10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

X	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
	THE SECURITIES EXCHANGE ACT OF 1934

For The Quarterly Period Ended March 31, 2007

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For the Transition Period from _____________ to ______________

Commission file number 1-3480

MDU Resources Group, Inc.

(Exact name of registrant as specified in its charter)

Delaware	41-0423660
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

1200 West Century Avenue

P.O. Box 5650

Bismarck, North Dakota 58506-5650

(Address of principal executive offices)

(Zip Code)

(701) 530-1000

(Registrant's telephone number, including area code)

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 o.

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act (Check one):

Large accelerated filer x Accelerated filer o Non-accelerated filer o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x.

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of May 1, 2007: 181,833,102 shares.

DEFINITIONS

The following abbreviations and acronyms used in this Form 10-Q are defined below:

Abbreviation or Acronym

2006 Annual Report	Company's Annual Report on Form 10-K for the year ended December 31, 2006
ALJ	Administrative Law Judge
Anadarko	Anadarko Petroleum Corporation
APB	Accounting Principles Board
APB Opinion No. 28	Interim Financial Reporting
Badger Hills Project	Tongue River-Badger Hills Project
Bcf	Billion cubic feet
BER	Montana Board of Environmental Review
Big Stone Station	450-MW coal-fired electric generating facility located near Big Stone City, South Dakota (22.7 percent ownership)
BLM	Bureau of Land Management
Brazilian Transmission Lines	Company’s equity method investment in companies owning ECTE, ENTE and ERTE
Btu	British thermal unit
Carib Power	Carib Power Management LLC
Cascade	Cascade Natural Gas Corporation
CBNG	Coalbed natural gas
CEM	Colorado Energy Management, LLC, a direct wholly owned subsidiary of Centennial Resources
Centennial	Centennial Energy Holdings, Inc., a direct wholly owned subsidiary of the Company
Centennial Capital	Centennial Holdings Capital LLC, a direct wholly owned subsidiary of Centennial
Centennial International	Centennial Energy Resources International, Inc., a direct wholly owned subsidiary of Centennial Resources
Centennial Power	Centennial Power, Inc., a direct wholly owned subsidiary of Centennial Resources
Centennial Resources	Centennial Energy Resources LLC, a direct wholly owned subsidiary of Centennial
Clean Air Act	Federal Clean Air Act
Clean Water Act	Federal Clean Water Act
Colorado Federal District Court	U.S. District Court for the District of Colorado
Company	MDU Resources Group, Inc.
D.C. Appeals Court	U.S. Court of Appeals for the District of Columbia Circuit
dk	Decatherm
DRC	Dakota Resource Council
EBSR	Elk Basin Storage Reservoir, one of Williston Basin's natural gas storage reservoirs, which is located in Montana and Wyoming
ECTE	Empresa Catarinense de Transmissão de Energia S.A.
EIS	Environmental Impact Statement
ENTE	Empresa Norte de Transmissão de Energia S.A.
EPA	U.S. Environmental Protection Agency
ERTE	Empresa Regional de Transmissão de Energia S.A.
Exchange Act	Securities Exchange Act of 1934, as amended
FASB	Financial Accounting Standards Board
FERC	Federal Energy Regulatory Commission
Fidelity	Fidelity Exploration & Production Company, a direct wholly owned subsidiary of WBI Holdings
FIN	FASB Interpretation No.
FIN 48	Accounting for Uncertainty in Income Taxes
Great Plains	Great Plains Natural Gas Co., a public utility division of the Company
Grynberg	Jack J. Grynberg
Hart-Scott-Rodino Act	Hart-Scott-Rodino Antitrust Improvements Act
Hartwell	Hartwell Energy Limited Partnership
Howell	Howell Petroleum Corporation, a wholly owned subsidiary of Anadarko
Indenture	Indenture dated as of December 15, 2003, as supplemented, from the Company to The Bank of New York as Trustee
Innovatum	Innovatum Inc., a former indirect wholly owned subsidiary of WBI Holdings (the stock and a portion of Innovatum’s assets were sold during the fourth quarter of 2006)
Knife River	Knife River Corporation, a direct wholly owned subsidiary of Centennial
kW	Kilowatt
kWh	Kilowatt-hour
LWG	Lower Willamette Group
MBbls	Thousands of barrels of oil or other liquid hydrocarbons
MBI	Morse Bros., Inc., an indirect wholly owned subsidiary of Knife River
Mcf	Thousand cubic feet
MDU Brasil	MDU Brasil Ltda., an indirect wholly owned subsidiary of Centennial International
MDU Construction Services	MDU Construction Services Group, Inc., a direct wholly owned subsidiary of Centennial
MMBtu	Million Btu
MMcf	Million cubic feet
MMdk	Million decatherms
Montana-Dakota	Montana-Dakota Utilities Co., a public utility division of the Company
Montana DEQ	Montana State Department of Environmental Quality
Montana Federal District Court	U.S. District Court for the District of Montana
Mortgage	Indenture of Mortgage dated May 1, 1939, as supplemented, amended and restated, from the Company to The Bank of New York and Douglas J. MacInnes, successor trustees
MPX	MPX Termoceara Ltda. (49 percent ownership, sold in June 2005)
MW	Megawatt
ND Health Department	North Dakota Department of Health
NEPA	National Environmental Policy Act
NHPA	National Historic Preservation Act
Ninth Circuit	U.S. Ninth Circuit Court of Appeals
NPRC	Northern Plains Resource Council
Order on Rehearing	Order on Rehearing and Compliance and Remanding Certain Issues for Hearing
Oregon DEQ	Oregon State Department of Environmental Quality
Prairielands	Prairielands Energy Marketing, Inc., an indirect wholly owned subsidiary of WBI Holdings
SEC	U.S. Securities and Exchange Commission
SEIS	Supplemental Environmental Impact Statement
SFAS	Statement of Financial Accounting Standards
SFAS No. 87	Employers’ Accounting for Pensions
SFAS No. 109	Accounting for Income Taxes
SFAS No. 142	Goodwill and Other Intangible Assets
SFAS No. 144	Accounting for the Impairment or Disposal of Long-Lived Assets
SFAS No. 157	Fair Value Measurements
SFAS No. 159	The Fair Value Option for Financial Assets and Financial Liabilities
SIP	State Implementation Plan
TRWUA	Tongue River Water Users’ Association
WBI Holdings	WBI Holdings, Inc., a direct wholly owned subsidiary of Centennial
Williston Basin	Williston Basin Interstate Pipeline Company, an indirect wholly owned subsidiary of WBI Holdings
Wyoming Federal District Court	U.S. District Court for the District of Wyoming

INTRODUCTION

The Company is a diversified natural resource company, which was incorporated under the laws of the state of Delaware in 1924. Its principal executive offices are at 1200 West Century Avenue, P.O. Box 5650, Bismarck, North Dakota 58506-5650, telephone (701) 530-1000.

Montana-Dakota, through the electric and natural gas distribution segments, generates, transmits and distributes electricity and distributes natural gas in Montana, North Dakota, South Dakota and Wyoming. Great Plains distributes natural gas in western Minnesota and southeastern North Dakota. These operations also supply related value-added products and services.

The Company, through its wholly owned subsidiary, Centennial, owns WBI Holdings (comprised of the pipeline and energy services and the natural gas and oil production segments), Knife River (construction materials and mining segment), MDU Construction Services (construction services segment), Centennial Resources (independent power production segment) and Centennial Capital (reflected in the Other category). For more information on the Company’s business segments, see Note 16.

On May 11, 2006, the Company’s Board of Directors approved a three-for-two common stock split. For more information on the common stock split, see Note 4.

INDEX

Part I -- Financial Information

Consolidated Statements of Income --

Three Months Ended March 31, 2007 and 2006

Consolidated Balance Sheets --

March 31, 2007 and 2006, and December 31, 2006

Consolidated Statements of Cash Flows --

Three Months Ended March 31, 2007 and 2006

Notes to Consolidated Financial Statements

Management's Discussion and Analysis of Financial

Condition and Results of Operations

Quantitative and Qualitative Disclosures About Market Risk

Controls and Procedures

Part II -- Other Information

Legal Proceedings

Risk Factors

Unregistered Sales of Equity Securities and Use of Proceeds

Submission of Matters to a Vote of Security Holders

Exhibits

Signatures

Exhibit Index

Exhibits

PART I -- FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

MDU RESOURCES GROUP, INC.

