OTTER TAIL POWER CO - 10-K Annual Report

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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

(Mark One) (X) Annual Report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 (fee required)

For the fiscal year ended December 31, 1997
OR
( ) Transition Report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 (no fee required)

For the transition period from _______to_______

Commission File Number 0-368

OTTER TAIL POWER COMPANY
(Exact name of registrant as specified in its charter)

MINNESOTA 41-0462685
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)

215 S. CASCADE ST., BOX 496, FERGUS FALLS, MN 56538-0496
(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code: (218) 739-8200

Securities registered pursuant to Section 12(b) of the Act:

Title of each class Name of each exchange on which registered
NONE NONE

Securities registered pursuant to Section 12(g) of the Act:

COMMON SHARES, par value $5.00 per share
PREFERRED SHARE PURCHASE RIGHTS
CUMULATIVE PREFERRED SHARES, without par value
(Title of class)

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. (X)

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. (Yes X No )

State the aggregate market value of the voting stock held by nonaffiliates of
the registrant.
$441,675,411 as of February 28, 1998

Indicate the number of shares outstanding of each of the registrant's classes
of Common Stock, as of the latest practicable date:
11,661,397 Common Shares ($5 par value) as of February 28, 1998

Documents Incorporated by Reference:
1997 Annual Report to Shareholders - Portions incorporated by reference into
Parts I and II
Proxy Statement dated March 13, 1998 - Portions incorporated by reference
into Part III

PART I

Item 1. BUSINESS
--------
(a) General Development of Business
-------------------------------

Otter Tail Power Company (the "Company") is an operating public utility
incorporated in 1907 under the laws of the State of Minnesota. The Company's
principal executive office is located at 215 South Cascade Street, Box 496,
Fergus Falls, Minnesota 56538-0496; its telephone number is (218) 739-8200.

The Company's primary business is the production, transmission,
distribution and sale of electric energy. The Company, through its
subsidiaries, is also engaged in other businesses which are referred to as
Manufacturing, Health Services and Other Business Operations. Manufacturing
Operations is made up of businesses acquired beginning in 1990 involved in the
production of agricultural equipment, automobile and truck frame straightening
equipment, plastic pipe extrusion, and metal parts stamping and fabrication.
Health Services Operations consists of certain businesses acquired beginning
in 1993, which are involved in the sale, service, rental, refurbishing, and
operation of medical imaging equipment and the sale of related supplies and
accessories to various medical institutions. Other Business Operations include
businesses involved in such areas as electrical and telephone construction
contracting, radio broadcasting, waste incinerating, and telephone/cable TV
utility.

The Company continues to investigate acquisitions of additional non-
electric businesses and expects continued growth in this area. On January 2,
1997, the Company's telecommunications subsidiary, North Central Utilities,
Inc. ("NCU"), acquired The Peoples Telephone Co. of Bigfork ("Peoples"), with
1,903 access lines serving five communities in Northern Minnesota. On June 30,
1997, the Company's subsidiary, Mid-States Development, Inc. ("Mid-States"),
acquired Chassis Liner Corporation ("Chassis Liner"), a manufacturer of auto
and truck frame straightening equipment. Both acquisitions were accounted for
under the pooling-of-interest method.

For a discussion of the Company's results of operations, see
"Management's discussion and analysis of financial condition and results of
operations," which is incorporated by reference to pages 22 through 30 of the
Company's 1997 Annual Report to Shareholders, filed as an Exhibit hereto.

(b) Financial Information About Industry Segments
---------------------------------------------

The Company and its subsidiaries are engaged in businesses that have been
classified into four segments: Electric Operations, Manufacturing Operations,
Health Services Operations, and Other Business Operations. Financial
information about the Company's industry segments is incorporated by reference
to note 2 of "Notes to consolidated financial statements" on page 39 of the
Company's 1997 Annual Report to Shareholders, filed as an Exhibit hereto.

(c) Narrative Description of Business
---------------------------------

ELECTRIC OPERATIONS
-------------------

General
- -------

The Company derived 52% of its consolidated operating revenues from the
electric segment during 1997; 54% during 1996; and 62% during 1995. During
1997 the Company derived approximately 53.4% of its electric revenues from
Minnesota, 38.7% from North Dakota, and 7.9% from South Dakota.

The territory served by the Company is predominantly agricultural,
including a part of the Red River Valley. Although there are relatively few
large customers, sales to commercial and industrial customers are significant.
By customer category, 34.4% of 1997 electric revenue was derived from
commercial customers, 32.2% from residential customers, 20.2% from industrial
customers, and 13.2% from other sources, including municipalities, farms and
power pools.

No customer accounted for more than 10% of electric revenues in 1997.
Power pool sales to other utilities, which accounted for 14.5% of total 1997
kwh sales, decreased from 15.3% in 1996. Activity in short-term energy sales
is subject to change based on a number of factors and the Company is unable to
predict the 1998 level of activity. The Company's other sales of electricity
for resale are insignificant.

The aggregate population of the Company's retail service area is
approximately 230,000. In this service area of 423 communities and adjacent
rural areas and farms, approximately 123,600 people live in communities having
a population of more than 1,000, according to the 1990 census. The only
communities served which have a population in excess of 10,000 are Jamestown,
North Dakota (15,571); Fergus Falls, Minnesota (12,362); and Bemidji,
Minnesota (11,245). Since 1990 when the customer count was at a low of
121,277, the Company has experienced an increase in customers. By year end
1997 total customers had increased to 125,191. During 1997, the Company
experienced a net increase of 409 customers, with the majority of growth in
residential and commercial customers.

Competition
- -----------

The Company's electric sales are subject to competition in some areas
from municipally owned systems, rural cooperatives and, in certain respects,
from on-site generators and cogenerators. The Company's electricity also
competes with other forms of energy. The degree of competition may vary from
time to time depending on relative costs and supplies of other forms of
energy. The Company may also face competition as the restructuring of the
electric industry evolves. Proposals that are being considered by various
states and at the federal level, along with the National Energy Policy Act of
1992 ("NEPA"), are expected to bring more competition into the electric
industry. The NEPA reduces restrictions on operation and ownership of
independent power producers ("IPPs"). It also allows IPPs and other wholesale
suppliers and purchasers increased access to transmission lines. The NEPA
prohibits retail wheeling ordered by the Federal Energy Regulatory Commission,
but it does not address the states' authority to order retail wheeling.

In 1996 the Federal Energy Regulatory Commission ("FERC") issued two
closely related final rules. FERC Order No. 888 opened wholesale power sales
to competition by requiring public utilities who own, control, or operate
transmission lines, to file nondiscriminatory proforma open access tariffs
that offer others the same transmission service they provide themselves.
FERC Order No. 889 requires utilities to post or make available information
about their transmission system for their own wholesale power transactions,
such as capacity availability, by the same means as their competitors would
via an Open Access Same-time Information System ("OASIS"), as well as
separate their wholesale marketing and transmission operation functions. In
1997 FERC issued Orders No. 888-A and -B which reaffirmed its basic
determinations in Order No. 888 and clarified certain terms. For the status
of other regulatory initiatives relating to competition, see "General
Regulation".

The Company is taking a number of steps to position itself for success in
a competitive marketplace. It has initiated the process of functionally
unbundling its energy supply, energy delivery, and energy services operations
by setting up distinct separate business units in each of these areas. The
Company is developing the necessary accounting systems to capture costs and
determine the profitability of each of these units and to identify areas for
improvement and opportunities for increased profitability. The Company has
established an energy services business unit to promote the energy related
products and services that have always been offered to its customers and to
develop new products and services to be offered to current and potential
customers in order to distinguish itself from the competition. Furthermore,
with the goal of alleviating state tax inequities in the electric industry,
the Company is working with other utilities to develop tax reform proposals
and testimony for a legislative committee developed to study competition.

As the electric industry evolves, the Company may also have opportunities
to increase its market share. The Company's generation capacity appears well
positioned for competition. A comparison of the Company's electric retail
rates to the rates of other investor-owned utilities, cooperatives, and
municipals in the states the Company serves indicates that the Company's rates
are competitive. In addition, the Company would attempt more flexible pricing
strategies under an open, competitive environment.

Capability and Demand
- ---------------------

At December 31, 1997, the Company had base load net plant capability
totaling 560,401 kw, consisting of 251,551 kw from the Big Stone Plant (the
Company's 53.9% share), 154,025 kw from the Hoot Lake Plant, 149,450 kw from
the Coyote Plant (the Company's 35% share), and under contract 5,375 kw from
the Potlatch Co-generation Plant near Bemidji, Minnesota. In addition to its
base load capability, the Company has combustion turbine and small diesel
units, used chiefly for peaking and standby purposes, with a total capability
of 91,208 kw, and 4,374 kw of hydroelectric capability. During 1997, the
Company generated about 69% of its total kwh sales and purchased the balance.

The Company has made arrangements to help meet its future base load
requirements, and continues to investigate other means for meeting such
requirements. The Company has an exchange agreement with another utility for
the annual exchange of 75,000 kw of seasonal diversity capacity which runs
through 2004. The Company also has agreements to purchase 60,000 kw of capacity
for the summers of 1998-1999 and 50,000 kw of year-round capacity which runs
through April 30, 2005. The Company also has a direct control load management
system which provides some flexibility to the Company to effect reductions of
peak load.

