracts with

customers

Revenues out of scope

121,477 $

457,959 $

136,236

276,716

34,353

24,603

7,556

—

— $

—

43,238

89,159

—

9,159

11,543

—

31,568

14,579

18,865

— $

579,436

—

968,755

1,423,068

(465,969)

—

926,875

392,544

—

412,952

58,956

7,556

132,397

9,159

11,543

968,755

1,423,068

(465,969)

926,875

392,544

525

11,259

76,796

—

(50,905)

(669)

(1,681)

(11,052)

(64,307)

331,190

817,095

77,821

1,925,185

1,318,263

207

4,469,761

3,933

6,152

197

—

51,509

—

61,791

Total external operating revenues

335,123 $

823,247 $

78,018 $ 1,925,185 $ 1,369,772 $

207 $ 4,531,552

Presented in the previous tables are intrasegment revenues within the construction materials and contracting segment to highlight the focus on
vertical integration as this segment sells materials to both third parties and internal customers. Due to consolidation requirements, these revenues
must be eliminated against construction materials to arrive at the external operating revenue total for the segment.

Contract balances
The timing of revenue recognition may differ from the timing of invoicing to customers. The timing of invoicing to customers does not necessarily
correlate with the timing of revenues being recognized under the cost‑to‑cost method of accounting. Contracts from contracting services are billed as
work progresses in accordance with agreed upon contractual terms. Generally, billing to the customer occurs contemporaneous to revenue
recognition. A variance in timing of the billings may result in a contract asset or a contract liability. A contract asset occurs when revenues are
recognized under the cost-to-cost measure of progress, which exceeds amounts billed on uncompleted contracts. Such amounts will be billed as
standard contract terms allow, usually based on various measures of performance or achievement. A contract liability occurs when there are billings
in excess of revenues recognized under the cost-to-cost measure of progress on uncompleted contracts. Contract liabilities decrease as revenue is
recognized from the satisfaction of the related performance obligation.

The changes in contract assets and liabilities were as follows:

December 31,
2020

December 31,
2019

(In thousands)

Change

Location on Consolidated Balance Sheets

Contract assets

104,345 $

109,078 $

(4,733)

Contract liabilities - current

(158,603)

(142,768)

(15,835)

Receivables, net

Accounts payable

Contract liabilities - noncurrent

(52)

(19)

(33)

Noncurrent liabilities - other

Net contract liabilities

(54,310) $

(33,709) $

(20,601)

December 31,
2019

December 31,
2018

(In thousands)

Change

Location on Consolidated Balance Sheets

Contract assets

109,078 $

104,239 $

4,839

Contract liabilities - current

(142,768)

(93,901)

(48,867)

Receivables, net

Accounts payable

Contract liabilities - noncurrent

(19)

(135)

116

Noncurrent liabilities - other

Net contract assets (liabilities)

(33,709) $

10,203 $

(43,912)

The Company recognized $138.2 million and $89.0 million in revenue for the years ended December 31, 2020 and 2019, respectively, which was
previously included in contract liabilities at December 31, 2019 and 2018, respectively.

The Company recognized a net increase in revenues of $58.8 million and $44.1 million for the years ended December 31, 2020 and 2019,
respectively, from performance obligations satisfied in prior periods.

74 MDU Resources Group, Inc. Form 10-K

Part II

Remaining performance obligations
The remaining performance obligations, also referred to as backlog, at the construction materials and contracting and construction services segments
include unrecognized revenues that the Company reasonably expects to be realized. These unrecognized revenues can include: projects that have a
written award, a letter of intent, a notice to proceed, an agreed upon work order to perform work on mutually accepted terms and conditions and
change orders or claims to the extent management believes additional contract revenues will be earned and are deemed probable of collection.
Excluded from remaining performance obligations are potential orders under master service agreements. The majority of the Company's construction
contracts have an original duration of less than two years.

The remaining performance obligations at the pipeline segment include firm transportation and storage contracts with fixed pricing and fixed
volumes. The Company has applied the practical expedient that does not require additional disclosures for contracts with an original duration of less
than 12 months to certain firm transportation and non-regulated contracts. The Company's firm transportation and firm storage contracts included in
the remaining performance obligations have weighted average remaining durations of approximately five and one years, respectively.

At December 31, 2020, the Company's remaining performance obligations were $2.1 billion. The Company expects to recognize the following
revenue amounts in future periods related to these remaining performance obligations: $1.6 billion within the next 12 months or less;
$298.8 million within the next 13 to 24 months; and $234.3 million in 25 months or more.

Note 4 - Business Combinations
The following acquisitions were accounted for as business combinations in accordance with ASC 805 - Business Combinations. The results of the
business combinations have been included in the Company's Consolidated Financial Statements beginning on the acquisition date. Pro forma
financial amounts reflecting the effects of the business combinations are not presented, as none of these business combinations, individually or in
the aggregate, were material to the Company's financial position or results of operations.

The acquisitions are also subject to customary adjustments based on, among other things, the amount of cash, debt and working capital in the
business as of the closing date. The amounts included in the Consolidated Balance Sheets for these adjustments are considered provisional until
final settlement has occurred.

The following acquisitions were made during 2020 and 2019 at the construction materials and contracting segment:

• In December 2020, the Company acquired the assets of McMurry Ready-Mix Co., an aggregates and concrete supplier in Wyoming.

• In February 2020, the Company acquired the assets of Oldcastle Infrastructure Spokane, a prestressed-concrete business in Washington.

• In December 2019, the Company acquired the assets Roadrunner Ready Mix, Inc., a provider of ready-mixed concrete in Idaho.

• In March 2019, the Company acquired Viesko Redi-Mix, Inc., a provider of ready-mixed concrete in Oregon.

The following acquisitions were made during 2020 and 2019 at the construction services segment:

• In February 2020, the Company acquired PerLectric, Inc., an electrical construction company in Virginia.

• In September 2019, the Company acquired the assets of Pride Electric, Inc., an electrical construction company in Washington.

The total purchase price for acquisitions that occurred in 2020 was $110.2 million, subject to certain adjustments, with cash acquired totaling
$1.7 million. The purchase price includes consideration paid of $106.0 million and $2.5 million of indemnity holdback liabilities. The amounts
allocated to the aggregated assets acquired and liabilities assumed during 2020 were as follows: $54.8 million to current assets; $27.1 million to
property, plant and equipment; $33.6 million to goodwill; $19.0 million to other intangible assets; $22.6 million to current liabilities; $300,000 to
noncurrent liabilities - other and $1.4 million to asset retirement obligations. At December 31, 2020, the purchase price adjustments for Oldcastle
Infrastructure Spokane had been settled and no material adjustments were made to the provisional accounting. Purchase price allocations for
PerLectric, Inc. and McMurry Ready-Mix Co. are preliminary and will be finalized within 12 months of the respective acquisition dates. The Company
issued debt to finance these acquisitions.

In 2019, the gross aggregate consideration for acquisitions was $56.8 million, subject to certain adjustments, and includes $1.2 million of debt
assumed. The amounts allocated to the aggregated assets acquired and liabilities assumed during 2019 were as follows: $15.8 million to current
assets; $16.7 million to property, plant and equipment; $23.1 million to goodwill; $6.7 million to other intangible assets; $500,000 to noncurrent
assets - other; $5.9 million to current liabilities and $100,000 to noncurrent liabilities - other. At December 31, 2020, the purchase price
adjustments for all 2019 acquisitions had been settled and no material adjustments were made to the provisional accounting. The Company issued
debt and equity securities to finance these acquisitions.

During 2020, measurement period adjustments were made to previously reported provisional amounts, which increased goodwill by $391,000.

Costs incurred for acquisitions are included in operation and maintenance expense on the Consolidated Statements of Income and were not material
for the years ended December 31, 2020 and 2019.

MDU Resources Group, Inc. Form 10-K 75

Part II

Note 5 - Property, Plant and Equipment
Property, plant and equipment at December 31 was as follows:

Regulated:

Electric:

Generation

Distribution

Transmission

Construction in progress

Other

Natural gas distribution:

Distribution

Transmission

Storage

General

Construction in progress

Other

Pipeline:

Transmission

Gathering

Storage

Construction in progress

Other

Non-regulated:

Pipeline:

Gathering

Construction in progress

Other

Construction materials and contracting:

Land

Buildings and improvements

Machinery, vehicles and equipment

Construction in progress

Aggregate reserves

Construction services:

Land

Buildings and improvements

Machinery, vehicles and equipment

Other

Other:

Land

Other

2020

2019

Weighted
Average
Depreciable
Life in Years

(Dollars in thousands, where applicable)

$ 1,133,390 $ 1,139,059

464,442

443,780

524,155

445,485

61,766

66,664

139,650

132,157

2,302,121

2,133,249

104,695

104,401

33,014

31,484

198,211

191,446

16,836

39,506

213,976

188,037

665,567

636,796

—

35,661

52,632

46,690

49,640

50,001

22,597

48,340

—

31,148

154

7,164

9,518

132,948

127,729

130,417

122,064

1,284,604

1,180,343

23,803

25,018

456,704

455,408

7,218

7,146

41,674

31,735

163,080

156,537

8,824

17,952

2,648

34,897

32,565

—

Less accumulated depreciation, depletion and amortization

3,133,831

2,991,486

Net property, plant and equipment

$ 5,166,939 $ 4,917,142

* Depleted on the units-of-production method based on recoverable aggregate reserves.

76 MDU Resources Group, Inc. Form 10-K

Part II

Note 6 - Regulatory Assets and Liabilities
The following table summarizes the individual components of unamortized regulatory assets and liabilities as of December 31:

Regulatory assets:

Current:

Natural gas costs recoverable through rate adjustments

Up to 1 year

42,481 $

42,823

Estimated Recovery

or Refund Period *

2020

2019

(In thousands)

Cost recovery mechanisms

Conservation programs

Other

Noncurrent:

Pension and postretirement benefits

Plant costs/asset retirement obligations

Plant to be retired

Manufactured gas plant sites remediation

Natural gas costs recoverable through rate adjustments

Cost recovery mechanisms

Taxes recoverable from customers

Long-term debt refinancing costs

Other

Total regulatory assets

Regulatory liabilities:

Current:

Up to 1 year

10,645

7,117

8,284

6,288

6,963

7,539

68,527

63,613

155,942

157,069

Over plant lives

Up to 2 years

Up to 10 years

Over plant lives

Up to 40 years

Up to 18 years

71,740

65,919

26,429

21,539

16,245

10,785

4,426

6,356

66,000

32,931

15,126

46,381

13,108

11,486

4,286

7,397

379,381

353,784

447,908 $

417,397

Natural gas costs refundable through rate adjustments

Up to 1 year

18,565 $

23,825

Electric fuel and purchased power deferral

Taxes refundable to customers

Other

Noncurrent:

Taxes refundable to customers

Plant removal and decommissioning costs

Pension and postretirement benefits

Other

Total regulatory liabilities

Net regulatory position

Up to 1 year

3,667

3,557

5,661

5,824

3,472

9,814

31,450

42,935

Over plant lives

227,850

246,034

Over plant lives

167,171

173,722

16,989

18,065

Up to 21 years

16,065

9,549

428,075

447,370

459,525 $

490,305

(11,617) $

(72,908)

* Estimated recovery or refund period for amounts currently being recovered or refunded in rates to customers.

** Recovered as expense is incurred or cash contributions are made.

As of December 31, 2020 and 2019, approximately $332.5 million and $276.5 million, respectively, of regulatory assets were not earning a rate of
return but are expected to be recovered from customers in future rates. These assets are largely comprised of the unfunded portion of pension and
postretirement benefits, asset retirement obligations, accelerated depreciation on plant to be retired and the estimated future cost of manufactured
gas plant site remediation.

In 2019, the Company experienced increased natural gas costs in Washington from the rupture of the Enbridge pipeline in Canada in late 2018. As
a result, the Company requested, and the WUTC approved, recovery of the balance of natural gas costs recoverable related to this period of time over
three years rather than its normal one-year recovery period.

In February 2019, the Company announced that it intends to retire one aging coal-fired electric generating unit in March 2021 and two units in early
2022. The Company has accelerated the depreciation related to these facilities in property, plant and equipment and has recorded the difference
between the accelerated depreciation, in accordance with GAAP, and the depreciation approved for rate-making purposes as regulatory assets. The
Company expects to recover the regulatory assets related to the plants to be retired in future rates.

MDU Resources Group, Inc. Form 10-K 77

Part II

If, for any reason, the Company's regulated businesses cease to meet the criteria for application of regulatory accounting for all or part of their
operations, the regulatory assets and liabilities relating to those portions ceasing to meet such criteria would be removed from the balance sheet and
included in the statement of income or accumulated other comprehensive income (loss) in the period in which the discontinuance of regulatory
accounting occurs.

Note 7 - Goodwill and Other Intangible Assets
The changes in the carrying amount of goodwill were as follows:

Balance at
January 1,
2020

Goodwill
Acquired
During
the Year

Measurement
Period
Adjustments

Balance at
December 31,
2020

(In thousands)

Natural gas distribution

345,736 $

— $

345,736

Construction materials and contracting

217,234

8,778

(9)

226,003

Construction services

Total

118,388

24,436

400

143,224

681,358 $

33,214 $

391 $

714,963

Balance at
January 1,
2019

Goodwill
Acquired
During the
Year

Measurement
Period
Adjustments

Balance at
December 31,
2019

(In thousands)

Natural gas distribution

345,736 $

— $

345,736

Construction materials and contracting

209,421

14,482

(6,669)

217,234

Construction services

Total

109,765

8,623

—

118,388

664,922 $

23,105 $

(6,669) $

681,358

Other amortizable intangible assets at December 31 were as follows:

Customer relationships

28,836 $

17,958

2020

2019

(In thousands)

Less accumulated amortization

Noncompete agreements

Less accumulated amortization

Other

Less accumulated amortization

6,887

6,268

21,949

11,690

3,941

2,309

1,632

12,927

11,012

1,915

3,439

1,957

1,482

8,094

6,020

2,074

Total

25,496 $

15,246

The previous tables include goodwill and intangible assets associated with the business combinations completed during 2020 and 2019. For more
information related to these business combinations, see Note 4.

Amortization expense for amortizable intangible assets for the years ended December 31, 2020, 2019 and 2018, was $9.0 million, $2.4 million
and $1.2 million, respectively. The amounts of estimated amortization expense for identifiable intangible assets as of December 31, 2020, were:

Amortization expense

4,911 $

4,394 $

4,121 $

3,799 $

1,862 $

6,409

2021

2022

2023

2024

2025

Thereafter

(In thousands)

78 MDU Resources Group, Inc. Form 10-K

Part II

Note 8 - Fair Value Measurements
The Company measures its investments in certain fixed-income and equity securities at fair value with changes in fair value recognized in income.
The Company anticipates using these investments, which consist of an insurance contract, to satisfy its obligations under its unfunded, nonqualified
defined benefit plans for executive officers and certain key management employees, and invests in these fixed-income and equity securities for the
purpose of earning investment returns and capital appreciation. These investments, which totaled $100.1 million and $87.0 million at
December 31, 2020 and 2019, respectively, are classified as investments on the Consolidated Balance Sheets. The net unrealized gains on these
investments for the years ended December 31, 2020 and 2019, were $13.1 million and $13.2 million, respectively. The net unrealized loss on
these investments for the year ended December 31, 2018, was $3.6 million. The change in fair value, which is considered part of the cost of the
plan, is classified in other income on the Consolidated Statements of Income.

The Company did not elect the fair value option, which records gains and losses in income, for its available-for-sale securities, which include
mortgage-backed securities and U.S. Treasury securities. These available-for-sale securities are recorded at fair value and are classified as
investments on the Consolidated Balance Sheets. Unrealized gains or losses are recorded in accumulated other comprehensive income (loss). Details
of available-for-sale securities were as follows:

December 31, 2020

Gross
Unrealized
Gains

Gross
Unrealized
Losses

Cost

Fair Value

(In thousands)

Mortgage-backed securities

9,799 $

156 $

U.S. Treasury securities

1,386

—

9 $

9,946

1,381

Total

11,185 $

156 $

14 $

11,327

December 31, 2019

Gross
Unrealized
Gains

Gross
Unrealized
Losses

Cost

Fair Value

(In thousands)

Mortgage-backed securities

9,804 $

U.S. Treasury securities

Total

1,228

11,032 $

87 $

88 $

10 $

—

9,881

1,229

10 $

11,110

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between
market participants at the measurement date. The fair value ASC establishes a hierarchy for grouping assets and liabilities, based on the significance
of inputs. The estimated fair values of the Company's assets and liabilities measured on a recurring basis are determined using the market approach.

The Company's assets measured at fair value on a recurring basis were as follows:

Assets:

Money market funds

Insurance contract*

Available-for-sale securities:

Mortgage-backed securities

U.S. Treasury securities

Fair Value Measurements
at December 31, 2020, Using

Quoted Prices
in Active
Markets for
Identical
Assets
(Level 1)

Significant
Other
Observable
Inputs
(Level 2)

(In thousands)

Significant
Unobservable
Inputs
(Level 3)

Balance at
December 31,
2020

— $

—

8,917 $

100,104

9,946

1,381

— $

—

8,917

100,104

9,946

1,381

Total assets measured at fair value

— $

120,348 $

— $

120,348

* The insurance contract invests approximately 57 percent in fixed-income investments, 18 percent in common stock of large-cap companies, 9 percent in common

stock of mid-cap companies, 9 percent in common stock of small-cap companies, 5 percent in target date investments and 2 percent in cash equivalents.

MDU Resources Group, Inc. Form 10-K 79

Part II

Assets:

Money market funds

Insurance contract*

Available-for-sale securities:

Mortgage-backed securities

U.S. Treasury securities

Fair Value Measurements
at December 31, 2019, Using

Quoted Prices
in Active
Markets for
Identical
Assets
(Level 1)

Significant
Other
Observable
Inputs
(Level 2)

(In thousands)

Significant
Unobservable
Inputs
(Level 3)

Balance at
December 31,
2019

— $

—

8,440 $

87,009

9,881

1,229

— $

—

8,440

87,009

9,881

1,229

Total assets measured at fair value

— $

106,559 $

— $

106,559

* The insurance contract invests approximately 51 percent in fixed-income investments, 23 percent in common stock of large-cap companies, 12 percent in common

stock of mid-cap companies, 10 percent in common stock of small-cap companies, 3 percent in target date investments and 1 percent in cash equivalents.

The Company's money market funds are valued at the net asset value of shares held at the end of the period, based on published market quotations
on active markets, or using other known sources including pricing from outside sources. The estimated fair value of the Company's mortgage-backed
securities and U.S. Treasury securities are based on comparable market transactions, other observable inputs or other sources, including pricing from
outside sources. The estimated fair value of the Company's insurance contract is based on contractual cash surrender values that are determined
primarily by investments in managed separate accounts of the insurer. These amounts approximate fair value. The managed separate accounts are
valued based on other observable inputs or corroborated market data.

Though the Company believes the methods used to estimate fair value are consistent with those used by other market participants, the use of other
methods or assumptions could result in a different estimate of fair value.

The Company applies the provisions of the fair value measurement standard to its nonrecurring, non-financial measurements, including long-lived
asset impairments. These assets are not measured at fair value on an ongoing basis but are subject to fair value adjustments only in certain
circumstances. The Company reviews the carrying value of its long-lived assets, excluding goodwill, whenever events or changes in circumstances
indicate that such carrying amounts may not be recoverable.

In the second quarter of 2019, the Company reviewed a non-utility investment at its electric and natural gas distribution segments for impairment.
This was a cost-method investment and was written down to zero using the income approach to determine its fair value, requiring the Company to
record a write-down of $2.0 million, before tax. The fair value of this investment was categorized as Level 3 in the fair value hierarchy. The reduction
is reflected in investments on the Consolidated Balance Sheet, as well as within other income on the Consolidated Statement of Income.

The estimated fair value of the Company's Level 2 commodity derivative instruments is based on futures prices, volatility and time to maturity,
among other things. Counterparty statements are utilized to determine the value of the commodity derivative instruments and are reviewed and
corroborated using various methodologies and significant observable inputs. The Company's and the counterparties' nonperformance risk is also
evaluated.

The Company performed a fair value assessment of the assets acquired and liabilities assumed in the business combinations that occurred during
2020 and 2019. For more information on these Level 2 and Level 3 fair value measurements, see Notes 2 and 4.

The Company's long-term debt is not measured at fair value on the Consolidated Balance Sheets and the fair value is being provided for disclosure
purposes only. The fair value was categorized as Level 2 in the fair value hierarchy and was based on discounted future cash flows using current
market interest rates. The estimated fair value of the Company's Level 2 long-term debt at December 31 was as follows:

2020

2019

(In thousands)

Carrying Amount

$ 2,213,130 $ 2,243,107

Fair Value

$ 2,537,289 $ 2,418,631

The carrying amounts of the Company's remaining financial instruments included in current assets and current liabilities approximate their fair
values.

80 MDU Resources Group, Inc. Form 10-K

Part II

Note 9 - Debt
Certain debt instruments of the Company's subsidiaries, including those discussed later, contain restrictive and financial covenants and cross-default
provisions. In order to borrow under the debt agreements, the subsidiary companies must be in compliance with the applicable covenants and certain
other conditions, all of which the subsidiaries, as applicable, were in compliance with at December 31, 2020. In the event the subsidiaries do not
comply with the applicable covenants and other conditions, alternative sources of funding may need to be pursued.

The following table summarizes the outstanding revolving credit facilities of the Company's subsidiaries:

Company

Facility

Facility
Limit

Amount
Outstanding at
December 31,
2020

Amount
Outstanding at
December 31,
2019

Letters of
Credit at
December 31,
2020

Expiration
Date

(In millions)

Montana-Dakota Utilities Co.

Commercial paper/Revolving credit agreement (a) $ 175.0

87.7 $

118.6 $

—

12/19/24

Cascade Natural Gas Corporation Revolving credit agreement

Intermountain Gas Company

Revolving credit agreement

$ 100.0 (b) $

85.0 (d) $

54.0 $

41.9 $

64.6 $

24.5 $

Centennial Energy Holdings, Inc. Commercial paper/Revolving credit agreement (e) $ 600.0

37.9 $

104.3 $

2.2 (c)

—

6/7/24

12/19/24

(a) The commercial paper program is supported by a revolving credit agreement with various banks (provisions allow for increased borrowings, at the option of Montana-

Dakota on stated conditions, up to a maximum of $225.0 million). There were no amounts outstanding under the revolving credit agreement.

on stated conditions, up to a maximum of $700.0 million). There were no amounts outstanding under the revolving credit agreement.

Short-term debt
Montana-Dakota On April 8, 2020, Montana-Dakota entered into a $75.0 million term loan agreement with a LIBOR-based variable interest rate and a
maturity date of April 7, 2021. At December 31, 2020, Montana-Dakota had $50.0 million outstanding under the agreement. The agreement
contains customary covenants and provisions, including a covenant of Montana-Dakota not to permit, at any time, the ratio of total debt to total
capitalization to be greater than 65 percent. The covenants also include certain restrictions on the sale of certain assets, loans and investments.

Long-term debt
Long-term Debt Outstanding Long-term debt outstanding was as follows:

Weighted Average
Interest Rate at
December 31, 2020

2020

2019

(In thousands)

Senior Notes due on dates ranging from October 22, 2022 to October 30, 2060

4.40 % $

1,950,000 $

1,850,000

Commercial paper supported by revolving credit agreements

.28 %

125,600

222,900

Credit agreements due on June 7, 2024

Medium-Term Notes due on dates ranging from September 15, 2027 to March 16, 2029

Term Loan Agreement due on September 3, 2032

Other notes due on dates ranging from July 15, 2021 to November 30, 2038

Less unamortized debt issuance costs

Less discount

Total long-term debt

Less current maturities

Net long-term debt

1.88 %

7.32 %

2.00 %

.75 %

95,900

35,000

8,400

4,034

5,803

89,050

50,000

9,100

29,117

7,010

2,213,130

2,243,107

1,555

16,540

2,211,575 $

2,226,567

Montana-Dakota's revolving credit agreement supports its commercial paper program. Commercial paper borrowings under this agreement are
classified as long-term debt as they are intended to be refinanced on a long-term basis through continued commercial paper borrowings. The credit
agreement contains customary covenants and provisions, including covenants of Montana-Dakota not to permit, as of the end of any fiscal quarter,

MDU Resources Group, Inc. Form 10-K 81

Part II

the ratio of funded debt to total capitalization (determined on a consolidated basis) to be greater than 65 percent. Other covenants include
limitations on the sale of certain assets and on the making of certain loans and investments.

Montana-Dakota's ratio of total debt to total capitalization at December 31, 2020, was 49 percent.

Cascade Any borrowings under the revolving credit agreement are classified as long-term debt as they are intended to be refinanced on a long-term
basis through continued borrowings. The credit agreement contains customary covenants and provisions, including a covenant of Cascade not to
permit, at any time, the ratio of total debt to total capitalization to be greater than 65 percent. Other covenants include restrictions on the sale of
certain assets, limitations on indebtedness and the making of certain investments.

On June 15, 2020, Cascade issued $50.0 million of senior notes under a note purchase agreement with maturity dates ranging from June 15, 2050
to June 15, 2060, at a weighted average interest rate of 3.66 percent. The agreement contains customary covenants and provisions, including a
covenant of Cascade not to permit, at any time, the ratio of total debt to total capitalization to be greater than 65 percent.

On October 30, 2020, Cascade issued $25.0 million of senior notes under a note purchase agreement with a maturity date of October 30, 2060, at
an interest rate of 3.34 percent. The agreement contains customary covenants and provisions, including a covenant of Cascade not to permit, at any
time, the ratio of total debt to total capitalization to be greater than 65 percent.

Cascade's ratio of total debt to total capitalization at December 31, 2020, was 53 percent.

Intermountain Any borrowings under the revolving credit agreement are classified as long-term debt as they are intended to be refinanced on a long-
term basis through continued borrowings. The credit agreement contains customary covenants and provisions, including a covenant of Intermountain
not to permit, at any time, the ratio of total debt to total capitalization to be greater than 65 percent. Other covenants include restrictions on the sale
of certain assets, limitations on indebtedness and the making of certain investments.

Intermountain's ratio of total debt to total capitalization at December 31, 2020, was 51 percent.

Centennial Centennial's revolving credit agreement supports its commercial paper program. Commercial paper borrowings under this agreement are
classified as long-term debt as they are intended to be refinanced on a long-term basis through continued commercial paper borrowings. Centennial's
revolving credit agreement contains customary covenants and provisions, including a covenant of Centennial, not to permit, as of the end of any
fiscal quarter, the ratio of total consolidated debt to total consolidated capitalization to be greater than 65 percent. Other covenants include
restricted payments, restrictions on the sale of certain assets, limitations on subsidiary indebtedness, minimum consolidated net worth, limitations
on priority debt and the making of certain loans and investments.

Centennial's ratio of total debt to total capitalization at December 31, 2020, was 31 percent.

Certain of Centennial's financing agreements contain cross-default provisions. These provisions state that if Centennial or any subsidiary of
Centennial fails to make any payment with respect to any indebtedness or contingent obligation, in excess of a specified amount, under any
agreement that causes such indebtedness to be due prior to its stated maturity or the contingent obligation to become payable, the applicable
agreements will be in default.

WBI Energy Transmission On July 26, 2019, WBI Energy Transmission amended its uncommitted note purchase and private shelf agreement to
increase capacity to $300.0 million and extend the issuance period to May 16, 2022. On December 16, 2020, WBI Energy Transmission issued
$25.0 million of senior notes under the private shelf agreement with a maturity date of December 16, 2035, at an interest rate of 3.26 percent. WBI
Energy Transmission had $195.0 million of notes outstanding at December 31, 2020, which reduced the remaining capacity under this
uncommitted private shelf agreement to $105.0 million. This agreement contains customary covenants and provisions, including a covenant of WBI
Energy Transmission not to permit, as of the end of any fiscal quarter, the ratio of total debt to total capitalization to be greater than 55 percent.
Other covenants include a limitation on priority debt and restrictions on the sale of certain assets and the making of certain investments.

WBI Energy Transmission's ratio of total debt to total capitalization at December 31, 2020, was 41 percent.

Schedule of Debt Maturities Long-term debt maturities, which excludes unamortized debt issuance costs and discount, for the five years and thereafter
following December 31, 2020, were as follows:

Long-term debt maturities

1,555 $

148,021 $

77,921 $

282,922 $

177,802 $ 1,530,713

2021

2022

2023

2024

2025

Thereafter

(In thousands)

82 MDU Resources Group, Inc. Form 10-K

Part II

Note 10 - Leases
Most of the leases the Company enters into are for equipment, buildings, easements and vehicles as part of their ongoing operations. The Company
also leases certain equipment to third parties through its utility and construction services segments. The Company determines if an arrangement
contains a lease at inception of a contract and accounts for all leases in accordance with ASC 842 - Leases.

The recognition of leases requires the Company to make estimates and assumptions that affect the lease classification and the assets and liabilities
recorded. The accuracy of lease assets and liabilities reported on the Consolidated Financial Statements depends on, among other things,
management's estimates of interest rates used to discount the lease assets and liabilities to their present value, as well as the lease terms based on
the unique facts and circumstances of each lease.

Lessee accounting
The leases the Company has entered into as part of its ongoing operations are considered operating leases and are recognized on the Consolidated
Balance Sheets as operating lease right-of-use assets, operating lease liabilities due within one year and, if applicable, noncurrent liabilities -
operating lease liabilities. The corresponding lease costs are included in operation and maintenance expense on the Consolidated Statements of
Income.

Generally, the leases for vehicles and equipment have a term of five years or less and buildings and easements have a longer term of up to 35 years
or more. To date, the Company does not have any residual value guarantee amounts probable of being owed to a lessor, financing leases or material
agreements with related parties.

The following tables provide information on the Company's operating leases at and for the years ended December 31:

Lease costs:

Operating lease cost

Variable lease cost

Short-term lease cost

2020

2019

(In thousands)

45,319 $

43,759

1,319

1,555

135,376

120,030

Total lease costs

182,014 $

165,344

Weighted average remaining lease term

Weighted average discount rate

Cash paid for amounts included in the

measurement of lease liabilities

2020

2019

(Dollars in thousands)

2.73 years

4.03 %

3.13 years

4.41 %

45,043 $

43,477

The reconciliation of the future undiscounted cash flows to the operating lease liabilities presented on the Consolidated Balance Sheet at
December 31, 2020, was as follows:

2021

2022

2023

2024

2025

Thereafter

Total

Less discount

(In thousands)

36,632

25,133

16,639

12,140

7,852

48,845

147,241

26,718

Total operating lease liabilities

120,523

Lessor accounting
The Company leases certain equipment to third parties through its utility and construction services segments, which are considered short-term
operating leases with terms of less than 12 months. The Company recognized revenue from operating leases of $48.0 million and $51.5 million for
the years ended December 31, 2020 and 2019, respectively. At December 31, 2020, the Company had $11.2 million of lease receivables with a
majority due within 12 months or less.

MDU Resources Group, Inc. Form 10-K 83

Part II

Note 11 - Asset Retirement Obligations
The Company records obligations related to retirement costs of natural gas distribution mains and lines, natural gas transmission lines, natural gas
storage wells, decommissioning of certain electric generating facilities, reclamation of certain aggregate properties, special handling and disposal of
hazardous materials at certain electric generating facilities, natural gas distribution facilities and buildings, and certain other obligations as asset
retirement obligations.

A reconciliation of the Company's liability, which the current portion is included in other accrued liabilities on the Consolidated Balance Sheets, for
the years ended December 31 was as follows:

Balance at beginning of year

Liabilities incurred

Liabilities acquired

Liabilities settled

Accretion expense*

Revisions in estimates

Balance at end of year

2020

2019

(In thousands)

417,575 $

375,553

11,560

25,869

1,378

(5,369)

21,668

107

486

(7,097)

19,789

2,975

446,919 $

417,575

* Includes $20.1 million and $18.3 million in 2020 and 2019, respectively, related to regulatory assets.

The Company believes that largely all expenses related to asset retirement obligations at the Company's regulated operations will be recovered in
rates over time and, accordingly, defers such expenses as regulatory assets. For more information on the Company's regulatory assets and liabilities,
see Note 6.

Note 12 - Equity
The Company depends on earnings and dividends from its subsidiaries to pay dividends on common stock. The Company has paid quarterly dividends
for 83 consecutive years with an increase in the dividend amount for the last 30 consecutive years. For the years ended December 31, 2020, 2019
and 2018, dividends declared on common stock were $.8350, $.8150 and $.7950 per common share, respectively. Dividends on common stock are
paid quarterly to the stockholders of record less than 30 days prior to the distribution date. For the years ended December 31, 2020, 2019 and
2018, the dividends declared to common stockholders were $167.4 million, $162.1 million and $155.7 million, respectively.

The declaration and payment of dividends of the Company is at the sole discretion of the board of directors. In addition, the Company's subsidiaries
are generally restricted to paying dividends out of capital accounts or net assets. The following discusses the most restrictive limitations.

Pursuant to a covenant under a credit agreement, Centennial may only declare or pay distributions if, as of the last day of any fiscal quarter, the ratio
of Centennial's average consolidated indebtedness as of the last day of such fiscal quarter and each of the preceding three fiscal quarters to
Centennial's Consolidated EBITDA does not exceed 3.5 to 1. In addition, certain credit agreements and regulatory limitations of the Company's
subsidiaries also contain restrictions on dividend payments. The most restrictive limitation requires the Company's subsidiaries not to permit the ratio
of funded debt to capitalization to be greater than 65 percent. Based on this limitation, approximately $1.4 billion of the net assets of the
Company's subsidiaries, which represents common stockholders' equity including retained earnings, would be restricted from use for dividend
payments at December 31, 2020.

The Company did not issue shares of common stock for the year ended December 31, 2020, pursuant to the “at-the-market” offering. The Company
issued 3.6 million shares of common stock for the year ended December 31, 2019, pursuant to the "at-the-market" offering. For the year ended
December 31, 2019, the Company received net proceeds of $94.0 million and paid commissions to the sales agents of approximately $950,000 in
connection with the sales of common stock under the "at-the-market" offering. The net proceeds were used for capital expenditures and acquisitions.
As of December 31, 2020, the Company had capacity to issue up to 6.4 million additional shares of common stock under the "at-the-market"
offering program.

84 MDU Resources Group, Inc. Form 10-K

Part II

The K-Plan provides participants the option to invest in the Company's common stock. For the years ended December 31, 2020, 2019 and 2018,
the K-Plan purchased shares of common stock on the open market or issued original issue common stock of the Company. At December 31, 2020,
there were 7.2 million shares of common stock reserved for original issuance under the K-Plan.

The Company currently has 2.0 million shares of preferred stock authorized to be issued with a $100 par value. At December 31, 2020 and 2019,
there were no shares outstanding.

Note 13 - Stock-Based Compensation
The Company has stock-based compensation plans under which it is currently authorized to grant restricted stock and other stock awards. As of
December 31, 2020, there were 4.2 million remaining shares available to grant under these plans. The Company either purchases shares on the
open market or issues new shares of common stock to satisfy the vesting of stock-based awards.

Total stock-based compensation expense (after tax) was $10.8 million, $6.5 million and $4.6 million in 2020, 2019 and 2018, respectively.

As of December 31, 2020, total remaining unrecognized compensation expense related to stock-based compensation was approximately
$10.9 million (before income taxes) which will be amortized over a weighted average period of 1.6 years.

Stock awards
Non-employee directors receive shares of common stock in addition to and in lieu of cash payment for directors' fees. There were 45,273 shares with
a fair value of $1.1 million, 41,644 shares with a fair value of $1.2 million and 38,605 shares with a fair value of $1.0 million issued to non-
employee directors during the years ended December 31, 2020, 2019 and 2018, respectively.

Restricted stock awards
In February 2018, the Company granted restricted stock awards under the long-term performance-based incentive plan to certain key employees. The
Company granted 22,838 shares at a weighted average grant-date fair value of $27.48 per share. The restricted stock awards vested on
December 31, 2020. The fair value of the vested awards was $600,000.

Performance share awards
Since 2003, key employees of the Company have been granted performance share awards each year under the long-term performance-based
incentive plan. Entitlement to performance shares is established by either the market condition or the performance metrics and service condition
relative to the designated award.

Target grants of performance shares outstanding at December 31, 2020, were as follows:

Grant Date

February 2019

February 2020

Performance
Period

2019-2021

2020-2022

Target Grant
of Shares

327,194

285,980

Under the market condition for these performance share awards, participants may earn from zero to 200 percent of the apportioned target grant of
shares based on the Company's total shareholder return relative to that of the selected peer group. Compensation expense is based on the grant-date
fair value as determined by Monte Carlo simulation. The blended volatility term structure ranges are comprised of 50 percent historical volatility and
50 percent implied volatility. Risk-free interest rates were based on U.S. Treasury security rates in effect as of the grant date. Assumptions used for
grants applicable to the market condition for certain performance shares issued in 2020, 2019 and 2018 were:

Weighted average grant-date fair value

Blended volatility range

Risk-free interest rate range

2020

$40.75

2019

$35.07

2018

$34.55

15.30 %

1.45 %

–

15.97 %

1.62 %

19.50 % –

19.69 %

17.87 % –

22.14 %

2.46 %

–

2.55 %

1.86 %

–

2.46 %

Weighted average discounted dividends per share

$2.91

$2.85

$2.46

Under the performance conditions for these performance share awards, participants may earn from zero to 200 percent of the apportioned target
grant of shares. The performance conditions are based on the Company's compound annual growth rate in earnings from continuing operations before
interest, taxes, depreciation, depletion and amortization and the Company's compound annual growth rate in earnings from continuing operations.
The weighted average grant-date fair value per share for the performance shares applicable to these performance conditions issued in 2020, 2019
and 2018 was $31.63, $26.25 and $27.48, respectively.

The fair value of the performance shares that vested during both years ended December 31, 2020 and 2019, was $9.7 million. There were no
performance shares that vested in 2018.

MDU Resources Group, Inc. Form 10-K 85

Part II

A summary of the status of the performance share awards for the year ended December 31, 2020, was as follows:

Number of
Shares

Nonvested at beginning of period

573,503 $

Granted

285,980

Additional performance shares earned

123,147

Weighted
Average
Grant-Date
Fair Value

30.81

36.19

27.48

Less:

Vested

Nonvested at end of period

369,456

613,174 $

29.84

33.24

Note 14 - Accumulated Other Comprehensive Income (Loss)
The Company's accumulated other comprehensive income (loss) is comprised of losses on derivative instruments qualifying as hedges, postretirement
liability adjustments and gain (loss) on available-for-sale investments.

The after-tax changes in the components of accumulated other comprehensive loss at December 31, 2020, 2019 and 2018, were as follows:

Net
Unrealized
Loss on
Derivative
Instruments
Qualifying
as Hedges

Post-
retirement
Liability
Adjustment

Net
Unrealized
Gain (Loss) on
Available-
for-sale
Investments

Total
Accumulated
Other
Comprehensive
Loss

(In thousands)

At December 31, 2018

(2,161) $

(36,069) $

Other comprehensive income (loss) before reclassifications

—

(6,151)

Amounts reclassified from accumulated other

comprehensive loss

Net current-period other comprehensive income (loss)

At December 31, 2019

Other comprehensive loss before reclassifications

Amounts reclassified from accumulated other

comprehensive loss

Net current-period other comprehensive income (loss)

731

(1,430)

—

446

1,486

(4,665)

(40,734)

(8,395)

1,922

(6,473)

(112) $

134

174

(1)

(38,342)

(6,017)

2,257

(3,760)

(42,102)

(8,396)

2,420

(5,976)

At December 31, 2020

(984) $

(47,207) $

113 $

(48,078)

The following amounts were reclassified out of accumulated other comprehensive loss into net income. The amounts presented in parenthesis
indicate a decrease to net income on the Consolidated Statements of Income. The reclassifications for the years ended December 31 were as follows:

2020

2019

(In thousands)

Location on Consolidated
Statements of Income

Reclassification adjustment for loss on derivative instruments

included in net income

(591) $

145

(446)

(591)

(140)

(731)

Interest expense

Income taxes

Amortization of postretirement liability losses included in net

periodic benefit cost

Reclassification adjustment for loss on available-for-sale investments

included in net income

(2,552)

(1,962)

630

476

(1,922)

(1,486)

(66)

(52)

(50)

(40)

Other income

Income taxes

Other income

Income taxes

Total reclassifications

(2,420) $

(2,257)

86 MDU Resources Group, Inc. Form 10-K

Note 15 - Income Taxes
The components of income before income taxes from continuing operations for each of the years ended December 31 were as follows:

United States

Foreign

2020

2019

2018

(In thousands)

474,856 $

398,532 $

317,655

261

(87)

(784)

Income before income taxes from continuing operations

475,117 $

398,445 $

316,871

Income tax expense (benefit) from continuing operations for the years ended December 31 was as follows:

Part II

Current:

Federal

State

Foreign

Deferred:

Income taxes:

Federal

State

Investment tax credit - net

2020

2019

2018

(In thousands)

65,006 $

(3,502) $

(15,901)

21,234

3,366

3,651

151

—

86,391

(136)

(12,250)

(3,735)

50,218

50,755

(625)

12,098

2,559

1,099

7,206

1,774

(1,801)

63,415

59,735

Total income tax expense

84,590 $

63,279 $

47,485

The TCJA was enacted on December 22, 2017. The SEC issued rules that allowed for a measurement period of up to 12 months after the enactment
date of the TCJA to finalize the recording of the related tax impacts. The Company reviewed the impacts of the TCJA and completed its assessment
of the transitional impacts during the period ending December 31, 2018, of which there were no such material adjustments.