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

	Three Months Ended March 31,
	2007		2006
	(In thousands, except per share amounts)
Operating revenues:
Electric, natural gas distribution and pipeline and energy services	$	268,011	$	291,052
Construction services, natural gas and oil production, construction materials and mining, and other		519,480		512,467
		787,491		803,519
Operating expenses:
Fuel and purchased power		17,118		16,135
Purchased natural gas sold		98,835		126,960
Operation and maintenance:
Electric, natural gas distribution and pipeline and energy services		44,654		37,288
Construction services, natural gas and oil production, construction materials and mining, independent power production and other		445,851		438,847
Depreciation, depletion and amortization		69,802		60,981
Taxes, other than income		32,262		32,240
		708,522		712,451
Operating income		78,969		91,068
Earnings from equity method investments		2,054		3,202
Other income		1,332		2,380
Interest expense		17,376		14,052
Income before income taxes		64,979		82,598
Income taxes		23,572		30,153
Income from continuing operations		41,407		52,445
Income from discontinued operations, net of tax (Note 3)		5,255		801
Net income		46,662		53,246
Dividends on preferred stocks		171		171
Earnings on common stock	$	46,491	$	53,075
Earnings per common share -- basic
Earnings before discontinued operations	$	.23	$	.29
Discontinued operations, net of tax		.03		.01
Earnings per common share -- basic	$	.26	$	.30
Earnings per common share -- diluted
Earnings before discontinued operations	$	.23	$	.29
Discontinued operations, net of tax		.02		---
Earnings per common share -- diluted	$	.25	$	.29
Dividends per common share	$	.1350	$	.1267
Weighted average common shares outstanding -- basic		181,341		179,823
Weighted average common shares outstanding -- diluted		182,337		180,915

The accompanying notes are an integral part of these consolidated financial statements.

MDU RESOURCES GROUP, INC.

CONSOLIDATED BALANCE SHEETS

(Unaudited)

	March 31, 2007			March 31, 2006			December 31, 2006
(In thousands, except shares and per share amounts)
ASSETS
Current assets:
Cash and cash equivalents	$	51,574		$	107,970			$	73,078
Receivables, net		548,542			542,746				622,478
Inventories		206,250			171,474				204,440
Deferred income taxes		2,702			10,286				---
Prepayments and other current assets		96,766			70,818				81,083
Current assets held for sale		23,871			10,180				12,656
		929,705			913,474				993,735
Investments		133,454			103,404				155,111
Property, plant and equipment		4,850,268			4,293,811				4,727,725
Less accumulated depreciation, depletion and amortization		1,799,770			1,575,110				1,735,302
		3,050,498			2,718,701				2,992,423
Deferred charges and other assets:
Goodwill		226,937			214,967				224,298
Other intangible assets, net		17,929			10,222				22,802
Other		107,639			106,020				103,840
Noncurrent assets held for sale		410,282			415,596				411,265
		762,787			746,805				762,205
	$	4,876,444		$	4,482,384			$	4,903,474
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Long-term debt due within one year	$	83,446		$	101,707			$	84,034
Accounts payable		244,059			225,611				289,836
Taxes payable		67,223			62,466				54,290
Deferred income taxes		---			---				5,969
Dividends payable		24,693			22,964				24,606
Other accrued liabilities		143,045			138,392				180,327
Current liabilities held for sale		19,150			6,397				14,900
		581,616			557,537				653,962
Long-term debt		1,155,117			1,134,889				1,170,548
Deferred credits and other liabilities:
Deferred income taxes		556,522			525,755				546,602
Other liabilities		357,353			278,589				336,916
Noncurrent liabilities held for sale		33,680			29,670				30,533
		947,555			834,014				914,051
Commitments and contingencies
Stockholders’ equity:
Preferred stocks		15,000			15,000				15,000
Common stockholders’ equity:
Common stock
Shares issued -- $1.00 par value 182,319,441 at March 31, 2007, 120,290,305 at March 31, 2006 and 181,557,543 at December 31, 2006		182,319			120,290				181,558
Other paid-in capital		891,990			913,026				874,253
Retained earnings		1,126,270			914,899				1,104,210
Accumulated other comprehensive loss		(19,797	)		(3,645	)			(6,482	)
Treasury stock at cost - 538,921 shares at March 31, 2007 and December 31, 2006 and 359,281 shares at March 31, 2006		(3,626	)		(3,626	)			(3,626	)
Total common stockholders’ equity		2,177,156			1,940,944				2,149,913
Total stockholders’ equity		2,192,156			1,955,944				2,164,913
	$	4,876,444		$	4,482,384			$	4,903,474

The accompanying notes are an integral part of these consolidated financial statements.

MDU RESOURCES GROUP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Three Months Ended March 31,
	2007				2006
	(In thousands)
Operating activities:
Net income		$	46,662		$	53,246
Income from discontinued operations, net of tax			5,255			801
Income from continuing operations			41,407			52,445
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, depletion and amortization			69,802			60,981
Earnings, net of distributions, from equity method investments			1,056			(1,017	)
Deferred income taxes			13,686			5,850
Changes in current assets and liabilities, net of acquisitions:
Receivables			79,780			56,859
Inventories			(1,761	)		(260	)
Other current assets			(37,931	)		(24,777	)
Accounts payable			(48,729	)		(25,553	)
Other current liabilities			(25,951	)		10,521
Other noncurrent changes			9,174			(358	)
Net cash provided by continuing operations			100,533			134,691
Net cash provided by (used in) discontinued operations			5,596			(2,900	)
Net cash provided by operating activities			106,129			131,791
Investing activities:
Capital expenditures			(123,758	)		(115,612	)
Acquisitions, net of cash acquired			(320	)		---
Net proceeds from sale or disposition of property			3,202			8,813
Investments			17,113			(4,408	)
Net cash used in continuing operations			(103,763	)		(111,207	)
Net cash used in discontinued operations			(839	)		(21,276	)
Net cash used in investing activities			(104,602	)		(132,483	)
Financing activities:
Issuance of long-term debt			8,765			113,006
Repayment of long-term debt			(24,692	)		(91,441	)
Proceeds from issuance of common stock			13,933			1,698
Dividends paid			(24,607	)		(22,950	)
Tax benefit on stock-based compensation			3,566			2,851
Net cash provided by (used in) continuing operations			(23,035	)		3,164
Net cash provided by discontinued operations			---			---
Net cash provided by (used in) financing activities			(23,035	)		3,164
Effect of exchange rate changes on cash and cash equivalents			4			---
Increase (decrease) in cash and cash equivalents			(21,504	)		2,472
Cash and cash equivalents -- beginning of year			73,078			105,498
Cash and cash equivalents -- end of period		$	51,574		$	$107,970

The accompanying notes are an integral part of these consolidated financial statements.

MDU RESOURCES GROUP, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

March 31, 2007 and 2006

(Unaudited)

 1.Basis of presentation

The accompanying consolidated interim financial statements were prepared in conformity with the basis of presentation reflected in the consolidated financial statements included in the Company's 2006 Annual Report, and the standards of accounting measurement set forth in APB Opinion No. 28 and any amendments thereto adopted by the FASB. Interim financial statements do not include all disclosures provided in annual financial statements and, accordingly, these financial statements should be read in conjunction with those appearing in the 2006 Annual Report. The information is unaudited but includes all adjustments that are, in the opinion of management, necessary for a fair presentation of the accompanying consolidated interim financial statements.

 2.Seasonality of operations

Some of the Company's operations are highly seasonal and revenues from, and certain expenses for, such operations may fluctuate significantly among quarterly periods. Accordingly, the interim results for particular businesses, and for the Company as a whole, may not be indicative of results for the full fiscal year.

 3.Discontinued operations

During the third quarter of 2006, the Company initiated a plan to sell Innovatum because the Company determined that Innovatum is a non-strategic asset. Innovatum, a component of the pipeline and energy services segment, specialized in cable and pipeline magnetization and location. During the fourth quarter of 2006, the stock and a portion of the assets of Innovatum were sold and the Company expects to sell the remaining assets of Innovatum within one year of the initial plan to sell. The loss on disposal on the portion of Innovatum that has been sold was not material. The Company does not expect to have any involvement in the operations of Innovatum after the sale.

During the fourth quarter of 2006, the Company initiated a plan to sell certain of the domestic assets of Centennial Resources, which largely comprise the independent power production segment. The plan to sell was based on the increased market demand for independent power production assets, combined with the Company’s desire to efficiently fund future capital needs. The results of operations of these assets were shown in continuing operations in the Company’s financial statements in the 2006 Annual Report as the Company intended to have significant continuing involvement with these assets in the form of continuing existing operation and maintenance agreements between CEM and these assets after the sale.

The Company subsequently committed to a plan to sell CEM due to strong interest in the operations of CEM during the bidding process for the domestic independent power production assets in the first quarter of 2007. As a result of the Company’s commitment to a plan to sell CEM, the Company will no longer have significant continuing involvement in the operations of the other domestic independent power production assets after the sale. Therefore, in accordance with SFAS No. 144, the results of operations of the domestic independent power production assets, including CEM, are presented as discontinued operations. For more information on the pending sale of the domestic independent power production assets, see Note 21.