The Company is a member of the Mid-Continent Area Power Pool ("MAPP").
The objective of MAPP is to coordinate the planning and operation of generation
and interconnecting transmission facilities to provide reliable and economic
electric service to members' customers. Customers served by MAPP members may,
therefore, benefit from the regional high voltage interconnections which are
capable of transferring large blocks of energy between systems. Also, high
voltage interconnections permit companies to engage in power transactions with
each other. The operating agreement for MAPP was restated in 1996 to open
membership to organizations outside the original Upper Midwest boundaries, to
establish a Regional Transmission Group ("RTG") and to add energy market
functions. RTGs, as proposed by the FERC, coordinate planning of transmission
grids on regional levels.

The Company traditionally experiences its peak system demand during the
winter season. For the calendar year 1997, the Company established a new
system peak demand of 635,529 kw on January 7, 1997. The highest previous
sixty-minute peak demand was 635,320 kw on November 26, 1996. Taking into
account additional capacity available to it in January 1997 under power
purchase contracts (including short-term arrangements), as well as its own
generating capacity, the Company's capability of then meeting system demand,
including reserve requirements computed in accordance with accepted industry
practice, amounted to 774,610 kw. The Company's additional capacity available
under power purchase contracts (as described above), combined with the
Company's generating capability and load management control capabilities, is
expected to meet 1998 system demand, including industry reserve requirements.

Fuel Supply
- -----------

Coal is the principal fuel burned by the Company at its Big Stone,
Coyote, and Hoot Lake generating plants. Coyote, a mine-mouth facility, burns
North Dakota lignite coal. Hoot Lake has burned primarily western subbituminous
coal since 1988, and Big Stone switched from North Dakota lignite to western
subbituminous coal in August of 1995. The following table shows for 1997 the
sources of energy used to generate the Company's net output of electricity:

Net Kilowatt % of Total
Hours Kilowatt
Generated Hours
Sources (Thousands) Generated
------- ----------- ---------

Subbituminous Coal. . . . . . . . . . . . . . 2,167,219 73.8%
Lignite Coal. . . . . . . . . . . . . . . . . 733,276 25.0
Hydro . . . . . . . . . . . . . . . . . . . . 26,399 .9
Oil . . . . . . . . . . . . . . . . . . . . . 7,353 .3
--------- -----
Total . . . . . . . . . . . . . . . . . . . . 2,934,247 100.0%
========= ======

The Company has a coal supply agreement with Westmoreland Resources, Inc.
of Billings, Montana, for supply of subbituminous coal to Big Stone Plant from
mid-1995 through 1999. The coal comes from the Absaloka Mine near Hardin,
Montana. The Company has purchase agreements for fixed quantities of
subbituminous coal with Kennecott Energy as needed for Hoot Lake Plant. The
lignite coal contract with Knife River Coal Mining Company for the Coyote Plant
expires in 2016, with a 15-year renewal option subject to certain
contingencies, and is expected to provide the plant's lignite coal requirements
during the term of the contract. Knife River Coal Mining Company is an
affiliate of Montana-Dakota Utilities Co., which is a co-owner of the Big Stone
and Coyote Plants.

In September 1996 three of the four co-owners of the Coyote generating
plant filed a Demand and Notice of Arbitration complaint against Knife River
Coal Mining Company and MDU Resources Group, Inc. The three co-owners contend
that the 14-year-old pricing mechanism outlined in the original coal supply
contract has been abandoned by all parties over the past 7 years and no longer
results in fair, equitable, and competitive prices for the lignite coal used to
generate electricity at the plant. The co-owners expect resolution of this
case in 1998.

It is the Company's practice to maintain minimum 30-day inventories (at
full output) of coal at Big Stone, a 20-day inventory at Coyote Plant, and a
10-day inventory at Hoot Lake Plant.

In November 1996, Big Stone Plant put new aluminum coal cars, leased by
the three plant owners, into service transporting coal to the plant. The
Company has a coal transportation agreement with Burlington Northern Railroad
for transportation services to the Big Stone Plant. This contract began in
1995 and runs through 1999. The aluminum coal cars and current coal and freight
agreements result in lower delivered coal prices at the Big Stone Plant which
is returned to the Company's retail customers through the Cost of Energy
Adjustment clause.

The Company has a subbituminous coal transportation agreement with
Northern Coal Transportation Company, effective January 1993, covering coal
moved from Kennecott Energy's Spring Creek mine to Hoot Lake Plant. That
agreement was renewed in January 1996 for an additional three years.

The average cost of coal consumed (including handling charges to the
plant sites) per million BTU for each of the three years 1997, 1996, and 1995,
was $.958, $.944, and $.969, respectively.

The Company is permitted by the State of South Dakota to burn some
alternative fuels, including tire and refuse derived fuel, at its Big Stone
Plant. The quantity of alternative fuel burned during 1997, 3.0% of total fuel
burned at Big Stone Plant, and expected to be burned in 1998, is insignificant
when compared to the total annual coal consumption at Big Stone Plant.

Rate Regulation
- ---------------
The Company is subject to electric rate regulation as follows:

Year Ended
December 31, 1997
-----------------
% of
Electric % of kwh
Rates Regulation Revenues Sales
- ------ ---------- -------- -------
MN retail sales MN Public Utilities
Commission 48.7% 45.9%

ND retail sales ND Public Service
Commission 38.0 33.0

SD retail sales SD Public Utilities
Commission 7.5 6.4

Transmission & sales FERC
for resale 5.8 14.7
---- ----
100.0% 100.0%
===== =====

The following table summarizes the electric rate proceedings with the
Minnesota Public Utilities Commission ("MPUC"), the South Dakota Public
Utilities Commissions ("SDPUC"), the North Dakota Public Service Commission
("NDPSC"), and FERC since January 1, 1993:
Increase
(Decrease) Granted
------------------
Commission Date Amount %
- ---------- ---- ------ -----
(Thousands)

Minnesota Last Proceeding was July 1, 1987

North Dakota
(1) September 22, 1993 ($ 449) (0.6%)

South Dakota Last Proceeding was November 1, 1987

FERC (2) March 25, 1997
(3) May 29, 1997

(1) An agreement for incentive regulation reached between the Company and the
NDPSC provided for sharing equally between ratepayers and shareholders
any amount earned in 1993 over or under a benchmark overall rate of
return. A liability of $449,000 resulting from sharing earnings above
this benchmark for 1993 was returned to customers in 1994.

(2) On March 25, 1997, FERC issued an order approving a settlement agreement
in the Company's Open Access Transmission Tariff filing of July 9, 1996.
This settlement sets the rates the Company can charge under its Open
Access Transmission Tariff.

(3) On May 29, 1997, FERC issued an order approving a request for waiver of
the standards of conduct under Order 889.

In 1994 the Company filed a petition with the MPUC for approval of an
annual recovery mechanism for demand-side management related costs, under
Minnesota's Conservation Improvement Programs. An intervenor, on behalf of the
Large General Service Group, filed comments against the petition and requested
the MPUC to order a general rate case to review the Company's earnings levels.
In the interest of rate stability the Company reached an agreement, which was
approved by the MPUC, resulting in an annual cost of approximately $2,200,000
in 1995, 1996, and 1997, and $1,000,000 thereafter. In 1997 the MPUC approved
the Company's 1996 financial incentive filing along with a 1.75 percent
surcharge on all Minnesota customers' bills starting on July 1, 1997, for the
recovery of conservation-related costs over and above those being recovered in
current rates. The approved surcharge in effect from July 1, 1996, through
June 30, 1997, was 1.25 percent and the approved surcharge in effect from July
1, 1995, through June 30, 1996, was .5030 percent. The current surcharge rate
will be in place until June 30, 1998, when it will be revised for subsequent
years' program results.

Under Minnesota law, the MPUC must allow implementation of an interim rate
increase, subject to refund with interest, 60 days after the initial filing
date of a rate increase request, except that the MPUC is not required to allow
implementation of the interim rate increase until four months after the
effective date of a previous rate order. The amount of the interim rate
increase will be calculated using the proposed test year cost of capital, the
rate of return on common equity most recently granted to the Company by the
MPUC, and rate base and expense items allowed by a currently effective MPUC
order. In addition, if the MPUC fails to make a final determination regarding
any rate request within ten months after the initial request is filed, then the
requested rate is deemed to be approved, except if (I) an extension of the
procedural schedule (in case of a contested rate increase request) has been
granted, in which case the schedule of rates will be deemed to have been
approved by the MPUC on the last day of the extended period of suspension of
the rate increase, or (II) a settlement has been submitted to and rejected by
the MPUC, and the MPUC does not make a final determination concerning the
schedule of rates, in which case the schedule of rates will be deemed to have
been approved 60 days after the initial or, if applicable, the extended period
of suspension of the rate increase.

Rate requests filed with the NDPSC become effective 30 days after the
date of filing unless suspended by the NDPSC. Within seven months after the
date of suspension, the NDPSC must act on the request, and during the period of
consideration by the NDPSC a suspended rate can be implemented only with the
approval of the NDPSC.