Components of deferred tax assets and deferred tax liabilities at December 31 were as follows:

Deferred tax assets:

Postretirement

Compensation-related

Operating lease liabilities

Payroll tax deferral

Legal and environmental contingencies

Asset retirement obligations

Customer advances

Federal renewable energy credit

Other

Total deferred tax assets

Deferred tax liabilities:

2020

2019

(In thousands)

51,495 $

51,075

40,477

25,963

14,010

9,467

8,060

7,463

—

37,330

24,459

—

6,601

7,450

7,325

5,343

37,944

32,533

194,879

172,116

Depreciation and basis differences on property, plant and equipment

536,966

511,867

Postretirement

Operating lease right-of-use-assets

Intangible asset amortization

Other

Total deferred tax liabilities

Valuation allowance

Net deferred income tax liability

49,233

25,858

19,514

67,922

48,927

24,436

18,930

61,385

699,493

665,545

11,484

13,154

516,098 $

506,583

As of December 31, 2020 and 2019, the Company had various state income tax net operating loss carryforwards of $151.5 million and
$149.8 million, respectively, and federal and state income tax credit carryforwards, excluding alternative minimum tax credit carryforwards, of
$37.1 million and $43.7 million, respectively. Included in the state credits are various regulatory investment tax credits of approximately
$36.3 million and $37.4 million at December 31, 2020 and 2019, respectively. The state income tax credit carryforwards are due to expire between

MDU Resources Group, Inc. Form 10-K 87

Part II

2021 and 2034. Changes in tax regulations or assumptions regarding current and future taxable income could require additional valuation
allowances in the future.

The following table reconciles the change in the net deferred income tax liability from December 31, 2019, to December 31, 2020, to deferred
income tax benefit:

Change in net deferred income tax liability from the preceding table

Deferred taxes associated with other comprehensive loss

Excess deferred income tax amortization

Other

9,515

1,817

(12,517)

(616)

Deferred income tax benefit for the period

(1,801)

2020

(In thousands)

Total income tax expense differs from the amount computed by applying the statutory federal income tax rate to income before taxes. The reasons for
this difference were as follows:

Years ended December 31,

Computed tax at federal statutory rate

Increases (reductions) resulting from:

State income taxes, net of federal income tax

Federal renewable energy credit

Tax compliance and uncertain tax positions

Excess deferred income tax amortization

TCJA revaluation

TCJA revaluation related to accumulated other comprehensive loss balance

Other

Total income tax expense

2020

2019

2018

Amount

(Dollars in thousands)

99,775

21.0 $

83,674

21.0 $

66,543

21.0

17,845

3.8

14,029

3.5

12,190

3.8

(16,009)

(3.4)

(15,843)

(4.0)

(11,759)

(3.7)

(3,543)

(.7)

(2,739)

(.7)

(12,517)

(2.6)

(11,904)

(3.0)

—

(961)

—

(.3)

—

(3,938)

—

(.9)

(2,725)

(9,319)

(5,947)

(42)

(1,456)

(.9)

(2.9)

(1.9)

—

(.4)

84,590

17.8 $

63,279

15.9 $

47,485

15.0

The Company and its subsidiaries file income tax returns in the U.S. federal jurisdiction, and various state, local and foreign jurisdictions. The
Company is no longer subject to U.S. federal or non-U.S. income tax examinations by tax authorities for years ending prior to 2016. With few
exceptions, as of December 31, 2020, the Company is no longer subject to state and local income tax examinations by tax authorities for years
ending prior to 2016.

For the years ended December 31, 2020, 2019 and 2018, total reserves for uncertain tax positions were not material. The Company recognizes
interest and penalties accrued relative to unrecognized tax benefits in income tax expense.

Note 16 - Cash Flow Information
Cash expenditures for interest and income taxes for the years ended December 31 were as follows:

Interest, net*

Income taxes paid (refunded), net**

2020

2019

2018

(In thousands)

88,681 $

93,414 $

83,009

65,536 $

(8,475) $

16,041

* AFUDC - borrowed was $2.6 million, $2.8 million and $2.3 million for the years ended December 31, 2020, 2019

and 2018, respectively.

** Income taxes paid (refunded), including discontinued operations, were $59.4 million, $(9.4) million and

$5.5 million for the years ended December 31, 2020, 2019 and 2018, respectively.

Noncash investing and financing transactions at December 31 were as follows:

Property, plant and equipment additions in accounts payable

Right-of-use assets obtained in exchange for new operating lease liabilities

Issuance of common stock in connection with acquisition

Debt assumed in connection with a business combination

Accrual for holdback payment related to a business combination

88 MDU Resources Group, Inc. Form 10-K

2020

2019

2018

(In thousands)

26,082 $

46,119 $

42,355

54,356 $

54,880 $

—

— $

18,186

1,163 $

2,500 $

— $

—

Part II

Note 17 - Business Segment Data
The Company's reportable segments are those that are based on the Company's method of internal reporting, which generally segregates the strategic
business units due to differences in products, services and regulation. The internal reporting of these operating segments is defined based on the
reporting and review process used by the Company's chief executive officer. The Company's operations are located within the United States.

The electric segment generates, transmits and distributes electricity in Montana, North Dakota, South Dakota and Wyoming. The natural gas
distribution segment distributes natural gas in those states, as well as in Idaho, Minnesota, Oregon and Washington. These operations also supply
related value-added services.

The pipeline segment provides natural gas transportation and underground storage services through a regulated pipeline system primarily in the
Rocky Mountain and northern Great Plains regions of the United States. This segment also provides non-regulated cathodic protection and other
energy-related services. In 2020, the pipeline segment divested its regulated and non-regulated natural gas gathering assets. With the completion of
these sales, the segment has exited the natural gas gathering business.

The construction materials and contracting segment mines, processes and sells construction aggregates (crushed stone, sand and gravel); produces
and sells asphalt mix; and supplies ready-mixed concrete. This segment focuses on vertical integration of its contracting services with its
construction materials to support the aggregate-based product lines including aggregate placement, asphalt and concrete paving, and site
development and grading. Although not common to all locations, other products include the sale of cement, liquid asphalt for various commercial
and roadway applications, various finished concrete products and other building materials and related contracting services. This segment operates in
the central, southern and western United States, including Alaska and Hawaii.

The construction services segment provides inside and outside specialty contracting services in 44 states plus Washington D.C. Its inside services
include design, construction and maintenance of electrical and communication wiring and infrastructure, fire suppression systems, and mechanical
piping and services. Its outside services include design, construction and maintenance of overhead and underground electrical distribution and
transmission lines, substations, external lighting, traffic signalization, and gas pipelines, as well as utility excavation and the manufacture and
distribution of transmission line construction equipment. This segment also constructs and maintains renewable energy projects. These specialty
contracting services are provided to utilities and large manufacturing, commercial, industrial, institutional and governmental customers.

The Other category includes the activities of Centennial Capital, which, through its subsidiary InterSource Insurance Company, insures various types
of risks as a captive insurer for certain of the Company's subsidiaries. The function of the captive insurer is to fund the self-insured layers of the
insured Company's general liability, automobile liability, pollution liability and other coverages. Centennial Capital also owns certain real and
personal property. In addition, the Other category includes certain assets, liabilities and tax adjustments of the holding company primarily associated
with corporate functions and certain general and administrative costs (reflected in operation and maintenance expense) and interest expense, which
were previously allocated to the refining business and Fidelity and do not meet the criteria for income (loss) from discontinued operations. The Other
category also includes Centennial Resources' former investment in Brazil.

Discontinued operations include the results and supporting activities of Dakota Prairie Refining and Fidelity other than certain general and
administrative costs and interest expense as described above.

The information below follows the same accounting policies as described in Note 2. Information on the Company's segments as of December 31 and
for the years then ended was as follows:

External operating revenues:

Regulated operations:

Electric

Natural gas distribution

Pipeline

Non-regulated operations:

Pipeline

Construction materials and contracting

Construction services

Other

2020

2019

2018

(In thousands)

331,538 $

351,725 $

847,651

69,957

865,222

62,357

335,123

823,247

54,857

1,249,146

1,279,304

1,213,227

15,389

21,835

23,161

2,177,585

2,189,651

1,925,185

2,090,685

1,845,896

1,369,772

(55)

207

4,283,604

4,057,472

3,318,325

Total external operating revenues

5,532,750 $

5,336,776 $

4,531,552

MDU Resources Group, Inc. Form 10-K 89

Part II

Intersegment operating revenues:

Regulated operations:

Electric

Natural gas distribution

Pipeline

Non-regulated operations:

Pipeline

Construction materials and contracting

Construction services

Other

Intersegment eliminations

Total intersegment operating revenues

Depreciation, depletion and amortization:

Electric

Natural gas distribution

Pipeline

Construction materials and contracting

Construction services

Other

Total depreciation, depletion and amortization

Operating income (loss):

Electric

Natural gas distribution

Pipeline

Construction materials and contracting

Construction services

Other

Total operating income

Interest expense:

Electric

Natural gas distribution

Pipeline

Construction materials and contracting

Construction services

Other

Intersegment eliminations

Total interest expense

Income tax expense (benefit):

Electric

Natural gas distribution

Pipeline

Construction materials and contracting

Construction services

Other

Total income expense

90 MDU Resources Group, Inc. Form 10-K

2020

2019

2018

(In thousands)

491 $

534

57,977

59,002

554

417

5,038

11,958

17,967

— $

—

56,037

215

1,066

3,370

16,461

21,112

—

50,580

325

669

1,681

11,052

13,727

(76,969)

(77,149)

(64,307)

— $

—

62,998 $

58,721 $

84,580

21,669

89,626

23,523

2,704

79,564

21,220

77,450

17,038

2,024

50,982

72,486

17,896

61,158

15,728

1,955

285,100 $

256,017 $

220,205

63,434 $

64,039 $

73,082

49,436

214,498

147,644

(3,169)

69,188

42,796

179,955

126,426

(1,184)

65,148

72,336

36,128

141,426

86,764

(79)

544,925 $

481,220 $

401,723

26,699 $

25,334 $

36,798

7,622

20,577

4,095

883

(155)

35,488

7,198

23,792

5,331

1,859

(415)

96,519 $

98,587 $

(11,636) $

(12,650) $

5,746

7,650

47,431

35,797

(398)

1,405

7,219

37,389

29,973

(57)

84,590 $

63,279 $

25,860

30,768

5,964

17,290

3,551

2,762

(1,581)

84,614

(6,482)

4,075

2,677

28,357

20,000

(1,142)

47,485

Net income (loss):

Regulated operations:

Electric

Natural gas distribution

Pipeline

Non-regulated operations:

Pipeline

Construction materials and contracting

Construction services

Other

Income from continuing operations

Income (loss) from discontinued operations, net of tax

Net income

Capital expenditures:

Electric

Natural gas distribution

Pipeline

Construction materials and contracting

Construction services

Other

Total capital expenditures (a)

Assets:

Electric (b)

Natural gas distribution (b)

Pipeline

Construction materials and contracting

Construction services

Other (c)

Assets held for sale

Total assets

Property, plant and equipment:

Electric (b)

Natural gas distribution (b)

Pipeline

Construction materials and contracting

Construction services

Other

Less accumulated depreciation, depletion and amortization

Part II

2020

2019

2018

(In thousands)

55,601 $

54,763 $

44,049

35,453

39,517

28,255

47,000

37,732

26,905

135,103

122,535

111,637

1,559

147,325

109,721

(3,181)

255,424

390,527

(322)

1,348

120,371

92,998

(2,086)

212,631

335,166

287

1,554

92,647

64,309

(761)

157,749

269,386

2,932

390,205 $

335,453 $

272,318

114,676 $

99,449 $

193,048

62,224

191,635

83,651

3,045

206,799

71,477

190,092

60,500

8,181

186,105

205,896

70,057

280,396

25,081

1,768

648,279 $

636,498 $

769,303

2,123,693 $

1,680,194 $

1,613,822

2,302,770

2,574,965

2,375,871

703,377

677,482

616,959

1,798,493

1,684,161

1,508,032

818,662

305,157

1,220

761,127

303,279

1,851

604,798

266,111

2,517

8,053,372 $

7,683,059 $

6,988,110

2,323,403 $

2,227,145 $

2,148,569

2,868,853

2,688,123

2,499,093

821,697

834,215

764,959

2,028,476

1,910,562

1,768,006

220,796

37,545

213,370

35,213

188,586

28,108

3,133,831

2,991,486

2,818,644

Net property, plant and equipment

5,166,939 $

4,917,142 $

4,578,677

(a) Capital expenditures for 2020, 2019 and 2018 include noncash transactions such as the issuance of the Company's equity securities in connection with acquisitions,
capital expenditure-related accounts payable, AFUDC and accrual of holdback payments in connection with acquisitions totaling $(15.7) million, $4.8 million and
$33.4 million, respectively.

(b) Includes allocations of common utility property.
(c) Includes assets not directly assignable to a business (i.e. cash and cash equivalents, certain accounts receivable, certain investments and other miscellaneous current

and deferred assets).

MDU Resources Group, Inc. Form 10-K 91

Part II

Note 18 - Employee Benefit Plans
Pension and other postretirement benefit plans
The Company has noncontributory qualified defined benefit pension plans and other postretirement benefit plans for certain eligible employees. The
Company uses a measurement date of December 31 for all of its pension and postretirement benefit plans.

Prior to 2013, defined benefit pension plan benefits and accruals for all nonunion and certain union plans were frozen and on June 30, 2015, the
remaining union plan was frozen. These employees were eligible to receive additional defined contribution plan benefits. In October 2018, the
Company transferred the liability of certain participants in the defined benefit pension plan, who are currently receiving benefits, to an annuity
company. The transfer of the benefit payments for these participants reduced the Company's liability and future premiums.

Effective January 1, 2010, eligibility to receive retiree medical benefits was modified at certain of the Company's businesses. Employees who had
attained age 55 with 10 years of continuous service by December 31, 2010, were provided the option to choose between a pre-65 comprehensive
medical plan coupled with a Medicare supplement or a specified company funded Retiree Reimbursement Account, regardless of when they retire.
All other eligible employees must meet the new eligibility criteria of age 60 and 10 years of continuous service at the time they retire to be eligible
for a specified company funded Retiree Reimbursement Account. Employees hired after December 31, 2009, will not be eligible for retiree medical
benefits at certain of the Company's businesses.

In 2012, the Company modified health care coverage for certain retirees. Effective January 1, 2013, post-65 coverage was replaced by a fixed-dollar
subsidy for retirees and spouses to be used to purchase individual insurance through an exchange.

Changes in benefit obligation and plan assets and amounts recognized in the Consolidated Balance Sheets at December 31 were as follows:

Change in benefit obligation:

(In thousands)

Benefit obligation at beginning of year

421,166 $

391,602 $

83,614 $

81,201

Pension Benefits

Other
Postretirement Benefits

2020

2019

2020

2019

Service cost

Interest cost

Plan participants' contributions

Actuarial loss

Benefits paid

Benefit obligation at end of year

Change in net plan assets:

Fair value of plan assets at beginning of year

Actual return on plan assets

Employer contribution

Plan participants' contributions

Benefits paid

—

12,093

15,225

—

27,737

40,219

(23,636)

(25,880)

1,532

2,437

752

2,203

(4,383)

1,142

2,986

1,040

2,632

(5,387)

437,360

421,166

86,155

83,614

365,264

307,809

42,206

—

58,409

24,926

—

94,587

10,249

434

752

82,516

15,731

687

1,040

(23,636)

(25,880)

(4,383)

(5,387)

Fair value of net plan assets at end of year

383,834

365,264

101,639

94,587

Funded status - over (under)

Amounts recognized in the Consolidated Balance Sheets at December 31:

Noncurrent assets - other

Other accrued liabilities

Noncurrent liabilities - other

Benefit obligation assets (liabilities) - net amount recognized

Amounts recognized in accumulated other comprehensive loss:

Actuarial loss

Prior service credit

Total

Amounts recognized in regulatory assets or liabilities:

Actuarial (gain) loss

Prior service credit

Total

(53,526) $

(55,902) $

15,484 $

10,973

— $

—

— $

—

36,769

30,475

622

647

53,526

55,902

20,663

18,855

(53,526) $

(55,902) $

15,484 $

10,973

27,527 $

27,748 $

5,557 $

—

(634)

27,527 $

27,748 $

4,923 $

6,118

(731)

5,387

(4,450)

(8,109)

154,013 $

155,484 $

(8,228) $

—

(6,808)

154,013 $

155,484 $

(15,036) $

(12,559)

Employer contributions and benefits paid in the preceding table include only those amounts contributed directly to, or paid directly from, plan
assets. Amounts related to regulated operations are recorded as regulatory assets or liabilities and are expected to be reflected in rates charged to
customers over time. For more information on regulatory assets and liabilities, see Note 6.

92 MDU Resources Group, Inc. Form 10-K

Unrecognized pension actuarial losses in excess of 10 percent of the greater of the projected benefit obligation or the market-related value of assets
are amortized over the average life expectancy of plan participants for frozen plans. The market-related value of assets is determined using a five-year
average of assets.

The pension plans all have accumulated benefit obligations in excess of plan assets. The projected benefit obligation, accumulated benefit obligation
and fair value of plan assets for these plans at December 31 were as follows:

Part II

Projected benefit obligation

Accumulated benefit obligation

Fair value of plan assets

2020

2019

(In thousands)

437,360 $

421,166

437,360 $

421,166

383,834 $

365,264

The components of net periodic benefit cost (credit), other than the service cost component, are included in other income on the Consolidated
Statements of Income. These components related to the Company's pension and other postretirement benefit plans for the years ended December 31
were as follows:

Components of net periodic benefit cost (credit):

(In thousands)

Pension Benefits

Other
Postretirement Benefits

2020

2019

2018

2020

2019

2018

Service cost

Interest cost

Expected return on assets

Amortization of prior service credit

Recognized net actuarial loss

Net periodic benefit cost (credit), including amount capitalized

Less amount capitalized

Net periodic benefit cost (credit)

Other changes in plan assets and benefit obligations recognized in

accumulated comprehensive loss:

Net (gain) loss

Amortization of actuarial loss

Amortization of prior service (cost) credit

— $

1,532 $

1,142 $

12,093

15,225

14,591

2,437

2,986

(19,949)

(18,236)

(20,753)

(5,019)

(4,804)

—

7,172

(684)

—

5,548

2,537

—

(684)

2,537

934

(1,155)

—

(144)

(904)

—

(1,398)

7,005

287

353

640

843

—

843

(2,161)

(1,721)

(1,227)

156

113

153

(2,317)

(1,834)

(1,380)

991

(1,084)

—

(93)

(259)

(306)

101

(464)

(127)

(110)

100

(137)

Total recognized in accumulated other comprehensive loss

(221)

(1,048)

Other changes in plan assets and benefit obligations recognized in

regulatory assets or liabilities:

Net (gain) loss

Amortization of actuarial gain (loss)

Amortization of prior service credit

4,546

189

8,263

(3,793)

(8,168)

(6,017)

(4,644)

(5,921)

(242)

—

1,297

1,614

1,494

2,899

(4,866)

(1,394)

(1,735)

(354)

(220)

(2,309)

(732)

(286)

Total recognized in regulatory assets or liabilities

(1,471)

(4,455)

2,342

(2,477)

(7,113)

596

Total recognized in net periodic benefit cost (credit), accumulated
other comprehensive loss and regulatory assets or liabilities

(2,376) $

(2,966) $

3,092 $

(5,258) $

(9,084) $

(3,093)

The estimated net loss for the defined benefit pension plans that will be amortized from accumulated other comprehensive loss and regulatory assets
or liabilities into net periodic benefit cost in 2021 is $8.0 million. The estimated net loss and prior service credit for the other postretirement benefit
plans that will be amortized from accumulated other comprehensive loss and regulatory assets or liabilities into net periodic benefit credit in 2021
are $24,000 and $1.4 million, respectively. Prior service credit is amortized on a straight-line basis over the average remaining service period of
active participants.

MDU Resources Group, Inc. Form 10-K 93

Part II

Weighted average assumptions used to determine benefit obligations at December 31 were as follows:

Discount rate

Expected return on plan assets

Rate of compensation increase

Pension Benefits

Other
Postretirement Benefits

2020

2019

2020

2019

2.30 %

6.00 %

N/A

2.96 %

6.25 %

N/A

2.30 %

5.50 %

3.00 %

5.75 %

3.00 %

Weighted average assumptions used to determine net periodic benefit cost (credit) for the years ended December 31 were as follows:

Discount rate

Expected return on plan assets

Rate of compensation increase

Pension Benefits

Other
Postretirement Benefits

2020

2.96 %

6.25 %

N/A

2019

4.03 %

6.25 %

N/A

2020

3.00 %

5.75 %

3.00 %

2019

4.05 %

5.75 %

3.00 %

The expected rate of return on pension plan assets is based on a targeted asset allocation range determined by the funded ratio of the plan. As of
December 31, 2020, the expected rate of return on pension plan assets is based on the targeted asset allocation range of 35 percent to 45 percent
equity securities and 55 percent to 65 percent fixed-income securities and the expected rate of return from these asset categories. The expected rate
of return on other postretirement plan assets is based on the targeted asset allocation range of 10 percent equity securities and 90 percent fixed-
income securities and the expected rate of return from these asset categories. The expected return on plan assets for other postretirement benefits
reflects insurance-related investment costs.

Health care rate assumptions for the Company's other postretirement benefit plans as of December 31 were as follows:

Health care trend rate assumed for next year

7.0 % 7.1 % –

7.4 %

Health care cost trend rate - ultimate

Year in which ultimate trend rate achieved

4.5 %

2031

4.5 %

2024

2020

2019

The Company's other postretirement benefit plans include health care and life insurance benefits for certain retirees. The plans underlying these
benefits may require contributions by the retiree depending on such retiree's age and years of service at retirement or the date of retirement. The
Company contributes a flat dollar amount to the monthly premiums which is updated annually on January 1.

Assumed health care cost trend rates may have a significant effect on the amounts reported for the health care plans. A one percentage point change
in the assumed health care cost trend rates would have had the following effects at December 31, 2020:

Effect on total of service and interest cost components

Effect on postretirement benefit obligation

1 Percentage
Point Increase

1 Percentage
Point Decrease

(In thousands)

182 $

3,846 $

(154)

(3,304)

The Company does not expect to contribute to its defined benefit pension plans in 2021 due to an additional $20.0 million contributed to the plans
in 2019. The Company expects to contribute approximately $500,000 to its postretirement benefit plans in 2021.

The following benefit payments, which reflect future service, as appropriate, and expected Medicare Part D subsidies at December 31, 2020, are as
follows:

Years

2021

2022

2023

2024

2025

Pension
Benefits

Other
Postretirement
Benefits

Expected
Medicare
Part D Subsidy

(In thousands)

24,455 $

5,404 $

24,507

24,733

24,835

24,713

5,437

5,424

5,377

5,277

2026-2030

119,191

25,949

252

94 MDU Resources Group, Inc. Form 10-K

Part II

Outside investment managers manage the Company's pension and postretirement assets. The Company's investment policy with respect to pension
and other postretirement assets is to make investments solely in the interest of the participants and beneficiaries of the plans and for the exclusive
purpose of providing benefits accrued and defraying the reasonable expenses of administration. The Company strives to maintain investment
diversification to assist in minimizing the risk of large losses. The Company's policy guidelines allow for investment of funds in cash equivalents,
fixed-income securities and equity securities. The guidelines prohibit investment in commodities and futures contracts, equity private placement,
employer securities, leveraged or derivative securities, options, direct real estate investments, precious metals, venture capital and limited
partnerships. The guidelines also prohibit short selling and margin transactions. The Company's practice is to periodically review and rebalance asset
categories based on its targeted asset allocation percentage policy.

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between
market participants at the measurement date. The fair value ASC establishes a hierarchy for grouping assets and liabilities, based on the significance
of inputs. The estimated fair values of the Company's pension plans' assets are determined using the market approach.

The carrying value of the pension plans' Level 2 cash equivalents approximates fair value and is determined using observable inputs in active
markets or the net asset value of shares held at year end, which is determined using other observable inputs including pricing from outside sources.

The estimated fair value of the pension plans' Level 1 and Level 2 equity securities are based on the closing price reported on the active market on
which the individual securities are traded or other known sources including pricing from outside sources. The estimated fair value of the pension
plans' Level 1 and Level 2 collective and mutual funds are based on the net asset value of shares held at year end, based on either published market
quotations on active markets or other known sources including pricing from outside sources. The estimated fair value of the pension plans' Level 2
corporate and municipal bonds is determined using other observable inputs, including benchmark yields, reported trades, broker/dealer quotes, bids,
offers, future cash flows and other reference data. The estimated fair value of the pension plans' Level 1 U.S. Government securities are valued
based on quoted prices on an active market. The estimated fair value of the pension plans' Level 2 U.S. Government securities are valued mainly
using other observable inputs, including benchmark yields, reported trades, broker/dealer quotes, bids, offers, to be announced prices, future cash
flows and other reference data. Some of these securities are valued using pricing from outside sources.

All investments measured at net asset value in the tables that follow are invested in comingled funds, separate accounts or common collective trusts
which do not have publicly quoted prices. The fair value of the comingled funds, separate accounts and common collective trusts are determined
based on the net asset value of the underlying investments. The fair value of the underlying investments held by the comingled funds, separate
accounts and common collective trusts is generally based on quoted prices in active markets.

The fair value of the Company's pension plans' assets (excluding cash) by class were as follows:

Assets:

Cash equivalents

Equity securities:

U.S. companies

International companies

Collective and mutual funds*

Corporate bonds

Municipal bonds

U.S. Government securities

Investments measured at net asset value

Fair Value Measurements
at December 31, 2020, Using

Quoted Prices
in Active
Markets for
Identical
Assets
(Level 1)

Significant
Other
Observable
Inputs
(Level 2)

(In thousands)

Significant
Unobservable
Inputs
(Level 3)

Balance at
December 31,
2020

— $

7,841 $

— $

7,841

12,844

—

177,397

—

11,177

—

1,727

55,788

92,809

10,126

2,695

—

12,844

1,727

233,185

92,809

10,126

13,872

11,430

Total assets measured at fair value

201,418 $

170,986 $

— $

383,834

* Collective and mutual funds invest approximately 36 percent in corporate bonds, 24 percent in common stock of international companies, 18 percent in common stock

of large-cap U.S. companies, 8 percent in cash equivalents, 5 percent in U.S. Government securities and 9 percent in other investments.

MDU Resources Group, Inc. Form 10-K 95

Part II

Assets:

Cash equivalents

Equity securities:

U.S. companies

International companies

Collective and mutual funds*

Corporate bonds

Municipal bonds

U.S. Government securities

Total assets measured at fair value

Fair Value Measurements
at December 31, 2019, Using

Quoted Prices
in Active
Markets for
Identical
Assets
(Level 1)

Significant
Other
Observable
Inputs
(Level 2)

(In thousands)

Significant
Unobservable
Inputs
(Level 3)

Balance at
December 31,
2019

— $

26,166 $

— $

26,166

14,457

—

160,906

—

7,296

—

938

58,894

80,768

11,828

2,082

—

14,457

938

219,800

80,768

11,828

9,378

182,659 $

180,676 $

— $

363,335

* Collective and mutual funds invest approximately 29 percent in common stock of international companies, 21 percent in common stock of large-cap U.S. companies,

18 percent in U.S. Government securities, 9 percent in corporate bonds, 6 percent in cash equivalents and 17 percent in other investments.

The estimated fair values of the Company's other postretirement benefit plans' assets are determined using the market approach.

The estimated fair value of the other postretirement benefit plans' Level 2 cash equivalents is valued at the net asset value of shares held at year
end, based on published market quotations on active markets, or using other known sources including pricing from outside sources. The estimated
fair value of the other postretirement benefit plans' Level 1 and Level 2 equity securities is based on the closing price reported on the active market
on which the individual securities are traded or other known sources including pricing from outside sources. The estimated fair value of the other
postretirement benefit plans' Level 2 insurance contract is based on contractual cash surrender values that are determined primarily by investments
in managed separate accounts of the insurer. These amounts approximate fair value. The managed separate accounts are valued based on other
observable inputs or corroborated market data.

The fair value of the Company's other postretirement benefit plans' assets (excluding cash) by asset class were as follows:

Assets:

Cash equivalents

Equity securities:

U.S. companies

International companies

Collective and mutual funds (a)

Insurance contract (b)

Investments measured at net asset value

Total assets measured at fair value

Fair Value Measurements
at December 31, 2020, Using

Quoted Prices
in Active
Markets for
Identical
Assets
(Level 1)

Significant
Other
Observable
Inputs
(Level 2)

(In thousands)

Significant
Unobservable
Inputs
(Level 3)

Balance at
December 31,
2020

— $

3,517 $

— $

3,517

1,850

—

147

96,103

—

1,850

157

96,103

1,860 $

99,769 $

— $

101,639

(a) Collective and mutual funds invest approximately 36 percent in corporate bonds, 24 percent in common stock of international companies, 18 percent in common

stock of large-cap U.S. companies, 8 percent in cash equivalents, 5 percent in U.S. Government securities and 9 percent in other investments.

(b) The insurance contract invests approximately 67 percent in corporate bonds, 12 percent in U.S. Government securities, 10 percent in common stock of large-cap

U.S. companies, 4 percent in common stock of small-cap U.S. companies, 1 percent in cash equivalents and 6 percent in other investments.

96 MDU Resources Group, Inc. Form 10-K

Part II

Fair Value Measurements
at December 31, 2019, Using

Quoted Prices
in Active
Markets for
Identical
Assets
(Level 1)

Significant
Other
Observable
Inputs
(Level 2)

(In thousands)

Significant
Unobservable
Inputs
(Level 3)

Balance at
December 31,
2019

— $

4,017 $

— $

4,017

2,073

—

221

88,265

2,083 $

92,504 $

—

— $

2,073

231

88,265

94,587

Assets:

Cash equivalents

Equity securities:

U.S. companies

International companies

Collective and mutual funds (a)

Insurance contract (b)

Total assets measured at fair value

(a) Collective and mutual funds invest approximately 29 percent in common stock of international companies, 21 percent in common stock of large-cap U.S. companies,

18 percent in U.S. Government securities, 9 percent in corporate bonds, 6 percent in cash equivalents and 17 percent in other investments.

(b) The insurance contract invests approximately 50 percent in corporate bonds, 25 percent in common stock of large-cap U.S. companies, 7 percent in U.S.

Government securities, 7 percent in common stock of small-cap U.S. companies and 11 percent in other investments.

Nonqualified benefit plans
In addition to the qualified defined benefit pension plans reflected in the table at the beginning of this note, the Company also has unfunded,
nonqualified defined benefit plans for executive officers and certain key management employees that generally provide for defined benefit payments
at age 65 following the employee's retirement or, upon death, to their beneficiaries for a 15-year period. In February 2016, the Company froze the
unfunded, nonqualified defined benefit plans to new participants and eliminated benefit increases. Vesting for participants not fully vested was
retained.

The projected benefit obligation and accumulated benefit obligation for these plans at December 31 were as follows:

Projected benefit obligation

Accumulated benefit obligation

2020

2019

(In thousands)

101,242 $

99,245

101,242 $

99,245

The components of net periodic benefit cost are included in other income on the Consolidated Statements of Income. These components related to
the Company's nonqualified defined benefit plans for the years ended December 31 were as follows:

2020

2019

2018

(In thousands)

Components of net periodic benefit cost:

Service cost

Interest cost

Recognized net actuarial loss

58 $

109 $

2,606

1,192

3,473

764

Net periodic benefit cost

3,856 $

4,346 $

185

3,157

1,047

4,389

Weighted average assumptions used at December 31 were as follows:

Benefit obligation discount rate

Benefit obligation rate of compensation increase

Net periodic benefit cost discount rate

2020

2019

1.97 %

2.73 %

N/A

2.73 %

3.86 %

Net periodic benefit cost rate of compensation increase

N/A

The amount of future benefit payments for the unfunded, nonqualified defined benefit plans at December 31, 2020, are expected to aggregate as
follows:

Nonqualified benefits

7,693 $

6,957 $

6,933 $

7,299 $

7,253 $

33,938

2021

2022

2023

2024

2025

2026-2030

(In thousands)

MDU Resources Group, Inc. Form 10-K 97

Part II

In 2012, the Company established a nonqualified defined contribution plan for certain key management employees. In 2020, the plan was frozen to
new participants and no new Company contributions will be made to the plan after December 31, 2020. A new plan was adopted in 2020 to replace
the plan originally established in 2012 with similar provisions. Vesting for participants not fully vested was retained. Expenses incurred under this
plan for 2020, 2019 and 2018 were $1.8 million, $1.6 million and $597,000, respectively.

The amount of investments that the Company anticipates using to satisfy obligations under these plans at December 31 was as follows:

Investments

Insurance contract*

Life insurance**

Other

Total investments

2020

2019

(In thousands)

100,104 $

87,009

39,779

38,659

8,917

8,450

148,800 $

134,118

* For more information on the insurance contract, see Note 8.
** Investments of life insurance are carried on plan participants (payable upon the employee's

death).

Defined contribution plans
The Company sponsors various defined contribution plans for eligible employees and the costs incurred under these plans were $50.1 million in
2020, $51.8 million in 2019 and $42.4 million in 2018.

98 MDU Resources Group, Inc. Form 10-K

Part II

Multiemployer plans
The Company contributes to a number of MEPPs under the terms of collective-bargaining agreements that cover its union-represented employees.
The risks of participating in these multiemployer plans are different from single-employer plans in the following aspects:

• Assets contributed to the MEPP by one employer may be used to provide benefits to employees of other participating employers

• If a participating employer stops contributing to the plan, the unfunded obligations of the plan may be borne by the remaining participating

employers

• If the Company chooses to stop participating in some of its MEPPs, the Company may be required to pay those plans an amount based on the

underfunded status of the plan, referred to as a withdrawal liability

The Company's participation in these plans is outlined in the following table. Unless otherwise noted, the most recent Pension Protection Act zone
status available in 2020 and 2019 is for the plan's year-end at December 31, 2019, and December 31, 2018, respectively. The zone status is
based on information that the Company received from the plan and is certified by the plan's actuary. Among other factors, plans in the red zone are
generally less than 65 percent funded, plans in the yellow zone are between 65 percent and 80 percent funded, and plans in the green zone are at
least 80 percent funded.

EIN/Pension
Plan Number

Pension Protection Act
Zone Status

2020

2019

FIP/RP Status
Pending/
Implemented

Contributions

2020

2019

2018

(In thousands)

Surcharge
Imposed

Expiration Date
of Collective
Bargaining
Agreement

91-6028298-001

Yellow as of
6/30/2020

Yellow as of
6/30/2019

Implemented $

828 $

815 $

732

12/31/2020 *

Pension Fund

Alaska Laborers-

Employers Retirement
Fund

Construction Industry
and Laborers Joint
Pension Trust for So
Nevada, Plan A

Edison Pension Plan

93-6061681-001

Green

88-0135695-001

Red

Green

Implemented

515

544

346

No 16,121 12,252 12,111

IBEW Local 212 Pension

Trust

31-6127280-001

Green as of
4/30/2020

Green as of
4/30/2019

1,521

1,110

1,341

IBEW Local 357 Pension

Plan A

88-6023284-001

Green

9,913 10,162

3,460

IBEW Local 38 Pension

Plan

34-6574238-001

Red as of
4/30/2020

Yellow as of
4/30/2019

Implemented

140

158

116

IBEW Local 648 Pension

Plan

31-6134845-001

Yellow as of
2/28/2020

Yellow as of
2/28/2019

Implemented

526

728

2,175

IBEW Local 82 Pension

Plan

31-6127268-001

Green as of
6/30/2020

Green as of
6/30/2019

Idaho Plumbers and

Pipefitters Pension Plan 82-6010346-001

Green as of
5/31/2020

Green as of
5/31/2019

1,373

1,662

1,569

1,370

1,307

1,247

Minnesota Teamsters

Construction Division
Pension Fund

National Automatic
Sprinkler Industry
Pension Fund

National Electrical

Benefit Fund

Pension Trust Fund for
Operating Engineers

Sheet Metal Workers
Pension Plan of
Southern CA, AZ, and
NV

Southwest Marine
Pension Trust

Other funds

Total contributions

41-6187751-001

Green as of
11/30/2019

Green as of
11/30/2018

663

673

740

52-6054620-001

Red

Implemented

954

1,074

738

53-0181657-001

Green

No 14,484 12,679

8,468

94-6090764-001

Yellow

Implemented

2,680

2,598

2,403

95-6052257-001

Yellow

Implemented

3,255

2,119

1,774

95-6123404-001

Red

Implemented

170

132

30,931 24,512 21,421

$ 85,444 $ 72,525 $ 58,722

6/30/2023

12/31/2021

6/1/2025

5/31/2021

4/23/2023

8/29/2021

12/3/2023

3/31/2023

4/30/2021

3/31/2021-
7/31/2024

12/31/2021-
8/30/2025

6/15/2022-
6/30/2023

6/30/2024

1/31/2024

* Plan includes contributions required by collective bargaining agreements which have expired, but contain provisions automatically renewing their terms in the absence

of a subsequent negotiated agreement.

MDU Resources Group, Inc. Form 10-K 99

Part II

The Company was listed in the plans' Forms 5500 as providing more than 5 percent of the total contributions for the following plans and plan years:

Pension Fund

Edison Pension Plan

IBEW Local 82 Pension Plan

IBEW Local 124 Pension Trust Fund

IBEW Local 212 Pension Trust Fund

IBEW Local 357 Pension Plan A

IBEW Local 648 Pension Plan

IBEW Local 683 Pension Fund Pension Plan

IBEW Local Union No 226 Open End Pension Fund

Idaho Plumbers and Pipefitters Pension Plan

International Union of Operating Engineers Local 701 Pension Trust Fund

Minnesota Teamsters Construction Division Pension Fund

Pension and Retirement Plan of Plumbers and Pipefitters Local 525

Year Contributions to Plan Exceeded More Than 5 Percent
of Total Contributions (as of December 31 of the Plan's Year-End)

2019 and 2018

2019

2019 and 2018

The Company also contributes to a number of multiemployer other postretirement plans under the terms of collective-bargaining agreements that
cover its union-represented employees. These plans provide benefits such as health insurance, disability insurance and life insurance to retired union
employees. Many of the multiemployer other postretirement plans are combined with active multiemployer health and welfare plans. The Company's
total contributions to its multiemployer other postretirement plans, which also includes contributions to active multiemployer health and welfare
plans, were $63.8 million, $59.5 million and $51.9 million for the years ended December 31, 2020, 2019 and 2018, respectively.

Amounts contributed in 2020, 2019 and 2018 to defined contribution multiemployer plans were $54.2 million, $49.2 million and $31.1 million,
respectively.

Note 19 - Jointly Owned Facilities
The consolidated financial statements include the Company's ownership interests in three coal-fired electric generating facilities (Big Stone Station,
Coyote Station and Wygen III) and one major transmission line (BSSE). Each owner of the jointly owned facilities is responsible for financing its
investment. The Company's share of the jointly owned facilities operating expenses was reflected in the appropriate categories of operating expenses
(electric fuel and purchased power; operation and maintenance; and taxes, other than income) in the Consolidated Statements of Income.

At December 31, the Company's share of the cost of utility plant in service, construction work in progress and related accumulated depreciation for
the jointly owned facilities was as follows:

Ownership
Percentage

2020

2019

(In thousands)

Big Stone Station:

22.7 %

Utility plant in service

155,967 $

152,836

Construction work in progress

Less accumulated depreciation

104

518

45,435

46,266

110,636 $

107,088

BSSE:

50.0 %

Utility plant in service

107,442 $

105,767

Construction work in progress

Less accumulated depreciation

—

2,682

1,232

104,760 $

104,535

Coyote Station:

25.0 %

Utility plant in service

159,784 $

160,235

Construction work in progress

Less accumulated depreciation

323

108,852

107,638

51,255 $

52,618

Wygen III:

25.0 %

Utility plant in service

66,101 $

67,869

Construction work in progress

Less accumulated depreciation

232

112

10,038

10,482

56,295 $

57,499

100 MDU Resources Group, Inc. Form 10-K

Part II

Note 20 - Regulatory Matters
The Company regularly reviews the need for electric and natural gas rate changes in each of the jurisdictions in which service is provided. The
Company files for rate adjustments to seek recovery of operating costs and capital investments, as well as reasonable returns as allowed by
regulators. Certain regulatory proceedings and cases may also contain recurring mechanisms that can have an annual true-up. Examples of these
recurring mechanisms include: infrastructure riders, transmission trackers, renewable resource cost adjustment riders, as well as weather
normalization and decoupling mechanisms. The following paragraphs summarize the Company's significant regulatory proceedings and cases by
jurisdiction, including the status of each open request. The Company is unable to predict the ultimate outcome of these matters, the timing of final
decisions of the various regulators and courts, or the effect on the Company's results of operations, financial position or cash flows.

MNPUC
On September 27, 2019, Great Plains filed an application with the MNPUC for a natural gas rate increase of approximately $2.9 million annually or
approximately 12.0 percent above current rates. The requested increase was primarily to recover investments in facilities to enhance safety and
reliability and the depreciation and taxes associated with the increase in investment. On November 22, 2019, Great Plains received approval to
implement an interim rate increase of approximately $2.6 million or approximately 11.0 percent, subject to refund, effective January 1, 2020. On
October 26, 2020, the MNPUC issued an order authorizing an annual increase in revenues of approximately $2.6 million or approximately
11.5 percent. This matter is pending before the MNPUC.

