3

MDU RESOURCES G ROUP, INC.

MDU Resources

continues its

string of paying

dividends for

70 years in a row.

terry d. hildestad

President and Chief Executive Officer

harry j. pearce

Chairman of the Board

Finally, we have had good initial success

of a national branding effort that will put its

Our construction services group delivered

with exploration efforts outside our

operations under a single name -- Knife

record earnings for the third consecutive

traditional areas of operation. Our first well

River -- and help these operations capitalize

year. The business continues to benefit

in the Paradox Basin in Utah is showing

on their combined market strength.

from strong demand in the energy

good results, and we expect production

industry, including the replacement of

We finalized the purchase of Cascade

from our first operated Bakken well in the

aging infrastructure such as electric

Natural Gas Corp., which serves high-growth

first quarter. The Bakken region is one of

distribution lines and the installation of

areas in Washington and Oregon. This was

the hottest oil plays in the United States.

air-quality control equipment at electric

the largest acquisition in our company's

generating plants. Our equipment

Our natural gas pipeline and gathering

history, and it nearly doubled the number

manufacturing business contributed with

systems both had record delivery volumes,

of natural gas customers we serve.

the best year in its history. This business

and we expanded firm capacity on our

Montana-Dakota Utilities Co. continued to

builds and distributes specialty equipment

Grasslands Pipeline by about 40 percent.

focus on adding electric generation to

used in the power line transmission and

Our construction materials and contracting

meet growing customer demand. Early this

distribution industry.

business added five acquisitions during 2007,

year, the utility completed construction

National issues pose challenges

solidifying our position as the fifth-largest

of 19.5 megawatts of wind generation

Our 2007 success was achieved despite

producer of sand and gravel in the United

near Baker, Montana. The utility also is

signs of a softening economy. The

States and the eighth-largest aggregate

participating in a consortium that plans

nation's depressed housing market, in

producer. Two of the acquisitions included

to build Big Stone II, a coal-fueled electric

particular, had a significant impact on

aggregate reserves, which are a critical

generating plant that would be located

our construction materials and contracting

asset for sustaining production capabilities.

next to the existing Big Stone I plant in

business, along with the rest of that

South Dakota. Both Big Stone plants will

industry. The bottom of this market may

A sharp focus on cost and production

benefit from state-of-the-art air quality

be at least a year away, so its challenges

efficiencies helped offset some of the

controls that will be installed. Finally, the

will continue for us in 2008.

effects of the depressed housing market

utility completed a four-year labor

and increasing material costs. In addition,

agreement with unionized employees that

the business completed the first phase

will carry into 2011.