In accordance with SFAS No. 144, the Company’s consolidated financial statements and accompanying notes for prior periods have been restated to present the results of operations of Innovatum and the domestic independent power production assets as discontinued operations. In addition, the assets and liabilities of these operations are treated as held for sale, and as a result, no depreciation, depletion and amortization expense was recorded from the time each of the assets was classified as held for sale, respectively.

In accordance with SFAS No. 142, at the time the Company committed to the plan to sell each of the assets, the Company was required to test the respective assets for goodwill impairment. The fair value of Innovatum, a reporting unit for goodwill impairment testing, was estimated using the expected proceeds from the sale, which was estimated to be the current book value of the assets of Innovatum other than its goodwill. As a result, a goodwill impairment loss of $4.3 million (before tax) was recognized and recorded as part of discontinued operations, net of tax, in the Consolidated Statements of Income in the third quarter of 2006. There were no goodwill impairments associated with the other assets held for sale.

Operating results related to Innovatum were as follows:

	Three Months Ended March 31,
	2007			2006
	(In thousands)
Operating revenues	$	250		$	509
Loss from discontinued operations before income tax benefit		(75	)		(473	)
Income tax benefit		(44	)		(149	)
Loss from discontinued operations, net of tax	$	(31	)	$	(324	)

Operating results related to the domestic independent power production assets were as follows:

	Three Months Ended March 31,
	2007		2006
	(In thousands)
Operating revenues	$	34,596	$	11,266
Income from discontinued operations before income tax expense (benefit)		7,390		492
Income tax expense (benefit)		2,104		(633	)
Income from discontinued operations, net of tax	$	5,286	$	1,125

The carrying amounts of the major assets and liabilities related to the domestic independent power production assets held for sale, as well as the major assets and liabilities related to Innovatum, were as follows:

	March 31, 2007		March 31, 2006		December 31, 2006
	(In thousands)
Cash and cash equivalents	$	9,991	$	1,779	$	1,878
Receivables, net		6,697		5,251		8,307
Inventories		596		1,007		490
Prepayments and other current assets		6,587		2,143		1,981
Total current assets held for sale	$	23,871	$	10,180	$	12,656
Net property, plant and equipment	$	391,168	$	386,387	$	390,679
Goodwill		11,167		15,472		11,167
Other intangible assets, net		7,241		7,647		7,162
Other		706		6,090		2,257
Total noncurrent assets held for sale	$	410,282	$	415,596	$	411,265
Accounts payable	$	13,717	$	5,763	$	11,557
Other accrued liabilities		5,433		634		3,343
Total current liabilities held for sale	$	19,150	$	6,397	$	14,900
Deferred income taxes	$	29,664	$	27,517	$	27,956
Other liabilities		4,016		2,153		2,577
Total noncurrent liabilities held for sale	$	33,680	$	29,670	$	30,533

 4.Common stock split

On May 11, 2006, the Company's Board of Directors approved a three-for-two common stock split to be effected in the form of a 50 percent common stock dividend. The additional shares of common stock were distributed on July 26, 2006, to common stockholders of record on July 12, 2006. Certain common stock information appearing in the accompanying consolidated financial statements has been restated in accordance with accounting principles generally accepted in the United States of America to give retroactive effect to the stock split. Additionally, preference share purchase rights have been appropriately adjusted to reflect the effects of the split.

 5.Allowance for doubtful accounts

The Company's allowance for doubtful accounts as of March 31, 2007 and 2006, and December 31, 2006, was $8.0 million, $7.9 million and $7.7 million, respectively.

 6. Natural gas in underground storage

Natural gas in underground storage for the Company's regulated operations is carried at cost using the last-in, first-out method. The portion of the cost of natural gas in underground storage expected to be used within one year was included in inventories and was $3.5 million, $4.7 million and $32.6 million at March 31, 2007 and 2006, and December 31, 2006, respectively. The remainder of natural gas in underground storage was included in other assets and was $44.2 million, $43.2 million and $44.2 million at March 31, 2007 and 2006, and December 31, 2006, respectively.

  7.Inventories

Inventories, other than natural gas in underground storage for the Company’s regulated operations, consisted primarily of aggregates held for resale of $95.2 million, $89.3 million and $88.1 million; materials and supplies of $75.4 million, $55.1 million and $54.1 million; and other inventories of $32.1 million, $22.4 million and $29.6 million, as of March 31, 2007 and 2006, and December 31, 2006, respectively. These inventories were stated at the lower of average cost or market value.

  8. Earnings per common share

Basic earnings per common share were computed by dividing earnings on common stock by the weighted average number of shares of common stock outstanding during the applicable period. Diluted earnings per common share were computed by dividing earnings on common stock by the total of the weighted average number of shares of common stock outstanding during the applicable period, plus the effect of outstanding stock options, restricted stock grants and performance share awards. For the three months ended March 31, 2007 and 2006, there were no shares excluded from the calculation of diluted earnings per share. Common stock outstanding includes issued shares less shares held in treasury.

 9.Cash flow information

Cash expenditures for interest and income taxes were as follows:

	Three Months Ended March 31,
	2007		2006
	(In thousands)
Interest, net of amount capitalized	$	17,367	$	12,332
Income taxes	$	3,150	$	5,888

10.New accounting standards

FIN 48 In July 2006, the FASB issued FIN 48. FIN 48 clarifies the application of SFAS No. 109 by defining a criterion that an individual tax position must meet for any part of the benefit of that position to be recognized in an enterprise’s financial statements. The criterion allows for recognition in the financial statements of a tax position when it is more likely than not that the position will be sustained upon examination. FIN 48 was effective for the Company on January 1, 2007. The adoption of FIN 48 did not have a material effect on the Company’s financial position or results of operations. For more information on the implementation of FIN 48, see Note 15.

SFAS No. 157 In September 2006, the FASB issued SFAS No. 157. SFAS No. 157 defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. The standard applies under other accounting pronouncements that require or permit fair value measurements with certain exceptions. SFAS No. 157 is effective for the Company on January 1, 2008. The Company is evaluating the effects of the adoption of SFAS No. 157.

SFAS No. 159 In February 2007, the FASB issued SFAS No. 159. SFAS No. 159 permits entities to choose to measure many financial instruments and certain other items at fair value that are not currently required to be measured at fair value. The standard also establishes presentation and disclosure requirements designed to facilitate comparisons between entities that choose different measurement attributes for similar types of assets and liabilities. SFAS No. 159 is effective for the Company on January 1, 2008. The Company is evaluating the effects of the adoption of SFAS No. 159.

11.Comprehensive income

Comprehensive income is the sum of net income as reported and other comprehensive income (loss). The Company's other comprehensive income (loss) resulted from gains (losses) on derivative instruments qualifying as hedges and foreign currency translation adjustments. For more information on derivative instruments, see Note 14.

Comprehensive income, and the components of other comprehensive income (loss) and related tax effects, were as follows:

	Three Months Ended March 31,
	2007			2006
	(In thousands)
Net income	$	46,662		$	53,246
Other comprehensive income (loss):
Net unrealized gain (loss) on derivative instruments qualifying as hedges:
Net unrealized gain (loss) on derivative instruments arising during the period, net of tax of $6,383 and $14,639 in 2007 and 2006, respectively		(10,196	)		23,385
Less: Reclassification adjustment for gain (loss) on derivative instruments included in net income, net of tax of $3,271 and $4,249 in 2007 and 2006, respectively		5,226			(6,787	)
Net unrealized gain (loss) on derivative instruments qualifying as hedges		(15,422	)		30,172
Foreign currency translation adjustment		2,107			(1	)
		(13,315	)		30,171
Comprehensive income	$	33,347		$	83,417

12.Equity method investments

The Company’s equity method investments at March 31, 2007, include Hartwell and the Brazilian Transmission Lines.

In February 2004, Centennial International acquired 49.99 percent of Carib Power. Carib Power, through a wholly owned subsidiary, owns a 225-MW natural gas-fired electric generating facility in Trinidad and Tobago. On February 26, 2007, the Company sold its interest in Carib Power. The sale did not have a significant effect on the Company’s results of operations.

In September 2004, Centennial Resources, through indirect wholly owned subsidiaries, acquired a 50-percent ownership interest in Hartwell, which owns a 310-MW natural gas-fired electric generating facility near Hartwell, Georgia. The Company has entered into an agreement to sell its ownership interest in Hartwell. For more information, see Note 21.

In August 2006, MDU Brasil acquired ownership interests in companies owning three electric transmission lines. The interests involve the ENTE (13.3-percent ownership interest), ERTE (13.3-percent ownership interest) and ECTE (25-percent ownership interest) electric transmission lines, which are primarily in northeastern and southern Brazil.