MTPSC
On May 8, 2020, Montana-Dakota filed a request with the MTPSC to use deferred accounting for costs related to the COVID-19 pandemic. The filing
was withdrawn by Montana-Dakota on January 25, 2021.

On June 22, 2020, Montana-Dakota filed an application with the MTPSC for a natural gas rate increase of approximately $8.6 million annually or
approximately 13.4 percent above current rates. The requested increase was primarily to recover investments in facilities that were made to enhance
system safety and reliability, as well as the depreciation, taxes and operation and maintenance costs associated with this increase in investment. On
January 14, 2021, Montana-Dakota received approval to implement an interim rate increase of approximately $4.9 million or approximately
7.7 percent, subject to refund, effective February 1, 2021. On February 1, 2021, Montana-Dakota filed a stipulation and settlement agreement with
the MTPSC reflecting an updated increase of approximately $7.3 million annually or approximately 11.4 percent above current rates. On
February 16, 2021, the MTPSC approved the settlement with rates effective on or after March 15, 2021.

NDPSC
On April 24, 2020, Montana-Dakota filed a request with the NDPSC to use deferred accounting for costs related to the COVID-19 pandemic. On
February 3, 2021, the NDPSC approved this request with an accounting order to track expenses and revenues related to the COVID-19 pandemic.
This order had an effective date of April 24, 2020.

On August 26, 2020, Montana-Dakota filed an application with the NDPSC for a natural gas rate increase of approximately $9.0 million annually or
approximately 7.8 percent above current rates. The requested increase was primarily to recover investments in facilities to enhance system safety
and reliability and the depreciation and taxes associated with the increase in investment. On December 16, 2020, Montana-Dakota received approval
to implement an interim rate increase of approximately $6.9 million or approximately 6.0 percent, subject to refund, effective January 1, 2021. A
hearing is scheduled for March 17, 2021. This matter is pending before the NDPSC.

Montana-Dakota has a renewable resource cost adjustment rate tariff that allows for annual adjustments for recent projected capital costs and related
expenses for projects determined to be recoverable under the tariff. On November 2, 2020, Montana-Dakota filed an annual update to its renewable
resource cost adjustment requesting to recover a revised revenue requirement of approximately $14.4 million annually, not including the prior period
true-up adjustment. The update reflects a decrease of approximately $300,000 from the revenues currently included in rates. On January 6, 2021,
the NDPSC approved the increase with rates effective February 1, 2021.

OPUC
On March 31, 2020, Cascade filed a natural gas general rate case with the OPUC requesting an increase in annual revenue of approximately
$4.9 million or approximately 7.2 percent, which included a request for an additional recovery of environmental remediation deferred costs of
approximately $364,000. On September 30, 2020, Cascade filed a settlement agreement with the OPUC reflecting an annual increase in revenues
of approximately $3.2 million or approximately 4.8 percent. On January 6, 2021, the filing was approved with rates effective February 1, 2021. On
January 21, 2021, Cascade submitted a compliance filing using final costs for plant additions which resulted in a final increase in revenues of
approximately $2.9 million or approximately 4.3 percent.

WUTC
On May 27, 2020, Cascade filed a request with the WUTC to use deferred accounting for costs related to the COVID-19 pandemic. On December 10,
2020, the WUTC approved this request.

MDU Resources Group, Inc. Form 10-K 101

Part II

On June 19, 2020, Cascade filed an application with the WUTC for a natural gas rate increase of approximately $13.8 million annually or
approximately 5.3 percent above current rates. The requested increase was primarily to recover investments made in infrastructure upgrades, as well
as increased operation and maintenance costs. Cascade updated its filing on July 24, 2020, to approximately $14.3 million annually or
approximately 5.5 percent. Cascade filed a rebuttal case on January 8, 2021, supporting an increase of approximately $7.4 million annually or
approximately 2.8 percent. The revised revenue within the rebuttal case reflects several adjustments including depreciation, reduction to return on
equity, delays on certain projects, adjustments to income taxes and updates to wages. The WUTC has 11 months to render a final decision on the
rate case. A hearing is scheduled for February 24, 2021. This matter is pending before the WUTC.

FERC
On September 1, 2020, Montana-Dakota filed an update to its transmission formula rate under the MISO tariff for its multi-value project for
$12.9 million, which is effective January 1, 2021.

Note 21 - Commitments and Contingencies
The Company is party to claims and lawsuits arising out of its business and that of its consolidated subsidiaries, which may include, but are not
limited to, matters involving property damage, personal injury, and environmental, contractual, statutory and regulatory obligations. The Company
accrues a liability for those contingencies when the incurrence of a loss is probable and the amount can be reasonably estimated. If a range of
amounts can be reasonably estimated and no amount within the range is a better estimate than any other amount, then the minimum of the range is
accrued. The Company does not accrue liabilities when the likelihood that the liability has been incurred is probable but the amount cannot be
reasonably estimated or when the liability is believed to be only reasonably possible or remote. For contingencies where an unfavorable outcome is
probable or reasonably possible and which are material, the Company discloses the nature of the contingency and, in some circumstances, an
estimate of the possible loss. Accruals are based on the best information available, but in certain situations management is unable to estimate an
amount or range of a reasonably possible loss including, but not limited to when: (1) the damages are unsubstantiated or indeterminate, (2) the
proceedings are in the early stages, (3) numerous parties are involved, or (4) the matter involves novel or unsettled legal theories.

At December 31, 2020 and 2019, the Company accrued liabilities which have not been discounted, including liabilities held for sale, of
$41.5 million and $29.1 million, respectively. At December 31, 2020 and 2019, the Company also recorded corresponding insurance receivables of
$17.5 million and $16.2 million, respectively, and regulatory assets of $21.3 million and $10.5 million, respectively, related to the accrued
liabilities. The accruals are for contingencies, including litigation, production taxes, royalty claims and environmental matters. This includes amounts
that have been accrued for matters discussed in Environmental matters within this note. The Company will continue to monitor each matter and
adjust accruals as might be warranted based on new information and further developments. Management believes that the outcomes with respect to
probable and reasonably possible losses in excess of the amounts accrued, net of insurance recoveries, while uncertain, either cannot be estimated
or will not have a material effect upon the Company's financial position, results of operations or cash flows. Unless otherwise required by GAAP, legal
costs are expensed as they are incurred.

Environmental matters
Portland Harbor Site In December 2000, Knife River - Northwest was named by the EPA as a PRP in connection with the cleanup of the riverbed site
adjacent to a commercial property site acquired by Knife River - Northwest from Georgia-Pacific West, Inc. along the Willamette River. The riverbed
site is part of the Portland, Oregon, Harbor Superfund Site where the EPA wants responsible parties to share in the costs of cleanup. To date, costs
of the overall remedial investigation and feasibility study of the harbor site are being recorded, and initially paid, through an administrative consent
order by the LWG. Investigative costs are indicated to be in excess of $100 million. The EPA issued an ROD in January 2017 adopting a selected
remedy which is expected to take 13 years to complete with a then estimated present value of approximately $1 billion. Corrective action will not be
taken until remedial design/remedial action plans are approved by the EPA. Knife River - Northwest was also notified that the Portland Harbor
Natural Resource Trustee Council intends to perform an injury assessment to natural resources resulting from the release of hazardous substances at
the Harbor Superfund Site. It is not possible to estimate the costs of natural resource damages until an assessment is completed and allocations are
undertaken.

At this time, Knife River - Northwest does not believe it is a responsible party and has notified Georgia-Pacific West, Inc., that it intends to seek
indemnity for liabilities incurred in relation to the above matters pursuant to the terms of their sale agreement. Knife River - Northwest has entered
into an agreement tolling the statute of limitations in connection with the LWG's potential claim for contribution to the costs of the remedial
investigation and feasibility study. LWG has stated its intent to file suit against Knife River - Northwest and others to recover LWG's investigation
costs to the extent Knife River - Northwest cannot demonstrate its non-liability for the contamination or is unwilling to participate in an alternative
dispute resolution process that has been established to address the matter. At this time, Knife River - Northwest has agreed to participate in the
alternative dispute resolution process.

The Company believes it is not probable that it will incur any material environmental remediation costs or damages in relation to the above
referenced matter.

Manufactured Gas Plant Sites Claims have been made against Cascade for cleanup of environmental contamination at manufactured gas plant sites
operated by Cascade's predecessors and a similar claim has been made against Montana-Dakota for a site operated by Montana-Dakota and its
predecessors. Any accruals related to these claims are reflected in regulatory assets. For more information, see Note 6.

102 MDU Resources Group, Inc. Form 10-K

Part II

Demand has been made of Montana-Dakota to participate in investigation and remediation of environmental contamination at a site in Missoula,
Montana. The site operated as a former manufactured gas plant from approximately 1907 to 1938 when it was converted to a butane-air plant that
operated until 1956. Montana-Dakota or its predecessors owned or controlled the site for a period of the time it operated as a manufactured gas
plant and Montana-Dakota operated the butane-air plant from 1940 to 1951, at which time it sold the plant. There are no documented wastes or by-
products resulting from the mixing or distribution of butane-air gas. Preliminary assessment of a portion of the site provided a recommended
remedial alternative for that portion of approximately $560,000. However, the recommended remediation would not address any potential
contamination to adjacent parcels that may be impacted by contamination from the manufactured gas plant. An environmental assessment was
started in 2020, which is estimated to cost approximately $800,000. Montana-Dakota and another party agreed to voluntarily investigate and
remediate the site and that Montana-Dakota will pay two-thirds of the costs for further investigation and remediation of the site. Montana-Dakota has
accrued costs of $800,000 for the remediation and investigation costs, and has incurred costs of $130,000 as of December 31, 2020. Montana-
Dakota received notice from a prior insurance carrier that it will participate in payment of defense costs incurred in relation to the claim.

A claim was made against Cascade for contamination at the Bremerton Gasworks Superfund Site in Bremerton, Washington, which was received in
1997. A preliminary investigation has found soil and groundwater at the site contain contaminants requiring further investigation and cleanup. The
EPA conducted a Targeted Brownfields Assessment of the site and released a report summarizing the results of that assessment in August 2009. The
assessment confirmed that contaminants have affected soil and groundwater at the site, as well as sediments in the adjacent Port Washington
Narrows. In April 2010, the Washington DOE issued notice it considered Cascade a PRP for hazardous substances at the site. In May 2012, the EPA
added the site to the National Priorities List of Superfund sites. Cascade entered into an administrative settlement agreement and consent order with
the EPA regarding the scope and schedule for a remedial investigation and feasibility study for the site. Current estimates for the cost to complete
the remedial investigation and feasibility study are approximately $7.6 million of which $5.0 million has been incurred as of December 31, 2020.
Based on the site investigation, preliminary remediation alternative costs were provided by consultants in August 2020; therefore, the accrual for
these costs was increased in the third quarter of 2020 by $11.1 million. The preliminary information received through the completion of the data
report allowed for the projection of possible costs for a variety of site configurations, remedial measures and potential natural resource damage
claims of between $13.6 million and $71.0 million. At December 31, 2020, Cascade has accrued $2.6 million for the remedial investigation and
feasibility study, as well as $17.5 million for remediation of this site. The accrual for remediation cost will be reviewed and adjusted, if necessary,
after the completion of the feasibility study. In April 2010, Cascade filed a petition with the WUTC for authority to defer the costs incurred in
relation to the environmental remediation of this site. The WUTC approved the petition in September 2010, subject to conditions set forth in the
order.

A claim was made against Cascade for contamination at a site in Bellingham, Washington. Cascade received notice from a party in May 2008 that
Cascade may be a PRP, along with other parties, for contamination from a manufactured gas plant owned by Cascade and its predecessor from about
1946 to 1962. Other PRPs reached an agreed order and work plan with the Washington DOE for completion of a remedial investigation and
feasibility study for the site. A feasibility study prepared for one of the PRPs in March 2018 identifies five cleanup action alternatives for the site
with estimated costs ranging from $8.0 million to $20.4 million with a selected preferred alternative having an estimated total cost of $9.3 million.
The other PRPs will develop a cleanup action plan and, after public review of the cleanup action plan, develop design documents. Cascade believes
its proportional share of any liability will be relatively small in comparison to other PRPs. The plant manufactured gas from coal between
approximately 1890 and 1946. In 1946, shortly after Cascade's predecessor acquired the plant, the plant converted to a propane-air gas facility.
There are no documented wastes or by-products resulting from the mixing or distribution of propane-air gas. Cascade has recorded an accrual for this
site for an amount that is not material.

The Company has received notices from and entered into agreement with certain of its insurance carriers that they will participate in defense for
certain contamination claims subject to full and complete reservations of rights and defenses to insurance coverage. To the extent these claims are
not covered by insurance, the Company intends to seek recovery of remediation costs through its natural gas rates charged to customers.

Purchase commitments
The Company has entered into various commitments largely consisting of contracts for natural gas and coal supply; purchased power; natural gas
transportation and storage; royalties; information technology; and construction materials. Certain of these contracts are subject to variability in
volume and price. The commitment terms vary in length, up to 39 years. The commitments under these contracts as of December 31, 2020, were:

Purchase commitments

458,397 $

235,858 $

173,306 $

124,724 $

98,894 $

691,613

2021

2022

2023

2024

2025

Thereafter

(In thousands)

These commitments were not reflected in the Company's consolidated financial statements. Amounts purchased under various commitments for the
years ended December 31, 2020, 2019 and 2018, were $666.0 million, $686.5 million and $548.0 million, respectively.

Guarantees
In 2009, multiple sale agreements were signed to sell the Company's ownership interests in the Brazilian Transmission Lines. In connection with the
sale, Centennial agreed to guarantee payment of any indemnity obligations of certain of the Company's indirect wholly owned subsidiaries. The

MDU Resources Group, Inc. Form 10-K 103

Part II

remaining guarantee is expected to expire in 2021. The guarantees were required by the buyers as a condition to the sale of the Brazilian
Transmission Lines.

Certain subsidiaries of the Company have outstanding guarantees to third parties that guarantee the performance of other subsidiaries of the
Company. These guarantees are related to construction contracts, insurance deductibles and loss limits, and certain other guarantees. At
December 31, 2020, the fixed maximum amounts guaranteed under these agreements aggregated $212.4 million. Certain of the guarantees also
have no fixed maximum amounts specified. The amounts of scheduled expiration of the maximum amounts guaranteed under these agreements
aggregate to $178.6 million in 2021; $16.1 million in 2022; $7.0 million in 2023; $500,000 in 2024; $500,000 in 2025; $700,000 thereafter;
and $9.0 million, which has no scheduled maturity date. There were no amounts outstanding under the previously mentioned guarantees at
December 31, 2020. In the event of default under these guarantee obligations, the subsidiary issuing the guarantee for that particular obligation
would be required to make payments under its guarantee.

Certain subsidiaries have outstanding letters of credit to third parties related to insurance policies and other agreements, some of which are
guaranteed by other subsidiaries of the Company. At December 31, 2020, the fixed maximum amounts guaranteed under these letters of credit
aggregated $22.7 million. The amounts of scheduled expiration of the maximum amounts guaranteed under these letters of credit aggregate to
$22.2 million in 2021 and $500,000 in 2022. There were no amounts outstanding under the previously mentioned letters of credit at
December 31, 2020. In the event of default under these letter of credit obligations, the subsidiary guaranteeing the letter of credit would be
obligated for reimbursement of payments made under the letter of credit.

In addition, Centennial, Knife River and MDU Construction Services have issued guarantees to third parties related to the routine purchase of
maintenance items, materials and lease obligations for which no fixed maximum amounts have been specified. These guarantees have no scheduled
maturity date. In the event a subsidiary of the Company defaults under these obligations, Centennial, Knife River or MDU Construction Services
would be required to make payments under these guarantees. Any amounts outstanding by subsidiaries of the Company were reflected on the
Consolidated Balance Sheet at December 31, 2020.

In the normal course of business, Centennial has surety bonds related to construction contracts and reclamation obligations of its subsidiaries. In the
event a subsidiary of Centennial does not fulfill a bonded obligation, Centennial would be responsible to the surety bond company for completion of
the bonded contract or obligation. A large portion of the surety bonds is expected to expire within the next 12 months; however, Centennial will likely
continue to enter into surety bonds for its subsidiaries in the future. At December 31, 2020, approximately $953.9 million of surety bonds were
outstanding, which were not reflected on the Consolidated Balance Sheet.

Variable interest entities
The Company evaluates its arrangements and contracts with other entities to determine if they are VIEs and if so, if the Company is the primary
beneficiary.

Fuel Contract Coyote Station entered into a coal supply agreement with Coyote Creek that provides for the purchase of coal necessary to supply the
coal requirements of the Coyote Station for the period May 2016 through December 2040. Coal purchased under the coal supply agreement is
reflected in inventories on the Consolidated Balance Sheets and is recovered from customers as a component of electric fuel and purchased power.

The coal supply agreement creates a variable interest in Coyote Creek due to the transfer of all operating and economic risk to the Coyote Station
owners, as the agreement is structured so that the price of the coal will cover all costs of operations, as well as future reclamation costs. The Coyote
Station owners are also providing a guarantee of the value of the assets of Coyote Creek as they would be required to buy the assets at book value
should they terminate the contract prior to the end of the contract term and are providing a guarantee of the value of the equity of Coyote Creek in
that they are required to buy the entity at the end of the contract term at equity value. Although the Company has determined that Coyote Creek is a
VIE, the Company has concluded that it is not the primary beneficiary of Coyote Creek because the authority to direct the activities of the entity is
shared by the four unrelated owners of the Coyote Station, with no primary beneficiary existing. As a result, Coyote Creek is not required to be
consolidated in the Company's financial statements.

At December 31, 2020, the Company's exposure to loss as a result of the Company's involvement with the VIE, based on the Company's ownership
percentage, was $33.7 million.

104 MDU Resources Group, Inc. Form 10-K

Part II

Supplementary Financial Information
Quarterly Data (Unaudited)
The following unaudited information shows selected items by quarter for the years 2020 and 2019:

2020

Operating revenues

Operating expenses

Operating income

Income from continuing operations

First
Quarter

Second
Quarter

Third
Quarter

Fourth
Quarter

(In thousands, except per share amounts)

$ 1,197,373 $ 1,362,928 $ 1,587,289 $ 1,385,160

1,140,303

1,224,674

1,383,578

1,239,270

57,070

138,254

203,711

145,890

25,539

99,842

153,015

112,131

Income (loss) from discontinued operations, net of tax

(409)

(139)

163

Net income

Earnings per share - basic:

Income from continuing operations

Discontinued operations, net of tax

Earnings per share - basic

Earnings per share - diluted:

Income from continuing operations

Discontinued operations, net of tax

Earnings per share - diluted

Weighted average common shares outstanding:

Basic

Diluted

2019

Operating revenues

Operating expenses

Operating income

Income from continuing operations

25,130

99,703

153,078

112,294

.13

—

.13

—

.13

.50

—

.50

—

.50

.76

—

.76

—

.76

.56

—

.56

—

.56

200,440

200,522

200,456

200,539

200,619

200,923

$ 1,091,191 $ 1,303,573 $ 1,563,799 $ 1,378,213

1,026,973

1,206,262

1,374,329

1,247,992

64,218

41,089

97,311

189,470

130,221

63,145

136,128

94,804

Income (loss) from discontinued operations, net of tax

(163)

(1,320)

1,509

261

Net income

Earnings per share - basic:

Income from continuing operations

Discontinued operations, net of tax

Earnings per share - basic

Earnings per share - diluted:

Income from continuing operations

Discontinued operations, net of tax

Earnings per share - diluted

Weighted average common shares outstanding:

Basic

Diluted

40,926

61,825

137,637

95,065

.21

—

.21

—

.21

.32

(.01)

.31

.32

(.01)

.31

.68

.01

.69

.68

.01

.69

.47

—

.47

—

.47

196,401

198,270

199,343

200,383

196,414

198,287

199,383

200,478

Certain operations of the Company are highly seasonal and revenues from and certain expenses for such operations may fluctuate significantly among
quarterly periods. Accordingly, quarterly financial information may not be indicative of results for a full year.

MDU Resources Group, Inc. Form 10-K 105

Part II

Definitions

The following abbreviations and acronyms used in Notes to Consolidated Financial Statements are defined below:
Abbreviation or Acronym
AFUDC

Allowance for funds used during construction

ASC

ASU

Big Stone Station

FASB Accounting Standards Codification

FASB Accounting Standards Update

475-MW coal-fired electric generating facility near Big Stone City, South Dakota (22.7 percent
ownership)

Brazilian Transmission Lines

Company's former investment in companies owning three electric transmission lines in Brazil

BSSE

Btu

Cascade

Centennial

345-kilovolt transmission line from Ellendale, North Dakota, to Big Stone City, South Dakota
(50 percent ownership)

British thermal unit

Cascade Natural Gas Corporation, an indirect wholly owned subsidiary of MDU Energy Capital

Centennial Energy Holdings, Inc., a direct wholly owned subsidiary of the Company

Centennial Capital

Centennial Holdings Capital LLC, a direct wholly owned subsidiary of Centennial

Centennial's Consolidated EBITDA

Centennial Resources

Centennial Energy Resources LLC, a direct wholly owned subsidiary of Centennial

Company

COVID-19

Coyote Creek

Coyote Station

Dakota Prairie Refining

EBITDA

EIN

EPA

FASB

FERC

Fidelity

FIP

GAAP

Great Plains

Holding Company Reorganization

IBEW

Intermountain

Knife River

Coronavirus disease 2019

Coyote Creek Mining Company, LLC, a subsidiary of The North American Coal Corporation

427-MW coal-fired electric generating facility near Beulah, North Dakota (25 percent ownership)

Dakota Prairie Refining, LLC, a limited liability company previously owned by WBI Energy and
Calumet Specialty Products Partners, L.P. (previously included in the Company's refining
segment)

Earnings before interest, taxes, depreciation, depletion and amortization

Employer Identification Number

United States Environmental Protection Agency

Financial Accounting Standards Board

Federal Energy Regulatory Commission

Fidelity Exploration & Production Company, a direct wholly owned subsidiary of WBI Holdings
(previously referred to as the Company's exploration and production segment)
Funding improvement plan

Accounting principles generally accepted in the United States of America

Great Plains Natural Gas Co., a public utility division of the Company prior to the closing of the
Holding Company Reorganization and a public utility division of Montana-Dakota as of January 1,
2019

International Brotherhood of Electrical Workers

Intermountain Gas Company, an indirect wholly owned subsidiary of MDU Energy Capital

Knife River Corporation, a direct wholly owned subsidiary of Centennial

Knife River - Northwest

Knife River Corporation - Northwest, an indirect wholly owned subsidiary of Knife River

K-Plan

LIBOR

LWG

Company's 401(k) Retirement Plan
London Inter-bank Offered Rate

Lower Willamette Group

MDU Construction Services

MDU Construction Services Group, Inc., a direct wholly owned subsidiary of Centennial

MDU Energy Capital

MDUR Newco

MDUR Newco Sub

MDU Energy Capital, LLC, a direct wholly owned subsidiary of the Company

MDUR Newco, Inc., a public holding company created by implementing the Holding Company
Reorganization, now known as the Company

MDUR Newco Sub, Inc., a direct, wholly owned subsidiary of MDUR Newco, which was merged
with and into Montana-Dakota in the Holding Company Reorganization

106 MDU Resources Group, Inc. Form 10-K

MEPP

MISO

MMBtu

MNPUC

Montana-Dakota

MTPSC

NDPSC

OPUC

PRP

ROD

SDPUC

SEC

Securities Act

SOFR

TCJA

VIE

Part II

Multiemployer pension plan

Midcontinent Independent System Operator, Inc.

Million Btu

Minnesota Public Utilities Commission

Montana Public Service Commission

Megawatt

North Dakota Public Service Commission

Oregon Public Utility Commission

Potentially Responsible Party

Record of Decision

Rehabilitation plan

South Dakota Public Utilities Commission

United States Securities and Exchange Commission

Securities Act of 1933, as amended

Secured Overnight Financing Rate
Tax Cuts and Jobs Act

Variable interest entity

Washington DOE

Washington State Department of Ecology

WBI Energy Transmission

WBI Energy Transmission, Inc., an indirect wholly owned subsidiary of WBI Holdings

WBI Holdings

WUTC

Wygen III

WYPSC

WBI Holdings, Inc., a direct wholly owned subsidiary of Centennial

Washington Utilities and Transportation Commission

100-MW coal-fired electric generating facility near Gillette, Wyoming (25 percent ownership)

Wyoming Public Service Commission

MDU Resources Group, Inc. Form 10-K 107

Part II

Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure

None.

Item 9A. Controls and Procedures

The following information includes the evaluation of disclosure controls and procedures by the Company's chief executive officer and the chief
financial officer, along with any significant changes in internal controls of the Company.

Evaluation of Disclosure Controls and Procedures
The term "disclosure controls and procedures" is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. The Company's disclosure
controls and other procedures are designed to provide reasonable assurance that information required to be disclosed in the reports that the Company
files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and
forms. The Company's disclosure controls and other procedures are designed to provide reasonable assurance that information required to be
disclosed is accumulated and communicated to management, including the Company's chief executive officer and chief financial officer, to allow
timely decisions regarding required disclosure. The Company's management, with the participation of the Company's chief executive officer and chief
financial officer, has evaluated the effectiveness of the Company's disclosure controls and other procedures as of the end of the period covered by
this report. Based upon that evaluation, the chief executive officer and the chief financial officer have concluded that, as of the end of the period
covered by this report, such controls and procedures were effective at a reasonable assurance level.

Changes in Internal Controls
No change in the Company's internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) occurred
during the three months ended December 31, 2020, that has materially affected, or is reasonably likely to materially affect, the Company's internal
control over financial reporting.

Management's Annual Report on Internal Control Over Financial Reporting
The information required by this item is included in this Form 10-K at Item 8 - Management's Report on Internal Control Over Financial Reporting.

Attestation Report of the Registered Public Accounting Firm
The information required by this item is included in this Form 10-K at Item 8 - Report of Independent Registered Public Accounting Firm.

Item 9B. Other Information

None.

108 MDU Resources Group, Inc. Form 10-K

Part III

Item 10. Directors, Executive Officers and Corporate Governance

Information required by this item will be included in the Company's Proxy Statement, which is incorporated herein by reference.

Item 11. Executive Compensation

Information required by this item will be included in the Company's Proxy Statement, which is incorporated herein by reference.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters

Equity Compensation Plan Information
The following table includes information as of December 31, 2020, with respect to the Company's equity compensation plans:

Plan Category

(a)
Number of securities to
be issued upon exercise
of outstanding options,

warrants and rights

(b)
Weighted average
exercise price of
outstanding options,
warrants and rights

(c)
Number of securities
remaining available for
future issuance under
equity compensation
plans (excluding
securities reflected in
column (a))

Equity compensation plans approved by stockholders (1)

613,174 (2) $

Equity compensation plans not approved by stockholders

Total

N/A

613,174

— (3)

N/A

—

3,555,471 (4)(5)

N/A

3,555,471

(1) Consists of the Non-Employee Director Long-Term Incentive Compensation Plan and the Long-Term Performance-Based Incentive Plan.
(2) Consists of performance share awards.
(3) No weighted average exercise price is shown for the performance share awards because such awards have no exercise price.
(4) This amount includes 3,328,721 shares available for future issuance under the Long-Term Performance-Based Incentive Plan in connection with grants of

restricted stock, performance units, performance shares or other equity-based awards.

(5) This amount includes 226,750 shares available for future issuance under the Non-Employee Director Long-Term Incentive Compensation Plan.

The remaining information required by this item will be included in the Company's Proxy Statement, which is incorporated herein by reference.

Item 13. Certain Relationships and Related Transactions, and Director Independence

Information required by this item will be included in the Company's Proxy Statement, which is incorporated herein by reference.

Item 14. Principal Accountant Fees and Services

Information required by this item will be included in the Company's Proxy Statement, which is incorporated herein by reference.

MDU Resources Group, Inc. Form 10-K 109

Part IV

Item 15. Exhibits, Financial Statement Schedules

(a) Financial Statements, Financial Statement Schedules and Exhibits

Index to Financial Statements and Financial Statement Schedules

1. Financial Statements

The following consolidated financial statements required under this item are
included under Item 8 - Financial Statements and Supplementary Data.

Page

Consolidated Statements of Income for each of the three years in the period ended

December 31, 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Consolidated Statements of Comprehensive Income for each of the three years in the
period ended December 31, 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Consolidated Balance Sheets at December 31, 2020 and 2019 . . . . . . . . . . . . . . .

Consolidated Statements of Equity for each of the three years in the period ended

December 31, 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Consolidated Statements of Cash Flows for each of the three years in the period

ended December 31, 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2. Financial Statement Schedules
The following financial statement schedules are included in Part IV of this report.

Schedule I - Condensed Financial Information of Registrant (Unconsolidated)

Condensed Statements of Income and Comprehensive Income for each of the three
years in the period ended December 31, 2020 . . . . . . . . . . . . . . . . . . . . . . . . . .

Condensed Balance Sheets at December 31, 2020 and 2019 . . . . . . . . . . . . . . . .

Condensed Statements of Cash Flows for each of the three years in the period ended
December 31, 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Notes to Condensed Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Page

111

112

113

All other schedules have been omitted because they are not applicable or the required information is included elsewhere in the financial statements
or related notes.

3. Exhibits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

114

110 MDU Resources Group, Inc. Form 10-K

MDU RESOURCES GROUP, INC.
Schedule I - Condensed Financial Information of Registrant (Unconsolidated)
Condensed Statements of Income and Comprehensive Income

Part IV

Years ended December 31,

Operating revenues
Operating expenses
Operating income
Other income
Interest expense
Income before income taxes
Income taxes
Equity in earnings of subsidiaries from continuing operations
Income from continuing operations
Equity in earnings (loss) of subsidiaries from discontinued operations

Net income

Comprehensive income

2020

2019

2018

(In thousands)

— $
—
—
—
—
—
—

— $ 628,331
— 540,125
88,206
—
1,504
—
32,761
—
56,949
—
(4,259)
—
390,527 335,166 208,177
390,527 335,166 269,385
2,933
$ 390,205 $ 335,453 $ 272,318
$ 384,229 $ 331,693 $ 279,269

(322)

287

The accompanying notes are an integral part of these condensed financial statements.

MDU Resources Group, Inc. Form 10-K 111

Part IV

MDU RESOURCES GROUP, INC.
Schedule I - Condensed Financial Information of Registrant (Unconsolidated)
Condensed Balance Sheets

December 31,

Assets
Current assets:

Cash and cash equivalents
Receivables, net
Accounts receivable from subsidiaries
Prepayments and other current assets

Total current assets
Noncurrent assets
Investments
Investment in subsidiaries
Deferred income taxes
Operating lease right-of-use assets
Other

Total noncurrent assets

Total assets

Liabilities and Stockholders' Equity
Current liabilities:

Accounts payable
Accounts payable to subsidiaries
Taxes payable
Dividends payable
Accrued compensation
Operating lease liabilities due within one year
Other accrued liabilities

Total current liabilities
Noncurrent liabilities:

Operating lease liabilities
Other

Total noncurrent liabilities
Commitments and contingencies
Stockholders' equity:

(In thousands, except shares and per share amounts)

2020

2019

8,781 $
4,865
50,539
1,612
65,797

12,326
4,727
49,943
501

67,497

52,000

46,294
3,069,956 2,842,068
7,269
153
27,098
3,160,569 2,922,882
$ 3,226,366 $ 2,990,379

9,691
56
28,866

2,135 $
5,412
4,056
42,611
7,825
40
6,881
68,960

16
78,285
78,301

2,981
4,752
1,253
41,580
8,812
96
7,690

67,164

56
75,913

75,969

Common stock
Authorized - 500,000,000 shares, $1.00 par value
Shares issued - 201,061,198 at December 31, 2020 and 200,922,790 at December 31, 2019

Other paid-in capital
Retained earnings
Accumulated other comprehensive loss
Treasury stock at cost - 538,921 shares

Total stockholders' equity

Total liabilities and stockholders' equity

The accompanying notes are an integral part of these condensed financial statements.

112 MDU Resources Group, Inc. Form 10-K

201,061

200,923
1,371,385 1,355,404
1,558,363 1,336,647
(42,102)
(3,626)
3,079,105 2,847,246
$ 3,226,366 $ 2,990,379

(48,078)
(3,626)

MDU RESOURCES GROUP, INC.
Schedule I - Condensed Financial Information of Registrant (Unconsolidated)
Condensed Statements of Cash Flows

Part IV

Years ended December 31,

Net cash provided by operating activities
Investing activities:

Capital expenditures
Net proceeds from sale or disposition of property and other
Investments in and advances to subsidiaries
Advances from subsidiaries
Investments

Net cash used in investing activities
Financing activities:

Issuance of long-term debt
Repayment of long-term debt
Payments of stock issuance costs
Proceeds from issuance of common stock
Dividends paid
Repurchase of common stock
Tax withholding on stock-based compensation

Net cash used in financing activities
Increase (decrease) in cash and cash equivalents
Cash and cash equivalents - beginning of year

Cash and cash equivalents - end of year

2020

2019

2018

(In thousands)

226,642 $

168,520 $

294,379

—
—
(67,000)
—
(4)
(67,004)

—
—
(120,000)
17,000
(236)

(242,692)
5,032
(40,000)
70,000
(528)

(103,236)

(208,188)

—
—
—
3,385
(166,405)
—
(163)
(163,183)
(3,545)
12,326

—
—
—
106,848
(160,256)
—
(1,821)

(55,229)
10,055
2,271

199,422
(125,961)
(10)
—
(154,573)
(1,920)
(1,721)

(84,763)
1,428
843

8,781 $

12,326 $

2,271

The accompanying notes are an integral part of these condensed financial statements.

Notes to Condensed Financial Statements
Note 1 - Summary of Significant Accounting Policies
Basis of presentation The condensed financial information reported in Schedule I is being presented to comply with Rule 12-04 of Regulation S-X.
The information is unconsolidated and is presented for the parent company only, MDU Resources Group, Inc. (the Company) as of and for the years
ended December 31, 2020 and 2019. Prior to the Holding Company Reorganization, the Company included Montana-Dakota and Great Plains,
public utility divisions of the Company as of December 31, 2018. On January 2, 2019, the Company announced the completion of the Holding
Company Reorganization, which resulted in Montana-Dakota and Great Plains becoming a subsidiary of the Company. Immediately after
consummation, the Company had, on a consolidated basis, the same assets, businesses and operations as it had immediately prior to the
reorganization. For more information on the reorganization, see Item 8 - Note 1. The prior periods have not been restated and reflect the condensed
financial information of Montana-Dakota and Great Plains as of and for the year ended December 31, 2018. Due to the completion of the Holding
Company Reorganization, the presentation of the year ended December 31, 2018, will vary from that of and for the years ended December 31, 2020
and 2019. In Schedule I, investments in subsidiaries are presented under the equity method of accounting where the assets and liabilities of the
subsidiaries are not consolidated. The investments in net assets of the subsidiaries are recorded on the Condensed Balance Sheets. The income from
subsidiaries is reported as equity in earnings of subsidiaries on the Condensed Statements of Income. The material cash inflows on the Condensed
Statements of Cash Flows are primarily from the dividends and other payments received from its subsidiaries and the proceeds raised from the
issuance of equity securities. The consolidated financial statements of MDU Resources Group, Inc. reflect certain businesses as discontinued
operations. These statements should be read in conjunction with the consolidated financial statements and notes thereto of MDU Resources Group,
Inc.

Earnings per common share Please refer to the Consolidated Statements of Income of the registrant for earnings per common share. In addition, see
Item 8 - Note 2 for information on the computation of earnings per common share.

Note 2 - Debt At December 31, 2020, the Company had no long-term debt maturities. For more information on debt, see Item 8 - Note 9.

Note 3 - Dividends The Company depends on earnings and dividends from its subsidiaries to pay dividends on common stock. Cash dividends paid to
the Company by subsidiaries were $228.4 million, $177.1 million and $115.9 million for the years ended December 31, 2020, 2019 and 2018,
respectively.

MDU Resources Group, Inc. Form 10-K 113

Part IV

Exhibits

Exhibit
Number

2(a)

3(a)

3(b)

4(a)

4(b)

*4(c)

*4(d)

4(e)

4(f)

4(g)

*4(h)

4(i)

4(j)

+10(a)

+10(b)

+10(c)

+10(d)

+10(e)

Exhibit Description

Agreement and Plan of Merger, dated December 31, 2018, by
and among MDU Resources Group, Inc., MDUR Newco, Inc.
MDU Newco Sub, Inc.

Amended and Restated Certificate of Incorporation of MDU
Resources Group, Inc.

Amended and Restated Bylaws of MDU Resources Group, Inc.

Indenture, dated as of December 15, 2003, between MDU
Resources Group, Inc. and The Bank of New York, as trustee

First Supplemental Indenture, dated as of November 17,
2009, between MDU Resources Group, Inc. and the Bank of
New York Mellon, as trustee

Fifth Amended and Restated Credit Agreement, dated as of
December 19, 2019, among Centennial Energy Holdings,
Inc., U.S. Bank National Association, as Administrative Agent,
and The Several Financial Institutions party thereto

Montana-Dakota Utilities Co. Amended and Restated Credit
Agreement, dated December 19, 2019, among Montana-
Dakota Utilities Co., Various Lenders, and Wells Fargo Bank,
National Association, as Administrative Agent

Centennial Energy Holdings, Inc. Note Purchase Agreement,
dated December 20, 2012, among Centennial Energy
Holdings, Inc. and various purchasers of the notes

Montana-Dakota Utilities Co. Note Purchase Agreement, dated
July 24, 2019, among Montana-Dakota Utilities Co. and
various purchasers of the notes

MDU Resources Group, Inc. Description of Securities
Registered Pursuant to Section 12 of the Securities and
Exchange Act of 1934

WBI Energy Transmission, Inc. Amended and Restated Note
Purchase and Private Shelf Agreement, effective as of
September 12, 2013, among Prudential Investment
Management, Inc. and certain investors described therein

Amendment No. 1 to WBI Energy Transmission, Inc. Amended
and Restated Note Purchase and Private Shelf Agreement,
dated May 17, 2016, among Prudential Investment
Management, Inc. and certain investors described therein

Amendment No. 2 to WBI Energy Transmission, Inc. Amended
and Restated Note Purchase and Private Shelf Agreement,
dated July 26, 2019 and effective May 16, 2019, among
Prudential Investment Management, Inc. and certain investors
described therein

MDU Resources Group, Inc. Supplemental Income Security
Plan, as amended and restated May 10, 2017

MDU Resource Group, Inc. Director Compensation Policy, as
amended May 8, 2019

Deferred Compensation Plan for Directors, as amended
May 15, 2008

Non-Employee Director Stock Compensation Plan, as
amended May 12, 2011

MDU Resources Group, Inc. Non-Employee Director Long-
Term Incentive Compensation Plan, as amended May 17,
2012

Filed
Herewith

Form

8-K

S-8

Incorporated by Reference

Period
Ended Exhibit

Filing
Date

File
Number

2(a)

1/2/19

1-03480

3.2

5/8/19

1-03480

3.1

4(f)

2/15/19

1-03480

1/21/04 333-11203

10-K 12/31/09

4(c)

2/17/10

1-03480

10-K 12/31/19

4(c)

2/21/20

1-03480

10-K 12/31/19

4(d)

2/21/20

1-03480

10-Q

6/30/19

4(a)

8/2/19

1-03480

10-Q

9/30/19

4(a)

11/1/19

1-03480

10-K 12/31/19

4(g)

2/21/20

1-03480

10-Q

6/30/17

10(d)

8/4/17

1-03480

10-Q

6/30/19

10(a)

8/2/19

1-03480

10-Q

6/30/08

10(a)

8/7/08

1-03480

10-Q

6/30/11

10(a)

8/5/11

1-03480

10-Q

6/30/12

10(a)

8/7/12

1-03480

+10(f)

MDU Resources Group, Inc. Long-Term Performance-Based
Incentive Plan, as amended February 11, 2016

10-K 12/31/15

10(f)

2/19/16

1-03480

114 MDU Resources Group, Inc. Form 10-K

Exhibit
Number

+10(g)

+10(h)

+10(i)

+10(j)

+10(k)

+10(l)

Exhibit Description

MDU Resources Group, Inc. Executive Incentive
Compensation Plan, as amended November 13, 2019, and
Rules and Regulations, as amended November 13, 2019

MDU Resources Group, Inc. Executive Incentive
Compensation Plan, as amended November 12, 2020, and
Rules and Regulations, as amended November 12, 2020

Form of Performance Share Award Agreement under the Long-
Term Performance-Based Incentive Plan, as amended
February 15, 2018

Form of Performance Share Award Agreement under the Long-
Term Performance-Based Incentive Plan, as amended
February 14, 2019

Form of Performance Share Award Agreement under the Long-
Term Performance-Based Incentive Plan, as amended
February 13, 2020

Form of Performance Share Award Agreement under the Long-
Term Performance-Based Incentive Plan, as amended
February 11, 2021

+10(m)

Restricted Stock Unit Award Agreement under the Long-Term
Performance-Based Incentive Plan, as amended February 15,
2018

+10(n)

+10(o)

+10(p)

+10(q)

+10(r)

+10(s)

+10(t)

+10(u)

+10(v)

Restricted Stock Unit Award Agreement under the Long-Term
Performance-Based Incentive Plan, as amended February 11,
2021

Form of MDU Resources Group, Inc. Indemnification
Agreement for Section 16 Officers and Directors, dated
May 15, 2014

Form of Amendment No. 1 to Indemnification Agreement,
dated May 15, 2014

MDU Resources Group, Inc. Section 16 Officers and Directors
with Indemnification Agreements Chart, as of February 6,
2021

MDU Resources Group, Inc. Nonqualified Defined
Contribution Plan, as amended and restated November 12,
2020

MDU Resources Group, Inc. Deferred Compensation Plan
Adoption Agreement, dated November 12, 2020

MDU Resources Group, Inc. Deferred Compensation Plan
Document, dated November 12, 2020

Instrument of Amendment to the MDU Resources Group, Inc.
401(k) Retirement Plan, dated December 17, 2020

MDU Resources Group, Inc. 401(k) Retirement Plan, as
restated April 1, 2020

+10(w)

Employment Letter for Jeffrey S. Thiede, dated May 16, 2013

+10(x)

Jason L. Vollmer Offer Letter, dated September 20, 2017

31(a)

31(b)

Subsidiaries of MDU Resources Group, Inc.

