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Otter Tail Corporation Reports Record Revenues and Net Income From Continuing Operations for 2007; Earnings Per Share of $1.78; Board Approves Dividend Increase

Wednesday, February 6, 2008 General News J E 4
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FERGUS FALLS, Minn., Feb. 5 Otter TailCorporation (Nasdaq: OTTR) today announced financial results for the quarterand year ended December 31, 2007.

"We are pleased with our 2007 results. Revenues and net income fromcontinuing operations were at record levels," said John Erickson, presidentand chief executive officer. "Our electric business provided a solidfoundation and our nonelectric businesses continued to perform well, led bygrowth in our manufacturing platform including strong results at DMIIndustries, our wind energy tower manufacturer. We are also pleased to reporta significant turnaround at our food ingredient processing business. The 2007results again illustrate the value of our diversification strategy."

Erickson said dividend payments will again increase in 2008. "Our Board ofDirectors has increased our dividend payment for the 33rd consecutive year.The increase brings the annual indicated dividend rate to $1.19 per share, a$0.02 increase over the 2007 rate."

Segment Performance Summary

Electric

Electric segment revenue and net income were $323.5 million and$24.5 million, respectively, in 2007 compared with $306.0 million and$24.2 million in 2006. The increase in electric revenue was due to a$16.0 million increase in retail revenues and a $1.8 million increase in otherelectric revenues, offset by a $0.3 million decrease in wholesale and netenergy trading revenues.

The increase in retail revenues includes $8.4 million in increasedfuel-clause adjustment (FCA) revenues mainly related to an increase inpurchased power costs in the fourth quarter of 2007 to replace generation lostduring a scheduled major maintenance shutdown of Big Stone Plant. The increasein retail revenues also includes $7.6 million related to a 3.3% increase inretail kwh sales. Residential kwh sales increased 4.0% due, in part, to a 9.6%increase in heating degree days. Increased oil and ethanol production in ourelectric service territory and surrounding regions contributed to a 3.3%increase in commercial and industrial kwh sales. The $1.8 million increase inother electric revenues is related to an increase in revenues from integratedtransmission agreements, reimbursement of system operations costs from theMidwest Independent Transmission System Operator and electric systemconstruction work performed for other companies.

Electric operating expenses increased $21.8 million, which includesincreases of $18.2 million in fuel and purchased power expenses and$3.3 million in other operating and maintenance expenses. Fuel costs increased$1.8 million despite a 5.3% decrease in kwhs generated mainly as a result ofan 86% increase in generation at the electric utility's higher-cost combustionturbine peaking plants. Purchased power costs to serve retail customersincreased $16.4 million, reflecting a 22.1% increase in kwhs purchased forsystem use combined with a 4.9% increase in the cost per kwh purchased, mainlyrelated to power purchased in the fourth quarter of 2007 to replace generationlost during a scheduled major maintenance shutdown of Big Stone Plant. Theincrease in electric operation and maintenance expenses in 2007 reflects anincrease in expenses related to external contract work, higher labor andbenefit costs, rate case related expenditures and increased tree-trimmingexpenses. The electric utility recorded a non-cash charge in other income anddeductions of $3.3 million in the fourth quarter of 2006 related to areduction in capitalized interest allowed in rate base. The resulting increasein other income and deductions in 2007 was partially offset by a $0.8 milliondecrease in allowance for equity funds used during construction.

Plastics

Plastics segment revenues and net income were $149.0 million and$8.3 million, respectively, in 2007 compared with $163.1 million and$14.3 million in 2006. The decrease in revenue and net in
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