At March 31, 2007 and 2006, and December 31, 2006, the Company's equity method investments had total assets of $457.6 million, $233.1 million and $583.6 million, respectively, and long-term debt of $275.5 million, $154.8 million and $321.5 million, respectively. The Company's investment in its equity method investments was approximately $79.6 million, $43.0 million and $102.0 million, including undistributed earnings of $930,000, $4.5 million and $8.5 million, at March 31, 2007 and 2006, and December 31, 2006, respectively.

13.Goodwill and other intangible assets

The changes in the carrying amount of goodwill were as follows:

Three Months Ended    March 31, 2007	Balance as of January 1, 2007		Goodwill Acquired During the Year*			Balance as of March 31, 2007
	(In thousands)
Electric	$	---	$	---		$	---
Natural gas distribution		---		---			---
Construction services		86,942		3,550			90,492
Pipeline and energy services		1,159		---			1,159
Natural gas and oil production		---		---			---
Construction materials and mining		136,197		(911	)		135,286
Independent power production		---		---			---
Other		---		---			---
Total	$	224,298	$	2,639		$	226,937

Three Months Ended March 31, 2006	Balance as of January 1, 2006		Goodwill Acquired During the Year*			Balance as of March 31, 2006
	(In thousands)
Electric	$	---	$	---		$	---
Natural gas distribution		---		---			---
Construction services		80,970		137			81,107
Pipeline and energy services		1,159		---			1,159
Natural gas and oil production		---		---			---
Construction materials and mining		133,264		(563	)		132,701
Independent power production		---		---			---
Other		---		---			---
Total	$	215,393	$	(426	)	$	214,967

Year Ended December 31, 2006	Balance as of January 1, 2006		Goodwill Acquired During the Year*		Balance as of December 31, 2006
	(In thousands)
Electric	$	---	$	---	$	---
Natural gas distribution		---		---		---
Construction services		80,970		5,972		86,942
Pipeline and energy services		1,159		---		1,159
Natural gas and oil production		---		---		---
Construction materials and mining		133,264		2,933		136,197
Independent power production		---		---		---
Other		---		---		---
Total	$	215,393	$	8,905	$	224,298

  * Includes purchase price adjustments that were not material related to acquisitions in a prior period.

Other intangible assets were as follows:

	March 31, 2007			March 31, 2006			December 31, 2006
	(In thousands)
Amortizable intangible assets:
Customer relationships	$	13,959		$	4,400		$	13,030
Accumulated amortization		(2,628	)		(620	)		(1,890	)
		11,331			3,780			11,140
Noncompete agreements		5,045			11,784			12,886
Accumulated amortization		(1,873	)		(8,680	)		(8,540	)
		3,172			3,104			4,346
Acquired contracts		1,186			3,504			8,307
Accumulated amortization		(1,118	)		(3,150	)		(4,646	)
		68			354			3,661
Other		4,842			3,162			5,062
Accumulated amortization		(1,484	)		(702	)		(1,407	)
		3,358			2,460			3,655
Unamortizable intangible assets		---			524			---
Total	$	17,929		$	10,222		$	22,802

The unamortizable intangible assets at March 31, 2006, were recognized in accordance with SFAS No. 87, which requires that if an additional minimum liability is recognized, an equal amount shall be recognized as an intangible asset provided that the asset recognized shall not exceed the amount of unrecognized prior service cost.

Amortization expense for amortizable intangible assets for the three months ended March 31, 2007 and 2006, and for the year ended December 31, 2006, was $1.0 million, $863,000 and $4.3 million, respectively. Estimated amortization expense for amortizable intangible assets is $3.7 million in 2007, $2.8 million in 2008, $2.4 million in 2009, $1.9 million in 2010, $1.5 million in 2011 and $6.6 million thereafter.

14.Derivative instruments

From time to time, the Company utilizes derivative instruments as part of an overall energy price, foreign currency and interest rate risk management program to efficiently manage and minimize commodity price, foreign currency and interest rate risk. As of March 31, 2007, the Company had no outstanding foreign currency or interest rate hedges. The following information should be read in conjunction with Notes 1 and 7 in the Company's Notes to Consolidated Financial Statements in the 2006 Annual Report.

At March 31, 2007, Fidelity held natural gas swap and collar derivative instruments designated as cash flow hedging instruments and had no outstanding oil derivative instruments.

Hedging activities

Fidelity utilizes natural gas and oil price swap and collar agreements to manage a portion of the market risk associated with fluctuations in the price of natural gas and oil on its forecasted sales of natural gas and oil production. Each of the price swap and collar agreements was designated as a hedge of the forecasted sale of the related production.

The fair value of the hedging instruments must be estimated as of the end of each reporting period and is recorded on the Consolidated Balance Sheets as an asset or a liability. Changes in the fair value attributable to the effective portion of hedging instruments, net of tax, are recorded in stockholders' equity as a component of accumulated other comprehensive income (loss). At the date the natural gas or oil production quantities are settled, the amounts accumulated in other comprehensive income (loss) are reported in the Consolidated Statements of Income. To the extent that the hedges are not effective, the ineffective portion of the changes in fair market value is recorded directly in earnings. The proceeds the Company receives for its natural gas and oil production are also generally based on market prices.

For the three months ended March 31, 2007 and 2006, the amount of hedge ineffectiveness was immaterial. For the three months ended March 31, 2007 and 2006, Fidelity did not exclude any components of the derivative instruments’ gain or loss from the assessment of hedge effectiveness. Gains and losses must be reclassified into earnings as a result of the discontinuance of cash flow hedges if it is probable that the original forecasted transactions will not occur. There were no such reclassifications into earnings as a result of the discontinuance of hedges.

Gains and losses on derivative instruments that are reclassified from accumulated other comprehensive income (loss) to current-period earnings are included in the line item in which the hedged item is recorded. As of March 31, 2007, the maximum term of Fidelity’s swap and collar agreements, in which Fidelity is hedging its exposure to the variability in future cash flows for forecasted transactions, is 21 months. The Company estimates that over the next 12 months net gains of approximately $6.0 million (after tax) will be reclassified from accumulated other comprehensive income into earnings, subject to changes in natural gas market prices, as the hedged transactions affect earnings.

15.Uncertainty in income taxes

On January 1, 2007, the Company adopted FIN 48 as discussed in Note 10.

The Company and its subsidiaries file income tax returns in the U.S. federal jurisdiction and various state, local and foreign jurisdictions. With few exceptions, the Company is no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations by tax authorities for years ending prior to 2003.

Upon the adoption of FIN 48, the Company recognized a decrease in the liability for unrecognized tax benefits, which was not material, and was accounted for as an increase to the January 1, 2007, balance of retained earnings. At the date of adoption, the amount of unrecognized tax benefits was $4.5 million.

Included in the balance of unrecognized tax benefits at the date of adoption are $3.0 million of tax positions for which the ultimate deductibility is highly certain but for which there is uncertainty about the timing of such deductibility. Because of the impact of deferred tax accounting, other than interest and penalties, the disallowance of the shorter deductibility period would not affect the annual effective tax rate but would accelerate the payment of cash to the taxing authority to an earlier period. The amount of unrecognized tax benefits at the date of adoption that, if recognized, would affect the effective tax rate was $1.5 million, including $304,000 for the payment of interest and penalties. The Company recognizes interest and penalties accrued related to unrecognized tax benefits in income taxes.

16.Business segment data

The Company’s reportable segments are those that are based on the Company’s method of internal reporting, which generally segregates the strategic business units due to differences in products, services and regulation. The vast majority of the Company’s operations are located within the United States. The Company also has investments in foreign countries, which largely consist of investments in transmission and natural resource-based projects.

The electric segment generates, transmits and distributes electricity in Montana, North Dakota, South Dakota and Wyoming. The natural gas distribution segment distributes natural gas in those states as well as in western Minnesota. These operations also supply related value-added products and services.

The construction services segment specializes in electric line construction, pipeline construction, inside electrical wiring, cabling and mechanical work, fire protection and the manufacture and distribution of specialty equipment.

The pipeline and energy services segment provides natural gas transportation, underground storage and gathering services through regulated and nonregulated pipeline systems primarily in the Rocky Mountain and northern Great Plains regions of the United States. The pipeline and energy services segment also provides energy-related management services.

The natural gas and oil production segment is engaged in natural gas and oil acquisition, exploration, development and production activities primarily in the Rocky Mountain and Mid-Continent regions of the United States and in and around the Gulf of Mexico.

The construction materials and mining segment mines aggregates and markets crushed stone, sand, gravel and related construction materials, including ready-mixed concrete, cement, asphalt, liquid asphalt and other value-added products. It also performs integrated construction services. The construction materials and mining segment operates in the central, southern and western United States and Alaska and Hawaii.