Consent of Independent Registered Public Accounting Firm

Certification of Chief Executive Officer filed pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002

Certification of Chief Financial Officer filed pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002

Certification of Chief Executive Officer and Chief Financial
Officer furnished pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002

Mine Safety Disclosures

Part IV

Incorporated by Reference

Filed
Herewith

Form

Period
Ended Exhibit

Filing
Date

File
Number

10-K 12/31/19

10(g)

2/21/20

1-03480

8-K

10.1

2/21/18

1-03480

10-K 12/31/18

10(k)

2/22/19

1-03480

10-K 12/31/19

10(k)

2/21/20

1-03480

8-K

10.3

2/21/18

1-03480

8-K

10.1

5/15/14

1-03480

10.2

5/15/14

1-03480

10.1

11/12/20

1-03480

10.2

11/12/20

1-03480

10-Q

3/31/20

10(a)

5/8/20

1-03480

10-K 12/31/13 10(ab)

2/21/14

1-03480

8-K

10.1

9/21/17

1-03480

MDU Resources Group, Inc. Form 10-K 115

Part IV

Exhibit
Number

Exhibit Description

101.INS XBRL Instance Document - the instance document does not
appear in the Interactive Data File because its XBRL tags are
embedded within the Inline XBRL document

101.SCH XBRL Taxonomy Extension Schema Document

101.CAL XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF XBRL Taxonomy Extension Definition Linkbase Document

101.LAB XBRL Taxonomy Extension Label Linkbase Document

101.PRE XBRL Taxonomy Extension Presentation Linkbase Document

Incorporated by Reference

Filed
Herewith

Form

Period
Ended Exhibit

Filing
Date

File
Number

* Schedules and exhibits to this agreement have been omitted pursuant to Item 601(a)(5) of Regulation S-K. A copy of any omitted
schedule and/or exhibit will be furnished as a supplement to the SEC upon request.

+ Management contract, compensatory plan or arrangement.

MDU Resources Group, Inc. agrees to furnish to the SEC upon request any instrument with respect to long-term debt that MDU Resources
Group, Inc. has not filed as an exhibit pursuant to the exemption provided by Item 601(b)(4)(iii)(A) of Regulation S-K.

Item 16. Form 10-K Summary

None.

116 MDU Resources Group, Inc. Form 10-K

Signatures
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.

Part IV

MDU Resources Group, Inc.

Date:

February 19, 2021

By:

/s/ David L. Goodin

David L. Goodin

(President and Chief Executive Officer)

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the
registrant in the capacities and on the date indicated.

Signature

/s/ David L. Goodin

David L. Goodin

(President and Chief Executive Officer)

/s/ Jason L. Vollmer

Jason L. Vollmer

(Vice President and Chief Financial Officer)

/s/ Stephanie A. Barth

Stephanie A. Barth

(Vice President, Chief Accounting Officer and Controller)

Title

Date

Chief Executive Officer and Director

February 19, 2021

Chief Financial Officer

February 19, 2021

Chief Accounting Officer

February 19, 2021

/s/ Dennis W. Johnson

Dennis W. Johnson
(Chair of the Board)

/s/ Thomas Everist

Thomas Everist

/s/ Karen B. Fagg

Karen B. Fagg

/s/ Mark A. Hellerstein

Mark A. Hellerstein

/s/ Patricia L. Moss

Patricia L. Moss

/s/ Edward A. Ryan

Edward A. Ryan

/s/ David M. Sparby

David M. Sparby

/s/ Chenxi Wang

Chenxi Wang

/s/ John K. Wilson

John K. Wilson

Director

February 19, 2021

MDU Resources Group, Inc. Form 10-K 117

March 26, 2021

Fellow Stockholders:

I invite you to join me, along with our Board of Directors and members of our senior management
team, for our annual meeting at 11 a.m. May 11, 2021. We intend to hold this meeting in person
at 909 Airport Road in Bismarck, North Dakota. Please contact us or check our website at
www.mdu.com/proxymaterials for updates and additional information about joining our meeting.

At the meeting, we will hear the results of stockholder voting on the items outlined in this Proxy
Statement, including election of our Board of Directors, the advisory vote to approve the compensation
paid to our named executive officers, and ratification of our independent auditors. I encourage you to
follow the instructions on your proxy card to vote your shares in advance of the meeting.

Also during the meeting, I look forward to providing you with an overview of our outstanding 2020
financial results and the operational excellence we achieved despite the challenges our country faced
during the year. In these unprecedented times, our employees continue to demonstrate their dedication
to providing the essential products and services that are necessary for Building a Strong America.®

I will provide details during the meeting as well about what we expect this year and beyond as we grow
each of our lines of business.

I look forward to seeing you May 11 if it is safe for us to gather in person.

We appreciate your continued investment in MDU Resources and remain committed to providing you
with the long-term returns you expect.

Sincerely,

David L. Goodin
President and Chief Executive Officer

MDU Resources Group, Inc. Proxy Statement

Proxy Statement

1200 West Century Avenue

Mailing Address:
P.O. Box 5650
Bismarck, North Dakota 58506-5650
(701) 530-1000

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS TO BE HELD MAY 11, 2021

March 26, 2021

NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of MDU Resources Group, Inc. will be held at 909 Airport Road,
Bismarck, North Dakota 58504, on Tuesday, May 11, 2021, at 11:00 a.m., Central Daylight Saving Time, for the following purposes:

Items of
Business

1. Election of directors;

2. Advisory vote to approve the compensation paid to the company’s named executive officers;

3. Ratification of the appointment of Deloitte & Touche LLP as the company’s independent registered public

accounting firm for 2021; and

4. Transaction of any other business that may properly come before the meeting or any adjournment(s) thereof.

Record Date

The board of directors has set the close of business on March 12, 2021, as the record date for the determination
of stockholders who will be entitled to notice of, and to vote at, the meeting and any adjournment(s) thereof.

Meeting
Attendance

All stockholders as of the record date of March 12, 2021, are cordially invited to attend the annual meeting. You
must request an admission ticket to attend. If you are a stockholder of record and plan to attend the meeting, please
contact MDU Resources Group, Inc. by email at CorporateSecretary@mduresources.com or by telephone at
701-530-1010 to request an admission ticket. A ticket will be sent to you by mail.

If your shares are held beneficially in the name of a bank, broker, or other holder of record, and you plan to
attend the annual meeting, you will need to submit a written request for an admission ticket by mail to:
Investor Relations, MDU Resources Group, Inc., P.O. Box 5650, Bismarck, ND 58506 or by email at
CorporateSecretary@mduresources.com. The request must include proof of stock ownership as of March 12,
2021, such as a bank or brokerage firm account statement or a legal proxy from the bank, broker, or other holder
of record confirming ownership. A ticket will be sent to you by mail.

Requests for admission tickets must be received no later than May 4, 2021. You must present your admission
ticket and state-issued photo identification, such as a driver’s license, to gain admittance to the meeting.

We are actively monitoring the public health and travel safety concerns relating to the coronavirus (COVID-19). You
are encouraged to vote in advance of the meeting using one of the voting methods set forth on page 69. In the event
it is not possible or advisable to hold our annual meeting as currently planned, we will announce additional or
alternative arrangements for the meeting on our company website at www.mdu.com/proxymaterials. For additional
information, see Public Health Concerns on page 72.

Proxy
Materials

Notice of Availability of Proxy Materials will be first sent to stockholders on or about March 26, 2021. The Notice
contains basic information about the annual meeting and instructions on how to view our proxy materials and vote
electronically on the Internet. Stockholders who do not receive the Notice will receive a paper copy of our proxy
materials, which will be sent on or about April 1, 2021.

By order of the Board of Directors,

Karl A. Liepitz

Secretary

Important Notice Regarding the Availability of Proxy Materials for the Stockholder Meeting to be Held on May 11, 2021.
The 2021 Notice of Annual Meeting and Proxy Statement and 2020 Annual Report to Stockholders
are available at www.mdu.com/proxymaterials.

MDU Resources Group, Inc. Proxy Statement

Proxy Statement

TABLE OF CONTENTS

PROXY STATEMENT SUMMARY . . . . . . . . . . . . . . . .

BOARD OF DIRECTORS

Item 1. Election of Directors . . . . . . . . . . . . . . . . . . . .

Director Nominees . . . . . . . . . . . . . . . . . . . . . . . . .

Board Evaluations and Process for Selecting Directors

CORPORATE GOVERNANCE

Director Independence . . . . . . . . . . . . . . . . . . . . . .

Sustainability and Social Responsibility . . . . . . . . . .

Stockholder Engagement . . . . . . . . . . . . . . . . . . . .

Board Leadership Structure . . . . . . . . . . . . . . . . . .

Board’s Role in Risk Oversight . . . . . . . . . . . . . . . .

Board Meetings and Committees . . . . . . . . . . . . . . .

Stockholder Communications with the Board . . . . . .

Additional Governance Features . . . . . . . . . . . . . . .

Corporate Governance Materials . . . . . . . . . . . . . . .

Related Person Transaction Disclosure . . . . . . . . . . .

Page

EXECUTIVE COMPENSATION (continued)

Executive Compensation Tables . . . . . . . . . . . . . . . . . .

Summary Compensation Table . . . . . . . . . . . . . . .

Grants of Plan-Based Awards . . . . . . . . . . . . . . . . .

Outstanding Equity Awards at Fiscal Year-End . . . . .

Option Exercises and Stock Vested . . . . . . . . . . . . .

Pension Benefits . . . . . . . . . . . . . . . . . . . . . . . . .

Nonqualified Deferred Compensation . . . . . . . . . . .

Potential Payments upon Termination or

Change of Control . . . . . . . . . . . . . . . . . . . . . . .

CEO Pay Ratio Disclosure . . . . . . . . . . . . . . . . . . .

Page

AUDIT MATTERS

Item 3. Ratification of the Appointment of

Deloitte & Touche LLP as the Company’s Independent

Registered Public Accounting Firm for 2021 . . . . . . . .

Annual Evaluation and Selection of Deloitte &

COMPENSATION OF NON-EMPLOYEE DIRECTORS

Touche LLP . . . . . . . . . . . . . . . . . . . . . . . . . . .

Director Compensation . . . . . . . . . . . . . . . . . . . . . .

Audit Fees and Non-Audit Fees . . . . . . . . . . . . . . .

SECURITY OWNERSHIP

Security Ownership Table . . . . . . . . . . . . . . . . . . . .

Hedging Policy . . . . . . . . . . . . . . . . . . . . . . . . . . .

Greater than 5% Beneficial Owners . . . . . . . . . . . . .

Delinquent Section 16(a) Reports . . . . . . . . . . . . . .

EXECUTIVE COMPENSATION

Item 2. Advisory Vote to Approve the Compensation Paid .

to the Company’s Named Executive Officers . . . . . . . . .

Information Concerning Executive Officers . . . . . . . . . . .

Compensation Discussion and Analysis . . . . . . . . . . . . . .

Executive Summary . . . . . . . . . . . . . . . . . . . . . . . .

2020 Compensation Framework . . . . . . . . . . . . . . .

2020 Compensation for Our Named

Executive Officers . . . . . . . . . . . . . . . . . . . . . . . .

Other Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Compensation Governance . . . . . . . . . . . . . . . . . . .

Compensation Committee Report . . . . . . . . . . . . . . . . . .

Policy on Audit Committee Pre-Approval of Audit

and Permissible Non-Audit Services . . . . . . . . . .

Audit Committee Report . . . . . . . . . . . . . . . . . . . . . . . .

INFORMATION ABOUT THE ANNUAL MEETING

Who Can Vote . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Notice and Access . . . . . . . . . . . . . . . . . . . . . . . .

How to Vote . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Revoking Your Proxy or Changing Your Vote . . . . . . .

Discretionary Voting Authority . . . . . . . . . . . . . . . .

Voting Standards . . . . . . . . . . . . . . . . . . . . . . . . .

Proxy Solicitation . . . . . . . . . . . . . . . . . . . . . . . . .

Electronic Delivery of Proxy Statement . . . . . . . . . .

Householding of Proxy Materials . . . . . . . . . . . . . .

MDU Resources Group, Inc. 401(k) Plan . . . . . . . .

Annual Meeting Admission and Guidelines . . . . . . .

Conduct of the Meeting . . . . . . . . . . . . . . . . . . . . .

Stockholder Proposals, Director Nominations, and

Other Items of Business for 2022 . . . . . . . . . . . .

MDU Resources Group, Inc. Proxy Statement

Proxy Statement

PROXY STATEMENT SUMMARY

To assist you in reviewing the company’s 2020 performance and voting your shares, we call your attention to key elements of our 2021
Proxy Statement. The following is only a summary and does not contain all the information you should consider. You should read the entire
Proxy Statement carefully before voting. For more information about these topics, please review the full Proxy Statement and our 2020
Annual Report to Stockholders.

Meeting Information

Summary of Stockholder Voting Matters

Time and Date

Voting Matters

Board Vote
Recommendation

See Page

11:00 a.m.
Central Daylight Saving Time
Tuesday, May 11, 2021

Place

MDU Service Center
909 Airport Road
Bismarck, ND 58504

Who Can Vote

Item 1. Election of Directors

FOR Each Nominee

Item 2. Advisory Vote to Approve the Compensation Paid to
the Company’s Named Executive Officers

Item 3. Ratification of the Appointment of Deloitte &

Touche LLP as the Company’s Independent
Registered Public Accounting Firm for 2021

FOR

If you held shares of MDU Resources common stock at the close of business on March 12, 2021, you are entitled to vote at the annual
meeting. You are encouraged to vote in advance of the meeting using one of the following voting methods.

How to Vote

Registered Stockholders

If your shares are held directly with our stock registrar, you can vote any one of four ways:

: By Internet:
) By Telephone:

Go to the website shown on the Notice or Proxy Card, if you received one, and follow the instructions.

Call the telephone number shown on the Notice or Proxy Card, if you received one, and follow the
instructions given by the voice prompts.

Voting via the Internet or by telephone authorizes the named proxies to vote your shares in the same
manner as if you marked, signed, dated, and returned the Proxy Card by mail. Your voting instructions
may be transmitted up until 11:59 p.m. Eastern Time on May 10, 2021.

* By Mail:

If you received a paper copy of the Proxy Statement, Annual Report, and Proxy Card, mark, sign, date,
and return the Proxy Card in the postage-paid envelope provided.

In Person:

Attend the annual meeting, or send a personal representative with an appropriate proxy, to vote by
ballot at the meeting.

Beneficial Stockholders

If you held shares beneficially in the name of a bank, broker, or other holder of record (sometimes referred to as holding shares “in street
name”), you will receive voting instructions from said bank, broker, or other holder of record. If you wish to vote in person at the meeting, you
must obtain a legal proxy from your bank, broker, or other holder of record of your shares and present it at the meeting.

MDU Resources Group, Inc. Proxy Statement 1

Proxy Statement

Director Nominees

The board recommends a vote FOR the election of each of the following nominees for director. Eight directors stand for re-election; one new
nominee stands for election. Additional information about each director’s background and experience can be found beginning on page 12.

Name

Director
Since

Age

Thomas Everist

1995

Karen B. Fagg

2005

Primary Occupation

Board Committees

President and chair of The Everist Company,
an investment and land development company,
formerly engaged in aggregate, concrete, and
asphalt production

Former vice president of DOWL LLC,
dba DOWL HKM, an engineering and design
firm

• Compensation
• Nominating and Governance

• Compensation
• Environmental and Sustainability (Chair)

David L. Goodin

2013

President and chief executive officer,
MDU Resources Group, Inc.

Dennis W. Johnson

2001

Patricia L. Moss

2003

Dale S. Rosenthal

Nominee

Chair, president, and chief executive officer of
TMI Group Incorporated, manufacturers of
casework and architectural woodwork

Former president and chief executive officer of
Cascade Bancorp, a financial holding
company, subsequently merged into First
Interstate Bank

Former senior executive, including strategic
director, division president of Clark Financial
Group, and chief financial officer of Clark
Construction Group, a building and civil
construction firm

Executive officer

Chair of the board

• Compensation
• Environmental and Sustainability

Edward A. Ryan

2018

Former executive vice president and general
counsel of Marriott International

• Audit
• Nominating and Governance (Chair)

David M. Sparby

2018

Former senior vice president and group
president, revenue, of Xcel Energy and
president and chief executive officer of its
subsidiary, NSP-Minnesota

• Audit (Chair)
• Nominating and Governance

Chenxi Wang

2019

Founder and managing general partner of Rain
Capital Fund, L.P., a cybersecurity-focused
venture fund

• Audit
• Environmental and Sustainability

2 MDU Resources Group, Inc. Proxy Statement

Proxy Statement

Corporate Governance Practices

MDU Resources Group, Inc. is committed to strong corporate governance practices. The following highlights our corporate governance
practices and policies. See the sections entitled “Corporate Governance” and “Executive Compensation” for more information on the
following:

ü Annual Election of All Directors

ü Majority Voting for Directors

ü No Shareholder Rights Plan

ü Standing Committees Consist Entirely of Independent

Directors

ü Active Investor Outreach Program

ü One Class of Stock

ü Succession Planning and Implementation Process

ü Stock Ownership Requirements for Directors and Executive

Officers

ü Separate Board Chair and CEO

ü Anti-Hedging and Anti-Pledging Policies for Directors and

Executive Officers

ü Executive Sessions of Independent Directors at Every

Regularly Scheduled Board Meeting

ü No Related Party Transactions by Our Directors or Executive

Officers

ü Annual Board and Committee Self-Evaluations

ü Compensation Recovery/Clawback Policy

ü Risk Oversight by Full Board and Committees

ü Annual Advisory Approval on Executive Compensation

ü All Directors are Independent Other Than Our CEO

ü Mandatory Retirement for Directors at Age 76

ü Proxy Access for Stockholders

ü Directors May Not Serve on More Than Three Public Boards

Including the Company’s Board

Governance Highlights

We are committed to strong corporate governance aligned with stockholder interests. The board, through its nominating and governance
committee, regularly monitors leading practices in governance and adopts measures that it determines are in the best interests of the
company and its stockholders.

■ Four new independent directors have been appointed or nominated for election to the board since 2018, two of whom are women

including one who is ethnically diverse.

■ The environmental and sustainability committee was established in 2019 as a standing committee of the board of directors to oversee

environmental, workplace health, safety, human capital, and other social sustainability matters that fundamentally affect the company’s
business and long-term viability.

■ The company released its enhanced Sustainability Report in May 2020, which can be found at www.mdu.com/sustainability. The
information on our website is not part of this Proxy Statement and is not incorporated by reference as part of this Proxy Statement.

■ Membership of all committees of the board of directors consists entirely of independent directors.

■ An emergency succession plan was adopted in 2020 for the temporary appointment of an acting chair of the board of directors or an

acting executive officer in the event of an unplanned and extended absence.

MDU Resources Group, Inc. Proxy Statement 3

Proxy Statement

Business Performance Highlights

Throughout 2020, all our business segments performed well despite challenges presented by the COVID-19 pandemic. Our overall
performance in 2020 was consistent with our long-term strategy as we focused on growing our regulated energy delivery and construction
materials and services business segments. In addition to our 2020 financial performance highlighted on the next page, our significant
accomplishments include:

■ As providers of essential services, our businesses continued operations in a safe manner during the COVID-19 pandemic and continued

to grow its overall workforce. Our 2020 peak employment of 15,668 reached during the third quarter exceeded our 2019 peak
employment of 15,022.

■ Invested capital expenditures of $648.3 million into our businesses.

■ The electric segment plans to retire three aging coal-fired electric generation units at two locations within the next two years and

construct a new simple-cycle natural gas combustion turbine. The retirement of the 44-megawatt Lewis & Clark Station in Sidney,
Montana is expected in early 2021, and the Heskett units 1 and 2, which combine for 100 megawatts, will be retired in early 2022.
Subject to regulatory approval, a new 88-megawatt simple-cycle peaking unit at the Heskett Station will be constructed in 2023.

■ The construction materials and contracting segment acquired the assets of Oldcastle Infrastructure Spokane, the Washington-based

prestressed-construction business previously owned by Oldcastle Infrastructure, as well as the assets, including nearly 100 million tons
of aggregate reserves, of McMurry Ready-Mix Co., an aggregate and concrete supplier based in Casper, Wyoming.

■ The construction materials and contracting segment continued development of new aggregate reserves near Burnett, Texas. The quarry,
which began production in December 2020, contains an estimated 40-year supply of high quality aggregates enabling the segment to
supply a significant portion of the aggregate materials used for its local construction activity and production of ready-mixed concrete
and asphalt products, along with third-party sales in its Texas market.

■ The pipeline segment in 2020 transported record natural gas volumes for the fourth consecutive year. The segment completed

construction of Phase II of the Line Section 22 Project near Billings, Montana in September 2020. The project provides additional
design capacity of 22.5 MMcf per day. This segment experienced increased customer demand for its natural gas storage services ending
2020 with a storage balance over 9 Bcf higher than 2019.

■ The pipeline segment continued construction plans for its North Bakken Expansion Project which includes new pipeline, compression,
and ancillary facilities to transport natural gas from core Bakken production areas near Tioga, North Dakota, to a new connection with
Northern Border Pipeline in McKenzie County, North Dakota. This project, as designed, would provide 250 million cubic feet per day of
incremental natural gas transportation capacity with estimated completion in 2021, pending regulatory and environmental permits.

■ The pipeline segment divested its Baker and Bowdoin natural gas gathering assets in 2020, exiting the gathering business.

■ The construction services segment was ranked as number 11 of the list of top specialty contractors in the nation, up from number 12 in

2019, by Engineering News Record based on annual revenues.

■ The construction services segment provided repair services for utility properties damaged by storms and wildfires.

■ The construction services segment acquired PerLectric, Inc., an electrical construction company in Fairfax, Virginia, in February 2020.

Performance from Continuing Operations

Electric Distribution

Retail Sales (million kWh)

Customers

Natural Gas Distribution

Retail Sales (MMdk)

Transportation (MMdk)

Customers

2016

2017

2018

2019

2020

3,258.5

3,306.5

3,354.4

3,314.3

3,204.5

142,948

142,901

143,022

143,346

143,782

99.3

147.6

112.6

144.5

112.6

149.5

123.7

166.1

114.5

160.0

922,408

938,867

957,727

977,468

997,146

Pipeline Transportation (MMdk)

285.3

312.5

351.5

429.7

438.6

Construction Materials and Contracting Revenues (millions)

$1,874.3

$1,812.5

$1,925.9

$2,190.7

$2,178.0

Construction Services Revenues (millions)

$1,073.3

$1,367.6

$1,371.5

$1,849.3

$2,095.7

4 MDU Resources Group, Inc. Proxy Statement

Proxy Statement

2020 Financial Performance Highlights

■ Despite challenges from the COVID-19 pandemic and associated weakness in the United States economy, the company exceeded the
financial targets set at the beginning of last year. Strong year-over-year performance from operations at both our regulated energy
delivery and construction materials and services segments resulted in an earnings increase of 16.3% in 2020 to $390.2 million, or
$1.95 per share, compared to 2019 earnings of $335.5 million, or $1.69 per share, including discontinued operations.

■ Our return on invested capital was 8.8%.

■ The chart below shows our progress over the last six years since our divestiture of oil and natural gas exploration assets and our interests

in a diesel refinery and natural gas processing plant.

* MDU Resources Group, Inc. reported 2017 earnings from continuing operations of $1.45 per
share which included a non-recurring benefit of 20 cents per share attributable to the federal
Tax Cuts and Jobs Act that was signed into law on December 22, 2017.

■ Returned $167 million to stockholders through dividends:

¨ Increased annual dividend for 30th straight year to 84 cents per share paid during 2020;

¨ Paid uninterrupted dividends for 83 straight years; and

¨ Member of the elite S&P High-Yield Dividend Aristocrat Index which recognizes companies within the S&P Composite 1500 Index

that have followed a managed dividend policy of consistently increasing dividends annually for at least 20 years.

■ Maintained BBB+ stable credit rating from Standard & Poor’s and Fitch rating agencies.1

■ Operating income from continuing operations increased from $481.2 million in 2019 to $544.9 million in 2020.

■ Earnings per common share before discontinued operations has grown 16.7% compounded annually since 2015.

30 Years

of Consecutive

Dividend Increases

Dividends Paid

$785 Million
Over the Last 5 Years

83 Years

of Uninterrupted

Dividend Payments

1 A securities rating is not a recommendation to buy, sell, or hold securities, and it may be revised or withdrawn at any time by the rating
agency.

MDU Resources Group, Inc. Proxy Statement 5

Earnings per Share from Continuing OperationsCAGR = 16.7%$0.90$1.19$1.25$1.38$1.69$1.95$0.20201520162017*201820192020$0.00$0.25$0.50$0.75$1.00$1.25$1.50$1.75$2.00
Proxy Statement

Compensation Highlights

The company’s executive compensation is based on providing market competitive compensation opportunities to attract top talent
focused on achievement of short and long-term business results. Our compensation program is structured to align compensation with the
company’s financial performance as a substantial portion of our executive compensation is directly linked to performance incentive awards.

■ Over 78% of our chief executive officer’s target compensation and over 66% of our other named executive officers’ target compensation

is performance based.

■ 100% of our chief executive officer’s annual and long-term incentive compensation is tied to performance against pre-established,

specific, measurable financial goals.

■ We require our executive officers to own a significant amount of company stock based upon a multiple of their base salary.

2020 Named Executive Officer Target Pay Mix

At the 2020 Annual Meeting, the company’s advisory vote
to approve executive compensation received support from
over 95% of the common stock represented at the
meeting and entitled to vote on the matter.

6 MDU Resources Group, Inc. Proxy Statement

Proxy Statement

Key Features of Our Executive Compensation Program

What We Do

þ Pay for Performance - Annual and long-term award incentives tied to performance measures set by the compensation committee

comprise the largest portion of executive compensation.

þ Independent Compensation Committee - All members of the compensation committee meet the independence standards under the

New York Stock Exchange listing standards and the Securities and Exchange Commission rules.

þ Independent Compensation Consultant - The compensation committee retains an independent compensation consultant to evaluate

executive compensation plans and practices.

þ Competitive Compensation - Executive compensation reflects executive performance, experience, relative value compared to other
positions within the company, relationship to competitive market value compensation, business segment economic environment,
and the actual performance of the overall company and the business segments.

þ Annual Cash Incentive - Payment of annual cash incentive awards are based on business segment and overall company performance

against pre-established annual financial measures.

þ Long-Term Equity Incentive - Long-term incentive awards may be earned at the end of a three-year period based on achieving pre-
established measures and are paid through shares of common stock which encourages stock ownership and helps retain
management talent.

þ Balanced Mix of Pay Components - The target compensation mix represents a balance of annual cash and long-term equity-based

compensation.

þ Mix of Financial Goals - Use of a mixture of financial goals to measure performance prevents overemphasis on a single metric.
þ Annual Compensation Risk Analysis - Risks related to our compensation programs are regularly analyzed through an annual

compensation risk assessment.

þ Stock Ownership and Retention Requirements - Executive officers are required to own, within five years of appointment or promotion,
company common stock equal to a multiple of their base salary. Our president and chief executive officer is required to own stock
equal to four times his base salary, and the other named executive officers are required to own stock equal to three times their
base salary. The executive officers also must retain at least 50% of the net after-tax shares of stock vested through the long-term
incentive plan for the earlier of two years or until termination of employment. Net performance shares must also be held until
share ownership requirements are met.

þ Clawback Policy - If the company’s audited financial statements are restated due to any material noncompliance with the financial
reporting requirements under the securities laws, the compensation committee may, or shall if required, demand repayment of
some or all incentives paid to our executive officers within the last three years.

What We Do Not Do

ý Stock Options - The company does not use stock options as a form of incentive compensation.
ý Employment Agreements - Executives do not have employment agreements entitling them to specific payments upon termination or

a change of control of the company.

ý Perquisites - Executives do not receive perquisites that materially differ from those available to employees in general.
ý Hedge Stock - Executives are not allowed to hedge company securities.
ý Pledge Stock - Executives are not allowed to pledge company securities in margin accounts or as collateral for loans.
ý No Dividends or Dividend Equivalents on Unvested Shares - We do not provide for payment of dividends or dividend equivalents on

unvested share awards.

ý Tax Gross-Ups - Executives do not receive tax gross-ups on their compensation.

ý No Pandemic Adjustments - We made no changes or adjustments to the 2020 annual incentive or outstanding long-term incentive

plan measures despite the pandemic.

MDU Resources Group, Inc. Proxy Statement 7

Proxy Statement

Corporate Responsibility, Environmental, and Sustainability Highlights

MDU Resources Group, Inc. is Building a Strong America® by providing essential products and services to our customers with a long-term
view toward sustainable operations. To ensure we can continue to provide these products and services in the communities where we do
business, we recognize we must preserve the trust our communities place in us to be a good corporate citizen. We remain committed to
pursuing responsible corporate environmental and sustainability practices and to maintaining the health and safety of the public and our
employees. In 2019, the board of directors established the environmental and sustainability committee as a standing committee of the
board. The committee meets quarterly in conjunction with the regular meetings of the board. The committee oversees and provides
recommendations to management and the board regarding environmental, workplace health, safety, human capital, and other social
sustainability matters that fundamentally affect the company’s business interests and long-term viability. To better serve our investors and
other stakeholders, in 2019 we began reporting environmental, social, governance, and sustainability (ESG/sustainability) metrics relevant
and important to our operations in frameworks that provide our stakeholders more uniform and transparent data and information, allowing
for comparison with our peers and other companies operating in our industries. For our electric and natural gas distribution segments, as
well as our pipeline segment, we report ESG/sustainability metrics using the reporting templates developed by the Edison Electric Institute
and the American Gas Association. For our other business segments, we report ESG/sustainability information under the frameworks
developed by the Sustainability Accounting Standards Board for our applicable industries. The use of the metrics developed by these
organizations provides for ESG/sustainability reporting tailored to our industries. The reports, along with our enhanced Sustainability Report
released in May 2020, can be found at www.mdu.com/sustainability. The information on our website is not part of this Proxy Statement
and is not incorporated by reference as part of this Proxy Statement.

These are some highlights of our recent efforts regarding sustainability:

■ As our renewable generation resource capacity has increased, we have reduced the carbon dioxide (CO2) emission intensity of our coal-

fired electric generation resource fleet by approximately 28% since 2005. We expect it to continue to decline with the planned
retirements of the Lewis & Clark Station and Heskett Units 1 and 2 coal generation facilities.

■ Renewable resources comprised approximately 27% of our current electric generation resource nameplate capacity in 2020.

■ Approximately 29.7% of the electricity delivered to our customers from company-owned generation in 2020 was from renewable

resources.

■ We invested approximately $168 million in environmental emission control equipment and other environmental improvements at our
coal-fired electric generation plants since 2005. The investments have resulted in substantial reductions in mercury, sulfur dioxide,
nitrogen oxide, and filterable particulate emissions from our coal-fired electric generation resources.

¨ 47% reduction in SO2 emissions since 2005.

¨ 60% reduction in NOx emissions since 2005.

■ Montana-Dakota Utilities Co. produces renewable natural gas (RNG) from the Billings Regional Landfill in Montana. The project came
online at the end of 2010 and has produced approximately 1.36 million dekatherm of RNG through year-end 2020. The RNG is
supplied to the vehicle fuel market generating renewable identification numbers (RINS) and low carbon fuel standard (LCFS) credits in
California and Oregon. In 2020, the Billings Landfill Plant produced approximately 1.53 million RINs and 1,547 LCFS credits.

8 MDU Resources Group, Inc. Proxy Statement

Percent of RenewablesPercent of Renewable Generation Resources0%4%11%22%27%20002008201020152020051015202530■ Our utility companies continue to receive high scores in customer satisfaction. Intermountain Gas Company ranked first, Cascade
Natural Gas Corporation second, and Montana-Dakota Utilities Co. fourth among West Region mid-sized natural gas utilities in the
2020 J.D. Power Gas Utility Residential Customer Satisfaction Study.SM

■ Although our utility companies have made substantial investments in their facilities, retail prices remain low providing value to

customers. Since 2016, our utility companies’ residential electric retail prices increased an average of 0.3% annually and residential
natural gas prices decreased an average of 1.0% annually. In comparison, the consumer price index (CPI) increased an average of 1.9%
annually over the same period.

Proxy Statement

■ WBI Energy’s estimated $260 million investment in the North Bakken Expansion Project will provide needed pipeline capacity to
transport increasing levels of associated natural gas from processing plants in the Williston Basin to markets in the Midwest. The
addition of processing and transportation capacity will assist in reducing associated natural gas flaring in the Williston Basin to meet
natural gas capture targets established by the State of North Dakota.

■ Knife River Corporation continues construction of a fully immersive training center near Albany, Oregon, to teach construction skills and

promote workforce development at Knife River as well as other companies, including minority and women-owned contractors. The
center will feature an 80,000 square-foot indoor arena, a 16,000 square-foot classroom building, and a number of large outdoor
training arenas. Instructors will provide hands-on training on construction equipment as well as classroom training and leadership
development. The indoor training arena is expected to be complete in spring 2021, and the classroom/conference room building is
expected to be complete in fall 2021.

■ Knife River Corporation produces and places warm-mix asphalt in applications where warm-mix asphalt is allowed. Warm-mix asphalt is
produced at cooler temperatures than traditional hot-mix asphalt methods, which reduces the amount of fuel needed in the production
process and thereby reduces emissions and fumes.

■ In certain of its markets, Knife River Corporation is offering concrete that incorporates carbon dioxide. Once injected, the carbon

dioxide mineralizes and becomes permanently embedded in the concrete. Beyond embedding carbon dioxide in concrete, an additional
goal of this process is to decrease the amount of cement required in Knife River Corporation’s production of concrete. This would
correspondingly reduce the amount of carbon dioxide released from suppliers’ production of cement.

■ Knife River Corporation continued its practice of recycling and reusing building materials. This conserves natural resources, uses less

energy, alleviates waste disposal problems in local landfills, and ultimately costs less for the consumer.

■ Knife River Corporation has invested in Blue Planet Systems Corporation to pursue the use of synthetic aggregates in ready-mix

concrete. Blue Planet is testing methods of creating synthetic limestone, using carbon dioxide captured from existing sources. The
synthetic limestone could then be used as a component of concrete. In addition to sequestering carbon dioxide through this process,
the use of synthetic limestone would prolong the life of natural aggregate sources.

■ Our employee safety DART (Days Away, Restricted or Transferred) rate of 0.95% was well below comparable industry averages. The

company experienced no employee fatalities in 2020.

MDU Resources Group, Inc. Proxy Statement 9

IndexResidential Prices Compared to Consumer PricesCPIElectric Residential Retail PricesNatural Gas Residential Prices20162017201820192020859095100105110Proxy Statement

■ In 2020, the company refreshed its Leading With Integrity Guide which is its code of conduct and ethics. The refreshed code helps

guide employees on our corporate culture and expectations on legal and ethical compliance.

■ The company and the MDU Resources Foundation contributed over $3 million to charitable organizations in 2020. Contributions by the

Foundation of over $2.5 million included $500,000 dedicated to charities providing relief to COVID-19 impacts.

■ We encourage and support community volunteerism by our employees. The MDU Resources Foundation contributes a $750 grant to an
eligible nonprofit organization after an employee or group of employees volunteer a minimum of 25 hours to the organization during
non-company hours during a calendar year. Eligible organizations are local 501(c) nonprofit organizations providing services in
categories of civic and community activities, culture and arts, education, environment, and health and human services. In 2020, the
foundation granted $77,000 under this program, matching over 7,200 employee volunteer hours.

■ We encourage support of educational institutions by all employees. The MDU Resources Foundation matches contributions to

educational institutions by employees up to $750.

29.7%

Over $3 Million

of 2020 Electricity Generated

Contributed to

From Renewable Resources

Charities

28%

Reduction in CO2 Intensity in
Our Electric Generation Fleet

Since 2005

10 MDU Resources Group, Inc. Proxy Statement

Proxy Statement

BOARD OF DIRECTORS

ITEM 1. ELECTION OF DIRECTORS

The board currently consists of ten directors. The board size will be fixed at nine directors effective as of the 2021 annual meeting. All of
the nominees are current directors of MDU Resources with the exception of Dale Rosenthal. All of the nominees are standing for election to
the board at the 2021 annual meeting to hold office until the 2022 annual meeting and until their successors are duly elected and
qualified. Two directors, Mark A. Hellerstein and John K. Wilson, will not stand for reelection, and their terms will expire at the company’s
2021 annual meeting.

The board has affirmatively determined all the director nominees, other than David L. Goodin, our president and chief executive officer, are
independent in accordance with New York Stock Exchange (NYSE) rules, our governance guidelines, and our bylaws.

Our bylaws provide for a majority voting standard for the election of directors. See “Additional Information - Majority Voting” below for
further detail.

Each of the director nominees has consented to be named in this proxy statement and to serve as a director, if elected. We do not know of
any reason why any nominee would be unable or unwilling to serve as a director, if elected. If a nominee becomes unable to serve or will not
serve, proxies may be voted for the election of such other person nominated by the board as a substitute or the board may choose to reduce
the number of directors.

Information about each director nominee’s share ownership is presented under “Security Ownership.”

The shares represented by the proxies received will be voted for the election of each of the nine nominees named below unless you indicate
in the proxy that your vote should be cast against any or all the director nominees or that you abstain from voting. Each nominee elected as
a director will continue in office until his or her successor has been duly elected and qualified or until the earliest of his or her resignation,
retirement, or death.

The nine nominees for election to the board at the 2021 annual meeting, all proposed by the board upon recommendation of the
nominating and governance committee, are listed below with brief biographies. The nominees’ ages are current as of December 31, 2020.

The board of directors recommends that the stockholders

vote FOR the election of each nominee.

MDU Resources Group, Inc. Proxy Statement 11

Proxy Statement

Director Nominees

Thomas Everist
Age 71

Independent Director Since 1995
Compensation Committee
Nominating and Governance Committee

Other Current Public Boards:
--Raven Industries, Inc.

Key Contributions to the Board: With a 44-year career in the construction materials and mining industry,
Mr. Everist brings critical knowledge of the construction materials and contracting industry to the board.
Mr. Everist also contributes strong business leadership and management capabilities and insights through
his role as president and chair of his companies for over 33 years. His service on the board of another public
company further enhances his contributions to the board.

Career Highlights

• President and chair of The Everist Company, Sioux Falls, South Dakota, an investment and land development company, since April

2002. Prior to January 2017, The Everist Company was engaged in aggregate, concrete, and asphalt production.

• Managing member of South Maryland Creek Ranch, LLC, a land development company, since June 2006; president of SMCR, Inc., an
investment company, since June 2006; and managing member of MCR Builders, LLC, which provides residential building services to
South Maryland Creek Ranch, LLC, since November 2014.

• Director and chair of the board of Everist Health, Inc., Ann Arbor, Michigan, which provides solutions for personalized medicines, since

2002, and chief executive officer from August 2012 to December 2012.

• President and chair of L.G. Everist, Inc., Sioux Falls, South Dakota, an aggregate production company, from 1987 to April 2002.

Other Leadership Experience

• Director of publicly traded Raven Industries, Inc., Sioux Falls, South Dakota, a general manufacturer of electronics, flow controls, and

engineered films, since 1996, and chair from April 2009 to May 2017.

• Director and compensation committee chair of Bell, Inc., Sioux Falls, South Dakota, a manufacturer of folding cartons and packages,

since April 2011.

• Director and audit committee chair of Showplace Wood Products, Inc., Sioux Falls, South Dakota, a custom cabinets manufacturer,

since January 2000.

• Director of Angiologix Inc., Mountain View, California, a medical diagnostic device company, from July 2010 through October 2011

when it was acquired by Everist Genomics, Inc.

• Member of the South Dakota Investment Council, the state agency responsible for investing state funds, from July 2001 to June 2006.

Karen B. Fagg
Age 67

Independent Director Since 2005
Compensation Committee
Environmental and Sustainability Committee

Key Contributions to the Board: Through her management experience and knowledge in the fields of engineering,
environment, and energy resource development, including four years as director of the Montana Department of
Natural Resources and Conservation and over eight years as president, chief executive officer, and chair of her
own engineering and environmental services company, as well as her service on a number of Montana state and
community boards, Ms. Fagg contributes experience in responsible natural resource development with an
informed perspective of the construction, engineering, and energy industries.

Career Highlights

• Vice president of DOWL LLC, dba DOWL HKM, an engineering and design firm, from April 2008 until her retirement in December 2011.

• President of HKM Engineering, Inc., Billings, Montana, an engineering and environmental services firm, from April 1995 to June 2000,

and chair, chief executive officer, and majority owner from June 2000 through March 2008. HKM Engineering, Inc. merged with
DOWL LLC in April 2008.

• Employed with MSE, Inc., Butte, Montana, an energy research and development company, from 1976 through 1988, and vice president

of operations and corporate development director from 1993 to April 1995.