South Dakota law provides that a requested rate increase can be
implemented 30 days after the date of filing, unless its effectiveness is
suspended by the SDPUC. The SDPUC may suspend the effectiveness of the
proposed rate change for a period not longer than 90 days beyond the time when
the rate change would otherwise go into effect, unless the SDPUC finds that a
longer time is required, in which case the SDPUC may extend the suspension for
a period not to exceed a total of 12 months. A public utility may not put a
proposed rate change into effect until at least 45 days after the SDPUC has
made a determination concerning any previously filed rate change. In the event
that a requested rate change is suspended by the SDPUC, such requested rate
change can be implemented by the public utility six months after the date of
filing (unless previously authorized by the SDPUC), subject to refund with
interest.

The Company's wholesale power sales and transmission rates are subject to
the jurisdiction of the FERC under the Federal Power Act of 1935. Filed rates
are effective after a one-day suspension period, subject to ultimate approval
by the FERC. Power pool sales are conducted continuously through MAPP on the
basis of generating costs, in accordance with schedules filed by MAPP with the
FERC.

In rate cases, a forward test year procedure enables cost increases to be
recovered more promptly than use of an historic test year. The MPUC has
established by regulation a forward test year procedure. North Dakota law
allows a forward test year. The SDPUC uses an historic test year with
adjustments for known and measurable changes occurring within 24 months of the
last month of the test year.

The Company has obtained approval from the regulatory commissions in all
three states which it serves for lower rates for residential demand control and
controlled service, and in North Dakota and South Dakota for bulk interruptible
rates. Each of these special rates is designed to improve efficient use of
Company facilities, while encouraging use of electricity instead of other fuels
and giving customers more control over the size of their electric bill.

All of the Company's electric rate schedules now in effect, except for
wheeling, certain municipal and area lighting services and certain
interruptible rates, provide for adjustments in rates based upon the cost of
fuel delivered to the Company's generating plants, as well as for adjustments
based upon the cost of the energy charge for electric power purchased by the
Company. Such adjustments are presently based upon a two-month moving average
in Minnesota and under the FERC, a three-month moving average in South Dakota,
and a four-month moving average in North Dakota and are applied to the next
billing after becoming applicable.

General Regulation
- ------------------

Minnesota: Under the Minnesota Public Utilities Act, the Company is
subject to the jurisdiction of the MPUC with respect to rates, issuance of
securities, depreciation rates, public utility services, construction of major
utility facilities, establishment of exclusive assigned service areas,
contracts and arrangements with subsidiaries and other affiliated interests,
and other matters. The MPUC has the authority to assess the need for large
energy facilities and to issue or deny certificates of need, after public
hearings, within six months of an application to construct such a facility.

The Minnesota Department of Public Service ("DPS") is responsible for
investigating all matters subject to the jurisdiction of the DPS or the MPUC,
and for the enforcement of MPUC orders. Among other things, the DPS is
authorized to collect and analyze data on energy and the consumption of energy,
develop recommendations as to energy policies for the Governor and the
Legislature of Minnesota and evaluate policies governing the establishment of
rates and prices for energy as related to energy conservation. The DPS acts as
a state advocate in matters heard before the MPUC. The DPS also has the power
to prepare and adopt regulations to conserve and allocate energy in the event
of energy shortages and on a long-term basis.

Under Minnesota law, every public utility that furnishes electric service
must make annual investments and expenditures in energy conservation
improvements, or make a contribution to the State's energy and conservation
account, in an amount equal to at least 1.5% of its gross operating revenues
from service provided in Minnesota. The DPS may require the Company to make
investments and expenditures in energy conservation improvements whenever it
finds that the improvement will result in energy savings at a total cost to the
utility less than the cost to the utility to produce or purchase an equivalent
amount of a new supply of energy. Such DPS orders are appealable to the MPUC.
Investments made pursuant to such orders generally are recoverable costs in
rate cases, even though ownership of the improvement may belong to the property
owner rather than the utility. In 1995 the MPUC approved an automatic recovery
mechanism which allows the Company to begin collecting from customers any
conservation-related expenditures not included in base rates.

The MPUC requires the submission of a 15-year advance integrated resource
plan by utilities serving at 10,000 customers, either directly or indirectly,
and having at least 100 megawatts of load. The MPUC's findings and orders with
respect to these submissions is binding for jurisdictional utilities. The
Company's most recent plan was submitted to the MPUC in 1996, and was approved
as submitted in its entirety. The MPUC granted the Company a one year waiver in
submitting the next plan, which is now due in 1999. The Minnesota legislature
has enacted a statute that favors conservation over the addition of new
resources. In addition, it has mandated the use of renewable resources where
new supplies are needed, unless the utility proves that a renewable energy
facility is not in the public interest. It has effectively prohibited the
building of new nuclear facilities. The environmental externality law requires
the MPUC, to the extent practicable, to quantify the environmental costs of
each type of generation, and to use such monetized values in evaluating
resource plans. The MPUC must disallow any nonrenewable rate base additions
(whether within or without the state) or any rate recovery therefrom, and shall
not approve any nonrenewable energy facility in an integrated resource plan,
unless the utility proves that a renewable energy facility is not in the public
interest. The state has prioritized the acceptability of new generation with
wind and solar ranked first and coal and nuclear ranked fifth, the lowest
ranking. Whether these state policies are preempted by federal law has not
been determined.

Pursuant to the Minnesota Power Plant Siting Act, the Minnesota
Environmental Quality Board ("EQB") has been granted the authority to regulate
the siting in Minnesota of large electric power generating facilities in an
orderly manner compatible with environmental preservation and the efficient use
of resources. To that end, the EQB is empowered, after study, evaluation, and
hearings, to select or designate in Minnesota sites for new electric power
generating plants (50,000 kw or more) and routes for transmission lines (200 kv
or more) and to certify such sites and routes as to environmental
compatibility.

North Dakota: The Company is subject to the jurisdiction of the NDPSC with
respect to rates, services, certain issuances of securities and other matters.
The North Dakota Energy Conversion and Transmission Facility Siting Act grants
the NDPSC the authority to approve sites in North Dakota for large electric
generating facilities and high voltage transmission lines. This Act is similar
to the Minnesota Power Plant Siting Act described above and affects new
electric power generating plants of 50,000 kw or more and new transmission
lines of more than 115 kv. The Company is required to submit a ten-year plan
to the NDPSC annually.

South Dakota: The South Dakota Public Utilities Act subjects the Company
to the jurisdiction of the SDPUC with respect to rates, public utility
services, establishment of assigned service areas, and other matters. The
Company is currently exempt from the jurisdiction of the Commission with
respect to the issuance of securities. Under the South Dakota Energy Facility
Permit Act, the SDPUC has the authority to approve sites in South Dakota for
large energy conversion facilities (100,000 kw or more) and transmission lines
of 115 kv or more.

FERC: The Company is also subject to regulation by the FERC, successor
to the Federal Power Commission, created pursuant to the Federal Power Act of
1935, as amended. The FERC is an independent agency which has jurisdiction
over rates for sales for resale, transmission and sale of electric energy in
interstate commerce, interconnection of facilities, and accounting policies
and practices.

General: The United States Congress ended its 1997 legislative session
without taking action on proposed electric industry restructuring
legislation. Federal restructuring legislation in 1998, a Congressional
election year, is also unlikely due to the complexities of issues involved
with federal intervention.

The MPUC issued its Wholesale Competition Report in 1996 and its Retail
Competition Report in 1997 and continues to work on specific topics in the
areas of potential stranded costs, unbundled rates and affiliated
transactions. The Minnesota Legislature is not expected to adopt
deregulation legislation until 1999 at the earliest. In 1997 the North Dakota
Legislature created a subcommittee to investigate the impact of electric
utility industry restructuring on North Dakota. In view of the legislative
effort, the NDPSC closed its investigative docket. The SDPUC has not taken
any action with regards to industry restructuring or retail competition.

The Company is subject to various federal and state laws, including the
Federal Public Utility Regulatory Policies Act and the Energy Policy Act of
1992, which are intended to promote the conservation of energy and the
development and use of alternative energy sources.

The Company is unable to predict the impact on its operations resulting
from future regulatory activities by any of the above agencies, from any
future legislation or from any future tax which may be imposed upon the
source or use of energy.

Environmental Regulation
- ------------------------

Impact of Environmental Laws: The Company's existing generating plants
are subject to stringent standards and regulations regarding, among other
things, air, water and solid waste pollution, by agencies of the federal
government and the respective states where the Company's plants are located.
The Company estimates that it has expended in the five years ended December
31, 1997, approximately $2,210,000 for environmental control facilities.
Included in the 1998-2002 construction budget are approximately $1,780,000
for environmental improvements for existing and new facilities, including
$440,000 for 1998.

Air Quality: Pursuant to the Federal Clean Air Act of 1970, the Clean
Air Act Amendments of 1990 and other amendments thereto (collectively the
"Act"), the United States Environmental Protection Agency ("EPA") has
promulgated national primary and secondary standards for certain air
pollutants.

All primary fuel burned by the Company at its steam generating plants is
North Dakota lignite or western subbituminous coal with sulfur content
averaging less than one percent. Electrostatic precipitators have been
installed at the Company's principal units at the Hoot Lake Plant and at the
Big Stone Plant. A fabric filter to collect particulates from stack gases
has been installed on a smaller unit at Hoot Lake Plant. As a result, the
Company's units at Big Stone and Hoot Lake currently meet all federal and
state air quality and emission standards presently applicable.