The independent power production segment owns, builds and operates electric generating facilities in the United States and has domestic and international investments including transmission and natural resource-based projects. Electric capacity and energy produced at its power plants primarily are sold under mid- and long-term contracts to nonaffiliated entities. For more information regarding the discontinued operations of this segment, see Note 3.

The Other category includes the activities of Centennial Capital, which insures various types of risks as a captive insurer for certain of the Company’s subsidiaries. The function of the captive insurer is to fund the deductible layers of the insured companies’ general liability and automobile liability coverages. Centennial Capital also owns certain real and personal property.

The information below follows the same accounting policies as described in Note 1 of the Company’s Notes to Consolidated Financial Statements in the 2006 Annual Report. Information on the Company’s businesses was as follows:

Three Months Ended March 31, 2007	External Operating Revenues		Inter- segment Operating Revenues			Earnings on Common Stock
	(In thousands)
Electric	$	47,104	$	---		$	3,784
Natural gas distribution		136,061		---			6,145
Pipeline and energy services		84,846		28,292			5,710
		268,011		28,292			15,639
Construction services		236,638		125			7,234
Natural gas and oil production		55,269		63,311			30,621
Construction materials and mining		227,573		---			(9,796	)
Independent power production		---		---			2,517
Other		---		2,440			276
		519,480		65,876			30,852
Intersegment eliminations		---		(94,168	)		---
Total	$	787,491	$	---		$	46,491

Three Months Ended March 31, 2006	External Operating Revenues		Inter- segment Operating Revenues			Earnings on Common Stock
	(In thousands)
Electric	$	45,030	$	---		$	3,797
Natural gas distribution		152,279		---			5,321
Pipeline and energy services		93,743		32,806			4,569
		291,052		32,806			13,687
Construction services		223,685		110			5,398
Natural gas and oil production		55,098		73,292			41,258
Construction materials and mining		233,684		---			(8,874	)
Independent power production		---		---			1,342
Other		---		1,769			264
		512,467		75,171			39,388
Intersegment eliminations		---		(107,977	)		---
Total	$	803,519	$	---		$	53,075

The pipeline and energy services segment recognized a loss from discontinued operations, net of tax, of $31,000 and $324,000 for the three months ended March 31, 2007 and 2006, respectively. The independent power production segment recognized income from discontinued operations, net of tax, of $5.3 million and $1.1 million for the three months ended March 31, 2007 and 2006, respectively. Excluding the loss from discontinued operations at pipeline and energy services, earnings from electric, natural gas distribution and pipeline and energy services are substantially all from regulated operations. Earnings (loss) from construction services, natural gas and oil production, construction materials and mining, independent power production, and other are all from nonregulated operations.

17.  Employee benefit plans

The Company has noncontributory defined benefit pension plans and other postretirement benefit plans for certain eligible employees. Components of net periodic benefit cost for the Company's pension and other postretirement benefit plans were as follows:

Three Months	Pension Benefits						Other Postretirement Benefits
Ended March 31,	2007			2006			2007			2006
	(In thousands)
Components of net periodic benefit cost:
Service cost	$	2,250		$	2,301		$	533		$	471
Interest cost		4,141			4,074			938			929
Expected return on assets		(5,070	)		(4,718	)		(1,093	)		(925	)
Amortization of prior service cost		209			256			11			11
Amortization of net actuarial (gain) loss		74			509			(313	)		(84	)
Amortization of net transition obligation (asset)		---			(1	)		531			531
Net periodic benefit cost, including amount capitalized		1,604			2,421			607			933
Less amount capitalized		151			156			52			46
Net periodic benefit cost	$	1,453		$	2,265		$	555		$	887

In addition to the qualified plan defined pension benefits reflected in the table, the Company has an unfunded, nonqualified benefit plan for executive officers and certain key management employees that generally provides for defined benefit payments at age 65 following an employee’s retirement or to their beneficiaries upon death for a 15-year period. The Company's net periodic benefit cost for this plan for the three months ended March 31, 2007 and 2006, was $1.8 million and $2.0 million, respectively.

18.Regulatory matters and revenues subject to refund

In December 1999, Williston Basin filed a general natural gas rate change application with the FERC. Williston Basin began collecting such rates effective June 1, 2000, subject to refund. Currently, the only remaining issue outstanding related to this rate change application is in regard to certain service restrictions. In May 2004, the FERC remanded this issue to an ALJ for resolution. In November 2005, the FERC issued an Order on Initial Decision affirming the ALJ’s Initial Decision regarding certain service and annual demand quantity restrictions. In April 2006, the FERC issued an Order on Rehearing denying Williston Basin’s Request for Rehearing of the FERC’s November 2005 Order. In April 2006, Williston Basin appealed to the D.C. Appeals Court certain issues addressed by the FERC’s Order on Initial Decision dated November 2005 and its Order on Rehearing issued in April 2006. The matter concerning the service restrictions is pending resolution by the D.C. Appeals Court.

19.  Contingencies

Litigation

Royalties Case In June 1997, Grynberg, acting on behalf of the United States, filed suit under the Federal False Claims Act against Williston Basin and Montana-Dakota. He also filed more than 70 similar suits against natural gas transmission companies and producers, gatherers and processors of natural gas. Grynberg alleged improper measurement of the heating content and volume of natural gas purchased by the defendants resulting in the underpayment of royalties to the United States. All cases were consolidated in Wyoming Federal District Court.

In October 2006, the Wyoming Federal District Court ordered that the actions against Williston Basin and Montana-Dakota be dismissed. Grynberg filed a Notice of Appeal of the decision to the U.S. Tenth Circuit Court of Appeals in November 2006.

On March 6, 2007, a settlement was reached between Grynberg, Williston Basin and Montana-Dakota. The case was dismissed by the U.S. Tenth Circuit Court of Appeals on April 20, 2007.

Coalbed Natural Gas Operations Fidelity has been named as a defendant in, and/or certain of its operations are or have been the subject of, more than a dozen lawsuits filed in connection with its CBNG development in the Powder River Basin in Montana and Wyoming. These lawsuits were filed in federal and state courts in Montana between June 2000 and January 2007 by a number of environmental organizations, including the NPRC and the Montana Environmental Information Center, as well as the TRWUA and the Northern Cheyenne Tribe. Portions of three of the lawsuits have been transferred to the Wyoming Federal District Court. The lawsuits involve allegations that Fidelity and/or various government agencies are in violation of state and/or federal law, including the Clean Water Act, the NEPA, the Federal Land Management Policy Act, the NHPA, the Montana State Constitution, the Montana Environmental Policy Act and the Montana Water Quality Act. The suits that remain extant include a variety of claims that state and federal government agencies violated various environmental laws that impose procedural and substantive requirements. The lawsuits seek injunctive relief, invalidation of various permits and unspecified damages. Fidelity has intervened or moved to intervene in three lawsuits filed by other gas producers which challenge the adoption of rules by the BER related to management of water associated with CBNG production. The state of Wyoming has filed a similar suit and Fidelity has also moved to intervene in that action.

In suits filed in the Montana Federal District Court, the NPRC and the Northern Cheyenne Tribe asserted that the BLM violated NEPA and other federal laws when approving the 2003 EIS analyzing CBNG development in southeastern Montana. The Montana Federal District Court, in February 2005, entered a ruling finding that the 2003 EIS was inadequate. The Montana Federal District Court later entered an order that would have allowed limited CBNG development in the Powder River Basin in Montana pending the BLM's preparation of a SEIS. The plaintiffs appealed the decision to the Ninth Circuit because the Montana Federal District Court declined to enter an injunction enjoining all development pending completion of the SEIS. The Montana Federal District Court also declined to enter an injunction pending the appeal. In May 2005, the Ninth Circuit granted the request of the NPRC and the Northern Cheyenne Tribe and, pending appeal or further order from the Ninth Circuit, enjoined the BLM from approving any new CBNG development of federal minerals in the Montana Powder River Basin. The Ninth Circuit also enjoined Fidelity from drilling any additional federally permitted wells associated with its Montana Coal Creek Project and from constructing infrastructure to produce and transport CBNG from the Coal Creek Project's existing federal wells. The matter has been fully briefed and argued before the Ninth Circuit and the parties are awaiting a decision of the court. In December 2006, the BLM issued a draft SEIS that endorses a phased-development approach to CBNG production in the Montana Powder River Basin, whereby future development projects would be reviewed against four screens or filters (relating to water quality, wildlife, Native American concerns and air quality). Fidelity filed written comments on the draft SEIS asking the BLM to reconsider its proposed phased-development approach and to make numerous other changes to the draft SEIS. The public comment period on the draft SEIS concluded on May 2, 2007. Fidelity cannot predict what the final terms of the SEIS will be. The final SEIS is scheduled for release in the summer of 2007.