• Director of the Montana Department of Natural Resources and Conservation, Helena, Montana, the state agency charged with promoting

stewardship of Montana’s water, soil, energy, and rangeland resources; regulating oil and gas exploration and production; and
administering several grant and loan programs, for a four-year term from 1989 through 1992.

Other Leadership Experience

• Chair of SCL Health Montana Regional Board from January 2020 to present; and member of Carroll College Board of Trustees from

2005 through 2010 and August 2019 to present.

• Former member of several regional, state, and community boards, including director of St. Vincent’s Healthcare from October 2003 to
October 2009 and January 2016 through December 2019, including a term as chair; director of the Billings Catholic Schools Board
from December 2011 through December 2018, including a term as chair; the First Interstate BancSystem Foundation from June 2013
to 2016; the Montana Justice Foundation from 2013 into 2015; Montana Board of Investments from 2002 through 2006; Montana
State University’s Advanced Technology Park from 2001 to 2005; and Deaconess Billings Clinic Health System from 1994 to 2002.

12 MDU Resources Group, Inc. Proxy Statement

Proxy Statement

David L. Goodin
Age 59

Director Since 2013
President and Chief Executive Officer

Key Contributions to the Board: Serving as president and chief executive officer of MDU Resources Group, Inc.
since 2013, Mr. Goodin is the only officer of the company that serves on our board. With 30 years of operating
and leadership positions with our utility operations and eight years in his current position, he brings utility
industry experience to the board as well as extensive knowledge of our company and its business operations.
He contributes valuable insight into management’s views and perspectives and the day-to-day operations of the
company.

Career Highlights

• President and chief executive officer and a director of the company since January 4, 2013.

• Prior to January 4, 2013, served as chief executive officer and president of Intermountain Gas Company, Cascade Natural Gas

Corporation, Montana-Dakota Utilities Co., and Great Plains Natural Gas Co.

• Began his career in 1983 at Montana-Dakota Utilities Co. as a division electrical engineer and served in positions of increasing
responsibility until 2007 when he was named president of Cascade Natural Gas Corporation; positions included division electric
superintendent, electric systems manager, vice president-operations, and executive vice president-operations and acquisitions.

Other Leadership Experience

• Member of the U.S. Bancorp Western North Dakota Advisory Board since January 2013.

• Director of Sanford Bismarck, an integrated health system dedicated to the work of health and healing, and Sanford Living Center, since

January 2011.

• Board member of the BSC Innovations Foundation, an extension of Bismarck State College providing curriculum to Saudi Arabia

industries, since August 1, 2018.

• Former board member of numerous industry associations, including the American Gas Association, the Edison Electric Institute, the

North Central Electric Association, the Midwest ENERGY Association, and the North Dakota Lignite Energy Council.

Dennis W. Johnson
Age 71

Independent Director Since 2001
Chair of the Board

Key Contributions to the Board: With over 46 years of experience in business management, manufacturing,
and finance, holding positions as chair, president, and chief executive officer of TMI Group Incorporated for 39
years, as well as his prior service as a director of the Federal Reserve Bank of Minneapolis, Mr. Johnson brings
operational, management, strategic planning, specialty contracting, and financial knowledge and insight to the
board. Mr. Johnson also contributes significant knowledge of local, state, and regional issues involving North
Dakota, the state where we are headquartered and have significant operations, resulting from his service on
several state and local organizations.

Career Highlights

• Chair of the board of the company effective May 8, 2019; and vice chair of the board from February 15, 2018 to May 8, 2019.

• Chair, president, and chief executive officer of TMI Group Incorporated as well as its two wholly owned subsidiary companies, TMI
Corporation and TMI Transport Corporation, manufacturers of casework and architectural woodwork in Dickinson, North Dakota;
employed since 1974 and serving as president or chief executive officer since 1982.

Other Leadership Experience

• Member of the Bank of North Dakota Advisory Board of Directors since August 2017.

• President of the Dickinson City Commission from July 2000 through October 2015.

• Director of the Federal Reserve Bank of Minneapolis from 1993 through 1998.

• Served on numerous industry, state, and community boards, including the North Dakota Workforce Development Council (chair); the

Decorative Laminate Products Association; the North Dakota Technology Corporation; and the business advisory council of the Steffes
Corporation, a metal manufacturing and engineering firm.

• Served on North Dakota Governor Sinner’s Education Action Commission; the North Dakota Job Service Advisory Council; the North
Dakota State University President’s Advisory Council; North Dakota Governor Schafer’s Transition Team; and chaired North Dakota
Governor Hoeven’s Transition Team.

MDU Resources Group, Inc. Proxy Statement 13

Proxy Statement

Patricia L. Moss

Age 67

Independent Director Since 2003
Compensation Committee
Environmental and Sustainability Committee

Other Current Public Boards:
--First Interstate BancSystem, Inc.
--Aquila Group of Funds

Key Contributions to the Board: With substantial experience in the finance and banking industry, including
service on the boards of public banking and investment companies, Ms. Moss contributes broad knowledge of
finance, business development, human resources, and compliance oversight, as well as public company
governance, to the board. Through her business experience and knowledge of the Pacific Northwest, Ms. Moss
also provides insight on state, local, and regional economic and political issues where a significant portion of
our operations and the largest number of our employees are located.

Career Highlights

• President and chief executive officer of Cascade Bancorp, a financial holding company, Bend, Oregon, from 1998 to January 3, 2012;
chief executive officer of Cascade Bancorp’s principal subsidiary, Bank of the Cascades, from 1998 to January 3, 2012, serving also as
president from 1998 to 2003; and chief operating officer, chief financial officer and secretary of Cascade Bancorp from 1987 to 1998.

Other Leadership Experience

• Member of the Oregon Investment Council, which oversees the investment and allocation of all state of Oregon trust funds, since

December 2018.

• Director of First Interstate BancSystem, Inc., since May 30, 2017.

• Director of Cascade Bancorp and Bank of the Cascades from 1993, and vice chair from January 3, 2012 until May 30, 2017 when

Cascade Bancorp merged into First Interstate BancSystem, Inc., and became First Interstate Bank.

• Chair of the Bank of the Cascades Foundation Inc. from 2014 to July 31, 2018; co-chair of the Oregon Growth Board, a state board

created to improve access to capital and create private-public partnerships, from May 2012 through December 2018; and a member of
the Board of Trustees for the Aquila Group of Funds, whose core business is mutual fund management and provision of investment
strategies to fund shareholders, from January 2002 to May 2005 (one fund) and from June 2015 to present (currently three funds).

• Former director of the Oregon Investment Fund Advisory Council, a state-sponsored program to encourage the growth of small businesses

in Oregon; the Oregon Business Council, with a mission to mobilize business leaders to contribute to Oregon’s quality of life and
economic prosperity; the North Pacific Group, Inc., a wholesale distributor of building materials, industrial, and hardwood products; and
Clear Choice Health Plans Inc., a multi-state insurance company.

Dale S. Rosenthal
Age 64

Independent Director Nominee

Key Contributions to the Board: With 22 years of experience with an integrated construction company, serving in
senior executive positions as strategic director, division president, and chief financial officer, Ms. Rosenthal
contributes expertise in construction, alternative energy, real estate and infrastructure development, risk
management, and corporate strategy. Ms. Rosenthal also brings public board experience with a regulated
public utility company.

Career Highlights

• Strategic director of Clark Construction Group, LLC, a vertically integrated construction company headquartered in Bethesda, Maryland,

from January 2017 to December 2017; division president of Clark Financial Services Group, leveraging Clark’s core turnkey construction
expertise into alternative energy development, from April 2008 to December 2016; chief financial officer and senior vice president of
Clark Construction Group, LLC, from April 2000 to April 2008; and established a Clark subsidiary, Global Technologies Group, which
developed and built data centers for early internet service providers. Ms. Rosenthal joined Clark Construction in 1996.

• Led financing teams for several tax-credit financed housing developers and was instrumental in identifying new sources of funding and

innovative tax structures for complex transactions.

Other Leadership Experience

• Director of Washington Gas Light Company, formerly publicly traded and now a subsidiary of AltaGas Ltd., since October 2014, and

chair of the audit committee since July 2018. Washington Gas is a regulated public utility company that sells and delivers natural gas in
the District of Columbia and surrounding metropolitan areas.

• Board advisor of Langan Engineering & Environmental Services, a provider of an integrated mix of engineering and environmental

consulting services in support of land development projects, corporate real estate portfolios, and the oil and gas industry, since March
2020.

• Member, Board of Trustees of Cornell University since June 2017, serving on the finance and building and properties committees.

14 MDU Resources Group, Inc. Proxy Statement

Proxy Statement

Edward A. Ryan
Age 67

Independent Director Since 2018
Audit Committee
Nominating and Governance Committee

Key Contributions to the Board: As a former executive vice president and general counsel for a large public
company with international operations, Mr. Ryan contributes expertise to the board in the areas of corporate
governance, acquisitions, risk management, legal, compliance, and labor relations. Mr. Ryan also brings
senior leadership, transactional, and public company experience.

Career Highlights

• Advisor to the chief executive officer and president of Marriott International from December 2017 to December 31, 2018.

• Executive vice president and general counsel of Marriott International from December 2006 to December 2017; senior vice president
and associate general counsel from 1999 to November 2006; and assumed responsibility for all corporate transactions and corporate
governance in 2005. Mr. Ryan joined Marriott International as assistant general counsel in May 1996.

• Private law practice from 1979 to 1996.

Other Leadership Experience

• Chair of Goodwill of Greater Washington, D.C., a non-profit organization whose mission is to transform lives and communities through

education and employment, effective January 1, 2020, where he has served as a director since January 2015, including a term as vice
chair from January 2019 through December 2019 and chair of the finance committee from January 2018 through December 2019.

David M. Sparby
Age 66

Independent Director Since 2018
Audit Committee
Nominating and Governance Committee

Key Contributions to the Board: With over 32 years of public utility management and leadership experience with
a large public utility company, including positions as senior vice president and as chief financial officer,
Mr. Sparby provides a broad understanding of the public utility and natural gas pipeline industries, including
renewable energy expertise. His lengthy senior leadership experience with a public company also contributes
to the board.

Career Highlights

• Senior vice president and group president, revenue, of Xcel Energy and president and chief executive officer of its subsidiary, NSP-

Minnesota, from May 2013 until his retirement in December 2014; senior vice president and group president, from September 2011 to
May 2013; chief financial officer from March 2009 to September 2011; and president and chief executive officer of NSP-Minnesota
from 2008 to March 2009. He joined Xcel Energy, or its predecessor Northern States Power Company, as an attorney in 1982 and held
positions of increasing responsibility.

• Attorney with the State of Minnesota, Office of Attorney General, from 1980 to 1982, during which period his responsibilities included

representation of the Department of Public Service and the Minnesota Public Utilities Commission.

Other Leadership Experience

• Board of Trustees of Mitchell Hamline School of Law from July 2011 to July 2020.

• Board of Trustees of the College of St. Scholastica since July 2012, including service as chair effective September 2020.

MDU Resources Group, Inc. Proxy Statement 15

Proxy Statement

Chenxi Wang
Age 50

Independent Director Since 2019
Audit Committee
Environmental and Sustainability Committee

Key Contributions to the Board: Having significant technology and cybersecurity expertise through her
management and leadership positions with several organizations, Ms. Wang contributes knowledge to the
board on technology and cybersecurity issues. As the founder and managing general partner of a cybersecurity-
focused venture fund, Ms. Wang also provides knowledge regarding capital markets and business development.

Career Highlights

• Founder and managing general partner of Rain Capital Fund, L.P., a cybersecurity-focused venture fund aiming to fund early-stage,
transformative technology innovations in the security market with a goal of supporting women and minority entrepreneurs, since
December 2017.

• Chief strategy officer at Twistlock, an automated and scalable cloud native cybersecurity platform, from August 2015 to February 2017.

• Vice president, cloud security & strategy of CipherCloud, a cloud security software company, from January 2015 to August 2015.

• Vice president of strategy of Intel Security, a company focused on developing proactive, proven security solutions and services that

protect systems, networks, and mobile devices, from April 2013 to January 2015.

• Principal analyst and vice president of research at Forrester Research, a market research company that provides advice on existing and

potential impact of technology, from January 2007 to April 2013.

• Assistant research professor and associate professor of computer engineering at Carnegie Mellon University from September 2001

through August 2007.

Other Leadership Experience

• Technical Board of Advisors of Secure Code Warriors, a Sydney-based cybersecurity company, since June 2019.

• Board of directors of OWASP Global Foundation, a nonprofit global community that drives visibility and evolution in the safety and

security of the world’s software, from January 2018 to December 2019, including a term as vice chair.

• Recipient of the 2019 Investor in Women Award by Women Tech Founders Foundation, an organization dedicated to advancing women

in the tech industry.

• Board of advisors of Keyp GmbH, a Munich-based software company with a mission to provide enterprises convenient access to the

digital identity ecosystem, from December 2017 to August 2019.

16 MDU Resources Group, Inc. Proxy Statement

Proxy Statement

Additional Information - Majority Voting
A majority of votes cast is required to elect a director in an uncontested election. A majority of votes cast means the number of votes cast
“for” a director’s election must exceed the number of votes cast “against” the director’s election. “Abstentions” and “broker non-votes” do
not count as votes cast “for” or “against” the director’s election. In a contested election, which is an election in which the number of
nominees for director exceeds the number of directors to be elected and which we do not anticipate, directors will be elected by a plurality
of the votes cast.

Unless you specify otherwise when you submit your proxy, the proxies will vote your shares of common stock “for” all directors nominated by
the board of directors. If a nominee becomes unavailable for any reason or if a vacancy should occur before the election, which we do not
anticipate, the proxies will vote your shares in their discretion for another person nominated by the board.

Our policy on majority voting for directors contained in our corporate governance guidelines requires any proposed nominee for re-election as
a director to tender to the board, prior to nomination, his or her irrevocable resignation from the board that will be effective, in an
uncontested election of directors only, upon:

• receipt of a greater number of votes “against” than votes “for” election at our annual meeting of stockholders; and

• acceptance of such resignation by the board of directors.

Following certification of the stockholder vote, the nominating and governance committee will promptly recommend to the board whether or
not to accept the tendered resignation. The board will act on the nominating and governance committee’s recommendation no later than 90
days following the date of the annual meeting.

Brokers may not vote your shares on the election of directors if you have not given your broker specific instructions on how to vote. Please
be sure to give specific voting instructions to your broker so your vote can be counted.

Board Evaluations and Process for Selecting Directors

Our corporate governance guidelines require that the board, in coordination with the nominating and governance committee, annually
reviews and evaluates the performance and functioning of the board and its committees. During 2020, each director completed an
anonymous written questionnaire with the opportunity to provide comments. In addition, committee members completed a separate written
questionnaire directed to the operation of the respective committees. The chair of the nominating and governance committee then
conducted individual interviews with each director. The results of the written questionnaires were aggregated and provided to the board and
each committee, and the chair of the nominating and governance committee summarized and shared input from the individual interviews in
an executive session of the board.

As part of the annual board evaluation process, the nominating and governance committee evaluates our directors considering the current
needs of the board and the company. In addition, during the year, the committee discusses board succession and reviews potential
candidates. Although the committee may also retain a third party to assist in identifying potential nominees, none were retained in 2020.

Our governance guidelines provide that directors are not eligible to be nominated or appointed to the board if they are 76 years or older at
the time of the election or appointment. Term limits on directors’ service have not been instituted.

Director Qualifications, Skills, and Experience
Director nominees are chosen to serve on the board based on their qualifications, skills, and experience, as discussed in their biographies,
and how those characteristics supplement the resources and talent on the board and serve the current needs of the board and the company.

In making its nominations, the nominating and governance committee also assesses each director nominee by a number of key
characteristics, including character, success in a chosen field of endeavor, background in publicly traded companies, independence, and
willingness to commit the time needed to satisfy the requirements of board and committee membership. Although the committee has no
formal policy regarding diversity, in recommending director nominees the committee considers diversity in gender, ethnic background,
geographic area of residence, skills, and professional experience.

MDU Resources Group, Inc. Proxy Statement 17

56%

Proxy Statement

The following shows core specialized competencies and other characteristics of the director nominees.

CORE SPECIALIZED COMPETENCES

EXECUTIVE MANAGEMENT/PUBLIC COMPANY
Served as CEO or other senior executive of an organization or
as a director of another publicly traded company

100%

INDUSTRY EXPERIENCE
Experience in our businesses and related industries, including
public utilities, natural gas pipelines, construction, and
aggregate mining

56%

ACCOUNTING/FINANCE
Experience in the preparation and review of ﬁnancial
statements and ﬁnancial reports

CAPITAL MARKETS
Experience overseeing company ﬁnancings, investments,
capital structures, and ﬁnancial strategy

44%

56%

LEGAL/CORPORATE GOVERNANCE
Experience in dealing with complex legal and public company
governance issues

56%

ENVIRONMENT/SCIENCE
Experience addressing environmental and sustainability
issues relating to our businesses

INFORMATION TECHNOLOGY/CYBERSECURITY
Oversight of or signiﬁcant background working with information
technology systems, data management and cybersecurity risks

11%

GOVERNMENT/REGULATORY/PUBLIC AFFAIRS
Background or experience in governmental regulations
and public policy issues affecting our businesses

RISK MANAGEMENT AND COMPLIANCE
Regulatory and compliance expertise or experience in the
identiﬁcation, assessment and mitigation of risks facing our
company

100%

TENURE
The average tenure of the director nominees
is approximately 10.7 years, which reﬂects a
balance of company experience and new
perspectives.

# of Years
of Service

0-4

5-10

11+

DIVERSITY
The board is committed to having a diverse
and broadly inclusive membership.

GENDER
Four of our nine director nominees are women.

44%

RACE/ETHNICITY
One of our nine director nominees is ethnically
diverse.

11%

INDEPENDENCE
The company’s corporate governance guidelines
require that a substantial majority of the board
must be independent. The board has
determined that all director nominees, other
than Mr. Goodin, meet the independence
standards set by the NYSE and SEC.

89%

Nominee Independence

18 MDU Resources Group, Inc. Proxy Statement

Proxy Statement

Board Composition and Refreshment
The nominating and governance committee is committed to ensuring that the board reflects a diversity of experience, skills, and
backgrounds to serve the company’s governance and strategic needs. Each of the nominees has been nominated for election to the board of
directors upon recommendation by the nominating and governance committee and each has decided to stand for election.

In evaluating the needs of the board and the company, the nominating and governance committee focuses on identifying board candidates
that will add gender and ethnic diversity along with relevant industry and leadership experience to the board as well as a background and
core competencies in the fields of technology, cybersecurity, and public company governance. Potential director nominees were brought to
the attention of the nominating and governance committee by board members, management, organizations, and database searches.

The nominating and governance committee continues to identify individuals as potential board of director candidates, particularly
individuals with industry experience to support the company’s strategy to grow its two business platforms of regulated energy delivery and
construction materials and services. The nominating and governance committee identified and recommended Dale Rosenthal for nomination
to the board in 2021 based on her financial expertise and relevant experience in the construction and public utility industries as well as her
addition to the board’s gender and geographic diversity.

By tenure, if the nominees are elected, the board will be comprised of four directors who have served from 0-4 years, one director who has
served from 5-10 years, and four directors who have served over 11 years. The nominating and governance committee believes this mix of
director tenures provides a balance of experience and institutional knowledge with fresh perspectives.

MDU Resources Group, Inc. Proxy Statement 19

Proxy Statement

CORPORATE GOVERNANCE AND THE BOARD OF DIRECTORS

Director Independence

The board of directors has adopted guidelines on director independence that are included in our corporate governance guidelines. Our
guidelines require that a substantial majority of the board consists of independent directors. In general, the guidelines require that an
independent director must have no material relationship with the company directly or indirectly, except as a director. The board determines
independence on the basis of the standards specified by the NYSE, the additional standards referenced in our corporate governance
guidelines, and other facts and circumstances the board considers relevant. Based on its review, the board has determined that all directors,
except for our chief executive officer Mr. Goodin, have no material relationship with the company and are independent.

In determining director independence, the board of directors reviewed and considered information about any transactions, relationships, and
arrangements between the non-employee directors and their immediate family members and affiliated entities on the one hand, and the
company and its affiliates on the other, and in particular the following transactions, relationships, and arrangements:

• Charitable contributions by the company and the MDU Resources Foundation (Foundation) to nonprofit organizations where a director or

immediate family member served as an officer or director of the organization. The company and the Foundation made charitable
contributions to five such nonprofit organizations that collectively totaled $20,500. None of the contributions made to any of the
nonprofit entities exceeded 2% of the relevant entity’s consolidated gross revenues.

• Business relationships with entities with which a director or director nominee is affiliated. Mr. Wilson is a member of the board of

directors of HDR, Inc., an architectural, engineering, environmental, and consulting firm. The company paid HDR, Inc. or its affiliates
approximately $1,161,000 in 2020 for services which were provided in the ordinary course of business and on substantially the same
terms prevailing for comparable services from other consulting firms. Mr. Wilson had no role in securing or promoting HDR, Inc. services
and the relationship did not affect his independence under our corporate governance guidelines or the NYSE listing standards.

The board has also determined that all members of the audit, compensation, and nominating and governance committees of the board are
independent in accordance with our guidelines and applicable NYSE and Securities Exchange Act of 1934 rules.

Sustainability and Social Responsibility

We view corporate responsibility as critical to our sustainability. While we are always focused on delivering strong financial performance, we
are committed to doing so in a responsible manner that recognizes and respects the interests of all our stakeholders.

In recognition of its social responsibility and sustainability commitments, the board of directors in May 2019 formed the environmental and
sustainability committee as a standing committee of the board with particular focus on our environmental, workplace health, safety, human
capital, and other social sustainability programs and performance. Our environmental and sustainability committee is discussed further on
page 26.

Also in 2019, we began reporting environmental, social, governance, and sustainability (ESG/sustainability) metrics relevant and important
to our operations in frameworks that provide our stakeholders more uniform and transparent data and information, allowing for comparison
with our peers and other companies operating in our industries. For our electric and natural gas distribution segments, as well as our
pipeline segment, we report ESG/sustainability metrics using the reporting templates developed by the Edison Electric Institute and the
American Gas Association. For our other business segments, we report ESG/sustainability information under the frameworks developed by
the Sustainability Accounting Standards Board for our applicable industries. The use of the metrics developed by these organizations
provides for ESG/sustainability reporting tailored to our industries. The reports, along with our enhanced Sustainability Report released in
May 2020, can be found at www.mdu.com/sustainability. The information on our website is not part of this Proxy Statement and is not
incorporated by reference as part of this Proxy Statement.

The company believes in a corporate social responsibility and its fundamental commitment to its stakeholders: customers, employees,
suppliers, communities, and stockholders. With the company’s origin and rich history in providing electric and natural gas utility service to
rural communities in the Dakotas, Montana, and Wyoming, our utility companies have long operated under the motto, “In the Community to
Serve®.” With the addition of our construction businesses to our legacy of regulated energy delivery businesses, we define our purpose as
“Building a Strong America®” in recognition of our mission to deliver value to our stakeholders. In 2007, the company adopted its Leading
With Integrity Guide, which sets out our commitments to stakeholders:

20 MDU Resources Group, Inc. Proxy Statement

Proxy Statement

• Commitment to Integrity. We will conduct business legally and ethically with our best skills and judgment.

• Commitment to Shareholders. We will act in the best interests of our corporation and protect its assets.

• Commitment to Employees. We will work together to provide a safe and positive workplace.

• Commitment to Customers, Suppliers, and Competitors. We will compete in business only by lawful and ethical means.

• Commitment to Communities. We will be a responsible and valued corporate citizen.

Further detail on our commitments to our stakeholders can be found at www.mdu.com/commitmenttointegrity.

Human Capital Management
At the core of Building a Strong America® is building a strong team of employees with a focus on safety and a commitment to diversity and
inclusion. While the number of our employees fluctuates throughout the year due to the seasonality and the number and size of construction
projects, our team included 12,994 employees at December 31, 2020 located in 40 states plus Washington D.C.

The company is committed to safety and health in the workplace and subscribes to the principle that all injuries can be prevented. To
facilitate a strong safety culture and ensure safe work environments, the company established its Safety Leadership Council to identify and
adopt best practices in the prevention of occupationally induced injuries and illness as well as monitoring the effectiveness of the company's
safety and environmental health programs. The company has policies and training that support safety in the workplace including training on
safety matters through classroom and toolbox meetings on job sites. The company utilizes safety compliance in the evaluation of employees,
which includes management. Accident and safety statistical information is gathered for each of the business segments and regularly
reported to management and the board of directors.

In response to COVID-19, the company established a task force to monitor developments related to the pandemic and implemented
procedures to protect employees by adopting recommended practices from the CDC and is following directives of each state and local
jurisdiction in which the company operates.

Each job is important and part of a coordinated team effort to accomplish the organization's objectives. Employees are hired having the
skills, abilities, and motivation to achieve the results needed for their jobs. The company provides opportunities for advancement through
job mobility, succession planning, and promotions both within and between business segments.

The company uses a variety of recruiting sources depending on the position, market, and job requirements. All open positions are posted on
the company's website at jobs.mdu.com. In markets where labor availability is tight, the company uses telecommuting, guaranteed hours,
flexible schedules, and work arrangements to fill open positions. To attract and retain employees, the company offers:

• Competitive salaries and wages based on the labor markets in which it operates;

• Employee growth through training in the form of technical, professional, and leadership programs. The company also provides formal and

informal mentoring and job shadowing programs to assist employees in their job and career goals;

• Incentive compensation opportunities based on the company's performance; and

• Comprehensive benefits including vacation, sick leave, health and wellness programs, retirement plans, and discount programs.

The company is committed to an inclusive environment that respects the differences and embraces the strengths of its diverse employees.
Each business segment has an appointed diversity officer who serves as a conduit for diversity-related issues by providing a voice to all
employees. The company has three strategic goals related to diversity:

• Increase productivity and profitability through the creation of a work environment which values all perspectives and methods of

accomplishing work;

• Enhance collaboration efforts through cooperation and sharing of best practices to create new ways of meeting employee, customer, and

stockholder needs; and

• Maintain a culture of integrity, respect, and safety by ensuring employees understand these essential values which are part of the

company's vision statement.

The company provides training and has policies which speak to diversity and inclusion. Training for employees on diversity and inclusion
topics include equal employment opportunity, workplace harassment, respect, and unconscious bias.

MDU Resources Group, Inc. Proxy Statement 21

Proxy Statement

Community Support
In 2020, the company and the MDU Resources Foundation contributed over $3 million to charitable organizations. Contributions by the
Foundation of over $2.5 million included $500,000 dedicated to charities providing relief to COVID-19 impacts. Foundation contributions
also included scholarship programs for educational institutions, scholarships for employee family members, and employee match
contributions of up to $750 to educational institutions and organizations to which our employees donated over 7,200 hours of service.
Since its inception in 1983, the Foundation has contributed more than $38 million toward community support for worthwhile causes in
categories of education, civic and community activities, culture and arts, environmental stewardship, and health and human services.

Stockholder Engagement

The company has an active stockholder outreach program. We believe in providing transparent and timely information to our investors. Each
year we routinely engage directly or indirectly with our stockholders, including our largest institutional stockholders. Management regularly
attends and presents at investor and financial conferences and holds one-on-one meetings with investors and also interacts directly with
investors and analysts during our quarterly earnings conference calls. During 2020, notwithstanding meeting and travel restrictions due to
COVID-19, the company held meetings, conference calls, and webcasts with a diverse mix of stockholders, including meetings or telephone
conferences with six of the institutional investors included in our year-end largest 30 stockholders. In our meetings or conferences, we
discussed a variety of topics, including company strategy and our capital expenditure forecast; operational and financial updates;
environmental, social, and corporate governance issues; sustainability; impact of COVID-19; and, previously announced strategic initiatives.
Feedback from engagements is shared by management with the board and its committees. The company also held telephone conferences
with a proxy advisory firm to discuss corporate governance, executive compensation practices, and other topics.

Board Leadership Structure

The board separated the positions of chair of the board and chief executive officer in 2006, and our bylaws and corporate governance
guidelines currently require that our chair be independent. The board believes this structure provides balance and is currently in the best
interest of the company and its stockholders. Separating these positions allows the chief executive officer to focus on the full-time job of
running our business, while allowing the chair to lead the board in its fundamental role of providing advice to and independent oversight of
management. The chair meets and confers regularly between board meetings with the chief executive officer and consults with the chief
executive officer regarding the board meeting agendas, the quality and flow of information provided to the board, and the effectiveness of
the board meeting process. The board believes this split structure recognizes the time, effort, and energy the chief executive officer is
required to devote to the position in the current business environment as well as the commitment required to serve as the chair, particularly
as the board’s oversight responsibilities continue to grow and demand more time and attention. The fundamental role of the board of
directors is to provide oversight of the management of the company in good faith and in the best interests of the company and its
stockholders. Having an independent chair is a means to ensure the chief executive officer is accountable for managing the company in
close alignment with the interests of stockholders including with respect to risk management as discussed below. An independent chair is in
a position to encourage frank and lively discussions including during regularly scheduled executive sessions consisting of only independent
directors and to assure that the company has adequately assessed all appropriate business risks before adopting its final business plans and
strategies. The board believes that having separate positions and having an independent outside director serve as chair is the appropriate
leadership structure for the company at this time and demonstrates our commitment to good corporate governance.

Board’s Role in Risk Oversight

Risk is inherent with every business, and how well a business manages risk can ultimately determine its success. We face a number of risks,
including economic risks, strategic risks, operational risks, environmental and regulatory risks, competitive risks, climate and weather
conditions, pension plan obligations, cyberattacks or acts of terrorism, and third party liabilities. Management is responsible for identifying
material risks, implementing appropriate risk management and mitigation strategies, and providing information regarding material risks and
risk management and mitigation to the board. The board, as a whole and through its committees, has responsibility for the oversight of risk
management. In its risk oversight role, the board of directors has the responsibility to satisfy itself that the risk management processes
designed and implemented by management are adequate for identifying, assessing, and managing risk.

The board believes establishing the right “tone at the top” and full and open communication between management and the board of
directors are essential for effective risk management and oversight. Our chair meets regularly with our chief executive officer to discuss
strategy and risks facing the company. The chair of the board and chairs of each of the board’s standing committees meet quarterly with our
chief executive officer, chief financial officer, and general counsel to discuss risks and presentations to the board regarding risks. Senior
management attends the quarterly board meetings and is available to address questions or concerns raised by the board on risk
management-related and any other matters. Each quarter, the board of directors and its applicable committees receive presentations from
senior management on enterprise risk management issues and strategic matters involving our operations. Senior management annually

22 MDU Resources Group, Inc. Proxy Statement

Proxy Statement

presents an assessment to the board of critical enterprise risks that threaten the company’s strategy and business model, including risks
inherent in the key assumptions underlying the company’s business strategy for value creation. Periodically, the board receives presentations
from external experts on matters of strategic importance to the board. At least annually, the board holds strategic planning sessions with
senior management to discuss strategies, key challenges, and risks and opportunities for the company.

The company has also developed a robust compliance program to promote a culture of compliance, consistent with the right “tone at the
top,” to mitigate risk. The program includes training and adherence to our code of conduct and legal compliance guide. We further mitigate
risk through our internal audit and legal departments.

While the board is ultimately responsible for risk oversight at our company, our standing board committees assist the board in fulfilling its
oversight responsibilities in certain areas of risk.

• The audit committee assists the board in fulfilling its oversight responsibilities with respect to risk management in a general manner and
specifically in the areas of financial reporting, internal controls, cybersecurity, and compliance with legal and regulatory requirements,
and, in accordance with NYSE requirements, discusses with the board policies with respect to risk assessment and risk management and
their adequacy and effectiveness. The audit committee receives regular reports on the company’s compliance program, including reports
received through our anonymous reporting hotline. It also receives reports and regularly meets with the company’s external and internal
auditors. During its quarterly meetings in 2020, the audit committee received presentations or reports from management on cybersecurity
and the company’s mitigation of cybersecurity risks as well as assessment and mitigation reports on other compliance and risk-related
topics. The entire board was present for the presentations and had access to the reports. This opens the opportunity for discussions about
areas where the company may have material risk exposure, steps taken to manage such exposure, and the company’s risk tolerance in
relation to company strategy. The audit committee reports regularly to the board of directors on the company’s management of risks in the
audit committee’s areas of responsibility.

• The compensation committee assists the board in fulfilling its oversight responsibilities with respect to the management of risks arising

from our compensation policies and programs.

• The nominating and governance committee assists the board in fulfilling its oversight responsibilities with respect to the management of
risks associated with board organization, board membership and structure, succession planning for our directors and executive officers,
and corporate governance.

• The environmental and sustainability committee assists the board in fulfilling its oversight responsibilities with respect to the

management of risks related to environmental matters, labor and human relations matters, physical and other workplace hazards,
employee and public safety, and other social sustainability matters.

Board Meetings and Committees

During 2020, the board of directors held four regular meetings and three special meetings. Each director attended at least 75% of the
combined total meetings of the board and the committees on which the director served during 2020. Directors are encouraged to attend our
annual meeting of stockholders. All directors participated in person or by teleconference at our 2020 Annual Meeting of Stockholders.

The board has standing audit, compensation, nominating and governance, and environmental and sustainability committees which meet at
least quarterly. The table below provides current committee membership.

Name

Thomas Everist

Karen B. Fagg
Mark A. Hellerstein

Patricia L. Moss

Edward A. Ryan

David M. Sparby

Chenxi Wang

John K. Wilson

C - Chair

● - Member

Audit
Committee

Compensation
Committee

Nominating and
Governance Committee

Environmental and
Sustainability Committee

●

●
C

●

MDU Resources Group, Inc. Proxy Statement 23

Proxy Statement

Below is a description of each standing committee of the board. The board has affirmatively determined that each of these standing
committees consists entirely of independent directors pursuant to rules established by the NYSE, rules promulgated under the Securities
and Exchange Commission (SEC), and the director independence standards established by the board. The board has also determined that
each member of the audit committee and the compensation committee is independent under the criteria established by the NYSE and the
SEC for audit committee and compensation committee members, as applicable.

Nominating and Governance Committee

Met Four Times in 2020

The nominating and governance committee met four times during 2020. The current committee members are Edward A. Ryan, chair,
Thomas Everist, David M. Sparby, and John K. Wilson.

The nominating and governance committee is governed by a written charter and provides recommendations to the board with respect to:

• board organization, membership, and function;

• committee structure and membership;

• succession planning for our executive management and directors; and

• our corporate governance guidelines.

The nominating and governance committee assists the board in overseeing the management of risks in the committee’s areas of
responsibility.

The committee identifies individuals qualified to become directors and recommends to the board the director nominees for the next annual
meeting of stockholders. The committee also identifies and recommends to the board individuals qualified to become our principal officers
and the nominees for membership on each board committee. The committee oversees the evaluation of the board and management.

In identifying nominees for director, the committee consults with board members, management, consultants, organizational representatives,
and other individuals likely to possess an understanding of our business and knowledge concerning suitable director candidates.

In evaluating director candidates, the committee, in accordance with our corporate governance guidelines, considers an individual’s:

• background, character, and experience, including experience relative to our company’s lines of business;

• skills and experience which complement the skills and experience of current board members;

• success in the individual’s chosen field of endeavor;

• skill in the areas of accounting and financial management, banking, business management, human resources, marketing, operations,

public affairs, law, technology, risk management, governance, and operations abroad;

• background in publicly traded companies, including service on other public company boards of directors;

• geographic area of residence;

• business and professional experience, skills, gender, and ethnic background, as appropriate in light of the current composition and needs

of the board;

• independence, including any affiliation or relationship with other groups, organizations, or entities; and

• compliance with applicable law and applicable corporate governance, code of conduct and ethics, conflict of interest, corporate

opportunities, confidentiality, stock ownership and trading policies, and other policies and guidelines of the company.

In addition, our bylaws contain requirements that a person must meet to qualify for service as a director.

The nominating and governance committee assesses these considerations annually in connection with the nomination of directors for
election at the annual meeting of stockholders. The committee seeks a collective background of board members to provide a portfolio of
experience and knowledge that serves the company’s governance and strategic needs and best perpetrates our long-term success. Directors
should have demonstrated experience and knowledge that is relevant to the board’s oversight role of the company’s business. The

24 MDU Resources Group, Inc. Proxy Statement

nominating and governance committee also considers the board’s diversity in recommending nominees, including diversity of experience,
expertise, ethnicity, gender, and geography. The composition of the current board and the board nominees reflects diversity in business and
professional experience, skills, ethnicity, gender, and geography.

Proxy Statement

Audit Committee

Met Ten Times in 2020

The audit committee is a separately-designated committee established in accordance with Section 3(a)(58)(A) of the Securities Exchange
Act of 1934 and is governed by a written charter.

The audit committee met ten times during 2020. The current audit committee members are David M. Sparby, chair, Mark A. Hellerstein,
Edward A. Ryan, and Chenxi Wang. The board of directors determined that Messrs. Sparby and Hellerstein are “audit committee financial
experts” as defined by SEC rules, and all audit committee members are financially literate within the meaning of the listing standards of the
NYSE. All members also meet the independence standard for audit committee members under our director independence guidelines, the
NYSE listing standards, and SEC rules.

The audit committee assists the board of directors in fulfilling its oversight responsibilities to the stockholders and serves as a
communication link among the board, management, the independent registered public accounting firm, and the internal auditors. The
committee reviews and discusses with management and the independent auditors, before filing with the SEC, the annual audited financial
statements and quarterly financial statements. The audit committee also:

• assists the board’s oversight of:

◦

the integrity of our financial statements and system of internal controls;

the company’s compliance with legal and regulatory requirements and the code of conduct;

discussions with management regarding the company’s earnings releases and guidance;

the independent registered public accounting firm’s qualifications and independence;

the appointment, compensation, retention, and oversight of the work of the independent registered public accounting firm;

the performance of our internal audit function and independent registered public accounting firm;

◦ management of risk in the audit committee’s areas of responsibility, including cybersecurity, financial reporting, legal and regulatory

compliance, and internal controls; and

• arranges for the preparation of and approves the report that SEC rules require we include in our annual proxy statement. See the section

entitled “Audit Committee Report” for further information.

Compensation Committee

Met Six Times in 2020

During 2020, the compensation committee met six times. The compensation committee consists entirely of independent directors within
the meaning of the company’s corporate governance guidelines and the NYSE listing standards and who meet the definitions of non-
employee directors for purposes of Rule 16-b under the Exchange Act. Current members of the compensation committee are John K.
Wilson, chair, Thomas Everist, Karen B. Fagg, and Patricia L. Moss.

The compensation committee is governed by a written charter and assists the board of directors in fulfilling its responsibilities relating to the
company’s compensation policies and programs. It has direct responsibility for determining compensation for our Section 16 officers and for
overseeing the company’s management of compensation risk in its areas of responsibility. The compensation committee also reviews and
recommends any changes to director compensation policies to the board of directors. The authority and responsibility of the compensation
committee is outlined in the compensation committee’s charter.

The compensation committee uses analysis and recommendations from outside consultants, the chief executive officer, and the human
resources department in making its compensation decisions. The chief executive officer, the vice president-human resources, and the
general counsel regularly attend compensation committee meetings. The committee meets in executive session as needed. The processes
and procedures for consideration and determination of compensation of the Section 16 officers as well as the role of our executive officers
are discussed in the “Compensation Discussion and Analysis.”

The compensation committee has sole authority to retain compensation consultants, legal counsel, or other advisers to assist in
consideration of the compensation of the chief executive officer, the other Section 16 officers, and the board of directors. The committee is

MDU Resources Group, Inc. Proxy Statement 25

Proxy Statement

directly responsible for the appointment, compensation, and oversight of the work of such advisers. In 2020, the compensation committee
retained a compensation consultant, Meridian Compensation Partners, LLC (“Meridian”), to conduct a review of the company’s executive
compensation program. Prior to retaining an adviser, the compensation committee considered relevant factors to ensure the adviser’s
independence from management. Annually the compensation committee conducts a potential conflicts of interest assessment raised by the
work of any compensation consultant and how such conflicts, if any, should be addressed. The compensation committee requested and
received information from Meridian to assist in its potential conflicts of interest assessment. Based on its review and analysis, the
compensation committee determined in 2020 that Meridian was independent from management. Meridian does not provide any services for
the company other than consultation services to the compensation committee on executive and director compensation. Meridian reports
directly to the compensation committee and not to management. Meridian participated in executive sessions with the compensation
committee without members of management present.

The board of directors determines compensation for our non-employee directors based upon recommendations from the compensation
committee. In 2020, the compensation committee retained Meridian to conduct an analysis of the company’s compensation for non-
employee directors.

Environmental and Sustainability Committee

Met Four Times in 2020

The environmental and sustainability committee was formed by the board of directors in May 2019 and met four times during 2020. The
committee is governed by a written charter and consists entirely of independent directors within the meaning of the company’s corporate
governance guidelines and the listing standards of the NYSE. The current members of the committee are Karen B. Fagg, chair, Mark A.
Hellerstein, Patricia L. Moss, and Chenxi Wang.

