MDU Construction Services Spin-off Notes

November 23, 2023 Update

MDU Resources (MDU) on Thursday, November 2, that it plans to spin off the company’s wholly owned construction services business, MDU Construction Services. This is expected to be a tax-free spinoff, completed in late 2024.

The construction services business spin-off provides a full range of construction services across the U.S. The two areas of focus are: 1) electrical & mechanical and 2) transmission & distribution.

This spin-off transaction would officially make MDU Resources *almost” a pure-play regulated energy delivery business. The only remaining “non-regulated utility” business would be its pipeline business.

Earlier this year, MDU spun off its construction materials business, Knife River.

MDU management expects the regulated utility business to generate $155MM to $165MM in net earnings in 2023. It expects the construction services business to generate $210MM to $230MM in EBITDA in 2023.

Based on my preliminary sum-of-the-parts analysis, I estimate that MDU is worth ~$24/share, implying decent upside from its current share price.