The Coyote Plant is substantially the same design as the Big Stone
Plant, except for site-related items and the inclusion of sulfur dioxide
removal equipment. The removal equipment--referred to as a dry scrubber--
consists of a spray dryer, followed by a fabric filter, and is designed to
desulphurize hot gases from the stack without producing sludge, an unwanted
by-product of the conventional wet scrubber system. The Coyote Plant is
currently operating within all presently applicable federal and state air
quality and emission standards.

The Clean Air Act Amendments of 1990, in addressing acid deposition,
will impose new requirements on power plants in an effort to reduce national
emissions of sulfur dioxide ("SO2") and nitrogen oxide ("NOx").

The national SO2 emission reduction goals are to be achieved through a
new market-based system under which power plants are to be allocated
"emissions allowances" that will require plants to either reduce their
emissions or acquire allowances from others to achieve compliance. The SO2
emission reduction requirements are being imposed in two phases, the first
phase was imposed in 1995 and the second phase will be imposed in 2000.

The phase one requirements do not apply to any of the Company's plants.
The phase two standards apply to the Company's plants in the year 2000. The
Company believes that its current use of low sulfur coal at the Hoot Lake
Plant and the dry scrubbers installed at the Coyote Plant will enable the
facilities to comply with anticipated phase two limitations with regards to
SO2. The Company has a subbituminous coal contract for Big Stone Plant which
runs through December 1999. The subbituminous coal replaced lignite, which
had been used since inception of plant operation in 1975 as the primary fuel.
The Company intends that the Big Stone Plant will maintain current levels of
operation and meet phase two requirements either by burning low sulfur
subbituminous coal or by the acquisition of SO2 allowances. The cost of
subbituminous coal in 2000 and beyond may be higher than the current market
price but would likely not adversely affect the Company's power plant
operations.

The national NOx emission reduction goals are to be achieved by imposing
mandatory emissions standards on individual sources. The NOx emissions
regulations that were issued by the EPA in 1995 apply to phase one boilers of
the same design as those used at the Company's Hoot Lake Plant units 2 and 3.
The Act allowed EPA to either retain the standard as it currently applies to
phase one boilers or adopt more stringent standards for such phase two
boilers by January 1, 1997. More stringent standards were adopted on
December 19, 1996. The Company had the option to either comply with the
phase one standards beginning on January 1, 1997, under EPA's early opt-in
provision, or comply with any revised standard for phase two units. The
Company elected the early opt-in provision for Hoot Lake Plant unit 2. The
unit is governed by the phase one standard until January 1, 2008. The Company
has not elected the early opt-in provision for Hoot Lake Plant unit 3. The
Company currently anticipates that the cost of complying with the limitations
applicable to Hoot Lake Plant unit 3 will not be material.

On December 19, 1996, the EPA also adopted NOx emissions regulations
that would be applicable to cyclone-fired boilers such as those used at Big
Stone and Coyote. The regulations require that the emission standard be
met by cyclone boilers beginning on January 1, 2000. The Utility Air
Regulatory Group ("UARG") filed a Petition for Review in the Court of Appeals
for the District of Columbia regarding the EPA adopted NOx emission
regulations. As a member of UARG, the Company participated in the Petition,
which was rejected by the Court of Appeals on February 13, 1998. The Company
is currently evaluating the Big Stone and Coyote NOx emissions with respect
to the December 19, 1996 rules. Existing emissions monitoring data indicate
that Coyote meets the emission requirements. During 1997, the Company
conducted tests at Big Stone to determine if emissions can be reduced through
modifications to existing equipment. The tests were successful and the
modifications will be completed at a nominal cost.

The Clean Air Act Amendments of 1990 contain a list of toxic air
pollutants to be regulated. The list includes certain substances believed to
be emitted by the Company's plants. The Act calls for EPA studies of the
effects of emissions of the listed pollutants by electric utility steam
generating plants. Because promulgation of rules by the EPA has not been
completed, it is not possible to assess at this time whether, or to what
extent, this legislation will ultimately impact the Company.

Water Quality: The Federal Water Pollution Control Act Amendments of
1972, and amendments thereto, provide for, among other things, the imposition
of effluent limitations to regulate discharges of pollutants, including
thermal discharges, into the waters of the United States, and the EPA has
established effluent guidelines for the steam electric power generating
industry. Discharges must also comply with state water quality standards.

The Company has all federal and state water permits presently necessary
for the operation of its Big Stone Plant. A water discharge permit for the
Hoot Lake Plant was renewed in 1997 for a five-year term. A permit for the
Coyote Plant was renewed in 1993 also for a five-year term. The Company owns
five small dams on the Otter Tail River which are subject to FERC licensing
requirements. A license for all five dams was issued on December 5, 1991.
Total nameplate rating of the five dams is 3,450 kw (net unit capability of
3,514 kw at December 31, 1997).

Solid Waste: Permits for disposal of ash and other solid wastes have
been issued for the Company's Big Stone and Coyote Plants. A renewal permit
is pending for the Company's Hoot Lake Plant and the Company anticipates that
it will obtain this renewal in due course. The EPA has promulgated various
solid and hazardous waste regulations and guidelines pursuant to, among other
laws, the Resource Conservation and Recovery Act of 1976, the Solid Waste
Disposal Act Amendments of 1980, and the Hazardous and Solid Waste Amendments
of 1984, which provide for, among other things, the comprehensive control of
various solid and hazardous wastes from their generation to final disposal.
The states of Minnesota, North Dakota and South Dakota have also adopted
rules and regulations pertaining to solid and hazardous waste. The total
impact on the Company of the various solid and hazardous waste statutes and
regulations enacted by the Federal Government or the states of Minnesota,
North Dakota and South Dakota is not certain at this time. To date the
Company has incurred no significant costs as a result of these laws.

In 1980 the United States enacted the Comprehensive Environmental
Response, Compensation and Liability Act, commonly known as the Federal
Superfund law, and in 1986 reauthorized and amended the 1980 Act. In 1983
Minnesota adopted the Minnesota Environmental Response and Liability Act,
commonly known as the Minnesota Superfund law. In 1988 South Dakota enacted
the Regulated Substance Discharges Act, commonly called the South Dakota
Superfund law. In 1989 North Dakota enacted the Environmental Emergency Cost
Recovery Act. Among other requirements the federal and state acts establish
environmental response funds to pay for remedial actions associated with the
release or threatened release of certain regulated substances into the
environment. These federal and state Superfund laws also establish liability
for cleanup costs and damage to the environment resulting from such release
or threatened release of regulated substances. The Minnesota Superfund law
also creates liability for personal injury and economic loss under certain
circumstances. The Company is unable to determine the total impact of the
Superfund laws on its operations at this time but has not incurred any
significant costs to date related to these laws.

The Federal Toxic Substances Control Act of 1976 regulates, among other
things, polychlorinated byphenyls ("PCBs"). The EPA has enacted regulations
concerning the use, storage and disposal of PCBs. The Company completed a
program for removal of all PCB-filled transformers and capacitors by the end
of 1987 and received Certificates of Disposal in 1989. The Company completed
removal of PCB-contaminated mineral oil dielectric fluid from all substation
transformers in 1991 and continues to remove such oil from voltage regulators
as well as other electrical equipment.

Health Effects of Electric and Magnetic Fields ("EMF"): In 1996 the
National Research Council of the National Academy of Sciences, after
evaluating more than 500 studies on the effects of EMF, found insufficient
evidence to consider electric and magnetic fields a threat to human health.
Although research conducted to date has found no conclusive evidence that
electric and magnetic fields affect health, a few studies have suggested a
possible connection with cancer. The utility industry continues to fund
studies. The ultimate impact, if any, of this issue on the Company and the
utility industry is impossible to predict.

Capital Expenditures
- --------------------

The Company is continually expanding, replacing and improving its
electric utility facilities. During 1997 the Company invested approximately
$26,489,000 for additions to its electric utility properties. During the
five years ended December 31, 1997, the Company had gross electric property
additions, including construction work in progress, of approximately
$141,769,000 and gross retirements of approximately $39,862,000.

The Company estimates that during the five years 1998 through 2002 it
will invest for electric utility construction approximately $117,000,000.
The Company continuously reviews options for increasing its generating
capacity, but at this time has no firm plans for additional base load
generating plant construction. The majority of electric utility expenditures
for the five-year period 1998 through 2002 will be for work related to the
Company's transmission and distribution system.

Franchises
- ----------

At December 31, 1997, the Company had franchises in all but one of the
371 incorporated municipalities which it serves. All franchises are
nonexclusive and generally were obtained for 20-year terms, with varying
expiration dates. No franchises are required to serve unincorporated
communities in any of the three states which the Company serves.

MANUFACTURING OPERATIONS
------------------------

General
- -------

Manufacturing Operations consists of businesses involved in the
following manufacturing activities: PVC pipe, sugar beet processing
equipment, metal stamping, contract machining, and frame straightening racks
and accessories used by the auto body industry. Initial acquisitions of
businesses in this segment were made in 1990. On June 30, 1997, Mid-States
acquired Chassis Liner in a pooling-of-interests transaction. The Company
derived 21% of its consolidated operating revenues from this segment in 1997,
17% in 1996, and 12% in 1995.