The environmental and sustainability committee oversees and provides recommendations to the board with respect to the company’s
policies, strategies, public policy positions, programs, and performance related to environmental, workplace health, safety, human capital,
and other social sustainability matters. The environmental and sustainability committee:

• reviews significant risks regarding environmental and social sustainability matters that fundamentally affect the company’s business

interests and long-term viability;

• reviews the company’s environmental and social sustainability strategies, policies, processes, programs, and performance;

• reviews recent and emerging environmental and social sustainability matters;

• reviews labor and human relations issues related to the company’s operations;

• reviews any fatality, serious injury, or illness involving an employee, customer, contractor, or third-party occurring in connection with the

company’s operations;

• reviews any material noncompliance by the company with environmental, health, and safety laws and regulations;

• reviews the company’s efforts to advance progress on sustainable development;

• reviews methods to communicate the company’s environmental and social sustainability values and performance;

• considers and advises the compensation committee on the company’s performance with respect to incentive compensation metrics

relating to environmental and social sustainability matters;

• reports to, advises, and makes recommendations to the board on environmental and social sustainability matters affecting the company;

• reviews the company’s environmental and social sustainability disclosures;

• reviews stockholder proposals related to environmental and social sustainability matters; and

• reviews significant legislative, regulatory, political, and social issues and trends that may affect the company’s environmental,

sustainability, health, and safety management processes and systems.

26 MDU Resources Group, Inc. Proxy Statement

Proxy Statement

Stockholder Communications with the Board

Stockholders and other interested parties who wish to contact the board of directors or any individual director, including our non-employee
chair or non-employee directors as a group, should address a communication in care of the secretary at MDU Resources Group, Inc.,
P.O. Box 5650, Bismarck, ND 58506-5650. The secretary will forward all communications.

Additional Governance Features

Board and Committee Evaluations
Our corporate governance guidelines provide that the board of directors, in coordination with the nominating and governance committee,
will annually review and evaluate the performance and functioning of the board and its committees. The self-evaluations are intended
to facilitate a candid assessment and discussion by the board and each committee of its effectiveness as a group in fulfilling its
responsibilities, its performance as measured against the corporate governance guidelines, and areas for improvement. The board and
committee members are provided with a questionnaire to facilitate discussion with follow-up interviews by the chair of the nominating and
governance committee. The results of the evaluations are reviewed and discussed in executive sessions of the committees and the board of
directors.

Executive Sessions of the Independent Directors
The non-employee directors meet in executive session at each regularly scheduled quarterly board of directors meeting. The chair of the
board presides at the executive session of the non-employee directors.

Director Resignation Upon Change of Job Responsibility
Our corporate governance guidelines require a director to tender his or her resignation after a material change in job responsibility. In 2020,
no directors submitted resignations under this requirement.

Majority Voting in Uncontested Director Elections
Our corporate governance guidelines require that in uncontested elections (those where the number of nominees does not exceed the
number of directors to be elected), director nominees must receive the affirmative vote of a majority of the votes cast to be elected to our
board of directors. Contested director elections (those where the number of director nominees exceeds the number of directors to be
elected) are governed by a plurality of the vote of shares present in person or represented by proxy at the meeting.

The board has adopted a director resignation policy for incumbent directors in uncontested elections. Any proposed nominee for re-election
as a director shall, before he or she is nominated to serve on the board, tender to the board his or her irrevocable resignation that will be
effective, in an uncontested election of directors only, upon (i) such nominee’s receipt of a greater number of votes “against” election than
votes “for” election at our annual meeting of stockholders; and (ii) acceptance of such resignation by the board of directors.

Director Overboarding Policy
Our bylaws and corporate governance guidelines state that a director may not serve on more than two other public company boards.
Currently, all of our directors are in compliance of this policy.

Board Refreshment
Recognizing the importance of board composition and refreshment for effective oversight, the nominating and governance committee
annually considers the composition and needs of the board of directors, reviews potential candidates, and recommends to the board
nominees for appointment or election. The nominating and governance committee and the board are committed to identifying individuals
with diverse backgrounds whose skills and experiences will enable them to make meaningful contributions to shaping the company’s
business strategy and priorities. As part of its consideration of director succession, the nominating and governance committee from time to
time reviews, including when considering potential candidates, the appropriate skills and characteristics required of board members. The
board considers diversity of skills, expertise, race, ethnicity, gender, age, education, geography, cultural background, and professional
experiences in evaluating board candidates for expected contributions to an effective board. Independent directors may not serve on the
board beyond the next annual meeting of stockholders after attaining the age of 76. Given the breadth of our businesses, we believe the
mandatory retirement age allows us to benefit from experienced directors, with industry expertise, company institutional knowledge and
historical perspective, stability, and comfort with challenging company management, while maintaining our ability to refresh the board
through the addition of new members. Mr. Sparby and Mr. Ryan joined the board in 2018, and Ms. Wang was elected as a director in 2019.
In 2020, the nominating and governance committee considered potential director candidates for board refreshment who would provide
construction industry experience as well as added diversity to the board. The nominating and governance committee subsequently
recommended, and the board of directors approved, the nomination of Ms. Rosenthal for election to the board of directors at the 2021
annual meeting.

MDU Resources Group, Inc. Proxy Statement 27

Proxy Statement

Our corporate governance guidelines include our policy on consideration of director candidates recommended to us. We will consider
candidates that our stockholders recommend in the same manner we consider other nominees. Stockholders who wish to recommend a
director candidate may submit recommendations, along with the information set forth in the guidelines, to the nominating and governance
committee chair in care of the secretary at MDU Resources Group, Inc., P.O. Box 5650, Bismarck, ND 58506-5650.

Stockholders who wish to nominate persons for election to our board at an annual meeting of stockholders must follow the applicable
procedures set forth in Section 2.08 or 2.10 of our bylaws. Our bylaws are available on our website. See “Stockholder Proposals, Director
Nominations, and Other Items of Business for 2022 Annual Meeting” in the section entitled “Information about the Annual Meeting” for
further details.

Prohibitions on Hedging/Pledging Company Stock
The director compensation policy prohibits directors from hedging their ownership of common stock, pledging company stock as collateral
for a loan, or holding company stock in an account that is subject to a margin call.

Code of Conduct
We have a code of conduct and ethics, which we refer to as the Leading With Integrity Guide. It applies to all directors, officers, and
employees. The Leading With Integrity Guide defines our values, our culture, and our commitments to stakeholders while setting
expectations of employee conduct for legal and ethical compliance. In 2020, the company undertook a refreshment of the Leading With
Integrity Guide to improve its readability and reflect updated policies and practices relating to environmental sustainability and diversity
matters.

We intend to satisfy our disclosure obligations regarding amendments to, or waivers of, any provision of the code of conduct that applies to
our principal executive officer, principal financial officer, and principal accounting officer, and that relates to any element of the code of
ethics definition in Regulation S-K, Item 406(b), and waivers of the code of conduct for our directors or executive officers, as required by
NYSE listing standards, by posting such information on our website.

Proxy Access
Our bylaws allow stockholders to nominate directors for inclusion in our proxy statement subject to the following parameters:

Ownership Threshold:

3% of outstanding shares of our common stock

Nominating Group Size:

Up to 20 stockholders may combine to reach the 3% ownership threshold

Holding Period:

Continuously for three years

Number of Nominees:

The greater of two nominees or 20% of our board

We believe these proxy access parameters reflect a well designed and balanced approach to proxy access that mitigates the risk of abuse
and protects the interests of all of our stockholders. Stockholders who wish to nominate directors for inclusion in our Proxy Statement in
accordance with proxy access must follow the procedures in Section 2.10 of our bylaws. See “Stockholder Proposals, Director Nominations,
and Other Items of Business for 2022 Annual Meeting.”

One Class of Stock
Our common stock is the only class of shares outstanding.

No Shareholder Rights Plan
We do not have a “poison pill” and have no intention of adopting one at this time.

Annual Say-on-Pay Advisory Vote
Stockholders annually vote on the company’s named executive officer compensation.

Cybersecurity Oversight
The audit committee reviewed reports and received presentations at each of its regular quarterly meetings in 2020 concerning cybersecurity-
related issues including information security, technology risks, and risk mitigation programs. All members of the board of directors received
copies of reports and were present during the presentations. In 2014, the board established a Cyber Risk Oversight Committee (CYROC)
consisting of the company’s chief information officer and chief financial officer as well as financial and information technology leaders from
the company’s business segments. The CYROC provides management and the audit committee with analyses, appraisals, recommendations,

28 MDU Resources Group, Inc. Proxy Statement

Proxy Statement

and pertinent information concerning cyber defense of the company’s electronic information and information technology systems. The
company has implemented an information security training and compliance program to facilitate initial and continuing education for
employees who have contact or potential contact with the company’s data. External reviews are conducted to assess company information
security programs and practices, including incident management, service continuity, and information security compliance programs. The
company has not had an indication of a material security breach and has not incurred any expenses, penalties, or settlements arising from a
material information security breach. The company maintains a cyber liability insurance policy providing insurance coverage within the
policy limits for liability losses and business interruption events arising from an information security breach. The audit committee receives
periodic briefings concerning cybersecurity, information security, technology risks, and risk mitigation programs.

Corporate Governance Materials

Stockholders can see our bylaws, corporate governance guidelines, board committee charters, and Leading With Integrity Guide on our
website.

Corporate Governance Materials

Website

• Bylaws

• Corporate Governance Guidelines

• Board Committee Charters for the Audit, Compensation,
Nominating and Governance, and Environmental and
Sustainability Committees

www.mdu.com/governance

• Leading With Integrity Guide

www.mdu.com/commitmenttointegrity

Related Person Transaction Disclosure

The board of directors’ policy for the review of related person transactions is contained in our corporate governance guidelines. The policy
requires the audit committee to review any transaction, arrangement or relationship, or series thereof:

• in which the company was or will be a participant;

• the amount involved exceeds $120,000; and

• a related person had or will have a direct or indirect material interest.

The purpose of this review is to determine whether this transaction is in the best interests of the company.

Related persons are directors, director nominees, executive officers, holders of 5% or more of our voting stock, and their immediate family
members. Related persons are required promptly to report to our general counsel all proposed or existing related person transactions in
which they are involved.

If our general counsel determines that the transaction is required to be disclosed under the SEC rules, the general counsel furnishes the
information to the chair of the audit committee. After its review, the committee makes a determination or a recommendation to the board
and officers of the company with respect to the related person transaction. Upon receipt of the committee’s recommendation, the board of
directors or officers, as the case may be, take such action as they deem appropriate in light of their responsibilities under applicable laws
and regulations.

We had no related person transactions in 2020.

MDU Resources Group, Inc. Proxy Statement 29

Proxy Statement

COMPENSATION OF NON-EMPLOYEE DIRECTORS

Director Compensation for 2020

MDU Resources’ non-employee directors are compensated for their service according to the MDU Resources Group Inc. Director
Compensation Policy. Only one company employee, David L. Goodin, the company’s president and chief executive officer, serves as a
director. Mr. Goodin receives no additional compensation for his service on the board. Director compensation is reviewed annually by the
compensation committee. The committee’s independent consultant provided an analysis of the company’s director compensation for 2020.
The analysis included research on market trends in director compensation as well as a review of director compensation practices of our peer
group companies. Although the analysis indicated the company’s aggregate annual cash and equity compensation for the company’s non-
employee directors was below that of the company’s peer group, the compensation committee nonetheless recommended and the board
concurred that the annual compensation for non-employee directors would remain at the levels set in 2019:

Base Cash Retainer

Additional Cash Retainers:

Non-Executive Chair

Audit Committee Chair

Compensation Committee Chair

Nominating and Governance Committee Chair

Environmental and Sustainability Committee Chair
Annual Stock Grant1 - Directors (other than Non-Executive Chair)
Annual Stock Grant2 - Non-Executive Chair

$85,000

95,000

20,000

15,000

125,000

150,000

1 The annual stock grant is a grant of shares of company common stock equal in value to $125,000.
2 The annual stock grant is a grant of shares of company common stock equal in value to $150,000.

There are no meeting fees paid to directors.

30 MDU Resources Group, Inc. Proxy Statement

The following table outlines the compensation paid to our non-employee directors for 2020.

Name

Thomas Everist

Karen B. Fagg

Mark A. Hellerstein

Dennis W. Johnson

Patricia L. Moss

Edward A. Ryan3

David M. Sparby

Chenxi Wang

John K. Wilson

Fees Earned or
Paid in Cash
($)

85,000

100,000

85,000

180,000

85,000

100,000

105,000

85,000

100,000

Stock
Awards
($)1

125,000

150,000

125,000

Proxy Statement

All Other
Compensation
($)2

5,083

3,683

2,083

3,683

5,083

1,283

2,083

Total
($)

215,083

228,683

213,683

333,683

212,083

228,683

235,083

211,283

227,083

1 Directors receive an annual payment of $125,000 in company common stock, except the non-executive chair who receives $150,000 in company
common stock, under the MDU Resources Group, Inc. Non-Employee Director Long-Term Incentive Compensation Plan. Directors serving less than
a full year receive a prorated stock payment based on the number of months served. All stock payments are measured in accordance with Financial
Accounting Standards Board (FASB) generally accepted accounting principles for stock-based compensation in FASB Accounting Standards
Codification Topic 718. The grant date fair value is based on the purchase price of our common stock on the grant date of November 17, 2020,
which was $25.40 per share. The amount paid in cash for fractional shares is included in the amount reported in the stock awards column to this
table.

2 Includes group life insurance premiums and charitable donations made on behalf of the director as applicable. Amounts for life insurance

premiums reflect prorated amounts for directors serving less than a full year based on the number of months served.

3 Mr. Ryan elected to receive shares of our common stock in lieu of $50,000 of his fees earned in cash. He received a total of 2,184 shares of

company common stock which was purchased during 2020 on March 31, June 30, September 30, and December 31 at market prices of $21.34,
$22.30, $22.40, and $25.97, respectively.

Other Compensation
In addition to liability insurance, we maintain group life insurance in the amount of $100,000 on each non-employee director for the
benefit of their beneficiaries during the time they serve on the board. The annual cost per director is $82.80. Directors who contribute to
the company’s Good Government Fund may designate, dependent on the amount of their contribution, up to four charities to receive
donations from the company to match the director’s contributions to the Good Government Fund. Directors are reimbursed for all reasonable
travel expenses, including spousal expenses in connection with attendance at meetings of the board and its committees. Perquisites, if any,
were below the disclosure threshold in 2020.

Deferral of Compensation
Directors may defer all or any portion of the annual cash retainer and any other cash compensation paid for service as a director pursuant to
the Deferred Compensation Plan for Directors. Deferred amounts are held as phantom stock with dividend accruals and are paid out in cash
over a five-year period after the director leaves the board.

Post-Retirement
Our post-retirement income plan for directors was terminated in May 2001 for current and future directors. The net present value of each
director’s benefit was calculated and converted into phantom stock. Payment is deferred pursuant to the Deferred Compensation Plan for
Directors and will be made in cash over a five-year period after the director’s retirement from the board.

MDU Resources Group, Inc. Proxy Statement 31

Proxy Statement

Stock Ownership Policy
Our director stock ownership policy contained in our corporate governance guidelines requires each director to beneficially own our common
stock equal in value to five times the director’s annual cash base retainer. Shares acquired through purchases on the open market and
received through our Non-Employee Director Long-Term Incentive Compensation Plan are considered in ownership calculations as well as
other beneficial ownership of our common stock by a spouse or other immediate family member residing in the director’s household. A
director is allowed five years commencing January 1 of the year following the year of the director’s initial election to the board to meet the
requirements. The level of common stock ownership is monitored with an annual report made to the compensation committee of the board.
All directors are in compliance with the stock ownership policy or are within the first five years of their election to the board. For further
details on our director’s stock ownership, see the section entitled “Security Ownership.”

32 MDU Resources Group, Inc. Proxy Statement

SECURITY OWNERSHIP

Security Ownership Table

The table below sets forth the number of shares of our common stock that each director, each named executive officer, and all directors and
executive officers as a group owned beneficially as of February 28, 2021. Unless otherwise indicated, each person has sole investment and
voting power (or share such power with his or her spouse) of the shares noted.

Proxy Statement

Name1

David C. Barney

Thomas Everist

Karen B. Fagg

David L. Goodin

Mark A. Hellerstein

Dennis W. Johnson

Nicole A. Kivisto

Patricia L. Moss

Edward A. Ryan

David M. Sparby

Jeffrey S. Thiede

Jason L. Vollmer

Chenxi Wang

John K. Wilson

All directors and executive officers as a group (18 in number)

Shares of
Common Stock
Beneficially Owned

Percent
of Class

93,820

2,3

870,899

83,100

426,344

33,207

112,679

101,241

2,5

85,535

25,581

25,728

105,047

45,900

7,778

138,808

2,265,237

2,6

1.13 %

* Less than one percent of the class. Percent of class is calculated based on 200,522,277 outstanding shares as of February 28, 2021.

1 The table includes the ownership of all current directors, named executive officers, and other executive officers of the company without naming

them.

2 Includes full shares allocated to the officer’s account in our 401(k) retirement plan.

3 The total includes 687 shares owned by Mr. Barney’s spouse.

4 Mr. Johnson disclaims all beneficial ownership of the 163 shares owned by his spouse.

5 The total includes 531 shares owned by Ms. Kivisto’s spouse.

Includes shares owned by a director’s or executive’s spouse regardless of whether the director or executive claims beneficial ownership.

Hedging Policy

The company’s Director Compensation Policy and its Executive Compensation Policy prohibit our directors and executives from hedging their
ownership of company stock. The Director Compensation Policy applies to all directors who are not full-time employees of the company. The
Executive Compensation Policy applies to the executives of the company designated as an officer for purposes of Section 16 of the
Securities Exchange Act of 1934 as well as all other executives of the company and its subsidiaries who participate in its Long-Term
Performance-Based Incentive Plan and its Executive Incentive Compensation Plan. Under the policies, directors and executives are
prohibited from engaging in transactions that allow them to own stock technically but without the full benefits and risks of such ownership,
including, but not limited to, zero-cost collars, equity swaps, straddles, prepaid variable forward contracts, security futures contracts,
exchange funds, forward sale contracts, and other financial transactions that allow the director or executive to benefit from the devaluation
of the company’s stock.

The company policies also prohibit directors, executives, and related persons from holding company stock in a margin account, with certain
exceptions, or pledging company securities as collateral for a loan. Company common stock may be held in a margin brokerage account only
if the stock is explicitly excluded from any margin, pledge, or security provisions of the customer agreement. Company common stock may

MDU Resources Group, Inc. Proxy Statement 33

Proxy Statement

be held in a cash account, which is a brokerage account that does not allow any extension of credit on securities. “Related person” means
an executive officer’s or director’s spouse, minor child, and any person (other than a tenant or domestic employee) sharing the household of
a director or executive officer as well as any entities over which a director or executive officer exercises control.

Greater Than 5% Beneficial Owners

Based solely on filings with the SEC, the table below shows information regarding the beneficial ownership of more than 5% of the
outstanding shares of our common stock.

Title of Class

Common Stock

Name and Address
of Beneficial Owner

The Vanguard Group

100 Vanguard Blvd.

Malvern, PA 19355

BlackRock, Inc.

55 East 52nd Street

New York, NY 10055

Amount and Nature
of Beneficial Ownership

20,724,538 1

Percent
of Class

10.34%

17,069,272 2

8.50%

Common Stock

State Street Corporation

13,699,907 3

6.83%

State Street Financial Center

One Lincoln Street

Boston, MA 02111

1 Based solely on the Schedule 13G, Amendment No. 9, filed on February 10, 2021, The Vanguard Group reported sole dispositive power
with respect to 20,407,235 shares, shared dispositive power with respect to 317,303 shares, and shared voting power with respect to
134,536 shares as the parent holding company or control person of Vanguard Asset Management, Limited; Vanguard Fiduciary Trust
Company; Vanguard Global Advisors, LLC; Vanguard Group (Ireland) Limited; Vanguard Investments Australia Ltd; Vanguard Investments
Canada Inc.; Vanguard Investments Hong Kong Limited; and Vanguard Investments UK, Limited.

2 Based solely on the Schedule 13G, Amendment No. 12, filed on January 29, 2021, BlackRock, Inc. reported sole voting power with

respect to 16,370,416 shares and sole dispositive power with respect to 17,069,272 shares as the parent holding company or control
person of BlackRock Life Limited; BlackRock Advisors, LLC; BlackRock (Netherlands) B.V.; BlackRock Institutional Trust Company,
National Association; BlackRock Asset Management Ireland Limited; BlackRock Financial Management, Inc.; BlackRock Asset
Management Schweiz AG; BlackRock Investment Management, LLC; BlackRock Investment Management (UK) Limited; BlackRock Asset
Management Canada Limited; BlackRock Investment Management (Australia) Limited; BlackRock Advisors (UK) Limited; BlackRock
Fund Advisors; and BlackRock Fund Managers Ltd.

3 Based solely on the Schedule 13G, filed on February 9, 2021, State Street Corporation reported shared voting power with respect to

13,228,547 shares and shared dispositive power with respect to 13,699,907 shares as the parent holding company or control person of
SSGA Funds Management, Inc.; State Street Global Advisors Limited (UK); State Street Global Advisors, Australia Limited; State Street
Global Advisors GmbH; and State Street Global Advisors Trust Company.

Delinquent Section 16(a) Reports

Section 16 of the Securities Exchange Act of 1934, as amended, requires officers, directors, and holders of more than 10% of our common
stock to file reports of their trading in our equity securities with the SEC. Based solely on a review of Forms 3, 4, and 5, and any
amendments to these forms furnished to us during and with respect to 2020, or written representations that no Forms 5 were required, all
such reports were timely filed, except for one Form 4 for Stephanie Barth in May 2020 relating to a purchase of shares of common stock.

34 MDU Resources Group, Inc. Proxy Statement

Proxy Statement

EXECUTIVE COMPENSATION

ITEM 2. ADVISORY VOTE TO APPROVE THE COMPENSATION PAID TO THE COMPANY’S NAMED EXECUTIVE
OFFICERS

In accordance with Section 14A of the Securities Exchange Act of 1934 and Rule 14a-21(a), we are asking our stockholders to approve, in
an advisory vote, the compensation of our named executive officers as disclosed in this Proxy Statement pursuant to Item 402 of Regulation
S-K. As discussed in the Compensation Discussion and Analysis, the compensation committee and board of directors believe the current
executive compensation program directly links compensation of the named executive officers to our financial performance and aligns the
interests of the named executive officers with those of our stockholders. The compensation committee and board of directors also believe
the executive compensation program provides the named executive officers with a balanced compensation package that includes an
appropriate base salary along with competitive annual and long-term incentive compensation targets. These incentive programs are designed
to reward the named executive officers on both an annual and long-term basis if they attain specified goals.

Our overall compensation program and philosophy for 2020 was built on a foundation of these guiding principles:

• we pay for performance, with over 66% of our 2020 total target direct compensation for the named executive officers in the form of

performance-based incentive compensation;

• we review competitive compensation data for the named executive officers, to the extent available, and incorporate internal equity in the

final determination of target compensation levels;

• we align executive compensation and performance by using annual performance incentives based on criteria that are important to

stockholder value, including earnings, earnings per share, and earnings before interest, taxes, depreciation, and amortization (EBITDA);
and

• we align executive compensation and performance by using long-term performance incentives based on total stockholder return relative to

our peer group and financial measures important to company growth.

We are asking our stockholders to indicate their approval of our named executive officer compensation as disclosed in this Proxy Statement,
including the Compensation Discussion and Analysis, the executive compensation tables, and narrative discussion. This vote is not intended
to address any specific item of compensation, but rather the overall compensation of our named executive officers for 2020. Accordingly,
the following resolution is submitted for stockholder vote at the 2021 annual meeting:

“RESOLVED, that the compensation paid to the company’s named executive officers, as disclosed pursuant to Item 402 of
Regulation S-K, including the Compensation Discussion and Analysis, compensation tables, and narrative discussion of this Proxy
Statement, is hereby approved.”

As this is an advisory vote, the results will not be binding on the company, the board of directors, or the compensation committee and will
not require us to take any action. The final decision on the compensation of the named executive officers remains with the compensation
committee and the board of directors, although the board and compensation committee will consider the outcome of this vote when making
future compensation decisions. We intend to hold this advisory vote every year until at least the next stockholder advisory vote on the
frequency of this vote.

The board of directors recommends a vote “for” the approval, on a non-binding

advisory basis, of the compensation of the company’s named executive officers,

as disclosed in this Proxy Statement.

Approval of the compensation of the named executive officers requires the affirmative vote of a majority of the common stock present in
person or represented by proxy at the meeting and entitled to vote on the proposal. Abstentions will count as votes against this proposal.
Broker non-vote shares are not entitled to vote on this proposal and, therefore, are not counted in the vote.

MDU Resources Group, Inc. Proxy Statement 35

Proxy Statement

INFORMATION CONCERNING EXECUTIVE OFFICERS

Information concerning the executive officers, including their ages as of December 31, 2020, present corporate positions, and business
experience during the past five years, is as follows:

Name

David L. Goodin

David C. Barney

Trevor J. Hastings

Anne M. Jones

Age

Nicole A. Kivisto

Karl A. Liepitz

Margaret (Peggy) A. Link

Jeffrey S. Thiede

Jason L. Vollmer

Present Corporate Position and Business Experience

Mr. Goodin was elected president and chief executive officer of the company and a director
effective January 4, 2013. For more information about Mr. Goodin, see the section entitled
“Item 1. Election of Directors.”

Mr. Barney was elected president and chief executive officer of Knife River Corporation
effective April 30, 2013, and president effective January 1, 2012.

Mr. Hastings was elected president and chief executive officer of WBI Holdings, Inc. effective
October 16, 2017. Prior to that, he was vice president-business development and operations
support of Knife River Corporation effective January 11, 2012.

Ms. Jones was elected vice president-human resources effective January 1, 2016. Prior to that,
she was vice president-human resources, customer service, and safety at Montana-Dakota
Utilities Co., Great Plains Natural Gas Co., Cascade Natural Gas Corporation, and
Intermountain Gas Company effective July 1, 2013, and director of human resources for
Montana-Dakota Utilities Co. and Great Plains Natural Gas Co. effective June 2008.

Ms. Kivisto was elected president and chief executive officer of Montana-Dakota Utilities Co.,
Cascade Natural Gas Corporation, and Intermountain Gas Company effective January 9, 2015.
Prior to that, she was vice president of operations for Montana-Dakota Utilities Co. and Great
Plains Natural Gas Co. effective January 3, 2014, and vice president, controller and chief
accounting officer for the company effective February 17, 2010.

Mr. Liepitz was elected vice president, general counsel and secretary effective February 6,
2021. Prior to that, he was assistant general counsel and assistant secretary effective
January 1, 2017, and senior attorney and assistant secretary effective January 9, 2016. He
held legal positions of increasing responsibility with the company since August 2003.

Ms. Link was elected vice president and chief information officer effective December 1, 2017.
Prior to that, she was chief information officer effective January 1, 2016, assistant vice
president-technology and cybersecurity officer effective January 1, 2015, and director shared
IT services effective June 2, 2009.

Mr. Thiede was elected president and chief executive officer of MDU Construction Services
Group, Inc. effective April 30, 2013, and president effective January 1, 2012.

Mr. Vollmer was named vice president and chief financial officer effective November 23, 2020.
Prior to that, he was vice president, chief financial officer and treasurer effective
September 30, 2017, vice president, chief accounting officer and treasurer effective
March 19, 2016, treasurer and director of cash and risk management effective November 29,
2014, and manager of treasury services and risk management effective June 30, 2014.

36 MDU Resources Group, Inc. Proxy Statement

Proxy Statement

COMPENSATION DISCUSSION AND ANALYSIS

The Compensation Discussion and Analysis describes how our named executive officers were compensated for 2020 and how their 2020
compensation aligns with our pay-for-performance philosophy. It also describes the oversight of the compensation committee and the
rationale and processes used to determine the 2020 compensation of our named executive officers including the objectives and specific
elements of our compensation program.

The Compensation Discussion and Analysis contains statements regarding corporate performance targets and goals. The targets and goals
are disclosed in the limited context of our compensation programs and should not be understood to be statements of management’s
expectations or estimates of results or other guidance. We specifically caution investors not to apply these statements to other contexts.

Our Named Executive Officers for 2020 were:

David L. Goodin

President and Chief Executive Officer (CEO)

Jason L. Vollmer

Vice President and Chief Financial Officer (CFO)

David C. Barney

President and Chief Executive Officer - Construction Materials and Contracting Segment

Jeffrey S. Thiede

President and Chief Executive Officer - Construction Services Segment

Nicole A. Kivisto

President and Chief Executive Officer - Electric and Natural Gas Distribution Segments

Executive Summary

Pay for Performance
The compensation committee is responsible for designing and approving our executive compensation program and setting compensation
opportunities for our named executive officers. Our compensation program is directly linked to our business strategy to ensure officers are
focused on elements that drive our business strategy and create stockholder value. To ensure management’s interests are aligned with those
of our stockholders and the performance of the company, the significant majority of the CEO’s and the other named executive officers’
compensation is dependent on the achievement of company performance targets. The charts below show the target pay mix for the CEO and
average target pay mix of the other named executive officers, including base salary and the annual and long-term incentives.

MDU Resources Group, Inc. Proxy Statement 37

Proxy Statement

Annual Base Salary
We provide our executive officers with base salary at a sufficient level to attract and retain executives with the knowledge, skills, and
abilities necessary to successfully execute their job responsibilities. Consistent with our compensation philosophy of linking pay to
performance, our executives receive a relatively smaller percentage of their overall target compensation in the form of base salary. In
establishing base salaries, the compensation committee considers each executive’s individual performance, the scope and complexities of
their responsibilities, internal equity, and whether the base salary is competitive as measured against the base salaries of similarly situated
executives in our peer group and market compensation data.

Annual Cash Incentive Awards
Annual cash incentive awards for our executive officers are linked to performance by rewarding achievement of financial goals and ensuring
our executive officers are focused and accountable for our growth and profitability. The design of the annual cash incentive award
opportunities for 2020 was the same as the design used in 2019. Each executive is assigned a target annual incentive award based on a
percentage of the executive’s base salary. The actual annual cash incentive realized is determined by multiplying the target award by the
payout percentage associated with the achievement of the executive’s performance measures.

Eighty percent of the annual cash incentive award for our business segment executives was based on specific business segment financial
performance measures selected by the compensation committee. The other 20% of the business segment executives’ annual incentive
award was based on the achievement of overall company earnings per share (EPS). These measures incentivize our business segment
executives to focus on the success and performance of their business segment while keeping the overall success of the company in mind.

The annual cash incentive award for corporate executives (including our CEO and CFO) was based on the achievement of the performance
measures for each business segment executive and weighted by each business segment’s invested capital relative to the company’s total
invested capital. Each corporate executive’s target award is multiplied by the sum of the weighted achievement percentage for each
business segment executive to derive the corporate executive’s realized annual award. This incentivizes the corporate executives to assist the
business segments in their success while still emphasizing overall company performance. See the “Annual Incentives” section within this
Compensation Discussion and Analysis for further details on our company’s annual cash incentive program.

The following chart shows the percentage payout of the annual incentive target realized by our CEO compared to earnings per share from
continuing operations for the last five years. The chart demonstrates the alignment between our financial performance and realized annual
cash incentive compensation.

38 MDU Resources Group, Inc. Proxy Statement

% of Target PaidEPSCEOAnnual Incentive Payout139.8%173.7%98.0%163.2%151.5%CEO % of Target PaidEPS (from continuing operations)201620172018201920200%50%100%150%200%$0.00$0.25$0.50$0.75$1.00$1.25$1.50$1.75$2.00Long-Term Equity-Based Incentive Awards
Our compensation committee and the board approved grants of long-term incentives to our executives in the form of performance shares
which vest into company stock plus dividend equivalents at the end of a three-year performance period upon achievement of established
performance measures. From 2018 through 2020, the compensation committee used earnings from continuing operations and earnings
before interest, taxes, depreciation, and amortization (EBITDA) from continuing operations growth as long-term performance measures in
addition to total stockholder return (TSR) relative to our peer group to align pay and long-term performance goals.

Proxy Statement

Long-Term Performance Measures
for the 2018 through 2020 Performance Period

TSR Ranking

50th
Percentile

Earnings Growth

16.9%

Compound Annual
Growth Rate

EBITDA Growth

10.3%

Compound Annual
Growth Rate

Target Ranking = 50th Percentile

Target Growth = 6.5%

Weighting = 50%

Weighting = 25%

With the majority of our executive officer’s compensation dependent on the achievement of robust performance measures set by the
compensation committee, we believe there is substantial alignment between executive pay and the company’s performance. See the “Long-
Term Incentives” section within this Compensation Discussion and Analysis for further details on the company’s long-term incentive
program.

Stockholder Advisory Vote (“Say on Pay”)
At our 2020 Annual Meeting of Stockholders, 95.1% of the votes cast on the “Say on Pay” proposal approved the compensation of our
named executive officers. The compensation committee viewed the 2020 vote as an expression of the stockholders’ general satisfaction with
the company’s executive compensation programs. The compensation committee reviewed and considered the 2020 vote on “Say on Pay” in
setting compensation for 2021 by continuing to link performance-based annual and long-term incentives to company financial performance
and stockholder value.

MDU Resources Group, Inc. Proxy Statement 39

Proxy Statement

Compensation Practices
Our practices and policies ensure alignment between the interests of our stockholders and our executives as well as effective compensation
governance.

What We Do

þ Pay for Performance - Annual and long-term award incentives tied to performance measures set by the compensation committee

comprise the largest portion of executive compensation.

þ Independent Compensation Committee - All members of the compensation committee meet the independence standards under the

New York Stock Exchange listing standards and the Securities and Exchange Commission rules.

þ Independent Compensation Consultant - The compensation committee retains an independent compensation consultant to evaluate

executive compensation plans and practices.

þ Annual Cash Incentive - Payment of annual cash incentive awards are based on business segment and overall company performance

against pre-established annual financial measures.

þ Balanced Mix of Pay Components - The target compensation mix represents a balance of annual cash and long-term equity-based

compensation.

compensation risk assessment.

What We Do Not Do

a change of control of the company.

unvested share awards.

ý Tax Gross-Ups - Executives do not receive tax gross-ups on their compensation.
ý No Pandemic Adjustments - We made no changes or adjustments to the 2020 annual incentive or outstanding long-term incentive

plan measures despite the pandemic.

40 MDU Resources Group, Inc. Proxy Statement

Proxy Statement

2020 Compensation Framework

Objectives of our Compensation Program
We have a written executive compensation policy for our executive officers, including all the named executive officers. Our policy’s stated
objectives are to:

• recruit, motivate, reward, and retain high performing executive talent required to create superior shareholder value;

• reward executives for short-term performance as well as for growth in enterprise value over the long-term;

• ensure effective utilization and development of talent by working in concert with other management processes - for example, performance

appraisal, succession planning, and management development;

• help ensure that compensation programs do not encourage or reward excessive or imprudent risk taking; and

• provide a competitive package relative to industry-specific and general industry comparisons and internal equity, as appropriate.

Compensation Decision Process for 2020
For 2020, the compensation committee made recommendations to the board of directors regarding compensation of all executive officers,
and the board of directors then approved the recommendations. The CEO’s role in the process includes the assessment of executive officer
performance and recommending base salaries for the executive officers other than himself. The CEO attended all compensation committee
meetings but was not present during discussions of his compensation. At its meetings in November 2019 and February 2020, the
compensation committee established and approved base salaries and performance measures for the annual and long-term incentive
compensation for 2020. It also certified the achievement of performance measures for 2019 associated with annual and long-term incentive
compensation that was paid or vested in 2020.

The compensation committee hires an independent consulting firm to assess and recommend competitive pay levels, including base salaries
and incentive compensation, associated with executive officer positions. In August 2019, the human resources department prepared an
analysis of and provided recommendations for the 2020 executive compensation structure which was reviewed by the compensation
committee’s independent consultant, Meridian Compensation Partners, LLC.

Compensation Policies and Practices as They Relate to Risk Management
The human resources department conducts an annual risk assessment of our compensation programs. Senior management and our
management policy committee reviewed the risk assessment for 2020 and concluded our compensation policies and practices do not create
risks which could have a material adverse effect on the company. After review and discussion of the assessment with senior management,
the compensation committee concurred with management’s assessment.

In assessing the risks arising from our compensation policies and practices, the human resources department identified the following
practices designed to prevent excessive risk taking:

• Business management and governance practices:

◦

risk management is a specific performance competency included in the annual performance assessment of executives;

◦ board oversight on capital expenditure and operating plans;

◦ board approval on business acquisitions above a specific dollar amount or on any transaction involving the exchange of company

common stock;

◦ employee integrity training programs and anonymous reporting systems;

◦ quarterly risk assessment reports at audit committee meetings; and

◦ prohibitions on holding company stock in an account that is subject to a margin call, pledging company stock as collateral for a loan,

and hedging of company stock by executive officers and directors.

• Executive compensation practices:

◦ active compensation committee review of executive compensation;

◦

initial determination of a position’s salary grade to be at or near the 50th percentile of base salaries paid to similar positions at peer
group companies and/or relevant industry companies;

MDU Resources Group, Inc. Proxy Statement 41

Proxy Statement

◦ consideration of peer group and/or relevant industry practices to establish appropriate target compensation;

◦ a balanced compensation mix of fixed salary as well as annual and long-term incentives tied primarily to the company’s financial and

stock performance;

◦ use of interpolation for annual and long-term incentive awards to avoid payout cliffs;

◦ negative discretion to adjust any annual incentive award payment downward;

◦ use of caps on annual incentive awards (maximum of 200% of target for regulated segments based on weighted maximum targets of

200% for earnings per share weighted 20% and 200% for business unit earnings weighted 80%; and 240% of target for construction
materials and services segments based on weighted maximum targets of 200% for earnings per share weighted 20% and 250% for
business unit EBITDA weighted 80%) and long-term incentive stock grant awards (maximum of 200% of target);

◦ ability to clawback incentive payments in the event of a financial restatement;

◦ use of performance shares and restricted stock units, rather than stock options or stock appreciation rights, as an equity component of

incentive compensation;

◦ use of performance shares for long-term incentive awards with relative total stockholder return, EBITDA growth, and earnings growth

performance measures;

◦ use of three-year performance periods for performance shares and restricted stock units to discourage short-term risk-taking;

◦ substantive incentive goals measured primarily by earnings, EBITDA, earnings per share criteria, and compound earnings and EBITDA

growth, which encourage balanced performance and are important to stockholders;

◦ use of financial performance metrics that are readily monitored and reviewed;

◦

regular review of companies in the peer group to ensure appropriateness and industry match;

◦ stock ownership requirements for the board and for executives participating in the MDU Resources Long-Term Performance-Based

Incentive Plan;

◦ mandatory holding periods of net after-tax company stock awards to executives until stock ownership requirements are achieved; and

◦ use of independent consultants to assist in establishing pay targets and compensation structure.

Components of Compensation
Our executive compensation program is designed to promote sustained long-term profitability and create stockholder value. The components
of our executive officer’s compensation are selected to drive financial and operational results as well as align the executive officer’s interests
with those of our stockholders. Pay components and performance measures are considered by the compensation committee as fundamental
financial measures of successful company performance and long-term value creation. The components of our 2020 executive compensation
included:

42 MDU Resources Group, Inc. Proxy Statement

Component

Payments

Purpose

How Determined

How it Links to Performance

Proxy Statement

Base Salary

Assured

Provides sufficient, regularly paid
income to attract and retain
executives with the knowledge,
skills, and abilities necessary to
successfully execute their job
responsibilities and reflects the
individual role, responsibilities,
performance, and experience of
each named executive officer and
the importance of the role to the
company.

Based on recommendation from
the CEO for executives other than
himself and analysis of peer
company and industry
compensation information. Base
salary for the CEO is determined
after consideration of input from
the independent compensation
consultant.

Annual Cash
Incentive

Performance
Based

At Risk

Provides an opportunity to earn
annual incentive compensation to
ensure focus on annual financial
and operating results and to be
competitive from a total
renumeration standpoint.

Annual cash incentives are
calculated as a percentage of
base salary with payout based on
the achievement of performance
measures established in advance
by the compensation committee.

Performance
Shares

Performance
Based

At Risk

Provides an opportunity to earn
long-term compensation to ensure
focus on long-term value creation
and the company’s strategic
objectives and to be competitive
from a total renumeration
standpoint.

Performance share award
opportunities are recommended
by the CEO for executives other
than himself and approved by the
compensation committee.
Performance share opportunities
for the CEO are determined by
the compensation committee with
input from the independent
compensation consultant. Vesting
of the awards is based on the
company’s achievement of
financial measures established by
the compensation committee as
well as total stockholder return in
comparison to the company’s
peer group over a three-year
performance period.

Base salary is a means to
attract and retain talented
executives capable of driving
success and performance.

Annual incentive performance
measures are tied to the
achievement of financial
goals aimed to drive the
success of the company and
the individual business
segments.

Fosters ownership in
company stock and aligns the
executive’s interests with
those of stockholders in
increasing long-term
stockholder value.

Allocation of Total Target Compensation for 2020
Total target compensation consists of base salary plus target annual and long-term incentive compensation. Performance-based incentive
compensation, which consists of annual cash incentive and three-year performance share award opportunities, comprises the largest portion
of our named executive officers’ total target compensation because:

• performance shares align the interests of the named executive officers with those of stockholders by making a significant portion of their

target compensation contingent upon results beneficial to stockholders;

• our named executive officers are in positions of authority to drive, and therefore bear high levels of responsibility for, our corporate

performance;

• variable compensation helps ensure focus on the goals that are aligned with overall company strategy; and

• incentive compensation is more variable than base salary and dependent upon company performance and the satisfaction of performance

objectives.

The compensation committee generally allocates a higher percentage of total target compensation to the target long-term incentive than to
the target annual incentive for our higher level executives because they are in a better position to influence long-term performance. The
long-term incentive awards, if earned by achieving established measures, are paid in company common stock. These awards, combined with
our stock retention requirements and our stock ownership policy, promote ownership of our stock by the executive officers. As a result, the
compensation committee believes the executive officers, as stockholders, will be motivated to deliver long-term value to all stockholders.