In related actions in the Montana Federal District Court, the NPRC and the Northern Cheyenne Tribe asserted, among other things, that the actions of the BLM in approving Fidelity's applications for permits and the plan of development for the Badger Hills Project in Montana did not comply with applicable federal laws, including the NHPA and the NEPA. In June 2005, the Montana Federal District Court issued orders in these cases enjoining operations on Fidelity's Badger Hills Project pending the BLM's consultation with the Northern Cheyenne Tribe as to satisfaction of the applicable requirements of the NHPA and a further environmental analysis under the NEPA. Fidelity sought and obtained stays of the injunctive relief from the Montana Federal District Court and production from Fidelity’s Badger Hills Project continues. In September 2005, the Montana Federal District Court entered an Order based on a stipulation between the parties to the NPRC action that production from existing wells in Fidelity’s Badger Hills Project may continue pending preparation of a revised environmental analysis. In November 2005, the Montana Federal District Court entered an Order dismissing the Northern Cheyenne Tribe lawsuit based on the parties’ stipulation that production from existing wells in Fidelity’s Badger Hills Project could continue pending consultation with the Tribe under the NHPA. In December 2005, Fidelity filed a Notice of Appeal of the NPRC lawsuit to the Ninth Circuitin connection with the Montana Federal District Court’s decision insofar as it found the BLM’s approval of Fidelity’s applications did not comply with applicable law.

In May 2005, the NPRC and other petitioners filed a petition with the BER to promulgate rules related to the management of water produced in association with CBNG operations. Thereafter, the BER initiated related rulemaking proceedings to consider rules that would, if promulgated, require re-injection of water produced in connection with CBNG operations, treatment of such water in the event re-injection is not feasible and amend the non-degradation policy in connection with CBNG development to include additional limitations on factors deemed harmful, thereby restricting discharges even further than under the previous standards. In March 2006, the BER issued its decision on the rulemaking petition. The BER rejected the proposed requirement of re-injection of water produced in connection with CBNG and deferred action on the proposed treatment requirement. The BER adopted the proposed amendment to the non-degradation policy. While it is possible the BER’s ruling could have an adverse impact on Fidelity’s operations, Fidelity believes that two five-year water discharge permits issued by the Montana DEQ in February 2006 should, assuming normal operating conditions, allow Fidelity to continue its existing CBNG operations at least through the expiration of the permits in March 2011. However, these permits are now under challenge in Montana state court by the Northern Cheyenne Tribe. Specifically, in April 2006, the Northern Cheyenne Tribe filed a complaint in the District Court of Big Horn County against the Montana DEQ seeking to set aside the two permits. The Northern Cheyenne Tribe asserted that the Montana DEQ issued the permits in violation of various federal and state environmental laws. In particular, the Northern Cheyenne Tribe claimed the agency violated the Clean Water Act and the Montana Water Quality Act by failing to include in the permits conditions requiring application of the best practicable control technology currently available and by ignoring the BER’s recently adopted amendment to the non-degradation policy. In addition, the Northern Cheyenne Tribe claimed that the actions of the Montana DEQ violated the Montana State Constitution’s guarantee of a clean and healthful environment, that the Montana DEQ’s related environmental assessment was invalid, that the Montana DEQ was required, but failed, to prepare an EIS and that it failed to consider other alternatives to the issuance of the permits. Fidelity, the NPRC and the TRWUA have been granted leave to intervene in this proceeding. The parties have submitted cross motions for summary judgment. The motions were argued to the District Court of Big Horn County on February 28, 2007. Fidelity’s discharge of water pursuant to its two permits is its primary means for managing CBNG produced water. If its permits are set aside, Fidelity’s CBNG operations in Montana could be significantly and adversely affected.

In a related proceeding, in July 2006, Fidelity filed a motion to intervene in a lawsuit filed in the District Court of Big Horn County by other producers. The lawsuit challenges the BER’s 2006 rulemaking, which amended the non-degradation policy, as well as the BER’s 2003 rulemaking procedure which first set numeric limits for certain parameters contained in water produced in connection with CBNG operations. Fidelity’s motion for intervention was granted in August 2006. The parties are currently briefing cross motions for summary judgment.

Similarly, industry members have filed two lawsuits, and the state of Wyoming has filed one lawsuit, in Wyoming Federal District Court. These lawsuits challenge the EPA’s failure to timely disapprove the 2006 rules. All three Wyoming lawsuits were consolidated in September 2006. Fidelity has moved to intervene in these consolidated cases.

Fidelity will continue to vigorously defend its interests in all CBNG-related lawsuits and related actions in which it is involved, including the Ninth Circuit injunction and the proceedings challenging its water permits. In those cases where damage claims have been asserted, Fidelity is unable to quantify the damages sought and will be unable to do so until after the completion of discovery. If the plaintiffs are successful in these lawsuits, the ultimate outcome of the actions could have a material effect on Fidelity’s existing CBNG operations and/or the future development of this resource in the affected regions.

Electric Operations Montana-Dakota joined with two electric generators in appealing a September 2003 finding by the ND Health Department that it may unilaterally revise operating permits previously issued to electric generating plants. Although it is doubtful that any revision of Montana-Dakota's operating permits by the ND Health Department would reduce the amount of electricity its plants could generate, the finding, if allowed to stand, could increase costs for sulfur dioxide removal and/or limit Montana-Dakota's ability to modify or expand operations at its North Dakota generation sites. Montana-Dakota and the other electric generators filed their appeal of the order in October 2003 in the Burleigh County District Court in Bismarck, North Dakota. Proceedings were stayed pending conclusion of the periodic review of sulfur dioxide emissions in the state.

In September 2005, the ND Health Department issued its final periodic review decision based on its August 2005 final air quality modeling report. The ND Health Department concluded there are no violations of the sulfur dioxide increment in North Dakota. In March 2006, the DRC filed a complaint in Colorado Federal District Court seeking to force the EPA to declare that the increment had been violated based on earlier modeling conducted by the EPA. The EPA defended against the DRC claim and filed a motion to dismiss the case. The Colorado Federal District Court has dismissed the case.

Montana-Dakota expects the EPA to initiate a rulemaking proceeding to formally approve the conclusions contained in the September 2005 ND Health Department decision and the August 2005 final report. Once concluded, this rulemaking should result in a revision to the North Dakota SIP that, in turn, should allow for the dismissal of the case in Burleigh County District Court referenced above.

In November 2006, the Sierra Club sent a notice of intent to file a citizen suit in federal court under the Clean Air Act to the co-owners, including Montana-Dakota, of the Big Stone Station. The suit would seek injunctive relief and monetary penalties based on the Sierra Club’s claim that three projects conducted at the Big Stone Station between 1995 and 2005 were modifications of a major source and that the Big Stone Station failed to obtain a prevention of significant deterioration permit, conduct best available control technology analyses, and comply with other regulatory requirements for those projects. The South Dakota Department of Environment and Natural Resources reviewed and approved the three projects and the co-owners of the Big Stone Station believe that the Sierra Club’s claims are without merit. The Big Stone Station co-owners intend to vigorously defend their interests if the suit is filed.

Natural Gas Storage Based on reservoir and well pressure data and other information, Williston Basin believes that reservoir pressure in the EBSR, one of its natural gas storage reservoirs, has decreased as a result of Howell and Anadarko’s drilling and production activities in areas within and near the boundaries of the EBSR. As of March 31, 2007, Williston Basin estimated approximately 7.5 Bcf of storage gas had been diverted from the EBSR as a result of Howell and Anadarko’s drilling and production.

Williston Basin filed suit in Montana Federal District Court in January 2006, seeking to recover unspecified damages from Howell and Anadarko, and to enjoin Howell and Anadarko’s present and future production from specified wells in and near the EBSR. The Montana Federal District Court entered an Order in July 2006, dismissing the case for lack of subject matter jurisdiction. Williston Basin filed a Notice of Appeal to the Ninth Circuit in July 2006.

In related litigation, Howell filed suit in Wyoming state district court against Williston Basin in February 2006 asserting that it is entitled to produce any gas that might escape from the EBSR. In August 2006, Williston Basin moved for a preliminary injunction to halt Howell and Anadarko’s production in and near the EBSR. A district court-appointed special master conducted a hearing on the motion in December 2006, and recommended denial of the motion on February 15, 2007. The district court is expected to rule on the special master’s recommendation in the first half of 2007. A trial in Wyoming state district court is scheduled for October 22, 2007.

As noted above, Williston Basin estimates that as of March 31, 2007, Howell and Anadarko had diverted approximately 7.5 Bcf from the EBSR. Williston Basin believes Howell and Anadarko continue to divert gas from the EBSR and Williston Basin continues to monitor and analyze the situation. At trial, Williston Basin will seek recovery based on the amount of gas that has been and continues to be diverted as well as on the amount of gas that must be recovered as a result of the equalization of the pressures of various interconnected geological formations.