The following is a brief description of each of these businesses:

Precision Machine of North Dakota, Inc., located in West Fargo, ND, uses
computer controlled lathes and milling machines to produce precision
parts for manufacturers.

Dakota Machine, Inc., located in West Fargo, ND, is primarily engaged in
metal fabrication of large equipment that handles or processes sugar
beets. Dakota Engineering, Inc., a subsidiary of Dakota Machine, Inc.,
was formed in 1995 and is engaged in design engineering and construction
management, primarily in the sugar industry.

Glendale Machining, Inc., located in Pelican Rapids, MN, uses computer
controlled lathes and milling machines to produce parts for
manufacturers.

BTD Manufacturing, Inc. ("BTD"), located in Detroit Lakes, MN, is a
metal stamping and tool and die manufacturer. BTD stamps, machines, and
assembles metal parts according to manufacturers' specifications
primarily for the snowmobile/recreation vehicle industry.

Northern Pipe Products, Inc., located in Fargo, ND, manufactures poly-
vinyl-chloride (PVC) pipe for municipal, rural water, irrigation and
other uses in a sixteen-state area.

Chassis Liner Corporation, located in Alexandria and Lucan, MN,
manufactures vehicle frame-straightening equipment and accessories used
by the auto body industry.

Competition
- -----------

The markets in which the Company's manufacturing entities compete are
characterized by intense competition. The various markets the companies
compete in have many established manufacturers with broader product lines,
greater distribution capabilities, greater capital resources and larger
marketing, research and development staffs and facilities than the Company.

The Company believes the principal competitive factors in its
manufacturing segment are product performance, quality, price, ease of use,
technical innovation, cost effectiveness, customer service and breadth of
product line. The Company intends to continue to compete on the basis of its
high performance products, innovative technologies, cost effective
manufacturing techniques, close customer relations and support and its
strategy to increase offerings of products.

Capital Expenditures
- --------------------

During 1997 capital expenditures of approximately $6,300,000 were made
in Manufacturing Operations, Plant and Equipment. Total capital expenditures
for Manufacturing Operations during the five-year period 1998-2002 are
estimated to be approximately $13,000,000.

HEALTH SERVICES OPERATIONS
--------------------------

General
- -------

Health Services Operations consists of businesses involved in the sale,
service, rental, refurbishing and operation of medical imaging equipment and
the sale of related supplies and accessories to various medical institutions
primarily in the Midwest United States. The Company derived 17% of its
consolidated operating revenues from this segment in 1997, 17% in 1996, and
16% in 1995.

Subsidiaries comprising Health Services Operations include the
following:

Diagnostic Medical Systems, Inc. ("DMS"), located in Fargo, ND, sells,
services and refurbishes diagnostic medical imaging equipment
manufactured primarily by Philips Medical Systems ("Philips"), including
fluoroscopic, radiographic and mammography equipment, along with
ultrasound, computerized tomography ("CT") scanners, magnetic resonance
imaging ("MRI") scanners, cardiac cath labs, and radiation therapy
equipment for the treatment of cancer. DMS is also a distributor of x-
rays supplies and accessories to health care facilities. DMS
subsidiaries are DMS Imaging, Inc. and DMS Leasing, Inc. In 1994 DMS
entered into a five-year dealer agreement with Philips, which can be
terminated by Philips upon certain circumstances. DMS is also a
supplier for Kodak, DuPont, Imation, and Fuji in the medical film and
accessory business. DMS markets mainly to hospitals, clinics and mobile
service companies in North Dakota, South Dakota, Minnesota, Montana and
Wyoming. Almost 80% of the hospitals served by DMS have 50 or fewer
beds.

DMS Imaging, Inc., a subsidiary of DMS located in Fargo, ND and Bemidji
MN, provides mobile and fixed diagnostic medical equipment and related
services to health care providers in a nineteen state area, including
diagnostic nuclear medicine, ultrasound, mammography, computerized axial
tomography, and magnetic resonance imaging. Northern Medical Imaging,
Inc., acquired in April 1996 and Imaging Plus, Inc. were combined in
January 1997 to form DMS Imaging, Inc.

Combined, the Health Service subsidiaries cover the three basics of the
medical imaging industry: (1) operating technologists who do the imaging of
patients of hospitals and clinics; (2) the equipment function that sells,
owns, rents, refurbishes and maintains the imaging machines; and (3) central
office specialists who provide scheduling, billing and administrative
support.

Each of the subsidiaries described above under Health Services
Operations and Manufacturing Operations are owned by Mid-States, which is a
wholly owned subsidiary of Minnesota Dakota Generating Company ("MDG"). MDG
is a wholly owned subsidiary of the Company.

Competition
- -----------

The market for selling, servicing and operating diagnostic imaging services
and imaging systems is highly competitive. In addition to direct competition
from other contract providers, the Company competes with free-standing
imaging centers and health care providers that have their own diagnostic
imaging systems and with equipment manufacturers that sell imaging equipment
to health care providers for full-time installation. Some of the Company's
direct competitors which provide contract MRI services have access to greater
financial resources than the Company. In addition, some of the Company's
customers are capable of providing the same services to their patients
directly, subject only to their decision to acquire a high-cost diagnostic
imaging system, assume the financial and technology risk, and employ the
necessary technologies. The Company competes against other contract
providers on the basis of quality of services, quality and magnetic field
strength of imaging systems, price, availability and reliability.

Capital Expenditures
- --------------------

During 1997 capital expenditures of approximately $3,800,000 were made
in Health Services. Total capital expenditures during the five-year period
1998-2002 are estimated to be $34,000,000.

OTHER BUSINESS OPERATIONS
-------------------------

General
- -------

The Company's Other Business Operations consists of businesses that are
diversified in such areas as electrical and telephone construction
contracting, radio broadcasting, waste incinerating, and telephone/cable TV
utility. On January 2, 1997, NCU acquired Peoples in a pooling-of-interests
transaction. The Company derived 10% of its consolidated operating revenues
from these diversified businesses during 1997, 12% in 1996, and 10% during
1995.

The following is a brief description of each of these businesses:

Moorhead Electric, Inc., located in Moorhead, MN, provides commercial
and industrial wiring of large buildings, constructs and maintains
telecommunications and power distribution systems, and installs computer
network cable.

Aerial Contractors, Inc., located in West Fargo, ND, installs overhead
and underground utility lines.

KFGO, Inc., located in Fargo, ND, operates two AM and four FM commercial
radio stations along with a video production facility.

Western Minnesota Broadcasting Company, located in Morris, MN, operates
an AM and FM commercial radio station.

Quadrant Co. ("Quadrant") operates a municipal waste burning facility
located in Perham, MN. In 1997 Quadrant began processing solid waste
for three Minnesota counties under the terms of a new waste incineration
agreement. Since operating under the new agreement, Quadrant has
experienced a reduction in revenue of approximately fifty percent, as
compared to 1996. New pollution rules for Minnesota waste incinerators
have been issued. The costs to be in compliance with the new pollution
rules by the year 2000 in conjunction with reduced operating revenues
threaten the economic viability of the plant. However, Quadrant is
currently generating positive cash flows from the operation of its plant
which had a net undepreciated book value of approximately $2.45 million
on December 31, 1997. The Company intends to operate the Quadrant plant
as long as positive cash flows can be maintained but will continue to
evaluate its investment in Quadrant for asset impairment on a quarterly
basis.

Midwest Information Systems, Inc.("MIS"), headquartered in Parkers
Prairie, MN, owns three operating telephone companies serving over 6,300
customers and two cable television companies serving approximately 1,200
customers. MIS is also involved in long-distance telephone, fiber-optic
transmission facilities, and the sale of direct broadcast satellite
television programming and equipment.

With the exception of Quadrant, which was founded by the Company in
1985, each of these businesses was acquired by the Company since 1989.
Quadrant is a wholly owned subsidiary of MDG, which in turn is a wholly owned
subsidiary of the Company. MIS is a wholly owned subsidiary of NCU, a
subsidiary of MDG formed for the purpose of acquiring utility companies.
Each of the other subsidiaries described above are owned by Mid-States, which
is also a wholly owned subsidiary of MDG.

General Regulation
- ------------------

The Company's operating telephone subsidiaries are subject to the
regulatory authority of the MPUC regarding rates and charges for telephone
services, as well as other matters. The operating telephone subsidiaries
must keep on file with the DPS schedules of such rates and charges, and any
requests for changes in such rates and charges must be filed for approval by
the MPUC. The telephone industry is also subject generally to rules and
regulations of the Federal Communications Commission ("FCC"). The Company's
operating cable television subsidiary is regulated by federal and local
authorities. The Company's radio broadcasting subsidiaries are regulated by
the FCC.

Environmental Regulation
- ------------------------

In recent years, facilities such as Quadrant that burn municipal solid
waste have been subjected to increasing state and federal environmental
regulation. The Minnesota Pollution Control Agency promulgated rules
relating to ash in 1993 and air emissions in 1994. In late 1996, the U.S.
Court of Appeals for the District of Columbia Circuit vacated air emission
regulations recently adopted by the EPA. EPA has petitioned for a rehearing
of the case. Quadrant continues to operate under an expired air emission
permit with the permission of the Minnesota Pollution Control Agency and
submitted its application for a new air emission permit in April of 1995.
Historically the terms of Quadrant's contracts with customers have enabled
Quadrant to pass on to its customers much of the cost of environmental
compliance. The increasing cost of environmental compliance may adversely
affect Quadrant's ability to successfully negotiate the renewal of the
contracts discussed above.