MDU Resources Group, Inc. Proxy Statement 43

Proxy Statement

Peer Group
The compensation committee evaluates the company’s compensation plan and its performance relative to a group of peer companies in
determining overall compensation and the vesting of long-term incentive compensation. The peer group is reviewed annually to assess
ongoing relevance and credibility. The companies included in our 2020 peer group remained the same as the 2019 peer group which were
evaluated and recommended by the independent compensation consultant, Meridian Compensation Partners, LLC. In evaluating potential
peer companies, the compensation consultant considered companies in the construction and engineering, construction materials, and utility
industries. They also sought a group of companies where MDU Resources would rank close to the 50th percentile in terms of revenues and
market capitalization. In addition, the consultant considered companies currently listed as peer companies for MDU Resources by proxy
advisory firms. The 2020 peer group recommended by the consultant includes eleven companies in regulated energy delivery businesses
and ten companies in the construction materials or construction services businesses. At the time of analysis, MDU Resources ranked at the
54th percentile in terms of revenue and at the 41st percentile in terms of market capitalization in comparison to the selected peer group
companies. The 2020 peer group reflects MDU Resources’ size, mix of current businesses, and complexity and consequently provides an
appropriate group for comparative purposes.

The peer group companies are shown below:

2020 Peer Companies

Regulated Energy Delivery

Construction Materials and Services

Alliant Energy Corporation

Ameren Corporation

Atmos Energy Corporation

Black Hills Corporation

CMS Energy Corporation

Evergy, Inc.

NiSource Inc.

Dycom Industries, Inc.

EMCOR Group, Inc.

Granite Construction Incorporated

Jacobs Engineering Group Inc.

KBR, Inc.

Martin Marietta Materials, Inc.

MasTec, Inc.

Pinnacle West Capital Corporation

Quanta Services, Inc.

Portland General Electric Company

Summit Materials, Inc.

Southwest Gas Holdings, Inc.

Vulcan Materials Company

WEC Energy Group, Inc.

2020 Compensation for Our Named Executive Officers

2020 Base Salary and Incentive Targets
At its November 2019 meeting, the compensation committee approved 2020 base salaries as well as the annual and long-term incentive
compensation targets for the named executive officers. Mr. Goodin was not present during the portion of the meeting where the
compensation committee discussed and approved the president and CEO base salary for 2020. At its February 2020 meeting, the
compensation committee approved the annual and long-term incentive performance measures for our named executive officers. In
determining base salaries, target cash annual incentives, target long-term incentives, and target total direct compensation for our named
executive officers, the compensation committee received and considered company and individual performance, market and peer data,
responsibilities, experience, tenure in position, internal equity, and input and recommendations from the CEO, human resources
department, and the independent compensation consultant. The following information relates to each named executive officer’s 2020 base
salary, target annual cash incentive, target long-term incentive, and target total direct compensation:

44 MDU Resources Group, Inc. Proxy Statement

Proxy Statement

David L. Goodin

Base Salary

Target Annual Cash Incentive Opportunity

Target Long-Term Incentive Opportunity

Target Total Direct Compensation

2020
($)

Compensation Component
as a % of Base Salary

960,000

1,200,000

2,400,000

4,560,000

125%

250%

The compensation committee considered information provided in the 2019 compensation study showing
Mr. Goodin's base salary, total cash compensation, and long-term incentives were below market levels and
increased Mr. Goodin’s base salary by 11.6%. Mr. Goodin’s 2020 annual incentive target increased from
100% to 125% of his base salary. The compensation committee, based on recommendations from
its compensation consultant, Meridian Compensation Partners, LLC, set Mr. Goodin’s long-term incentive
target at $2,400,000, which is the same as 2019 and represents 250% of his base salary.

Jason L. Vollmer

Base Salary

Target Annual Cash Incentive Opportunity

Target Long-Term Incentive Opportunity

Target Total Direct Compensation

2020
($)

440,000

330,000

528,000

1,298,000

Compensation Component
as a % of Base Salary

75%

120%

Mr. Vollmer received a 10.0% increase in his base salary in 2020. The compensation committee
considered information provided in the 2019 compensation study showing Mr. Vollmer’s base salary was
below market based on peer group and compensation survey data. The compensation committee maintained
Mr. Vollmer’s target annual and long-term incentive opportunities at 75% and 120% of base salary,
respectively.

David C. Barney

Base Salary

Target Annual Cash Incentive Opportunity

Target Long-Term Incentive Opportunity

Target Total Direct Compensation

2020
($)

487,000

365,250

585,000

1,437,250

Compensation Component
as a % of Base Salary

75%

120%

Mr. Barney received a 3.9% increase in base salary for 2020. The compensation committee maintained
Mr. Barney’s target annual and long-term incentive opportunities at 75% of his base salary and $585,000,
respectively.

Jeffrey S. Thiede

Base Salary

Target Annual Cash Incentive Opportunity

Target Long-Term Incentive Opportunity

Target Total Direct Compensation

2020
($)

487,000

365,250

585,000

1,437,250

Compensation Component
as a % of Base Salary

75%

120%

Mr. Thiede received a 3.9% increase in his base salary for 2020. The compensation committee maintained
Mr. Thiede’s target annual and long-term incentive opportunities at 75% of base salary and $585,000,
respectively.

MDU Resources Group, Inc. Proxy Statement 45

Proxy Statement

Nicole A. Kivisto

Base Salary

Target Annual Cash Incentive Opportunity

Target Long-Term Incentive Opportunity

Target Total Direct Compensation

2020
($)

487,000

365,250

585,000

1,437,250

Compensation Component
as a % of Base Salary

75%

120%

Ms. Kivisto received a base salary increase of 7.0% for 2020. The compensation committee maintained her
target annual and long-term incentive opportunities at 75% of her base salary and $585,000, respectively.

Annual Incentives
Annual incentive awards are received by business segment executives through the achievement of financial performance measures specific
to each business segment plus a performance measure tied to overall company earnings per share. For corporate executives, annual
incentive awards are determined as the sum of the weighted percentage award payouts for each business segment with the weighting based
upon the business segment’s invested capital relative to the company’s total invested capital. Through this, our business segment executives
are incentivized to primarily focus on the success and performance of their business segment while keeping the overall financial success of
the company in mind, whereas our corporate executives are incentivized to assist in the success and performance of all lines of business.

The compensation committee selected objective financial performance measures to ensure that compensation to the executives reflects the
success of their respective business segments and the company. The annual incentive performance measures for each business segment
president include a corporate earnings per share performance measure representing 20% of the target award opportunity and a business
segment financial performance measure representing 80% of the target award opportunity. In February 2020, the compensation committee
set performance targets that it believed were rigorous based on the company’s capital and business plans, prior year results, and anticipated
future market conditions. To incentivize executives to make decisions that have long-term positive impact, even at the expense of short-term
results, and to prevent one-time gains and losses from having an undue impact on incentive payments, the compensation committee
designed its annual incentive measures to allow for adjustments for certain unplanned events that impact our performance targets but are
not indicative of underlying business performance. The following annual incentive performance measures for 2020 were adopted by the
compensation committee for the business segment presidents (exclusive of the MDU Resources Group, Inc. corporate executive officers) at
its February 2020 meeting:

46 MDU Resources Group, Inc. Proxy Statement

Measure

Applies to

Purpose

Measurement

Target Weight How Target was Selected

Proxy Statement

$1.76

20% Target reflects 2020 financial goal

to achieve an estimated return on
invested capital of 8.1%. The 2020
target is 31 cents more than the
2019 target and 7 cents more than
2019 actual EPS before
discontinued operations (diluted).

All Business
Segment
Presidents

MDU
Resources
Diluted
Adjusted
Earnings per
Share (EPS)

Business
Segment
Earnings

Electric and
Natural Gas
Distribution
Segments
President

Pipeline
Segment
President

EPS is a generally
accepted accounting
principle (GAAP)
measurement and is a
key driver of stockholder
return. This is the basis
on which we provide
annual performance
expectations and
consistent with how we
report results to the
financial community.
This goal applies to the
presidents of all business
segments to engage them
as members of the
company’s management
policy committee in the
overall success of the
company.

Provides a measure of
financial performance
and an incentive to drive
business results.
Regulated entities are
valued based on earnings
potential and rate base.

GAAP EPS (diluted) before
discontinued operations plus
earnings/losses from any
operations discontinued after
December 31, 2019, and
adjustments approved by the
compensation committee to
remove:
- the effect on earnings at the

company level of intersegment
earnings eliminations;

- the negative effect on earnings
from asset sales/dispositions/
retirements;

- the effect on earnings from

withdrawal liabilities relating to
multiemployer pension plans;

- the effect on earnings from

transaction costs incurred for
acquisitions and mergers; and

- the effect on earnings from
unanticipated changes and
interpretations of tax law.

GAAP business segment earnings
before discontinued operations
plus earnings/losses from any
operations discontinued after
December 31, 2019, and
adjustments approved by the
compensation committee to
remove:
- the negative effect on earnings
from asset sales/dispositions/
retirements;

- the effect on earnings from

transaction costs incurred for
acquisitions or mergers; and
- the effect on earnings from
unanticipated changes and
interpretations of tax law.

$99.0
million

$31.1
million

Construction
Materials and
Contracting
Segment
President

Business
Segment
Earnings
Before
Interest, Tax,
Depreciation,
and
Amortization
(EBITDA)

Construction
Services
Segment
President

Provides a measure of
financial performance
common to the industries
in which these segments
operate. Focusing on
EBITDA encourages
growth by excluding the
impact of decisions
regarding interest, taxes,
depreciation, and
amortization made during
the acquisition process.

$270.1
million

$150.9
million

EBITDA from continuing
operations adjusted plus EBITDA
from any operations discontinued
after December 31, 2019, and
adjustments approved by the
compensation committee to
remove:
- the negative effect on EBITDA
from asset sales/dispositions/
retirements;

- the effect on EBITDA from

withdrawal liabilities relating to
multiemployer pension plans;
and

- the effect on EBITDA from

transaction costs incurred for
acquisitions or mergers.

80% Target reflects the 2020 financial

goal for the business segment to
achieve an estimated return on
invested capital of 5.0%. The 2020
target is 5.0% above 2019 actual
results reflecting continued
investment in its infrastructure and
regulatory recovery from completed
and pending rate cases.

80% Target reflects the 2020 financial

goal of the business segment to
achieve an estimated return on
invested capital of 7.8%. The 2020
target is 5.0% above the 2019
actual results and reflects the
business segment’s continued
execution of pipeline expansion
projects.

80% Target reflects the 2020 financial

goal of the business segment to
achieve an estimated return on
invested capital of 10.7% and is
4.3% above the actual 2019
EBITDA results. The increase
reflects acquisitions completed in
2019 and backlog at 2019 year-
end.

80% Target reflects the 2020 financial

goal of the business segment to
achieve an estimated return on
invested capital of 20.4% and is
3.8% above the actual 2019
EBITDA results reflecting backlog at
2019 year-end and anticipated
organic and acquisition growth.

MDU Resources Group, Inc. Proxy Statement 47

Proxy Statement

Actual performance results are compared to target performance measures to arrive at a percent of target achieved. The percent of target
achieved is translated into a payout percentage of the target award opportunity. Achievement of 100% of the target performance measure
results in a payout of 100% of the target award opportunity. Achievement of an established threshold is required to receive partial payment
of the target award opportunity. Results achieved below the established threshold result in no payout. The threshold and maximum
performance as well as the associated payout opportunity are depicted in the following chart:

Measure

Weighting

% of Target

Payout %

% of Target

Payout %

MDU Resources Diluted Adjusted EPS

Electric and Natural Gas Distribution Earnings

Pipeline Earnings

Construction Materials and Contracting EBITDA

Construction Services EBITDA

20%

80%

85%

90%

85%

75%

65%

25%

50%

25%

115%

110%

115%

200%

250%

Threshold

Maximum

Results achieved between payout levels are calculated using linear interpolation.

2020 Annual Incentive Results
The 2020 performance measure results, percent of target achieved based on those results, and the associated payout percentages reflect
the company’s excellent 2020 financial performance and are presented below:

Business Segment

All Business Segments

Performance
Measure

Earnings per Share

Result

$1.95

Electric and Natural Gas Distribution

Pipeline

Earnings

$99.7 million

$37.0 million

Construction Materials and Contracting

EBITDA

$305.9 million

Construction Services

EBITDA

$173.3 million

Percent of
Performance
Measure
Achieved

Percent
of Award
Opportunity
Payout

110.8%

100.7%

119.1%

113.2%

114.9%

172.0%

106.5%

200.0%

232.4%

248.6%

Weighted
Award
Opportunity
Payout %

34.4%

85.2%

160.0%

185.9%

198.9%

Weight

20%

80%

For our corporate named executive officers, namely Messrs. Goodin and Vollmer, the payout of the annual cash incentives is based on the
achievement of performance measures at the business segments weighted by each business segment’s average invested capital relative to
the company’s total invested capital. The compensation committee believes this approach provides alignment between our corporate
executives and business segment performance. Messrs. Goodin’s and Vollmer’s 2020 annual cash incentives were earned at 151.5% of the
target award opportunity based on the following proportional weighted sum of the annual business segment payouts:

Business Segment

Electric and Natural Gas Distribution

Pipeline

Construction Materials and Contracting

Construction Services

Total Payout Percentage

Column A
Business Segment
Award Payout

Column B
Percentage of
Average Invested Capital

Column A x Column B

119.6%

194.4%

57.3%

8.9%

25.0%

8.8%

68.5%

17.3%

48.6%

17.1%

151.5%

For purposes of calculating the incentive awards for Messrs. Goodin and Vollmer, the award payouts associated with the construction materials and
contracting and construction services segments’ EBITDA performance measures were limited to 200% which resulted in a weighted payout of 194.4%
versus 232.4% and 248.6% for the construction materials and contracting and construction services business segment presidents, respectively.

48 MDU Resources Group, Inc. Proxy Statement

Based on the achievement of the performance targets, the named executive officers received the following 2020 annual incentive
compensation:

Proxy Statement

Name

David L. Goodin

Jason L. Vollmer

David C. Barney

Jeffrey S. Thiede

Nicole A. Kivisto

Target Annual
Incentive
($)

1,200,000

330,000

365,250

Annual Incentive Earned

Payout as a % of Target
(%)

151.5

220.3

233.3

119.6

Amount
($)

1,818,000

499,950

804,646

852,128

436,839

Long-Term Incentives
All our named executive officers participated in the 2020 long-term incentive plan which aligns long-term compensation with the
achievement of pre-determined financial goals. Long-term incentive compensation comprised 52.6% of the CEO’s 2020 total target direct
compensation and 40.7% of the average of the other named executive officer’s target total direct compensation. Stock earned under long-
term incentive compensation is subject to our stock retention requirements. If the executive’s employment is terminated during the
performance period for cause at any time, or for any reason before the executive has reached age 55 and completed ten years of service, all
performance shares and related dividend equivalents are forfeited.

Grant of 2020-2022 Long-Term Performance Share Awards
For 2020, the compensation committee approved performance share awards which may vest at the end of a three-year period between 0%
and 200% based on the achievement of three performance measures:

• Total stockholder return relative to that of the peer group companies was selected as the measure for 50% of the award vesting to align

the award with the company's performance relative to our peers;

• Compound annual growth rate in EBITDA from continuing operations was selected as the measure for 25% of the award vesting to

encourage strategic growth and focuses on controllable costs; and

• Compound annual growth rate in earnings from continuing operations was selected as the measure for 25% of the award vesting to

encourage quality earnings and continued growth of the company.

For the awards made in 2020, earnings used to calculate EBITDA growth may be adjusted, as such adjustments are approved by the
compensation committee, to remove:

• the effect on earnings from leases/impairments on asset sales/dispositions/retirements;

• the effect on earnings from withdrawal liabilities relating to multiemployer pension plans; and

• the effect on earnings from costs incurred for acquisitions or mergers.

Earnings used to calculate earnings growth from continuing operations for the 2020 awards may be adjusted, as approved by the
compensation committee, to remove the effects on earnings as noted above for the calculation of EBITDA growth plus any effect on earnings
from unanticipated tax law changes.

Vesting of shares and associated dividend equivalents is predicated on achievement of an established threshold associated with each
performance measure. To safeguard the confidentiality of our long-term outlook on projected performance outcomes, we do not disclose
actual performance targets until the performance period is completed. Achievement at the threshold level of the performance measure
results in vesting of 20% of the associated portion of the performance share award. Actual results of the performance measure achieved
below the threshold lead to zero vesting of the associated portion of the performance share award. Maximum performance measure levels
have also been established for each performance measure and result in vesting of 200% of the associated portion of the performance share
award. Thresholds and maximum payouts as a percentage of target performance for the 2020 measures are:

MDU Resources Group, Inc. Proxy Statement 49

Proxy Statement

The Company’s Peer
TSR Percentile Rank

75th or higher

50th

25th

The Company’s Earnings and
EBITDA Growth Rate as a
Percentage of Target

153.8% or higher

Target

46.2%

Less than 25th

less than 46.2%

Vesting Percentage
of Award Target

200%

100%

20%

Vesting for percentile ranks falling between the intervals is interpolated.

On February 13, 2020, for the 2020-2022 performance period, the compensation committee determined the target number of performance
shares for each named executive officer by dividing a selected target long-term award amount by the average of the closing prices of our
stock from January 1 through January 22, 2020, which was $29.20 per share. Based on this price, the compensation committee awarded
the following target performance share opportunities to the named executive officers:

Name

David L. Goodin

Jason L. Vollmer

David C. Barney

Jeffrey S. Thiede

Nicole A. Kivisto

Base Salary
($)

960,000

440,000

487,000

Target Long-Term
Performance Share
Incentive % of Base Salary
(%)

Long-Term
Performance Share
Incentive Target
($)

Performance Share
Opportunities
(#)

250

120

2,400,000

528,000

585,000

82,191

18,082

20,034

Vesting of 2018-2020 Performance Share Awards
For the 2018-2020 performance period, the long-term incentive program consisted solely of performance shares. The performance criteria
used for vesting of the 2018-2020 performance share awards was:

• 50% based on total stockholder return as a percentile of the total stockholder return for our peer companies over the three-year

performance period;

• 25% based on EBITDA growth over the three-year performance period; and

• 25% based on earnings growth over the three-year performance period.

Performance Criteria

Relative TSR Percentile Ranking

EBITDA Growth

Earnings Growth

Total Weighted Payout

Result

50th

10.3%

16.9%

Vesting %

Weighting

Weighted Payout

100%

200%

50%

25%

The named executive officers received the following long-term compensation for the 2018-2020 performance period:

Target
Performance
Shares
(#)

78,460

15,987

20,784

19,642

Performance
Shares
Vested
(#)

117,690

23,980

31,176

29,463

Name

David L. Goodin

Jason L. Vollmer

David C. Barney

Jeffrey S. Thiede

Nicole A. Kivisto

50 MDU Resources Group, Inc. Proxy Statement

50%

150%

Dividend
Equivalents
($)

287,752

58,631

76,225

72,037

Proxy Statement

Stock Retention Requirement
The named executive officers must retain 50% of the net after-tax shares vested pursuant to the long-term incentive awards for the earlier of
two years from the date the vested shares are issued or the executive’s termination of employment. The executive officer is also required to
retain all vested share awards net of taxes if the executive has not met the stock ownership requirements under the company’s stock
ownership policy for executives.

Other Benefits

The company provides post-employment benefit plans and programs in which our named executive officers may be participants. We believe
it is important to provide post-employment benefits which approximate retirement benefits paid by other employers to executives in similar
positions. The compensation committee periodically reviews the benefits provided to maintain a market-based benefits package. Our named
executive officers participated in the following plans during 2020 which are described below:

Plans

401(k) Retirement Plan

Pension Plans

Supplemental Income Security Plan

Nonqualified Defined Contribution Plan

David L. Goodin

Jason L. Vollmer

David C. Barney

Jeffrey S. Thiede

Nicole A. Kivisto

Yes

401(k) Retirement Plan
The named executive officers as well as all employees working a minimum of 1,000 hours per year are eligible to participate in the 401(k)
plan and defer annual income up to the IRS limit. The company provides a match up to 3% depending on the employee’s elected deferral
rate. Contributions and the company match are invested in various funds based on the employee’s election including company common
stock.

In 2010, the company began offering increased company contributions to our 401(k) plan in lieu of pension plan contributions. For non-
bargaining unit employees hired after 2006 or employees who were not previously participants in the pension plan, the added retirement
contribution is 5% of plan eligible compensation. For non-bargaining unit employees hired prior to 2006 who were participants in the
pension plan, the added retirement contributions are based on the employee’s age as of December 31, 2009. The retirement contribution is
11.5% for Mr. Goodin, 9.0% for Ms. Kivisto, 7.0% for Mr. Vollmer, and 5.0% for Messrs. Barney and Thiede. These amounts may be
reduced in accordance with the provisions of the 401(k) plan to ensure compliance with IRS limits.

Pension Plans
Effective in 2006, the defined benefit pension plans were closed to new non-bargaining unit employees and as of December 31, 2009, the
defined benefit plans were frozen. For further details regarding the company’s pension plans, please refer to the section entitled “Pension
Benefits for 2020.”

Supplemental Income Security Plan
We offered certain key managers and executives benefits under a nonqualified retirement plan referred to as the Supplemental Income
Security Plan (SISP). The SISP provides participants with additional retirement income and death benefits payable for 15 years. Effective
February 11, 2016, the SISP was amended to exclude new participants to the plan and freeze current benefit levels for existing
participants. For further details regarding the company’s SISP, please refer to the section entitled “Pension Benefits for 2020.” Named
executive officers participating in the SISP are Messrs. Goodin and Barney and Ms. Kivisto.

MDU Resources Group, Inc. Proxy Statement 51

Proxy Statement

The following table reflects our named executive officers’ SISP benefits as of December 31, 2020:

Name

David L. Goodin

Jason L. Vollmer

David C. Barney

Jeffrey S. Thiede

Nicole A. Kivisto

SISP Benefits

Annual Death Benefit
($)

Annual Retirement Benefit
($)

552,960

n/a

262,464

n/a

157,728

276,480

n/a

131,232

n/a

78,864

Nonqualified Defined Contribution Plan
The company adopted the Nonqualified Defined Contribution Plan (NQDCP) effective January 1, 2012, to provide retirement and deferred
compensation for a select group of management and other highly compensated employees. The compensation committee, upon
recommendation from the CEO, annually determines which employees will participate in the NQDCP and the amount of contributions for
each participant. After satisfying a vesting requirement for each contribution, distributions will be made in accordance with the terms of the
plan. For further details regarding the company’s NQDCP, please refer to the section entitled “Nonqualified Deferred Compensation for
2020.”

For 2020, the compensation committee selected and approved contributions of $44,000 to Mr. Vollmer, $150,000 to Mr. Barney, and
$100,000 to Mr. Thiede. The contributions awarded to Messrs. Vollmer, Barney, and Thiede represent 10.0%, 30.8%, and 20.5% of their
base salaries, respectively.

Employment and Severance Agreements
We currently do not have employment or severance agreements with our executives entitling them to specific payments upon termination of
employment or a change of control of the company. The compensation committee generally considers providing severance benefits on a
case-by-case basis. Any post-employment or change of control benefits available to our executives are addressed within our incentive and
retirement plans. Please refer to the section entitled “Potential Payments upon Termination or Change of Control.”

Compensation Governance

Impact of Tax and Accounting Treatment
The compensation committee may consider the impact of tax or accounting treatment in determining compensation. The compensation
committee did not make any adjustments to the 2020 compensation program to address the impact of tax or accounting treatment. The
compensation committee may also consider the accounting and cash flow implications of various forms of executive compensation. We
expense salaries and annual incentive compensation as earned. For our equity awards, we record the accounting expense in accordance with
Financial Accounting Standards Board 718, which is generally expensed over the vesting period.

Stock Ownership Requirements
Executives participating in our Long-Term Performance-Based Incentive Plan are required within five years of appointment or promotion into
an executive level to beneficially own our common stock equal to a multiple of their base salary as outlined in the stock ownership policy.
Stock owned through our 401(k) plan or by a spouse is considered in ownership calculations. The level of stock ownership compared to the
ownership requirement is determined based on the closing sale price of our stock on the last trading day of the year and base salary at
December 31 of the same year. The table shows the named executive officers’ holdings as a multiple of their base salary.

Name

David L. Goodin

Jason L. Vollmer

David C. Barney

Jeffrey S. Thiede

Nicole A. Kivisto

Ownership Policy Multiple of
Base Salary Within 5 Years

Actual Holdings as a
Multiple of Base Salary1

Ownership Requirement
Must Be Met By:

9.6

1.8

3.8

4.1

4.4

01/01/2018

01/01/2023

01/01/2019

01/01/2020

1 Includes performance stock awards earned net of taxes for the 2018-2020 performance period.

52 MDU Resources Group, Inc. Proxy Statement

Proxy Statement

Deferral of Annual Incentive Compensation
We provide executives the opportunity to defer receipt of earned annual incentives. If an executive chooses to defer all or part of an annual
incentive, we credit the deferral with interest at a rate determined by the compensation committee. For 2020, the interest rate for deferrals
was 4.14% based on an average of the Treasury High Quality Market Corporate Bond Yield Curve for the last business day of each month for
the twelve-month period from October 2018 to September 2019. The compensation committee’s reasons for using this interest rate
recognize incentive deferrals are a low-cost source of capital for the company and are unsecured obligations and, therefore, carry an
associated level of risk to the executives.

Clawback
Our Long-Term Performance-Based Incentive Plan and Executive Incentive Compensation Plan include provisions commonly referred to as a
clawback policy. The compensation committee may, or shall if required, take action to recover incentive-based compensation from specific
executives in the event the company is required to restate its financial statements due to material noncompliance with any financial
reporting requirements under the securities laws.

Policy Regarding Hedging Stock Ownership
Our executive compensation policy prohibits executive officers, which includes our named executive officers, from hedging their ownership
of company common stock. Executives may not enter into transactions that allow the executive to benefit from devaluation of our stock or
otherwise own stock technically but without the full benefits and risks of such ownership. See the section entitled “Security Ownership” for
our policy on margin accounts and pledging of our stock.

COMPENSATION COMMITTEE REPORT

The compensation committee is primarily responsible for reviewing, approving, and overseeing the company’s compensation plans and
practices and works with management and the committee’s independent compensation consultant to develop the company executive
compensation programs. The compensation committee has reviewed and discussed the Compensation Discussion and Analysis required by
Regulation S-K, Item 402(b), with management. Based on the review and discussions referred to in the preceding sentence, the
compensation committee recommended to the board of directors that the Compensation Discussion and Analysis be included in our Proxy
Statement on Schedule 14A.

John K. Wilson, Chair
Thomas Everist
Karen B. Fagg
Patricia L. Moss

MDU Resources Group, Inc. Proxy Statement 53

Proxy Statement

EXECUTIVE COMPENSATION TABLES

Summary Compensation Table for 2020

Name and
Principal Position
(a)

David L. Goodin

Year
(b)

Salary
($)
(c)

Stock
Awards
($)
(e)1

2020

960,000

2,974,497

President and CEO

2019

860,000

3,029,392

2018

824,460

2,433,437

Non-Equity
Incentive Plan
Compensation
($)
(g)

1,818,000

1,403,520

807,971

Jason L. Vollmer

2020

440,000

Vice President and CFO

2019

400,000

David C. Barney
President and CEO of

2018

350,000

2020

487,000

2019

468,500

Knife River Corporation

2018

455,000

Jeffrey S. Thiede
President and CEO of

MDU Construction

Services Group, Inc.

Nicole A. Kivisto

President and CEO of

2020

487,000

2019

468,500

2018

455,000

2020

487,000

2019

455,000

Montana-Dakota Utilities Co.,

2018

430,000

Cascade Natural Gas Corporation,

and Intermountain Gas Company

654,388

605,877

495,840

725,030

738,389

958,410

725,030

738,389

958,410

725,030

738,389

609,197

499,950

489,600

222,950

804,646

843,300

384,589

852,128

843,300

437,141

436,839

480,139

225,277

Change in
Pension Value
and
Nonqualified
Deferred
Compensation
Earnings
($)
(h)2

484,134

735,366

16,503

6,880

8,455

—

86,980

174,117

—

All Other
Compensation
($)
(i)3

Total
($)
(j)

186,779

6,423,410

116,077

6,144,355

72,884

4,155,255

105,928

1,707,146

86,049

69,589

1,589,981

1,138,379

220,062

201,771

2,323,718

2,426,077

251,255

2,049,254

170,362

151,751

2,234,520

2,201,940

140,925

1,991,476

184,058

243,761

210

73,374

54,763

42,302

1,906,301

1,972,052

1,306,986

1 Amounts in this column represent the aggregate grant date fair value of performance share award opportunities at target calculated in accordance
with Financial Accounting Standards Board (FASB) generally accepted accounting principles for stock-based compensation in FASB Accounting
Standards Codification Topic 718. This column was prepared assuming none of the awards were or will be forfeited. The amounts were calculated
as described in Note 13 of our audited financial statements in our Annual Report on Form 10-K for the year ended December 31, 2020. For
2020, the aggregate grant date fair value of outstanding performance share award opportunities assuming the highest level of payout would be as
follows:

Name

David L. Goodin

Jason L. Vollmer

David C. Barney

Jeffrey S. Thiede

Nicole A. Kivisto

Aggregate grant date fair
value at highest payout
($)

5,948,994

1,308,775

1,450,061

54 MDU Resources Group, Inc. Proxy Statement

2 Amounts shown for 2020 represent the change in the actuarial present value for the named executive officers’ accumulated benefits
under the pension plan, SISP, and Excess SISP, collectively referred to as the “accumulated pension change,” plus above-market
earnings on deferred annual incentives as of December 31, 2020.

Proxy Statement

Name

David L. Goodin

Jason L. Vollmer

David C. Barney

Jeffrey S. Thiede

Nicole A. Kivisto

Accumulated Pension Change
($)

Above Market Earnings
($)

435,581

6,880

86,980

—

181,795

48,553

—

2,263

3 All Other Compensation is comprised of:

Name

David L. Goodin

Jason L. Vollmer

David C. Barney

Jeffrey S. Thiede

Nicole A. Kivisto

401(k) Plan
($)a

Nonqualified Defined
Contribution Plan
($)

Life Insurance
Premium
($)

Matching Charitable
Contributions
($)

Dividend
Equivalents
($)b

Total
($)

41,325

28,500

22,800

34,200

—

44,000

150,000

100,000

—

774

681

754

3,600

141,080

186,779

3,600

29,147

105,928

1,200

45,308

220,062

1,500

45,308

170,362

3,600

34,820

73,374

Represents company contributions to the 401(k) plan, which includes matching contributions and retirement contributions associated with the
freeze of the pension plans at December 31, 2009.

b Represents accrued dividend equivalents for 2020 on the 2020-2022, 2019-2021, and 2018-2020 performance share awards associated with
financial performance measures and restricted stock units awarded to Mr. Barney and Mr. Thiede in 2018. The 2020-2022 and 2019-2021
performance share awards are presented at target, and the 2018-2020 performance share awards are presented based on the actual achievement
of the performance measure.

Grants of Plan-Based Awards in 2020

Estimated Future
Payouts Under Non-Equity
Incentive Plan Awards

Estimated Future
Payouts Under Equity
Incentive Plan Awards

Threshold
($)
(c)

Target
($)
(d)

Maximum
($)
(e)

Threshold
(#)
(f)

Target
(#)
(g)

Maximum
(#)
(h)

Grant Date Fair
Value of
Stock and
Option Awards
($)
(l)

435,000

1,200,000

2,400,000

119,625

330,000

660,000

91,313

365,250

876,600

91,313

365,250

876,600

164,363

365,250

730,500

16,438

82,191

164,382

2,974,497

3,616

18,082

36,164

654,388

4,006

20,034

40,068

725,030

4,006

20,034

40,068

725,030

4,006

20,034

40,068

725,030

Grant
Date
(b)

2/13/2020

Name
(a)

David L. Goodin

Jason L. Vollmer

David C. Barney

Jeffrey S. Thiede

Nicole A. Kivisto

1 Annual incentive for 2020 granted pursuant to the MDU Resources Group, Inc. Executive Incentive Compensation Plan.
2 Performance shares for the 2020-2022 performance period granted pursuant to the MDU Resources Group, Inc. Long-Term Performance-Based

Incentive Plan.

MDU Resources Group, Inc. Proxy Statement 55

Proxy Statement

Narrative Discussion Relating to the Summary Compensation Table
and Grants of Plan-Based Awards Table

Annual Incentive
The compensation committee recommended the 2020 annual incentive award opportunities for our named executive officers and the board
approved these opportunities at its meeting on February 13, 2020. The award opportunities at threshold, target, and maximum are reflected
in columns (c), (d), and (e), respectively, of the Grants of Plan-Based Awards Table. The actual amount paid with respect to 2020
performance is reflected in column (g) of the Summary Compensation Table.

As described in the “Annual Incentives” section of the “Compensation Discussion and Analysis,” payment of annual award opportunities is
dependent upon achievement of performance measures; actual payout may range from 0% to 200% of the target except for the construction
materials and contracting and construction services segments which may range from 0% to 240%.

All our named executive officers were awarded their annual incentive opportunities pursuant to the MDU Resources Group, Inc. Executive
Incentive Compensation Plan. Under the Executive Incentive Compensation Plan, executives who retire during the year at or after age 65
remain eligible to receive a prorated award, but executives who terminate employment for other reasons are not eligible for an award. The
compensation committee generally does not modify the performance measures; however, if in years of unusually adverse or favorable
external conditions or other unforeseen significant factors beyond the control of management, the compensation committee may modify the
performance measures. No performance measures were modified in determining 2020 annual incentives. The compensation committee has
full discretion to determine the extent to which goals have been achieved, the payment level, and whether to adjust payment of awards
downward based upon individual performance. For further discussion of the specific 2020 incentive plan performance measures and results,
see the “Annual Incentives” section in the “Compensation Discussion and Analysis.”

Long-Term Incentive
The compensation committee recommended long-term incentive award opportunities for the named executive officers in the form of
performance shares, and the board approved the award opportunities at its meeting on February 13, 2020. The long-term incentive
opportunities are presented as the number of performance shares at threshold, target, and maximum in columns (f), (g), and (h) of the
Grants of Plan-Based Awards Table. The value of the long-term performance-based incentive opportunities is based on the aggregate grant
date fair value and is reflected in column (e) of the Summary Compensation Table and column (l) of the Grant of Plan-Based Awards Table.

Depending on the achievement of the performance measures associated with our 2020-2022 performance period, executives will receive
from 0% to 200% of the target awards in February 2023. We also will pay dividend equivalents in cash on the number of shares actually
vested for the performance period. The dividend equivalents will be paid in 2023 if and to the extent they vest and at the same time as the
performance share awards are settled.

Nonqualified Defined Contribution Plan
The CEO recommends participants and contribution amounts to the Nonqualified Defined Contribution Plan which are approved by the
compensation committee of the board of directors. The purpose of the plan is to recognize outstanding performance coupled with enhanced
retention as the Nonqualified Defined Contribution Plan requires a vesting period. The amount shown in column (i) - All Other Compensation
of the Summary Compensation Table includes contributions of $44,000 to Mr. Vollmer, $150,000 to Mr. Barney, and $100,000 to
Mr. Thiede. For further information, see the section entitled “Nonqualified Deferred Compensation for 2020.”

Salary and Bonus in Proportion to Total Compensation
The following table shows the proportion of salary and bonus to total compensation as presented in the Summary Compensation Table. No
bonuses were paid to the executive officers in 2020.

Salary
($)

960,000

440,000

487,000

Bonus
($)

—

Total
Compensation
($)

Salary and Bonus
as a % of
Total Compensation

6,423,410

1,707,146

2,323,718

2,234,520

1,906,301

14.9%

25.8%

21.0%

21.8%

25.5%

Name

David L. Goodin

Jason L. Vollmer

David C. Barney

Jeffrey S. Thiede

Nicole A. Kivisto

56 MDU Resources Group, Inc. Proxy Statement

Outstanding Equity Awards at Fiscal Year-End 2020

Name
(a)

David L. Goodin

Jason L. Vollmer

David C. Barney

Jeffrey S. Thiede

Nicole A. Kivisto

Proxy Statement

Stock Awards

Equity Incentive Plan Awards:
Number of Unearned Shares, Units
or Other Rights That Have Not
Vested
(#)
(i)1

Equity Incentive Plan Awards:
Market or Payout Value of
Unearned Shares, Units or Other
Rights That Have Not Vested
($)
(j)2

337,917

69,817

97,104

83,401

8,900,734

1,838,980

2,557,719

2,196,782

1 Below is a breakdown by year of the outstanding performance share plan awards:

Name

David L. Goodin

Jason L. Vollmer

David C. Barney

Jeffrey S. Thiede

Nicole A. Kivisto

Performance Period End

12/31/2020

2018 Award

2019 Award

12/31/2021

2020 Award

12/31/2022

Total

156,920

31,974

52,987

39,284

98,806

19,761

24,083

82,191

337,917

18,082

20,034

69,817

97,104

83,401

Shares for the 2018 award are shown at the maximum level (200%) based on results for the 2018-2020 performance period above target. The
number of shares under the 2018 award also includes 11,419 time-vesting restricted stock units granted to Messrs. Barney and Thiede.

Shares for the 2019 award are shown at the target level (100%) based on results for the first two years of the 2019-2021 performance period
between threshold and target.

Shares for the 2020 award are shown at the target level (100%) based on results for the first year of the 2020-2022 performance period between
threshold and target.

2 Value based on the number of performance shares and restricted stock units reflected in column (i) multiplied by $26.34, the year-end per share

closing stock price for 2020.

While for purposes of the Outstanding Equity Awards at Fiscal Year-End 2020 Table, the number of shares and value shown for the
2018-2020 performance period is at 200% of target, the actual results for the performance period certified by the compensation committee
and settled on February 11, 2021, was 150% of target. For further information, see the “Long-Term Incentives” section of the
“Compensation Discussion and Analysis.”

MDU Resources Group, Inc. Proxy Statement 57

Proxy Statement

Option Exercises and Stock Vested During 2020

Name
(a)

David L. Goodin

Jason L. Vollmer

David C. Barney

Jeffrey S. Thiede

Stock Awards

Number of Shares
Acquired on Vesting
(#)
(d)1

14,234

899

3,067

3,144

Value Realized
on Vesting
($)
(e)2

484,170

30,580

104,324

106,943

Nicole A. Kivisto
1 Reflects performance shares for the 2017-2019 performance period ended December 31, 2019, which were settled February 13, 2020.

2,714

92,317

2 Reflects the value of vested performance shares based on the closing stock price of $31.63 per share on February 13, 2020, and the dividend

equivalents paid on the vested shares.

Pension Benefits for 2020

Name
(a)

David L. Goodin

Jason L. Vollmer

David C. Barney

Jeffrey S. Thiede

Nicole A. Kivisto

Plan Name
(b)

Pension
Basic SISP 2
Excess SISP 3
Pension
Basic SISP 3
Excess SISP 3
Pension 3
Basic SISP 2
Excess SISP 3
Pension 3
Basic SISP 3
Excess SISP 3
Pension
Basic SISP 2
Excess SISP 3

Number of Years
Credited Service
(#)
(c)1
26

n/a

n/a
10

n/a

n/a
14

n/a

Present Value of
Accumulated Benefit
($)
(d)

1,433,114

3,209,181

44,583

36,192

—

1,710,384

—

345,211

726,043

—

1 Years of credited service related to the pension plan reflects the years of participation in the plan as of December 31, 2009, when the pension

plan was frozen. Years of credited service related to the Basic SISP reflects the years toward full vesting of the benefit which is 10 years. Years of
credited service related to Excess SISP reflects the same number of credited years of services as the pension plan.

2 The present value of accumulated benefits for the Basic SISP assumes the named executive officer would be fully vested in the benefit on the

benefit commencement date; therefore, no reduction was made to reflect actual vesting levels.

3 Messrs. Barney and Thiede are not eligible to participate in the pension plans. Messrs. Vollmer and Thiede do not participate in the SISP.

Mr. Goodin is the only named executive officer eligible to participate in the Excess SISP.

58 MDU Resources Group, Inc. Proxy Statement

Proxy Statement

The amounts shown for the pension plan, Basic SISP, and Excess SISP represent the actuarial present values of the executives’
accumulated benefits accrued as of December 31, 2020, calculated using:

• a 1.95% discount rate for the Basic SISP and Excess SISP;

• a 2.25% discount rate for the pension plan;

• the Society of Actuaries Pri-2012 Total Dataset Mortality with Scale MP-2020 (post commencement only); and

• no recognition of pre-retirement mortality.

The actuary assumed a retirement age of 60 for the pension, Basic SISP, and Excess SISP benefits and assumed retirement benefits
commence at age 60 for the pension and Excess SISP and age 65 for Basic SISP benefits.

Pension Plan
The MDU Resources Group, Inc. Pension Plan for Non-Bargaining Unit Employees (pension plan) applies to employees hired before 2006
and was amended to cease benefit accruals as of December 31, 2009. The benefits under the pension plan are based on a participant’s
average annual salary over the 60 consecutive month period where the participant received the highest annual salary between 1999 and
2009. Benefits are paid as straight life annuities for single participants and as actuarially reduced annuities with a survivor benefit for
married participants unless they choose otherwise.

Supplemental Income Security Plan
The Supplemental Income Security Plan (SISP), a nonqualified defined benefit retirement plan, is offered to select key managers and
executives. SISP benefits are determined by reference to levels defined within the plan. Our compensation committee, after receiving
recommendations from our CEO, determined each participant’s level within the plan. On February 11, 2016, the SISP was amended to
exclude new participants to the plan and freeze current benefit levels for existing participants.

