Related Party Transactions

12 Months Ended

Dec. 31, 2024

Related Party Transactions [Abstract]

Related Party Transactions

Related-Party Transactions

Allocation of Corporate Expenses

Prior to the Separation, Centennial and MDU Resources allocated expenses for corporate services provided to the Company, including costs related to senior management, legal, human resources, finance and accounting, treasury, information technology, internal audit, risk management and other shared services. For the years ended December 31, 2024, 2023 and 2022, the Company was allocated $30.4 million, $27.1 million and $21.2 million, respectively, for these corporate services. These expenses were allocated to the Company on the basis of direct usage where identifiable, with the remainder allocated on the basis of percent of total capital invested, the percent of total average cash management program borrowings with MDU Resources, the percent of total average commercial paper borrowings with Centennial or other allocation methodologies that were considered to be a reasonable reflection of the utilization of the services provided to the benefits received. Some of the utilization factors considered included the following: number of employees paid and stated as cost per check; number of employees served; weighted factor of travel, managed units, national account spending, equipment and fleet acquisitions; purchase order dollars spent and purchase order line count; number of payments, vouchers or unclaimed property reports; labor hours; time tracked; and projected workload.

These cost allocations were a reasonable reflection of the utilization of services provided to, or the benefit derived by, the Company during the periods presented prior to the Separation. However, the allocations may not be indicative of the actual expenses that would have been incurred had the Company operated as a standalone company. Actual costs as a standalone company depend on a number of factors, including the chosen organizational structure, whether functions are outsourced or performed by Company employees, and strategic decisions made in areas such as selling and marketing, information technology and infrastructure. Refer to Note 2 – Basis of Presentation and Summary of Significant Accounting Policies for additional information.

Transition Services Agreement

On October 31, 2024, as part of the Separation, the Company and MDU Resources entered into a transition services agreement whereby the Company and MDU Resources will provide certain transition services to each other. The transition services agreement outlines services that are expected to be provided between parties related to tax, legal, treasury, human resources, information technology, risk management and other general and administrative functions. For the year ended December 31, 2024, the Company paid $0.7 million related to these activities, which was reflected in Selling, general and administrative expenses on the consolidated statements of income. For the year ended December 31, 2024, the Company received $47 thousand related to these activities, which was reflected in Other income on the consolidated statements of income. The majority of the transition services are expected to be completed over a period of 20 months, but no longer than two years, after the Separation.

Cash Management and Financing

Prior to the second quarter of 2023, Centennial had a commercial paper program and long-term borrowing arrangements in which the Company and certain of its subsidiaries participated. Centennial repaid all of its outstanding debt in the second quarter of 2023, and subsequently MDU Resources supported the Company’s borrowing needs through Centennial. The Company accounted for cash receipts and disbursements from MDU Resources and Centennial, through related-party receivables and payables. Until the Separation, the Company had related-party agreements in place with Centennial, via MDU Resources, for the financing of its capital needs. Following the Separation, the Company relies on its own credit and financing arrangements.

Related-Party Notes Payable

Prior to the Separation, during the periods in which the Company was utilizing MDU Resources financing arrangements, MDU Resources was required to be in compliance with certain financial covenants, cross-default provisions and other conditions. MDU Resources was in compliance with all requirements until the Separation. Also, the borrowings under the commercial paper program with Centennial did not have stated maturities. Therefore, MDU Resources committed to continue funding the Company through Centennial using its cash management program and revolving credit facility to allow the Company to meet its obligations as they became due prior to the Separation.

As part of the Separation, the Company repaid $230.0 million of outstanding cash management program borrowings to Centennial using a portion of the net proceeds of indebtedness incurred by the Company. The repayment amount represented the total Related-party notes payable balance outstanding as of October 31, 2024, and thus, there were no amounts outstanding as of December 31, 2024. Also, as a result of the Separation, a portion of the net proceeds of the indebtedness was used to pay a

$60.0 million dividend to MDU Resources and is included in Net transfers to Centennial and MDU Resources including Separation adjustments in the consolidated statements of equity for the year ended December 31, 2024. Refer to Note 7 – Debt for more information.

Related-party notes payable as of December 31, 2023, was as follows:

	Weighted Average Interest Rate as of December 31, 2023		December 31, 2023
	(In percentage)		(in thousands)
Borrowing arrangements with MDU Resources	5.94	%	$	168,531
Total related-party notes payable			$	168,531

The Company repaid $27.0 million and $45.0 million of short- and long-term Related-party notes payable, respectively, during the year ended December 31, 2023, in connection with the Knife River separation.

The Company issued $27.0 million of short-term Related-party notes payable during the year ended December 31, 2022.

The Company was allocated interest based on borrowings from or lending to the cash management and financing program as well as the funding related to these agreements as described above. The related-party interest expense associated with the Company’s participation in the cash management and financing program was $10.2 million, $17.0 million and $6.4 million for the years ended December 31, 2024, 2023 and 2022, respectively.