In light of the actions of Howell and Anadarko, Williston Basin installed additional compression at the site in order to maintain deliverability into the transmission system. While installation of the additional compression has provided temporary relief, Williston Basin believes that the adverse physical and operational effects occasioned by the continued loss of storage gas, if left unchecked, could threaten the operation and viability of the EBSR, impair Williston Basin’s ability to comply with the EBSR certificated operating requirements mandated by the FERC and adversely affect Williston Basin’s ability to meet its contractual storage and transportation service commitments to customers. Williston Basin intends to vigorously defend its rights and interests in these proceedings, to assess further avenues for recovery through the regulatory process at the FERC, and to pursue the recovery of any and all economic losses it may have suffered. Williston Basin cannot predict the ultimate outcome of this proceeding.

The Company also is involved in other legal actions in the ordinary course of its business. Although the outcomes of any such legal actions cannot be predicted, management believes that the outcomes with respect to these other legal proceedings will not have a material adverse effect upon the Company’s financial position or results of operations.

Environmental matters

Portland Harbor Site In December 2000, MBI was named by the EPA as a Potentially Responsible Party in connection with the cleanup of a riverbed site adjacent to a commercial property site, acquired by MBI in 1999. The riverbed site is part of the Portland, Oregon, Harbor Superfund Site. Sixty-eight other parties were also named in this administrative action. The EPA wants responsible parties to share in the cleanup of sediment contamination in the Willamette River. To date, costs of the overall remedial investigation of the harbor site for both the EPA and the Oregon DEQ are being recorded, and initially paid, through an administrative consent order by the LWG, a group of 10 entities, which does not include MBI or Georgia-Pacific West, Inc., the seller of the commercial property to MBI. Although the LWG originally estimated the overall remedial investigation and feasibility study would cost approximately $10 million, it is now anticipated, on the basis of costs incurred to date and delays attributable to an additional round of sampling and potential further investigative work, that such cost could increase to a total in excess of $60 million. It is not possible to estimate the cost of a corrective action plan until the remedial investigation and feasibility study has been completed, the EPA has decided on a strategy and a record of decision has been published. While the remedial investigation and feasibility study for the harbor site has commenced, it is expected to take several more years to complete. The development of a proposed plan and record of decision on the harbor site is not anticipated to occur until 2010, after which a cleanup plan will be undertaken.

Based upon a review of the Portland Harbor sediment contamination evaluation by the Oregon DEQ and other information available, MBI does not believe it is a Responsible Party. In addition, MBI has notified Georgia-Pacific West, Inc., that it intends to seek indemnity for any and all liabilities incurred in relation to the above matters, pursuant to the terms of their sale agreement. MBI has entered into an agreement tolling the statute of limitation in connection with the LWG’s potential claim for contribution to the costs of the remedial investigation and feasibility study.

The Company believes it is not probable that it will incur any material environmental remediation costs or damages in relation to the above administrative action.

Guarantees

In connection with the sale of MPX in June 2005 to Petrobras, an indirect wholly owned subsidiary of the Company has agreed to indemnify Petrobras for 49 percent of any losses that Petrobras may incur from certain contingent liabilities specified in the purchase agreement. Centennial has agreed to unconditionally guarantee payment of the indemnity obligations to Petrobras for periods ranging from approximately two to five and a half years from the date of sale. The guarantee was required by Petrobras as a condition to closing the sale of MPX.

In addition, WBI Holdings has guaranteed certain of Fidelity’s natural gas price swap and collar agreement obligations. Fidelity’s obligations at March 31, 2007, were $3.4 million. There is no fixed maximum amount guaranteed in relation to the natural gas price swap and collar agreements, as the amount of the obligation is dependent upon natural gas commodity prices. The amount of hedging activity entered into by the subsidiary is limited by corporate policy. The guarantees of the natural gas price swap and collar agreements at March 31, 2007, expire in 2007 and 2008; however, Fidelity continues to enter into additional hedging activities and, as a result, WBI Holdings from time to time may issue additional guarantees on these hedging obligations. The amount outstanding by Fidelity was reflected on the Consolidated Balance Sheets at March 31, 2007. In the event Fidelity defaults under its obligations, WBI Holdings would be required to make payments under its guarantees.

Certain subsidiaries of the Company have outstanding guarantees to third parties that guarantee the performance of other subsidiaries of the Company. These guarantees are related to natural gas transportation and sales agreements, electric power supply agreements, construction contracts, gathering contracts, a conditional purchase agreement and certain other guarantees. At March 31, 2007, the fixed maximum amounts guaranteed under these agreements aggregated $175.3 million. The amounts of scheduled expiration of the maximum amounts guaranteed under these agreements aggregate $14.9 million in 2007; $86.0 million in 2008; $3.1 million in 2009; $30.3 million in 2010; $23.0 million in 2011; $12.7 million in 2012; $300,000 in 2028; $1.0 million, which is subject to expiration 30 days after the receipt of written notice; and $4.0 million, which has no scheduled maturity date. A guarantee for an unfixed amount estimated at $250,000 at March 31, 2007, has no scheduled maturity date. The amount outstanding by subsidiaries of the Company under the above guarantees was $641,000 and was reflected on the Consolidated Balance Sheet at March 31, 2007. In the event of default under these guarantee obligations, the subsidiary issuing the guarantee for that particular obligation would be required to make payments under its guarantee.

Centennial has outstanding letters of credit to third parties related to insurance policies and other agreements that guarantee the performance of other subsidiaries of the Company. At March 31, 2007, the fixed maximum amounts guaranteed under these letters of credit aggregated $42.5 million. In 2007 and 2008, $15.6 million and $26.9 million, respectively, of letters of credit are scheduled to expire. There were no amounts outstanding under the above letters of credit at March 31, 2007.

Fidelity and WBI Holdings have outstanding guarantees to Williston Basin. These guarantees are related to natural gas transportation and storage agreements that guarantee the performance of Prairielands. At March 31, 2007, the fixed maximum amounts guaranteed under these agreements aggregated $25.1 million. Scheduled expiration of the maximum amounts guaranteed under these agreements aggregate $2.2 million in 2007, $2.9 million in 2008 and $20.0 million in 2009. In the event of Prairielands’ default in its payment obligations, the subsidiary issuing the guarantee for that particular obligation would be required to make payments under its guarantee. The amount outstanding by Prairielands under the above guarantees was $1.7 million, which was not reflected on the Consolidated Balance Sheet at March 31, 2007, because these intercompany transactions are eliminated in consolidation.

In addition, Centennial and Knife River have issued guarantees to third parties related to the Company’s routine purchase of maintenance items, materials and lease obligations for which no fixed maximum amounts have been specified. These guarantees have no scheduled maturity date. In the event a subsidiary of the Company defaults under its obligation in relation to the purchase of certain maintenance items, materials or lease obligations, Centennial or Knife River would be required to make payments under these guarantees. Any amounts outstanding by subsidiaries of the Company for these maintenance items and materials were reflected on the Consolidated Balance Sheet at March 31, 2007.

In the normal course of business, Centennial has purchased surety bonds related to construction contracts and reclamation obligations of its subsidiaries. In the event a subsidiary of Centennial does not fulfill a bonded obligation, Centennial would be responsible to the surety bond company for completion of the bonded contract or obligation. A large portion of the surety bonds is expected to expire within the next 12 months; however, Centennial will likely continue to enter into surety bonds for its subsidiaries in the future. As of March 31, 2007, approximately $466 million of surety bonds were outstanding, which were not reflected on the Consolidated Balance Sheet.

20.Pending acquisition

In July 2006, the Company entered into a definitive merger agreement to acquire Cascade, subject to approval of Cascade’s shareholders and various regulatory authorities, as well as antitrust clearance under the Hart-Scott-Rodino Act, and the satisfaction of other customary closing conditions. In October 2006, shareholders of Cascade approved the merger agreement. In November 2006, the Company obtained clearance under the Hart-Scott-Rodino Act. In March 2007, regulatory approvals were received from the North Dakota Public Service Commission and the Minnesota Public Utilities Commission.

On May 1, 2007, the Company filed stipulations with the Oregon Public Utility Commission to resolve pending proceedings before that commission. The filed stipulations relate to the application for approval of the pending merger with Cascade, as well as a pending show cause proceeding (applicable to Cascade’s level of rates) in Oregon, which commenced in August 2006. Parties to the stipulations include the commission’s staff as well as various interveners. In addition, the Washington Utilities and Transportation Commission staff, various interveners, Cascade and the Company have reached a settlement in principle of all issues in the merger proceedingpending before the Washington Utilities and Transportation Commission and a settlement stipulation is expected to be filed by mid-May 2007. The Oregon and Washington stipulations include certain commitments and rate credits applicable to the approval of the merger and are subject to the approval of the respective commissions.