Basic SISP Benefits
Basic SISP is a supplemental retirement benefit intended to augment the retirement income provided under the pension plans. SISP
benefits are payable to the participant or their beneficiary for a period of 15 years. The Basic SISP benefits are subject to a vesting
schedule where participants are 100% vested after ten years of participation in the plan.

Participants can elect to receive the Basic SISP as:

• monthly retirement benefits only;

• monthly death benefits paid to a beneficiary only; or

• a combination of retirement and death benefits, where each benefit is reduced proportionately.

Regardless of the election, if the participant dies before the SISP retirement benefit commences, only the SISP death benefit is provided.

Excess SISP Benefits
Excess SISP is an additional retirement benefit relating to Internal Revenue Code limitations on retirement benefits provided under the
pension plans. Excess SISP benefits are equal to the difference between the monthly retirement benefits that would have been payable to
the participant under the pension plans absent the limitations under the Internal Revenue Code and the actual benefits payable to the
participant under the pension plans. Participants are only eligible for the Excess SISP benefits if the participant is fully vested under the
pension plan, their employment terminates prior to age 65, and benefits under the pension plan are reduced due to limitations under the
Internal Revenue Code on plan compensation.

In 2009, the SISP was amended to limit eligibility for the Excess SISP benefit. Mr. Goodin is the only named executive officer eligible for
the Excess SISP benefit and must remain employed with the company until age 60 in order to receive the benefit. Benefits generally
commence six months after the participant’s employment terminates and continue to age 65 or until the death of the participant, if prior to
age 65.

Both Basic and Excess SISP benefits are forfeited if the participant’s employment is terminated for cause.

MDU Resources Group, Inc. Proxy Statement 59

Proxy Statement

Nonqualified Deferred Compensation for 2020

Deferred Annual Incentive Compensation
Executives participating in the annual incentive compensation plans may elect to defer up to 100% of their annual incentive awards.
Deferred amounts accrue interest at a rate determined by the compensation committee. The interest rate in effect for 2020 was 4.14%
based on an average of the Treasury High Quality Market Corporate Bond Yield Curve for the last business day of each month for the twelve
month period from October 2018 to September 2019. The deferred amount will be paid in accordance with the participant’s election,
following termination of employment or beginning in the fifth year following the year the award was earned. The amounts are paid in
accordance with the participant’s election in either a lump sum or in monthly installments not to exceed 120 months. In the event of a
change of control, all amounts deferred would immediately become payable. For purposes of deferred annual incentive compensation, a
change of control is defined as:

• an acquisition during a 12-month period of 30% or more of the total voting power of our stock;

• an acquisition of our stock that, together with stock already held by the acquirer, constitutes more than 50% of the total fair market value

or total voting power of our stock;

• replacement of a majority of the members of our board of directors during any 12-month period by directors whose appointment or

election is not endorsed by a majority of the members of our board of directors; or

• acquisition of our assets having a gross fair market value at least equal to 40% of the gross fair market value of all of our assets.

Nonqualified Defined Contribution Plan
The company adopted the Nonqualified Defined Contribution Plan, effective January 1, 2012, to provide deferred compensation for a select
group of employees. The compensation committee approves the amount of employer contributions under the Nonqualified Defined
Contribution Plan and the obligations under the plan constitute an unsecured promise of the company to make such payments. The
company credits contributions to plan accounts which capture the hypothetical investment experience based on the participant’s elections.
Contributions made prior to 2017 vest four years after each contribution in accordance with the terms of the plan. Contributions made in
and after 2017 vest rateably over a three-year period. Amounts shown as aggregate earnings in the table below for Messrs. Vollmer, Barney,
and Thiede reflect the change in investment value at market rates for the hypothetical investments selected by the participants. Participants
may elect to receive their vested contributions and investment earnings either in a lump sum upon separation from service with the company
or in annual installments over a period of years upon the latter of (i) separation from service and (ii) age 65. Plan benefits become fully
vested if the participant dies while actively employed. Benefits are forfeited if the participant’s employment is terminated for cause.

The table below includes individual contributions from deferrals of annual incentive compensation and company contributions under the
Nonqualified Defined Contribution Plan:

Name
(a)

David L. Goodin

Jason L. Vollmer

David C. Barney

Jeffrey S. Thiede

Nicole A. Kivisto

Executive
Contributions in
Last FY
($)
(b)

Registrant
Contributions in
Last FY
($)
(c)

Aggregate
Earnings in
Last FY
($)
(d)

Aggregate
Withdrawals/
Distributions
($)
(e)

701,760

—

108,834

—

120,035

44,000

150,000

100,000

—

26,331

96,016

132,359

5,073

—

Aggregate
Balance at
Last FYE
($)
(f)

2,795,829 1
194,007 2
790,996 3
1,116,799 4
143,587 5

1 Mr. Goodin deferred 50% of his 2019 annual incentive compensation which was $1,403,520 as reported in the Summary Compensation Table for 2019.

2 Mr. Vollmer received $44,000 under the Nonqualified Defined Contribution Plan for 2020. Mr. Vollmer’s balance also includes contributions of $40,000,
$35,000, and $22,550 for 2019, 2018, and 2017, respectively. Each of these amounts are reported in column (i) of the Summary Compensation Table
for its respective year, where applicable.

3 Mr. Barney received $150,000 under the Nonqualified Defined Contribution Plan for 2020. Mr. Barney’s balance also includes contributions of

$150,000 for each of 2019, 2018, and 2017. Each of these amounts are reported in column (i) of the Summary Compensation Table for its respective
year.

4 Mr. Thiede received $100,000 under the Nonqualified Defined Contribution Plan for 2020. Mr. Thiede’s balance also includes contributions of

$100,000 for each of 2019, 2018, 2017, and 2016, $150,000 for 2015, $75,000 for 2014, and $33,000 for 2013. Each of these amounts was
reported in column (i) of the Summary Compensation Table in the Proxy Statement for its respective year, where applicable.

5 Ms. Kivisto deferred 25% of her 2019 annual incentive compensation which was $480,139 as reported in the Summary Compensation Table for 2019.

60 MDU Resources Group, Inc. Proxy Statement

Potential Payments upon Termination or Change of Control

The Potential Payments upon Termination or Change of Control Table shows the payments and benefits our named executive officers would
receive in connection with a variety of employment termination scenarios or upon a change of control. The scenarios include:

Proxy Statement

• Voluntary Termination;

• Not for Cause Termination;

• Death;

• Disability;

• Change of Control with Termination; and

• Change of Control without Termination.

For the named executive officers, the information assumes the terminations or the change of control occurred on December 31, 2020.

The table excludes compensation and benefits our named executive officers would earn during their employment with us whether or not a
termination or change of control event had occurred. The tables also do not include benefits under plans or arrangements generally available
to all salaried employees and that do not discriminate in favor of the named executive officers, such as benefits under our qualified defined
benefit pension plan (for employees hired before 2006), accrued vacation pay, continuation of health care benefits, and life insurance
benefits. The tables also do not include Nonqualified Defined Contribution Plan or deferred annual compensation amounts which are shown
and explained in the “Nonqualified Deferred Compensation for 2020” Table.

Compensation
None of our named executive officers have employment or severance agreements entitling them to their base salary, some multiple of base
salary or severance upon termination or change of control. Our compensation committee generally considers providing severance benefits on
a case-by-case basis. Because severance payments are discretionary, no amounts are presented in the tables.

All our named executive officers were granted their 2020 annual incentive award under the Executive Incentive Compensation Plan (EICP)
which has no change of control provision in regards to annual incentive compensation other than for deferred compensation. The EICP
requires participants to remain employed with the company through the service year to be eligible for a payout unless otherwise determined
by the compensation committee for executive officers or employment termination after age 65. As all our scenarios assume a termination or
change in control event on December 31st, the named executive officers would be considered employed for the entire performance period;
therefore, no amounts are shown for annual incentives in the tables for our named executive officers, as they would be eligible to receive
their annual incentive award based on the level that performance measures were achieved for the performance period regardless of
termination or change of control occurring on December 31, 2020.

All named executive officers received their performance share awards under the Long-Term Performance-Based Incentive Plan (LTIP). Upon
a change of control (with or without termination), performance share awards would be deemed fully earned and vest at their target levels for
the named executive officers. For this purpose, the term “change of control” is defined in the LTIP as:

• the acquisition by an individual, entity, or group of 20% or more of our outstanding common stock;

• a majority of our board of directors whose election or nomination was not approved by a majority of the incumbent board members;

• consummation of a merger or similar transaction or sale of all or substantially all of our assets, unless our stockholders immediately prior
to the transaction beneficially own more than 60% of the outstanding common stock and voting power of the resulting corporation in
substantially the same proportions as before the merger, no person owns 20% or more of the resulting corporation’s outstanding common
stock or voting power except for any such ownership that existed before the merger and at least a majority of the board of the resulting
corporation is comprised of our directors; or

• stockholder approval of our liquidation or dissolution.

MDU Resources Group, Inc. Proxy Statement 61

Proxy Statement

For termination scenarios other than a change of control, our award agreements provide that performance share awards are forfeited if the
participant’s employment terminates before the participant has reached age 55 and completed 10 years of service. If a participant’s
employment is terminated other than for cause after reaching age 55 and completing 10 years of service, performance shares are prorated
as follows:

• termination of employment during the first year of the performance period = shares are forfeited;

• termination of employment during the second year of the performance period = performance shares earned are prorated based on the

number of months employed during the performance period; and

• termination of employment during the third year of the performance period = full amount of any performance shares earned are received.

Under the termination scenarios, Messrs. Goodin, Barney, and Thiede would receive performance shares as they have each reached age 55
and have 10 or more years of service. The number of performance shares received would be based on the following:

• 2018-2020 performance shares would vest based on the achievement of the performance measure for the period ended December 31,

2020, which was 150%;

• 2019-2021 performance shares would be prorated at 24 out of 36 months (2/3) of the performance period and vest based on the actual

achievement of the performance measure for the period ended December 31, 2021. For purposes of the Potential Payments upon
Termination or Change of Control Table, the performance achievement for the performance period is shown at target; and

• 2020-2022 performance shares would be forfeited.

For purposes of calculating the performance share value shown in the Potential Payments upon Termination or Change of Control Table, the
number of vesting shares was multiplied by the average of the high and low stock price for the last market day of the year, which was
December 31, 2020. Dividend equivalents based on the number of vesting shares are also included in the amounts presented.

Neither Ms. Kivisto nor Mr. Vollmer have reached age 55; therefore, they are not eligible for vesting of performance shares in the event of
their termination.

Messrs. Barney and Thiede were granted 11,419 restricted stock units in February 2018. The restricted stock units and dividend
equivalents vested on December 31, 2020, after Messrs. Barney and Thiede met the conditions for vesting by being continuously employed
by the company through the vesting date. In the case of a change of control (with or without termination) occurring on December 31, 2020,
the restricted stock units plus dividend equivalents would have vested pursuant to their normal terms.

Benefits and Perquisites

Supplemental Income Security Plan
As described in the “Pension Benefits for 2020” section, the Basic SISP provides a benefit of payments for 15 years commencing at the
latter of retirement or age 65. Of the named executive officers, only Messrs. Goodin, Barney, and Ms. Kivisto participate in the Basic SISP
benefits and are 100% vested in their benefit.

Under all scenarios except death and change of control without termination, the payment represents the present value of the vested Basic
SISP benefit as of December 31, 2020, using the monthly retirement benefit shown in the table below and a discount rate of 1.95%. In the
event of death, Messrs. Goodin, Barney, and Ms. Kivisto’s beneficiaries would receive monthly death benefit payments for 15 years. The
Potential Payments upon Termination or Change of Control Table shows the present value calculations of the monthly death benefit using
the 1.95% discount rate.

David L. Goodin

David C. Barney

Nicole A. Kivisto

Monthly SISP Retirement Payment
($)
23,040

Monthly SISP Death Payment
($)
46,080

10,936

6,572

21,872

13,144

Because the plan requires a participant to be no longer actively employed by the company in order to be eligible for payments, we do not
show benefits for the change of control without termination scenario.

62 MDU Resources Group, Inc. Proxy Statement

Proxy Statement

Disability
We provide disability benefits to some of our salaried employees equal to 60% of their base salary, subject to a salary limit of $200,000 for
officers and $100,000 for other salaried employees. For all eligible employees, disability payments continue until age 65 if disability occurs
at or before age 60 and for five years if disability occurs between the ages of 60 and 65. Disability benefits are reduced for amounts paid as
retirement benefits. The disability payments in the Potential Payments upon Termination or Change of Control Table reflect the present
value of the disability benefits attributable to the additional $100,000 of base salary recognized for executives under our disability program,
subject to the 60% limitation, after reduction for amounts that would be paid as retirement benefits. For Messrs. Goodin and Vollmer and
Ms. Kivisto, who participate in the pension plan, the amount represents the present value of the disability benefit after reduction for
retirement benefits using a discount rate of 2.25%. Because Mr. Goodin’s retirement benefit is greater than the disability benefit, the
amount shown is zero. For Messrs. Barney and Thiede, who do not participate in the pension plan, the amount represents the present value
of the disability benefit without reduction for retirement benefits using the discount rate of 1.95%, which is considered a reasonable rate for
purposes of the calculation.

MDU Resources Group, Inc. Proxy Statement 63

Proxy Statement

Potential Payments upon Termination or Change of Control Table

Executive Benefits and Payments upon
Termination or Change of Control

Voluntary
Termination
($)

Not for
Cause
Termination
($)

Death
($)

Disability
($)

Change of
Control
(With
Termination)
($)

Change of
Control
(Without
Termination)
($)

David L. Goodin

Compensation:

Performance Shares

Benefits and Perquisites:

Basic SISP

SISP Death Benefits

Disability Benefits

Total

Jason L. Vollmer

Compensation:

Performance Shares

Benefits and Perquisites:

Disability Benefits

Total

David C. Barney

Compensation:

Performance Shares

Restricted Stock Units

Benefits and Perquisites:

Basic SISP

SISP Death Benefits

Disability Benefits

Total

Jeffrey S. Thiede

Compensation:

Performance Shares

Restricted Stock Units

Benefits and Perquisites:

Disability Benefits

Total

Nicole A. Kivisto

Compensation:

Performance Shares

Benefits and Perquisites:

Basic SISP

SISP Death Benefits

Disability Benefits

Total

64 MDU Resources Group, Inc. Proxy Statement

4,103,672

4,103,672 4,103,672

4,103,672

6,608,842

3,212,382

—

3,212,382

—

— 7,198,103

—

7,316,054

7,316,054 11,301,775

7,316,054

9,821,224

6,608,842

—

1,088,165

—

995,310

—

995,310

1,088,165

956,112

1,607,038

—

326,127

1,708,300

—

1,708,300

—

— 3,416,600

—

286,082

—

2,664,412

4,698,839

3,276,621

3,641,465

1,933,165

970,335

1,616,520

—

326,127

—

344,478

—

970,335

1,296,462

1,640,940

1,942,647

—

1,514,878

727,629

—

727,629

—

— 2,053,209

—

740,094

—

727,629

2,053,209

1,467,723

2,242,507

1,514,878

Proxy Statement

CEO Pay Ratio Disclosure

As required by Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 402(u) of Regulation S-K, we
are providing information regarding the relationship of the annual total compensation of David L. Goodin, our president and chief executive
officer, to the annual total compensation of our median employee.

Our employee workforce fluctuates during the year largely depending on the seasonality, number, and size of construction project activity
conducted by our businesses. Approximately 55% of our employee workforce is employed under union bargained labor contracts which
define compensation and benefits for participants which may include payments made by the company associated with employee
participation in union benefit and pension plans.

We identified the median employee by examining the 2020 taxable wage information for all individuals on the company’s payroll records as
of December 31, 2020, excluding Mr. Goodin. All of the company’s employees are located in the United States. We made no adjustments to
annualize compensation for individuals employed for only part of the year. We selected taxable wages as reported to the Internal Revenue
Service on Form W-2 for 2020 to identify the median employee as it includes substantially all of the compensation for our median employee
and provided a reasonably efficient and cost-effective manner for the identification of the median employee. Our median employee works for
a subsidiary of our construction materials and contracting segment with compensation consisting of wages, bonus, company 401(k)
matching and profit sharing contributions.

Once identified, we categorized the median employee’s compensation to correspond to the compensation components as reported in the
Summary Compensation Table. For 2020, the total annual compensation of Mr. Goodin as reported in the Summary Compensation Table
included in this Proxy Statement was $6,423,410, and the total annual compensation of our median employee was $94,463. Based on this
information, the 2020 ratio of annual total compensation of Mr. Goodin to the median employee was 68 to 1.

MDU Resources Group, Inc. Proxy Statement 65

Proxy Statement

AUDIT MATTERS

ITEM 3: RATIFICATION OF THE APPOINTMENT OF DELOITTE & TOUCHE LLP AS THE COMPANY’S
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR 2021

The audit committee at its February 2021 meeting appointed Deloitte & Touche LLP as our independent registered public accounting firm
for fiscal year 2021. The board of directors concurred with the audit committee’s decision. Deloitte & Touche LLP has served as our
independent registered public accounting firm since fiscal year 2002.

Although your ratification vote will not affect the appointment or retention of Deloitte & Touche LLP for 2021, the audit committee will
consider your vote in determining its appointment of our independent registered public accounting firm for the next fiscal year. The audit
committee, in appointing our independent registered public accounting firm, reserves the right, in its sole discretion, to change an
appointment at any time during a fiscal year if it determines that such a change would be in our best interests.

A representative of Deloitte & Touche LLP will be present at the annual meeting and will be available to respond to appropriate questions.
We do not anticipate that the representative will make a prepared statement at the annual meeting; however, he or she will be free to do so
if he or she chooses.

The board of directors recommends a vote “for” the ratification of the

appointment of Deloitte & Touche LLP as our independent registered

public accounting firm for fiscal year 2021.

Ratification of the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for 2021 requires the
affirmative vote of a majority of our common stock present in person or represented by proxy at the annual meeting and entitled to vote on
the proposal. Abstentions will count as votes against this proposal.

Annual Evaluation and Selection of Deloitte & Touche LLP

The audit committee annually evaluates the performance of its independent registered public accounting firm, including the senior audit
engagement team, and determines whether to re-engage the current independent accounting firm or consider other firms. Factors
considered by the audit committee in deciding whether to retain the current independent accounting firm include:

• Deloitte & Touche LLP’s capabilities considering the complexity of our business and the resulting demands placed on Deloitte & Touche

LLP in terms of technical expertise and knowledge of our industry and business;

• the quality and candor of Deloitte & Touche LLP’s communications with the audit committee and management;

• Deloitte & Touche LLP’s independence;

• the quality and efficiency of the services provided by Deloitte & Touche LLP, including input from management on Deloitte & Touche
LLP’s performance and how effectively Deloitte & Touche LLP demonstrated its independent judgment, objectivity, and professional
skepticism;

• external data on audit quality and performance, including recent Public Company Accounting Oversight Board reports on Deloitte &

Touche LLP and its peer firms; and

• the appropriateness of Deloitte & Touche LLP’s fees, tenure as our independent auditor, including the benefits of a longer tenure, and the

controls and processes in place that help ensure Deloitte & Touche LLP’s continued independence.

Based on this evaluation, the audit committee and the board believe that retaining Deloitte & Touche LLP to serve as our independent
registered public accounting firm for the fiscal year ending December 31, 2021, is in the best interests of our company and its
stockholders.

66 MDU Resources Group, Inc. Proxy Statement

In accordance with rules applicable to mandatory partner rotation, Deloitte & Touche LLP’s lead engagement partner for our audit is
scheduled to change in 2022. The audit committee oversees the process for, and ultimately approves, the selection of the lead engagement
partner.

Audit Fees and Non-Audit Fees

The following table summarizes the aggregate fees that our independent registered public accounting firm, Deloitte & Touche LLP, billed or
is expected to bill us for professional services rendered for 2019 and 2020:

Proxy Statement

Audit Fees 1
Audit-Related Fees
Tax Fees
All Other Fees 2
Total Fees 3

2019

2020

$ 2,919,950

$ 2,798,015

—

5,000

—

$ 2,924,950

$ 2,798,015

Ratio of Tax and All Other Fees to Audit and Audit-Related Fees

0.2 %

0.0 %

1 Audit fees for 2019 and 2020 consisted of fees for the annual audit of our consolidated financial statements and internal control over financial
reporting, statutory and regulatory audits, reviews of quarterly financial statements, comfort letters in connection with securities offerings, and
other filings with the SEC.

2 All other fees relate to training.

3 Total fees reported above include out-of-pocket expenses related to the services provided of $310,000 for 2019 and $85,000 for 2020.

Policy on Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services of the Independent
Registered Public Accounting Firm

The audit committee pre-approved all services Deloitte & Touche LLP performed in 2020 in accordance with the pre-approval policy and
procedures the audit committee adopted in 2003. This policy is designed to achieve the continued independence of Deloitte & Touche LLP
and to assist in our compliance with Sections 201 and 202 of the Sarbanes-Oxley Act of 2002 and related rules of the SEC.

The policy defines the permitted services in each of the audit, audit-related, tax, and all other services categories, as well as prohibited
services. The pre-approval policy requires management to submit annually for approval to the audit committee a service plan describing the
scope of work and anticipated cost associated with each category of service. At each regular audit committee meeting, management reports
on services performed by Deloitte & Touche LLP and the fees paid or accrued through the end of the quarter preceding the meeting.
Management may submit requests for additional permitted services before the next scheduled audit committee meeting to the designated
member of the audit committee, currently David M. Sparby, for approval. The designated member updates the audit committee at the next
regularly scheduled meeting regarding any services approved during the interim period. At each regular audit committee meeting,
management may submit to the audit committee for approval a supplement to the service plan containing any request for additional
permitted services.

In addition, prior to approving any request for audit-related, tax, or all other services of more than $50,000, Deloitte & Touche LLP will
provide a statement setting forth the reasons why rendering of the proposed services does not compromise Deloitte & Touche LLP’s
independence. This description and statement by Deloitte & Touche LLP may be incorporated into the service plan or included as an exhibit
thereto or may be delivered in a separate written statement.

MDU Resources Group, Inc. Proxy Statement 67

Proxy Statement

AUDIT COMMITTEE REPORT

The audit committee assists the board in fulfilling its oversight responsibilities and serves as a communication link among the board,
management, the independent auditors, and the internal auditors. The audit committee (a) assists the board’s oversight of (i) the integrity of
the company’s financial reporting process and system of internal controls, (ii) the company’s compliance with legal and regulatory
requirements and the code of conduct, (iii) the independent auditors’ qualifications and independence, (iv) the performance of the
company’s internal audit function and independent auditors, and (v) the company’s management of risks in the audit committee’s areas of
responsibility; (b) arranges for the preparation of and approves the report that SEC rules require be included in the company’s annual proxy
statement; and (c) is also responsible for the appointment, compensation, retention, and oversight of the independent auditors including
pre-approval of all audit and non-audit services by the independent auditors. The audit committee acts under a written charter which it
reviews at least annually and a copy of which is available on our website.

Management has primary responsibility for the company’s financial statements and the reporting process, including the systems of internal
control over financial reporting. The independent auditors are responsible for performing an independent audit of the company’s
consolidated financial statements, issuing an opinion on the conformity of those audited financial statements with generally accepted
accounting principles, and assessing the effectiveness of the company’s internal controls over financial reporting. The audit committee
oversees the company’s financial reporting process and internal controls on behalf of the board.

In performing its oversight responsibilities in connection with our financial statements for the year ended December 31, 2020, the audit
committee:

• reviewed and discussed the audited financial statements with management;

• discussed with the independent auditors the matters required to be discussed by the applicable requirements of the Public Company

Accounting Oversight Board and the SEC;

• received the written disclosures and the letter from the independent auditors required by applicable requirements of the Public Company
Accounting Oversight Board regarding the independent auditors’ communications with the audit committee concerning independence and
discussed with the independent auditors their independence; and

• reviewed and pre-approved the services provided by the independent auditors other than their audit services and considered whether the

provision of such other services by our independent auditors is compatible with maintaining their independence.

Based on the review and discussions referred to above, the audit committee recommended to the board of directors, and the board of
directors has approved, that the audited financial statements be included in our Annual Report on Form 10-K for the year ended
December 31, 2020, for filing with the SEC. The audit committee has appointed Deloitte & Touche LLP as the company’s independent
auditors for 2021. Stockholder ratification of this appointment is included as Item 3 in these proxy materials.

David M. Sparby, Chair

Mark A. Hellerstein

Edward A. Ryan

Chenxi Wang

68 MDU Resources Group, Inc. Proxy Statement

Proxy Statement

INFORMATION ABOUT THE ANNUAL MEETING

Who Can Vote?

Stockholders of record at the close of business on March 12, 2021, are entitled to vote each share they owned
on that date on each matter presented at the meeting and any adjournment(s) thereof. As of March 12, 2021,
we had 201,194,537 shares of common stock outstanding entitled to one vote per share.

Distribution of Our
Proxy Materials Using
Notice and Access

We distributed proxy materials to certain of our stockholders via the Internet under the SEC’s “Notice and
Access” rules to reduce our costs and decrease the environmental impact of our proxy materials. Using this
method of distribution, on or about March 26, 2021, we mailed a Notice Regarding the Availability of Proxy
Materials (Notice) that contains basic information about our 2021 annual meeting and instructions on how to
view all proxy materials, and vote electronically, on the Internet. If you received the Notice and prefer to receive
a paper copy of the proxy materials, follow the instructions in the Notice for making this request and the
materials will be sent promptly to you via the preferred method. Stockholders who do not receive the Notice will
receive a paper copy of our proxy materials which will be sent on or about April 1, 2021.

How to Vote

You are encouraged to vote in advance of the meeting using one of the following voting methods, even if you are
planning to attend the 2021 Annual Meeting of Stockholders.

Registered Stockholders: Stockholders of record who hold their shares directly with our stock registrar can vote
any one of four ways:

instructions.

: By Internet: Go to the website shown on the Notice or Proxy Card, if you received one, and follow the
) By Telephone: Call the telephone number shown on the Notice or Proxy Card, if you received one, and

follow the instructions given by the voice prompts.

Revoking Your Proxy
or Changing Your
Vote

Voting via the Internet or by telephone authorizes the named proxies to vote your shares in the same
manner as if you marked, signed, dated, and returned the Proxy Card by mail. Your voting instructions may
be transmitted up until 11:59 p.m. Eastern Time on May 10, 2021.

* By Mail: If you received a paper copy of the Proxy Statement, Annual Report, and Proxy Card, mark, sign,

date, and return the Proxy Card in the postage-paid envelope provided.

In Person: Attend the annual meeting, or send a personal representative with an appropriate proxy, to vote
by ballot at the meeting.

Beneficial Stockholders: Stockholders whose shares are held beneficially in the name of a bank, broker, or other
holder of record (sometimes referred to as holding shares “in street name”), will receive voting instructions from
said bank, broker, or other holder of record. If you wish to vote in person at the meeting, you must obtain a legal
proxy from your bank, broker, or other holder of record of your shares and present it at the meeting.

See discussion below regarding the MDU Resources Group, Inc. 401(k) Plan for voting instructions for shares held
under our 401(k) plan.

You may change your vote at any time before the proxy is exercised.

Registered Stockholders:

• If you voted by mail: you may revoke your proxy by executing and delivering a timely and valid later dated

proxy, by voting by ballot at the meeting, or by giving written notice of revocation to the corporate secretary.

• If you voted via the Internet or by telephone: you may change your vote with a timely and valid later Internet

or telephone vote, as the case may be, or by voting by ballot at the meeting.

• Attendance at the meeting will not have the effect of revoking a proxy unless (1) you give proper written

notice of revocation to the corporate secretary before the proxy is exercised, or (2) you vote by ballot at the
meeting.

Beneficial Stockholders: Follow the specific directions provided by your bank, broker, or other holder of record to
change or revoke any voting instructions you have already provided. Alternatively, you may vote your shares by
ballot at the meeting if you obtain a legal proxy from your bank, broker, or other holder of record and present it
at the meeting.

MDU Resources Group, Inc. Proxy Statement 69

Proxy Statement

Discretionary Voting
Authority

If you complete and submit your proxy voting instructions, the individuals named as proxies will follow your
instructions. If you are a stockholder of record and you submit proxy voting instructions but do not direct how to
vote on each item, the individuals named as proxies will vote as the board recommends on each proposal. The
individuals named as proxies will vote on any other matters properly presented at the annual meeting in
accordance with their discretion. Our bylaws set forth requirements for advance notice of any nominations or
agenda items to be brought up for voting at the annual meeting, and we have not received timely notice of any
such matters, other than the items from the board of directors described in this Proxy Statement.

Voting Standards

A majority of outstanding shares of stock entitled to vote must be present in person or represented by proxy to
hold the meeting. Abstentions and broker non-votes are counted for purposes of determining whether a quorum
is present at the annual meeting.

If you are a beneficial holder and do not provide specific voting instruction to your broker, the organization that
holds your shares will not be authorized to vote your shares, which would result in broker non-votes, on proposals
other than the ratification of the selection of our independent registered public accounting firm for 2021.

The following chart describes the proposals to be considered at the annual meeting, the vote required to elect
directors and to adopt each other proposal, and the manner in which votes will be counted:

Item
No.

Proposal

Election of Directors

Voting
Options

For,
against,
or abstain
on each
nominee

Vote Required to Adopt the Proposal

A nominee for director will be
elected if the votes cast for such
nominee exceed the votes cast
against such nominee.

Effect of
Abstentions

Effect of “Broker
Non-Votes”

No effect

Advisory Vote to Approve
the Compensation Paid
to the Company’s Named
Executive Officers

For,
against,
or abstain

The affirmative vote of a majority
of the shares of common stock
represented at the annual meeting
and entitled to vote thereon

Same
effect as
votes
against

No effect

3 Ratification of the

Appointment of Deloitte
& Touche LLP as the
Company’s Independent
Registered Public
Accounting Firm for
2021

For,
against,
or abstain

The affirmative vote of a majority
of the shares of common stock
represented at the annual meeting
and entitled to vote thereon

Same
effect as
votes
against

Brokers have
discretion to
vote

Proxy Solicitation

The board of directors is furnishing proxy materials to solicit proxies for use at the Annual Meeting of
Stockholders on May 11, 2021, and any adjournment(s) thereof. Proxies are solicited principally by mail, but
directors, officers, and employees of MDU Resources Group, Inc. or its subsidiaries may solicit proxies
personally, by telephone, or by electronic media, without compensation other than their regular compensation.
Okapi Partners, LLC, additionally will solicit proxies for approximately $8,500 plus out-of-pocket expenses. We
will pay the cost of soliciting proxies and will reimburse brokers and others for forwarding proxy materials to
stockholders.

70 MDU Resources Group, Inc. Proxy Statement

Electronic Delivery
of Proxy Statement
and Annual Report
Documents

For stockholders receiving proxy materials by mail, you can elect to receive an email in the future that will
provide electronic links to these documents. Opting to receive your proxy materials online will save the company
the cost of producing and mailing documents to your home or business and will also give you an electronic link
to the proxy voting site.

Proxy Statement

• Registered Stockholders: If you vote on the Internet, simply follow the prompts for enrolling in the electronic

proxy delivery service. You may also enroll in the electronic proxy delivery service at any time in the future by
going directly to http://enroll.icsdelivery.com/mdu to request electronic delivery. You may revoke an electronic
delivery election at this site at any time.

• Beneficial Stockholders: If you hold your shares in a brokerage account, you may also have the opportunity to
receive copies of the proxy materials electronically. You may enroll in the electronic proxy delivery service at
any time by going directly to http://enroll.icsdelivery.com/mdu to request electronic delivery. You may also
revoke an electronic delivery election at this site at any time. In addition, you may also check the information
provided in the proxy materials mailed to you by your bank or broker regarding the availability of this service
or contact your bank or broker to request electronic delivery.

In accordance with a Notice sent to eligible stockholders who share a single address, we are sending only one
Annual Report to Stockholders and one Proxy Statement to that address unless we received instructions to the
contrary from any stockholder at that address. This practice, known as “householding,” is designed to reduce our
printing and postage costs. However, if a stockholder of record wishes to receive a separate Annual Report to
Stockholders and Proxy Statement in the future, he or she may contact the Office of the Treasurer at MDU
Resources Group, Inc., P.O. Box 5650, Bismarck, ND 58506-5650, Telephone Number: (701) 530-1000.
Eligible stockholders of record who receive multiple copies of our Annual Report to Stockholders and Proxy
Statement can request householding by contacting us in the same manner. Stockholders who own shares through
a bank, broker, or other nominee can request householding by contacting the nominee.

We will promptly deliver, upon written or oral request, a separate copy of the Annual Report to Stockholders and
Proxy Statement to a stockholder at a shared address to which a single copy of the document was delivered.

This Proxy Statement is being used to solicit voting instructions from participants in the MDU Resources Group,
Inc. 401(k) Plan with respect to shares of our common stock that are held by the trustee of the plan for the
benefit of plan participants. If you are a plan participant and also own other shares as a registered stockholder or
beneficial owner, you will separately receive a Notice or proxy materials to vote those other shares you hold
outside of the MDU Resources Group, Inc. 401(k) Plan. If you are a plan participant, you must instruct the plan
trustee to vote your shares by utilizing one of the methods described on the voting instruction form that you
receive in connection with shares held in the plan. If you do not give voting instructions, the trustee generally
will vote the shares allocated to your personal account in accordance with the recommendations of the board of
directors. Your voting instructions may be transmitted up until 11:59 p.m. Eastern Time on May 6, 2021.

Householding of
Proxy Materials

MDU Resources
Group, Inc. 401(k)
Plan

Annual Meeting
Admission and
Guidelines

Admission: All stockholders as of the record date of March 12, 2021, are cordially invited to attend the annual
meeting. You must request an admission ticket to attend. If you are a stockholder of record and plan to attend the
meeting, please contact MDU Resources by email at CorporateSecretary@mduresources.com or by telephone at
701-530-1010 to request an admission ticket. A ticket will be sent to you by mail.

If your shares are held beneficially in the name of a bank, broker, or other holder of record, and you plan to
attend the annual meeting, you will need to submit a written request for an admission ticket by mail to:
Investor Relations, MDU Resources Group, Inc., P.O. Box 5650, Bismarck, ND 58506 or email at
CorporateSecretary@mduresources.com. The request must include proof of stock ownership as of March 12,
2021, such as a bank or brokerage firm account statement or a legal proxy from the bank, broker, or other holder
of record confirming ownership. A ticket will be sent to you by mail.

Guidelines: The use of cameras or sound recording equipment is prohibited except by the media or those
employed by the company to provide a record of the proceedings. The use of cell phones and other personal
communication devices is also prohibited during the meeting. All devices must be turned off or muted. No
firearms or weapons, banners, packages, or signs will be allowed in the meeting room. MDU Resources Group,
Inc. reserves the right to inspect all items, including handbags and briefcases, that enter the meeting room.

MDU Resources Group, Inc. Proxy Statement 71

Proxy Statement

Annual Meeting
Admission and
Guidelines
(continued)

Public Health Concerns: We are actively monitoring the public health and travel safety concerns relating to
COVID-19 and the advisories or mandates that federal, state, and local governments and related agencies may
issue. In the event it is not possible or advisable to hold our annual meeting as currently planned, we will
announce additional or alternative arrangements for the meeting, which may include a change in venue
or holding the meeting solely by means of remote communication. Please monitor our company website at
www.mdu.com/proxymaterials for updated information including meeting protocols. If you are planning to attend
our meeting, please check our website the week of the meeting for updates on the meeting and public health
safety protocols that may be required. As always, we encourage you to vote your shares prior to the annual
meeting.

Conduct of the
Meeting

Neither the board of directors nor management intends to bring before the meeting any business other than the
matters referred to in the Notice of Annual Meeting and this Proxy Statement. We have not been informed that
any other matter will be presented at the meeting by others. However, if any other matters are properly brought
before the annual meeting, or any adjournment(s) thereof, your proxies include discretionary authority for the
persons named in the proxy to vote or act on such matters in their discretion.

Stockholder
Proposals, Director
Nominations, and
Other Items of
Business for 2022
Annual Meeting

Stockholder Proposals for Inclusion in Next Year’s Proxy Statement: To be included in the proxy materials for our
2022 annual meeting, a stockholder proposal must be received by the corporate secretary no later than
November 26, 2021, unless the date of the 2022 annual meeting is more than 30 days before or after May 11,
2022, in which case the proposal must be received a reasonable time before we begin to print and mail our
proxy materials. The proposal must also comply with all applicable requirements of Rule 14a-8 under the
Securities Exchange Act of 1934.

Director Nominations From Stockholders for Inclusion in Next Year’s Proxy Statement: If a stockholder or group of
stockholders wishes to nominate one or more director candidates to be included in our proxy statement for the
2022 annual meeting through our proxy access bylaw provision, we must receive proper written notice of the
nomination not later than 120 days or earlier than 150 days before the anniversary date that the definitive proxy
statement was first released to stockholders in connection with the annual meeting, or between October 27,
2021 and November 26, 2021. In the event that the 2022 annual meeting is more than 30 days before or after
May 11, 2022, the notice must be delivered no earlier than the 150th day prior to such meeting and no later
than the 120th day prior to such meeting or the 10th day following the date on which public announcement of
the meeting date is first made. In addition, the nomination must otherwise comply with the requirements in our
bylaws. The requirements of such notice can be found in our bylaws, a copy of which is on our website, at
www.mdu.com/governance.

Director Nominations and Other Stockholder Proposals Raised From the Floor at the 2022 Annual Meeting of
Stockholders: Under our bylaws, if a stockholder intends to nominate a person as a director, or present other
items of business at an annual meeting, the stockholder must provide written notice of the director nomination
or stockholder proposal within 90 to 120 days prior to the anniversary of the most recent annual meeting. Notice
of director nominations or stockholder proposals for our 2022 annual meeting must be received between
January 11, 2022 and February 10, 2022, and meet all the requirements and contain all the information,
including the completed questionnaire for director nominations, provided by our bylaws. The requirements for
such notice can be found in our bylaws, a copy of which is on our website, at www.mdu.com/governance.

We will make available to our stockholders to whom we furnish this Proxy Statement a copy of our Annual Report on Form 10-K, excluding exhibits,
for the year ended December 31, 2020, which is required to be filed with the SEC. You may obtain a copy, without charge, upon written or oral
request to the Office of the Treasurer of MDU Resources Group, Inc., 1200 West Century Avenue, Mailing Address: P.O. Box 5650, Bismarck, North
Dakota 58506-5650, Telephone Number: (701) 530-1000. You may also access our Annual Report on Form 10-K through our website at
www.mdu.com.

By order of the Board of Directors,

Karl A. Liepitz

Secretary

March 26, 2021

72 MDU Resources Group, Inc. Proxy Statement

Corporate Headquarters
MDU Resources Group, Inc.
Street Address: 1200 W. Century Ave.
Bismarck, ND 58503

Mailing Address: P.O. Box 5650
Bismarck, ND 58506-5650

Telephone: 701-530-1000
Toll-Free Telephone: 866-760-4852
www.mdu.com

The company has filed as exhibits to its Annual Report on Form
10-K the CEO and CFO certifications as required by Section 302
of the Sarbanes-Oxley Act.

Common Stock
MDU Resources’ common stock is listed on the NYSE under the
symbol MDU. The stock began trading on the NYSE in 1948 and
is included in the Standard & Poor’s MidCap 400 index. Average
daily trading volume in 2020 was 1,305,676 shares.

Shareowner Service Plus Plan
The Shareowner Service Plus Plan provides interested investors the
opportunity to purchase shares of MDU Resources’ common stock
and to reinvest all or a percentage of dividends without incurring
brokerage commissions or service charges. The plan is sponsored
and administered by Equiniti Trust Company, transfer agent and
registrar for MDU Resources. For more information, contact
Equiniti Trust Company at 877-536-3553 or visit www.
shareowneronline.com.

2021 Key Dividend Dates

Ex-Dividend Date

Record Date

Payment Date

March 11
March 10
First Quarter
June 10
June 9
Second Quarter
September 9
September 8
Third Quarter
December 9
December 8
Fourth Quarter
Key dividend dates are subject to the discretion of the Board of Directors.

April 1
July 1
October 1
January 1, 2022

Stockholder Information

Annual Meeting
11 a.m. CDT May 11, 2021
Montana-Dakota Utilities Co. Service Center
909 Airport Road
Bismarck, North Dakota

Shareholder Information and Inquiries
Registered shareholders have electronic access to their accounts by
visiting www.shareowneronline.com. Shareowner Online allows
shareholders to view their account balance, dividend information,
reinvestment details and more. The stock transfer agent maintains
stockholder account information.

Communications regarding stock transfer requirements, lost
certificates, dividends or change of address should be directed to
the stock transfer agent.

Company information, including financial reports, is available at
www.mdu.com.

Shareholder Contact
Dustin J. Senger
Telephone: 866-866-8919
Email: investor@MDUResources.com

Analyst Contact
Jason L. Vollmer
Telephone: 701-530-1755
Email: Jason.Vollmer@MDUResources.com

Transfer Agent and Registrar for All Classes of Stock
Equiniti Trust Company
Stock Transfer Department
P.O. Box 64874
St. Paul, MN 55164-0874
Telephone: 877-536-3553
www.shareowneronline.com

Independent Registered Public Accounting Firm
Deloitte & Touche LLP
50 S. Sixth St., Suite 2800
Minneapolis, MN 55402-1538

Note: This information is not given in connection with any sale or
offer for sale or offer to buy any security.

Design: MDU Resources
Printing: AFPI