Competition
- -----------

Each of the businesses in Other Business Operations is subject to
competition, as well as the effects of general economic conditions, in their
respective industries.

Capital Expenditures
- --------------------

During 1997 capital expenditures of approximately $3,000,000 were made
in Other Business Operations. Capital expenditures during the five-year
period 1998-2002 are estimated to be approximately $9,000,000 for Other
Business Operations.

FINANCING
---------

The Company estimates that funds internally generated net of forecasted
dividend payments, combined with funds on hand, will be sufficient to meet
all sinking fund payments for First Mortgage Bonds in the next five years and
to provide for its estimated 1998-2002 consolidated capital expenditures.
Additional short-term or long-term financing will be required in the period
1998-2002 for the maturity of First Mortgage Bonds and other long-term debt,
in the event the Company decides to refund or retire early any of its
presently outstanding debt or Cumulative Preferred Shares, or for other
corporate purposes.

The foregoing estimates of capital expenditures and funds internally
generated may be subject to substantial changes due to unforeseen factors,
such as changed economic conditions, competitive conditions, technological
changes, new environmental and other governmental regulations, tax law
changes, and rate regulation.

As of December 31, 1997, the Company had unutilized net fundable
property available for the issuance of more than $39,000,000 principal amount
of additional First Mortgage Bonds and also was entitled to issue in excess
of $131,000,000 principal amount of additional First Mortgage Bonds on the
basis of First Mortgage Bonds theretofore retired.

The Company's operating subsidiaries have been responsible for obtaining
their own financing after the Company's initial equity investment and have
developed financing arrangements with various banks. Historically, the
Company has not made or guaranteed loans to its subsidiaries, loaned any
subsidiary money or cosigned on any of their borrowing.

The Company has access to short-term borrowing resources. As of December
31, 1997, the Company and subsidiaries had unused credit lines totaling
$52,285,000. The Company had $2,100,000 in short-term borrowings as of
December 31, 1997. The subsidiary companies had $3,115,000 of credit lines
in use at December 31, 1997, a portion classified as current maturities and a
portion classified as long-term debt depending on the terms and nature of
use.

EMPLOYEES
---------

The Company and its subsidiaries had approximately 1,884 full-time
employees at December 31, 1997. A total of 484 employees are represented by
local unions of the International Brotherhood of Electrical Workers, of which
412 are employees of the Electric Operations segment and are covered by a
three-year labor contract that was renewed in 1996 and expires November 1,
1999. The Company has never experienced any strike, work stoppage, or strike
vote, and regards its present relations with employees as very good.

Forward Looking Information - Safe Harbor Statement Under the Private
Securities Litigation Reform Act of 1995

In connection with the "safe harbor" provisions of the Private
Securities Litigation Reform Act of 1995 (the "Act"), the Company has filed
cautionary statements identifying important factors that could cause the
Company's actual results to differ materially from those discussed in
forward-looking statements made by or on behalf of the Company. When used in
this Form 10-K and in future filings by the Company with the Securities and
Exchange Commission, in the Company's press releases and in oral statements,
words such as "may", "will", "expect", "anticipate", "continue", "estimate",
"project", "believes" or similar expressions are intended to identify
forward-looking statements within the meaning of the Act. Factors that might
cause such differences include, but are not limited to, the factors discussed
under "Factors affecting future earnings" on pages 28 through 30 of the
Company's 1997 Annual Report to Shareholders, filed as an exhibit hereto.
These factors are in addition to any other cautionary statements, written or
oral, which may be made or referred to in connection with any such forward-
looking statement or contained in any subsequent filings by the Company with
the Securities and Exchange Commission.

Item 2. PROPERTIES
----------

The Coyote Plant, which commenced operation in 1981, is a 414,000 kw
(nameplate rating) mine-mouth plant located in the lignite coal fields near
Beulah, North Dakota and is jointly owned by the Company, Northern Municipal
Power Agency, Montana-Dakota Utilities Co. and Northwestern Public Service
Company. The Company has a 35% interest in the plant and was the project
manager in charge of construction. Montana-Dakota Utilities Co., in whose
service territory the plant is located, is the operating manager of the
plant.

The Company, jointly with Northwestern Public Service Company and
Montana-Dakota Utilities Co., owns the 414,000 kw (nameplate rating) Big
Stone Plant in northeastern South Dakota which commenced operation in 1975.
The Company, for the benefit of all three utilities, was in charge of
construction and is now in charge of operations. The Company owns 53.9% of
the plant.

Located near Fergus Falls, Minnesota, the Hoot Lake Plant is comprised
of three separate generating units with a combined rating of 127,000 kw. The
oldest Hoot Lake Plant generating unit was constructed in 1948 (7,500 kw
nameplate rating) and a subsequent unit was added in 1959 (53,500 kw
nameplate rating). A third unit was added in 1964 (66,000 kw nameplate
rating) and later modified during 1988 to provide cycling capability,
allowing this unit to be more efficiently brought on-line from a standby
mode.

At December 31, 1997, the Company's transmission facilities, which are
interconnected with lines of other public utilities, consisted of 48 miles of
345 kv lines; 363 miles of 230 kv lines; 633 miles of 115 kv lines; and
4,120 miles of lower voltage lines, principally 41.6 kv. The Company owns
the uprated portion of the 48 miles of the 345 kv line, with Minnkota Power
Cooperative retaining title to the original 230 kv construction.

All of the Company's electric utility properties, with minor exceptions,
are subject to the lien of the Company's Indenture of Mortgage dated July 1,
1936, as amended and supplemented, securing its First Mortgage Bonds. All of
the common shares of the companies owned by Mid-States are pledged to secure
indebtedness of Mid-States.

Item 3. LEGAL PROCEEDINGS
-----------------

Patricia C. Reimel v, John C. MacFarlane, et al, and Otter Tail Power Company

This suit was filed on July 1, 1997, in United States District Court for
the District of Minnesota by Pactricia C. Reimel, individually and
derivatively as a shareholder of the Company. The suit names as defendants
the Company, each member of the Company's Board of Directors and certain
executive officers of the Company. The allegations made by the plaintiff
relate to the Company's Shareholder Rights Plan, which was adopted by the
Company's Board of Directors in January 1997. Claims for relief include
modification or elimination of the Company's Shareholder Rights Plan, as well
as damages in an unspecified amount. The Company believes the suit is
procedurally inappropriate and has requested that the Court dismiss the suit
because the plaintiff failed to make a demand on the Board of Directors of
the Company prior to seeking to resolve the alleged claims through
litigation.

Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
---------------------------------------------------

No matters were submitted to a vote of security holders during the three
months ended December 31, 1997.

Item 4A. EXECUTIVE OFFICERS OF THE REGISTRANT (AS OF MARCH 1, 1998)
----------------------------------------------------------

Set forth below is a summary of the principal occupations and business
experience during the past five years of executive officers of the Company:

DATES ELECTED
-------------
NAME AND AGE TO OFFICE PRESENT POSITION AND BUSINESS EXPERIENCE
- ------------ --------- ----------------------------------------

John C. MacFarlane (58) 4/8/91 Present: Chairman, President and Chief
Executive Officer

Andrew E. Anderson (58) 4/08/96 Present: Vice President, Finance and
Treasurer
4/10/95 Vice President, Finance
Prior to
4/10/95 Controller

Marlowe E. Johnson (53) 4/12/93 Present: Vice President, Customer
Service, North Dakota
Prior to
4/12/93 Division Manager, Jamestown

Douglas L. Kjellerup (56) 4/12/93 Present: Vice President, Marketing and
Development
Prior to
4/12/93 Vice President, Planning and
Development

LeRoy S. Larson (52) 4/12/93 Present: Vice President, Customer
Service, Minnesota and South
Dakota
4/13/92 Vice President, Division Operations,
Minnesota and South Dakota
Prior to
4/13/92 Division Manager, Morris

Richard W. Muehlhausen (59) 4/8/96 Present: Senior Vice President,
Corporate Services
Prior to
4/8/96 Vice President, Corporate Services

Jay D. Myster (59) 4/8/96 Present: Senior Vice President,
Governmental and Legal, and
Corporate Secretary
Prior to
4/8/96 Vice President, Governmental and Legal,
and Corporate Secretary

Rodney C.H. Scheel (48) 4/10/95 Present: Vice President, Electrical
Prior to
4/10/95 Director, Information Services

Ward L. Uggerud (48) 4/10/89 Present: Vice President, Operations

Jeffrey J. Legge (41) 4/10/95 Present: Controller
Prior to
4/10/95 Manager, Tax Department

The term of office of each of the officers is one year, and there are no
arrangements or understanding between individual officers or any other
persons pursuant to which he was selected as an officer.

No family relationships exist between any officers of the Company.

PART II

Item 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
-----------------------------------------------------------------
MATTERS
-------

The information required by this Item is incorporated by reference to
the first sentence under "Otter Tail Power Company Stock listing" on Page 48,
to "Selected consolidated financial data" on Page 21 and to "Quarterly
information" on Page 45, of the Company's 1997 Annual Report to Shareholders,
filed as an Exhibit hereto.

