2007 MDU Resources Group, Inc. Annual Report

FORM 10-K

MDU RESOURCES G ROUP, INC.

· Increased earnings from aggregate and asphalt operations of $10.4 million (after tax), largely due to higher realized margins, partially

offset by lower volumes

· Earnings from companies acquired since the comparable prior period, which contributed approximately 18 percent of the earnings increase

· Higher earnings of $4.2 million (after tax) from ready-mixed concrete operations, largely due to higher margins

Partially offsetting the increase were:

· Higher depreciation, depletion and amortization expense from existing operations of $4.6 million (after tax), primarily due to higher

property, plant and equipment balances

· Increased general and administrative expense of $4.2 million (after tax), primarily payroll-related

Other and Intersegment Transactions

Amounts presented in the preceding tables will not agree with the Consolidated Statements of Income due to the Company's other

operations and the elimination of intersegment transactions. The amounts relating to these items are as follows:

Years ended December 31,

2007

2006

2005

(In millions)

Other:

Operating revenues

$ 10.0

8.1

$ 6.0

Operation and maintenance

15.9

15.4

10.7

Depreciation, depletion and amortization

1.2

1.2

Taxes, other than income

Intersegment transactions:

Operating revenues

$315.1

$335.1

$375.9

Purchased natural gas sold

286.8

308.1

354.2

Operation and maintenance

28.3

27.0

21.7

For further information on intersegment eliminations, see Item 8 -- Note 16.

PROSPECTIVE INFORMATION

The following information highlights the key growth strategies, projections and certain assumptions for the Company and its subsidiaries

and other matters for each of the Company's businesses. Many of these highlighted points are "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 targeted growth and earnings projections.

MDU Resources Group, Inc.

· Earnings per common share for 2008, diluted, are projected in the range of $1.65 to $1.90.

· The Company expects the percentage of 2008 earnings per common share, diluted, by quarter to be in the following approximate ranges:

First quarter -- 15 percent to 20 percent

Second quarter -- 20 percent to 25 percent

Third quarter -- 30 percent to 35 percent

Fourth quarter -- 25 percent to 30 percent

· Long-term compound annual growth goals on earnings per share from operations are in the range of 7 percent to 10 percent.

Electric

· The Company is analyzing potential projects for accommodating load growth and replacing an expired purchased power contract with

company-owned generation, which will add to base-load capacity and rate base. A final decision on the Big Stone Station II project will

be made when major permits are issued and certain regulatory approvals are obtained, which is expected by mid-to-late 2008. The plant

is projected to be completed in 2013. The Company anticipates it would own at least 116 MW of this plant or other generation sources.

For further information, see Item 8 -- Note 19.

· On July 12, 2007, Montana-Dakota filed an electric rate case with the MTPSC, as discussed in Item 8 -- Note 19.

· This business continues to pursue expansion of energy-related services.