Otter Tail Power Corp. has made a believer out of Bill Gates.
The Microsoft Corp. chairman -- through his investment vehicle, Cascade Investment LLC -- has increased his stake in the regional company to 5.9 percent.
Based in Fergus Falls, Minn., and Fargo, Otter Tail has interests in the electric utility, health services, plastics, manufacturing, construction, transportation, telecommunications, energy services and entertainment industries.
According to forms filed with the U.S. Securities and Exchange Commission, Gates' Cascade Investments now owns 1.5 million shares of Otter Tail stock, up from 1.4 million shares a year ago. That makes Cascade Otter Tail's largest institutional stockholder.
Gates' investment portfolio grew nearly 18 percent in the fourth quarter, according to the SEC. Cascade Investments reported stakes in 17 companies, for a total value of $2.15 billion, as of Dec. 31.
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Cascade Investments in the last quarter of the year increased its stake in Otter Tail and five other companies: Canadian National Railway Co., Cox Communications Inc., Extended Stay America Inc., Nextel Partners Inc. and PNM Resources Inc.
Gates created Cascade Investments to diversify his portfolio, which, of course, is heavily invested in Microsoft.
Kevin Moug, Otter Tail's chief financial officer, said Cascade's investment in the company serves as a testament to Otter Tail's resilience in tough economic times.
Otter Tail recently announced record earnings of $46.1 million for the year 2002. That compares to earnings of $43.6 million in 2001. The company's annual report is being mailed to shareholders this week.
More than 80 percent of the company's 25 million shares are owned by individual stockholders.
"The corporation's diversification strategy continues to serve us well," said Otter Tail Corp. president and chief executive officer John Erickson.
David Parker, a research analyst who tracks Otter Tail's stock for Robert W. Baird & Co. of Tampa, Fla., said Otter Tail has been a safe bet despite market and international political turmoil.
"What better place to be than a Midwest utility with all the volatility," he said Tuesday. "Otter Tail shows some of the benefits of diversifying carefully and wisely. They're able to put up decent numbers year after year."
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Otter Tail's earnings growth in 2002 was bolstered by its plastics segment, which had a record year with a $7.3 million increase in net income over 2001.
The health services segment also saw an 8.1 percent increase in earnings over 2001. Meanwhile, Otter Tail reported decreased performance from its electric and manufacturing segments.
Otter Tail's electric retail revenues in 2002 were $207 million, up from $199 million in 2001. However, net income in the electric segment was off 3.3 percent from 2001. Erickson said the decrease was primarily the result of lower wholesale electric prices in 2002 compared with 2001.
Net income for the manufacturing segment was $4.5 million for 2002, compared to $6.1 million for 2001. Erickson said a sluggish economy led to a slowdown at most of Otter Tail's manufacturing companies.
Otter Tail's revenues for the fourth quarter of 2002 were $190.1 million compared with $159.5 million for the same period one year ago.
Moug said Otter Tail projects earnings per share for 2003 to range from $1.80 to $1.85. Though growth is not expected in the electric segment in 2003, Moug said the company expects growth in non-utility operations through internal growth as well as acquisitions.
The company's stock trades on the NASDAQ stock market under the symbol OTTR.
Readers can Reach Forum Business Editor Gerry Gilmour at (701) 241-5560