In the January 2, 1997, acquisition of Peoples, a Company subsidiary
exchanged 163,758 newly issued shares of the Company's common stock and
$209,000 in cash for all of the outstanding stock of Peoples. In the June
30, 1997, acquisition of Chassis Liner a Company subsidiary exchanged 157,646
newly issued shares of the Company's common stock for all of the outstanding
common stock of Chassis Liner. The issuance of shares of common stock for
both acquisitions did not involve a public offering and therefore was exempt
from registration pursuant to Section 4(2) of the Securities Act of 1933, as
amended (the "Act"). On January 8, 1997, the Company issued 2,630 shares of
its common stock as a bonus to a consultant. The issuance of such shares did
not constitute a "sale" within the meaning of Section 2(3) of the Act.

Item 6. SELECTED FINANCIAL DATA
-----------------------

The information required by this Item is incorporated by reference to
"Selected consolidated financial data" on Page 21 of the Company's 1997
Annual Report to Shareholders, filed as an Exhibit hereto.

Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
---------------------------------------------------------------
RESULTS OF OPERATIONS
---------------------

The information required by this Item is incorporated by reference to
"Management's discussion and analysis of financial condition and results of
operations" on Pages 22 through 30 of the Company's 1997 Annual Report to
Shareholders, filed as an Exhibit hereto.

Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
-------------------------------------------

The information required by this Item is incorporated by reference to
"Quarterly information" on Page 45 and the Company's audited financial
statements on Pages 31 through 44 of the Company's 1997 Annual Report to
Shareholders excluding "Report of Management" on Page 32, filed as an Exhibit
hereto.

Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
---------------------------------------------------------------
FINANCIAL DISCLOSURE
--------------------

None.

PART III

Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
--------------------------------------------------

The information required by this Item is incorporated by reference from
the information under "Nominees for Election as Directors" in the Company's
definitive Proxy Statement dated March 13, 1998. The information regarding
executive officers is set forth in Item 4A hereto.

Item 11. EXECUTIVE COMPENSATION
----------------------

The information required by this Item is incorporated by reference from
the information under "Summary Compensation Table," "Pension and Supplemental
Retirement Plans," "Severance Agreements," and "Directors' Compensation" in
the Company's definitive Proxy Statement dated March 13, 1998.

Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
--------------------------------------------------------------

The information required by this Item is incorporated by reference from
the information under "Outstanding Voting Shares" and "Security Ownership of
Management" in the Company's definitive Proxy Statement dated March 13, 1998.

Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
----------------------------------------------

None.

PART IV

Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
---------------------------------------------------------------

(a) List of documents filed:

(1) and (2) See Table of Contents on Page 22 hereof.

(3) See Exhibit Index on Pages 23 through 29 hereof.

Pursuant to Item 601(b)(4)(iii) of Regulation S-K, copies of
certain instruments defining the rights of holders of certain
long-term debt of the Company are not filed, and in lieu
thereof, the Company agrees to furnish copies thereof to the
Securities and Exchange Commission upon request.

(b) Reports on Form 8-K:

The Company's Current Report on Form 8-K filed with the Securities
and Exchange Commission on November 20, 1997, regarding the
Company's issuance of $50,000,000 aggregate principal amount of its
Senior Debentures, 6.375% Series due 2007.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.

OTTER TAIL POWER COMPANY

By /s/A. E. Anderson
A. E. Anderson
Vice President, Finance and
Treasurer

Dated: March 26, 1998

Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated:

Signature and Title
- -------------------

John C. MacFarlane )
Chairman, President and )
Chief Executive Officer )
(principal executive officer) )
and Director )
)
A. E. Anderson )
Vice President, Finance and Treasurer )
(principal financial officer) )
)
Jeffrey J. Legge )
Controller ) By /s/A. E. Anderson
(principal accounting officer) ) A. E. Anderson
) Pro Se and Attorney-in-Fact
) Dated March 26, 1998
Thomas M. Brown, Director )
)
Dayle Dietz, Director )
)
Dennis R. Emmen, Director )
)
Maynard D. Helgaas, Director )
)
Arvid R. Liebe, Director )
)
Kenneth L. Nelson, Director )
)
Nathan I. Partain, Director )
)
Robert N. Spolum, Director )

OTTER TAIL POWER COMPANY

TABLE OF CONTENTS
-----------------

FINANCIAL STATEMENTS, SUPPLEMENTARY FINANCIAL DATA, SUPPLEMENTAL FINANCIAL
SCHEDULES INCLUDED IN ANNUAL REPORT (FORM 10-K) FOR THE YEAR ENDED
DECEMBER 31, 1997

The following items are included in this annual report by reference to the
registrant's Annual Report to Shareholders for the year ended December 31,
1997:

Page in
Annual
Report to
Shareholders
------------
Financial Statements:

Independent Auditors' Report.............................................33

Consolidated Balance Sheets, December 31, 1997 and 1996.............32 & 33

Consolidated Statements of Income for the Three Years
Ended December 31, 1997..................................................31

Consolidated Statements of Changes in Equity for the
Three Years Ended December 31, 1997......................................34

Consolidated Statements of Cash Flows for the Three Years
Ended December 31, 1997..................................................35

Consolidated Statements of Capitalization, December 31, 1997
and 1996.................................................................36

Notes to Consolidated Financial Statements............................37-45

Selected Consolidated Financial Data for the Five Years
Ended December 31, 1997..................................................21

Quarterly Data for the Two Years Ended
December 31, 1997........................................................45

Schedules are omitted because of the absence of the conditions under which
they are required or because the information required is included in the
financial statements or the notes thereto.

Exhibit Index
to
Annual Report
on Form 10-K
For Year Ended December 31, 1997

Previously Filed
----------------
As
Exhibit
File No. No.
-------- -------
3-A 10-K for year 3-A --Restated Articles of
ended 12/31/96 Incorporation, as amended
(including resolutions
creating outstanding series
of Cumulative Preferred Shares).

3-C 33-46071 4-B --Bylaws as amended through
April 11, 1988.

4-D-1 2-14209 2-B-1 --Twenty-First Supplemental
Indenture from the Company to
First Trust Company of Saint
Paul and Russel M. Collins, as
Trustees, dated as of July 1,
1958.

4-D-2 2-14209 2-B-2 --Twenty-Second Supplemental
Indenture dated as of
July 15, 1958.

4-D-3 33-32499 4-D-7 --Thirty-Second Supplemental
Indenture dated as of
January 18, 1974.

4-D-4 33-46070 4-D-12 --Forty-Third Supplemental
Indenture dated as of
February 1, 1991.

4-D-5 33-46070 4-D-13 --Forty-Fourth Supplemental
Indenture dated as of
September 1, 1991

4-D-6 8-K dated 4-D-15 --Forty-Fifth Supplemental
7/24/92 Indenture dated as of
July 1, 1992

4-D-7 8-A dated 1 --Rights Agreement, dated as of
1/28/97 January 28, 1997, between the
Company and Norwest Bank Minnesota,
National Association
Previously Filed
----------------
As
Exhibit
File No. No.
-------- -------
10-A 2-39794 4-C --Integrated Transmission
Agreement dated August 25,
1967, between Cooperative
Power Association and the
Company.

10-A-1 10-K for year 10-A-1 --Amendment No. 1, dated as
ended 12/31/92 of September 6, 1979, to
Integrated Transmission
Agreement, dated as of
August 25, 1967, between
Cooperative Power Associa-
tion and the Company.

10-A-2 10-K for year 10-A-2 --Amendment No. 2, dated as of
ended 12/31/92 November 19, 1986, to Integ-
rated Transmission Agreement
between Cooperative Power
Association and the Company.

10-C-1 2-55813 5-E --Contract dated July 1, 1958,
between Central Power Elec-
tric Corporation, Inc.,
and the Company.

10-C-2 2-55813 5-E-1 --Supplement Seven dated
November 21, 1973.
(Supplements Nos. One
through Six have been super-
seded and are no longer in
effect.)

10-C-3 2-55813 5-E-2 --Amendment No. 1 dated
December 19, 1973, to
Supplement Seven.

10-C-4 10-K for year 10-C-4 --Amendment No. 2 dated
ended 12/31/91 June 17, 1986, to Supple-
ment Seven.

10-C-5 10-K for year 10-C-5 --Amendment No. 3 dated
ended 12/31/92 June 18, 1992, to Supple-
ment Seven.

10-C-6 10-K for year 10-C-6 --Amendment No. 4 dated
ended 12/31/93 January 18, 1994, to Supple-
ment Seven.

10-D 2-55813 5-F --Contract dated April 12,
1973, between the Bureau of
Reclamation and the Company.

10-E-1 2-55813 5-G --Contract dated January 8,
1973, between East River
Electric Power Cooperative
and the Company.

10-E-2 2-62815 5-E-1 --Supplement One dated
February 20, 1978.

Previously Filed
----------------
As
Exhibit
File No. No.
-------- -------
10-E-3 10-K for year 10-E-3 --Supplement Two dated
ended 12/31/89 June 10, 1983.

10-E-4 10-K for year 10-E-4 --Supplement Three dated
ended 12/31/90 June 6, 1985.

