FORM 10-K
65
MDU RESOURCES G ROUP, INC.
· Pipeline and gathering projects
· Further enhancement of natural gas and oil production and reserve growth
· Power generation opportunities, including certain costs for additional electric generating capacity
· Acquisition of natural gas production assets in East Texas completed in late January 2008
· Other growth opportunities
The Company continues to evaluate potential future acquisitions and other growth opportunities; 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 and retirement of long-term debt for the years 2008 through 2010 will
be met from various sources, including internally generated funds; the Company's credit facilities, as described below; and through the
issuance of long-term debt and the Company's equity securities.
Capital resources
Certain debt instruments of the Company and its subsidiaries, including those discussed below, contain restrictive covenants, all of which
the Company and its subsidiaries were in compliance with at December 31, 2007.
MDU Resources Group, Inc. The Company has a revolving credit agreement with various banks totaling $125 million (with provision for an
increase, at the option of the Company on stated conditions, up to a maximum of $150 million). There were no amounts outstanding under
the credit agreement at December 31, 2007. The credit agreement supports the Company's $100 million commercial paper program. Under
the Company's commercial paper program, $61.0 million was outstanding at December 31, 2007. The commercial paper borrowings are
classified as long-term debt as they are intended to be refinanced on a long-term basis through continued commercial paper borrowings
(supported by the credit agreement, which expires in June 2011).
The Company's objective is to maintain acceptable credit ratings in order to access the capital markets through the issuance of commercial
paper. Minor fluctuations in the Company's credit ratings have not limited, nor would they be expected to limit, the Company's ability to
access the capital markets. In the event of a minor downgrade, the Company may experience a nominal basis point increase in overall
interest rates with respect to its cost of borrowings. If the Company were to experience a significant downgrade of its credit ratings, it may
need to borrow under its credit agreement.
Prior to the maturity of the credit agreement, the Company expects that it will negotiate the extension or replacement of this agreement.
If the Company is unable to successfully negotiate an extension of, or replacement for, the credit agreement, or if the fees on this facility
became too expensive, which the Company does not currently anticipate, the Company would seek alternative funding.
In order to borrow under the Company's credit agreement, the Company must be in compliance with the applicable covenants and certain
other conditions. For information on the covenants and certain other conditions of the Company's credit agreement, see Item 8 -- Note 10.
In connection with the funding of the Cascade acquisition, on June 29, 2007, the Company entered into a term loan agreement providing for
a commitment amount of $310 million. The Company borrowed $310 million under this agreement on July 2, 2007. On July 11, 2007, and
August 14, 2007, the Company paid down $220 million and $5 million, respectively, of the outstanding principal balance. In addition, on
August 14, 2007 and August 28, 2007, the Company received $50 million and $35 million, respectively, from the repayment of an
intercompany loan with MDU Energy Capital. The Company, in turn, repaid the remaining principal balance of the term loan indebtedness
that it incurred to fund the acquisition of Cascade. The term loan agreement terminated on August 28, 2007.
There are no credit facilities that contain cross-default provisions between the Company and any of its subsidiaries.
The Company's issuance of first mortgage debt is subject to certain restrictions imposed under the terms and conditions of its Mortgage.
Generally, those restrictions require the Company to fund $1.43 of unfunded property or use $1.00 of refunded bonds for each dollar of
indebtedness incurred under the Mortgage and, in some cases, to certify to the trustee that annual earnings (pretax and before interest
charges), as defined in the Mortgage, equal at least two times its annualized first mortgage bond interest costs. Under the more restrictive
of the tests, as of December 31, 2007, the Company could have issued approximately $544 million of additional first mortgage bonds.
The Company's coverage of fixed charges including preferred dividends was 6.4 times for the 12 months ended December 31, 2007
and 2006. Common stockholders' equity as a percent of total capitalization was 66 percent and 63 percent at December 31, 2007 and
2006, respectively.
The Company has repurchased, and may from time to time seek to repurchase, outstanding first mortgage bonds through open market
purchases or privately negotiated transactions. The Company will evaluate any such transactions in light of then existing market conditions,
taking into account its liquidity and prospects for future access to capital. As of December 31, 2007, the Company had $50.5 million of
first mortgage bonds outstanding, $30.0 million of which were held by the Indenture trustee for the benefit of the senior note holders.
The aggregate principal amount of the Company's outstanding first mortgage bonds, other than those held by the Indenture trustee, is
$20.5 million and satisfies the lien release requirements under the Indenture. As a result, the Company may at any time, subject to