10-E-5 10-K for year 10-E-5 --Supplement No. Four, dated
ended 12/31/92 as of September 10, 1986.

10-E-6 10-K for year 10-E-6 --Supplement No. Five, dated
ended 12/31/92 as of January 7, 1993.

10-E-7 10-K for year 10-E-7 --Supplement No. Six, dated
ended 12/31/93 as of December 2, 1993.

10-F 10-K for year 10-F --Agreement for Sharing
ended 12/31/89 Ownership of Generating
Plant by and between the
Company, Montana-Dakota
Utilities Co., and North-
western Public Service
Company (dated as of
January 7, 1970).

10-F-1 10-K for year 10-F-1 --Letter of Intent for pur-
ended 12/31/89 chase of share of Big Stone
Plant from Northwestern
Public Service Company
(dated as of May 8, 1984).

10-F-2 10-K for year 10-F-2 --Supplemental Agreement No. 1
ended 12/31/91 to Agreement for Sharing
Ownership of Big Stone Plant
(dated as of July 1, 1983).

10-F-3 10-K for year 10-F-3 --Supplemental Agreement No. 2
ended 12/31/91 to Agreement for Sharing
ownership of Big Stone Plant
(dated as of March 1, 1985).

10-F-4 10-K for year 10-F-4 --Supplemental Agreement No. 3
ended 12/31/91 to Agreement for Sharing
ownership of Big Stone Plant
(dated as of March 31, 1986).

10-F-5 10-K for year 10-F-5 --Amendment I to Letter of
ended 12/31/92 Intent dated May 8, 1984, for
purchase of share of Big Stone
Plant.

10-G 10-Q for quarter 10-A --Big Stone Plant Coal Agrmnt
ended 9/30/94 by and between the Company,
Montana-Dakota Utilities Co.,
Northwestern Public Service
Company, and Westmoreland
Resources, Inc. (dated as of
June 30, 1994).
Previously Filed
----------------
As
Exhibit
File No. No.
-------- -------
10-G-1 10-Q for quarter 10-B --Big Stone Coal Transp.
ended 9/30/94 Agreement by and between the
Company, Montana-Dakota
Utilities, Northwestern Public
Service Co., and Burlington
Northern Railroad Company
(dated as of July 18, 1994).

10-G-2 10-K for year 10-G-2 --Amendment No. 1, dated as of
ended 12/31/95 December 27, 1995, to Big
Stone Coal Transportation
Agreement (dated as of
July 18, 1994).

10-H 2-61043 5-H --Agreement for Sharing Owner-
ship of Coyote Station
Generating Unit No. 1 by and
between the Company, Minnkota
Power Cooperative, Inc.,
Montana-Dakota Utilities Co.,
Northwestern Public Service
Company, and Minnesota Power
& Light Company (dated as of
July 1, 1977).

10-H-1 10-K for year 10-H-1 --Supplemental Agreement No.
ended 12/31/89 One dated as of November 30,
1978, to Agreement for Sharing
Ownership of Coyote Generating
Unit No. 1.

10-H-2 10-K for year 10-H-2 --Supplemental Agreement No.
ended 12/31/89 Two dated as of March 1, 1981,
to Agreement for Sharing
Ownership of Coyote Generating
Unit No. 1 and Amendment No. 2
dated March 1, 1981, to Coyote
Plant Coal Agreement.

10-H-3 10-K for year 10-H-3 --Amendment dated as of
ended 12/31/89 July 29, 1983, to Agreement
for Sharing Ownership of
Coyote Generating Unit No. 1.

Previously Filed
----------------
As
Exhibit
File No. No.
-------- -------
10-H-4 10-K for year 10-H-4 --Agreement dated as of Sept.
ended 12/31/92 5, 1985, containing Amendment
No. 3 to Agreement for Sharing
Ownership of Coyote Generating
Unit No.1, dated as of July 1,
1977, and Amendment No. 5 to
Coyote Plant Coal Agreement,
dated as of January 1, 1978.

10-I 2-63744 5-I --Coyote Plant Coal Agreement
by and between the Company,
Minnkota Power Cooperative,
Inc., Montana-Dakota
Utilities Co., Northwestern
Public Service Company,
Minnesota Power & Light
Company, and Knife River
Coal Mining Company (dated
as of January 1, 1978).

10-I-1 10-K for year 10-I-1 --Addendum, dated as of March
ended 12/31/92 10, 1980, to Coyote Plant
Coal Agreement.

10-I-2 10-K for year 10-I-2 --Amendment (No. 3), dated as
ended 12/31/92 of May 28, 1980, to Coyote
Plant Coal Agreement.

10-I-3 10-K for year 10-I-3 --Fourth Amendment, dated as
ended 12/31/92 of August 19, 1985, to
Coyote Plant Coal Agreement.

10-I-4 10-Q for quarter 19-A --Sixth Amendment, dated as of
ended 6/30/93 February 17, 1993, to Coyote
Plant Coal Agreement.

10-K 10-K for year 10-K --Diversity Exchange Agreement
ended 12/31/91 by and between the Company
and Northern States Power
Company, (dated as of May 21,
1985) and amendment thereto
(dated as of August 12, 1985).

10-K-1 10-Q for quarter 10 --Purchased Power and
ended 6/30/94 Interconnection Agreement
between the Company and
Potlatch Corporation dated
as of June 8, 1994.

10-K-2 10-K for year 10-K-4 --Capacity & Energy Agreement
ended 12/31/94 by and between the Company
and Minnkota Power Coop.
Inc. dated as of May 27, 1994.

10-K-3 10-K for year 10-K-5 --Interchange Agreement by and
ended 12/31/92 between the Company and
Wisconsin Power and Light
Company dated as of February
21, 1992.

Previously Filed
----------------
As
Exhibit
File No. No.
-------- -------
10-K-4 10-K for year 10-K-6 --Interchange Agreement by and
ended 12/31/92 between the Company and
Wisconsin Electric Power Co.
dated as of June 26, 1992.

10-K-5 10-Q for quarter 19-B --Interchange Agreement by and
ended 6/30/93 between the Company and
Wisconsin Public Service
Corp dated as of January
20, 1993.

10-L 10-K for year 10-L --Integrated Transmission
ended 12/31/91 Agreement by and between the
Company, Missouri Basin
Municipal Power Agency and
Western Minnesota Municipal
Power Agency (dated as of
March 31, 1986).

10-L-1 10-K for Year 10-L-1 --Amendment No. 1, dated as
ended 12/31/88 of December 28, 1988, to
Integrated Transmission
Agreement (dated as of
March 31, 1986).

10-M-1 10-K for year 10-M-1 --Hoot Lake Plant Coal
ended 12/31/89 Agreement dated as of
October 1, 1980, by and
between the Company and
Knife River Coal Mining
Company.

10-M-2 10-K for year 10-M-2 --First Amendment dated as of
ended 12/31/89 August 14, 1985, to Hoot
Lake Plant Coal Agreement.

10-M-3 10-K for year 10-M-10 --Hoot Lake Coal Transp.
ended 12/31/92 Agreement dated January 15,
1993 by and between the
Company and Northern Coal
Transportation Co.

10-M-4 10-Q for quarter 19-C --First Amendment dated as of
ended 6/30/93 January 20, 1993 to Hoot Lake
Coal Transportation Agreement
dated January 15, 1993.

10-M-5 10-K for year 10-M-5 --Second Amendment dated as of
ended 12/31/96 May 21, 1996 to Hoot Lake
Coal Transportation Agreement
dated January 15, 1993.

10-N-1 10-K for year 10-N --Deferred Compensation Plan
ended 12/31/91 for Directors, dated
April 9, 1984.*

10-N-2 10-K for year 10-N-2 --Executive Survivor and Sup-
ended 12/31/94 plemental Retirement Plan,
as amended.*

Previously Filed
----------------
As
Exhibit
File No. No.
-------- -------

10-N-3 10-K for year 10-P --Form of Severance Agrmnt.*
ended 12/31/92

10-N-4 10-K for year 10-N-5 --Nonqualified Profit Sharing
ended 12/31/93 Plan.*

10-N-5 10-K for year 10-N-6 --Nonqualified Retirement
ended 12/31/93 Savings Plan.*

10-O 10-K for year 10-O --Dealer Agreement by and
ended 12/31/93 between DMS and Philips
Medical Systems North
America Company dated
January 18, 1994.

13-A --Portions of 1997 Annual
Report to Shareholders
incorporated by reference
in this Form 10-K.

21-A --Subsidiaries of Registrant

23 --Consent of Deloitte & Touche LLP

24-A --Powers of Attorney.

27 --Financial Data Schedule.

27-1 --Restated Financial Data Schedules.

Restated Financial Data Schedules for 1996 interim and year end
consolidated financial statements. Exhibit 27.1 contains restated
summary financial information extracted from the restated consolidated
financial statements for the affected periods.

27-2 --Restated Financial Data Schedule

Restated Financial Data Schedules for 1997 interim consolidated
financial statements. Exhibit 27.2 contains restated
summary financial information extracted from the restated consolidated
financial statements for the affected periods.
- --------

* Management contract or compensatory plan or arrangement required to be filed
pursuant to Item 601(b)(10)(iii)(A) of Regulation S-K.