Regulatory approvals in Oregon and Washington are anticipated by mid-year 2007. The total value of the transaction, including the outstanding indebtedness of Cascade, is approximately $475 million. Cascade’s natural gas service areas are concentrated in western and south central Washington and south central and eastern Oregon.

21.  Pending sale

On April 25, 2007, Centennial Resources entered into a definitive purchase and sale agreement with Montana Acquisition Company LLC. Under the agreement, the Company will sell its domestic independent power production business consisting of Centennial Power and CEM to Montana Acquisition Company LLC.

The transaction is valued at $636 million, which includes the assumption of approximately $36 million of project-related debt. The closing of the sale is expected to occur in June 2007 and is subject to the receipt of regulatory approvals and fulfillment of other conditions established in the agreement. Proceeds from the sale will be used to fund the Company’s acquisition of Cascade and will provide additional cash for growth opportunities that exist in the Company’s core lines of business.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIALCONDITION

AND RESULTS OF OPERATIONS

OVERVIEW

The Company’s strategy is to apply its expertise in energy and transportation infrastructure industries to increase market share, increase profitability and enhance shareholder value through:

·   Organic growth as well as a continued disciplined approach to the acquisition of well-managed companies and properties

·   The elimination of system-wide cost redundancies through increased focus on integration of operations and standardization and consolidation of various support services and functions across companies within the organization

·   The development of projects that are accretive to earnings per share and return on invested capital

The Company has capabilities to fund its growth and operations through various sources, including internally generated funds, commercial paper facilities and the issuance from time to time of debt securities and the Company’s equity securities. For more information on the Company’s net capital expenditures, see Liquidity and Capital Commitments. Net capital expenditures are comprised of (A) capital expenditures plus (B) acquisitions (including the issuance of the Company’s equity securities, less cash acquired) less (C) net proceeds from the sale or disposition of property.

The key strategies for each of the Company’s business segments, and certain related business challenges, are summarized below.

Key Strategies and Challenges

Electric and Natural Gas Distribution

Strategy Provide competitively priced energy to customers while working with them to ensure efficient usage. Both the electric and natural gas distribution segments continually seek opportunities for growth and expansion of their customer base through extensions of existing operations and through selected acquisitions of companies and properties at prices that will provide an opportunity for the Company to earn a competitive return on investment. The natural gas distribution segment also continues to pursue growth by expanding its level of energy-related services.

ChallengesBoth segments are subject to extensive regulation in the state jurisdictions where they conduct operations with respect to costs and permitted returns on investment as well as subject to certain operational regulations at the federal level. The ability of these segments to grow through acquisitions is subject to significant competition from other energy providers. In addition, as to the electric business, the ability of this segment to grow its service territory and customer base is affected by significant competition from other energy providers, including rural electric cooperatives.

Construction Services

Strategy Provide a competitive return on investment while operating in a competitive industry by: building new and strengthening existing customer relationships; effectively controlling costs; recruiting, developing and retaining talented employees; focusing business development efforts on project areas that will permit higher margins; and properly managing risk. This segment continuously seeks opportunities to expand through strategic acquisitions.

Challenges This segment operates in highly competitive markets with many jobs subject to competitive bidding. Maintenance of effective operational and cost controls and retention of key personnel are ongoing challenges.

Pipeline and Energy Services

Strategy Leverage the segment’s existing expertise in energy infrastructure and related services to increase market share and profitability through optimization of existing operations, internal growth, and acquisitions of energy-related assets and companies. Incremental and new growth opportunities include: access to new sources of natural gas for storage, gathering and transportation services; expansion of existing gathering and transmission facilities; and incremental expansion of pipeline capacity to allow customers access to more liquid and higher-priced markets.

Challenges Energy price volatility; natural gas basis differentials; regulatory requirements; ongoing litigation; recruitment and retention of a skilled workforce; and increased competition from other natural gas pipeline and gathering companies.

Natural Gas and Oil Production

Strategy Apply new technology and leverage existing exploration and production expertise, with a focus on operated properties, to increase production and reserves from existing leaseholds, and to seek additional reserves and production opportunities in new areas to further diversify the segment’s asset base. By optimizing existing operations and taking advantage of new and incremental growth opportunities, this segment’s goal is to increase both production and reserves over the long term so as to generate competitive returns on investment.

Challenges Fluctuations in natural gas and oil prices; ongoing environmental litigation and administrative proceedings; timely receipt of necessary permits and approvals; recruitment and retention of a skilled workforce; availability of drilling rigs, auxiliary equipment and industry-related field services; and increased competition from many of the larger natural gas and oil companies.

Construction Materials and Mining

Strategy Focus on high growth strategic markets located near major transportation corridors and desirable mid-sized metropolitan areas; strengthen long-term, strategic aggregate reserve position through purchase and/or lease opportunities; enhance profitability through cost containment, margin discipline and vertical integration of the segment’s operations; and continue growth through organic and acquisition opportunities. Ongoing efforts to increase margin are being pursued through the implementation of a variety of continuous improvement programs, including corporate purchasing of equipment, parts and commodities (liquid asphalt, diesel fuel, cement and other materials), negotiation of contract price escalation provisions and the utilization of national purchasing accounts. Vertical integration allows the segment to manage operations from aggregate mining to final lay-down of concrete and asphalt, with control of and access to adequate quantities of permitted aggregate reserves being significant. A key element of the Company’s long-term strategy for this business is to further expand its presence in the higher-margin materials business (rock, sand, gravel, liquid asphalt, ready-mixed concrete and related products), complementing and expanding on the Company’s expertise.

Challenges Price volatility with respect to, and availability of, raw materials such as liquid asphalt, diesel fuel and cement; recruitment and retention of a skilled workforce; and management of fixed price construction contracts, which are particularly vulnerable to volatility of these energy and material prices. Some of our markets are likely to be affected by the slowdown in housing, which should be partially mitigated by increased commercial spending.

Independent Power Production

Strategy Divest domestic assets due to the increased market demand for independent power production assets, combined with the Company’s desire to efficiently fund its future capital needs.

Challenges Overall business challenges for this segment include: the risks and uncertainties associated with the sale of the domestic assets; construction, startup and operation of power plant facilities; and foreign currency fluctuation and political risk in the countries where this segment does business.

For further information on the risks and challenges the Company faces as it pursues its growth strategies and other factors that should be considered for a better understanding of the Company’s financial condition, see Part II, Item 1A - Risk Factors, as well as Part I, Item 1A - Risk Factors in the 2006 Annual Report. For further information on each segment’s key growth strategies, projections and certain assumptions, see Prospective Information. For information pertinent to various commitments and contingencies, see Notes to Consolidated Financial Statements.

Earnings Overview

The following table summarizes the contribution to consolidated earnings by each of the Company's businesses.

	Three Months Ended March 31,
	2007			2006
(Dollars in millions, where applicable)
Electric	$	3.8		$	3.8
Natural gas distribution		6.2			5.3
Construction services		7.2			5.4
Pipeline and energy services		5.7			4.9
Natural gas and oil production		30.6			41.3
Construction materials and mining		(9.8	)		(8.9	)
Independent power production		(2.8	)		.2
Other		.3			.3
Earnings before discontinued operations		41.2			52.3
Income from discontinued operations, net of tax		5.3			.8
Earnings on common stock	$	46.5		$	53.1
Earnings per common share - basic:
Earnings before discontinued operations	$	.23		$	.29
Discontinued operations, net of tax		.03			.01
Earnings per common share - basic	$	.26		$	.30
Earnings per common share - diluted:
Earnings before discontinued operations	$	.23		$	.29
Discontinued operations, net of tax		.02			---
Earnings per common share - diluted	$	.25		$	.29
Return on average common equity for the 12 months ended		14.8	%		16.2	%

Three Months Ended March 31, 2007 and 2006Consolidated earnings for the quarter ended March 31, 2007, decreased $6.6 million from the comparable prior period. Earnings at the natural gas and oil production business decreased largely due to lower average realized natural gas prices of 11 percent, higher depreciation, depletion and amortization expense, and higher lease operating expense, partially offset by increased oil production of 24 percent. Partially offsetting the earnings decrease were higher construction margins in most regions at the construction services business.

FINANCIAL AND OPERATING DATA

Below are key financial and operating data for each of the Company's businesses.

Electric

	Three Months Ended March 31,
	2007		2006
(Dollars in millions, where applicable)
Operating revenues	$ 47.1		$ 45.0
Operating expenses:
Fuel and purchased power		17.1		16.1
Operation and maintenance		15.1		14.0
Depreciation, depletion and amortization		5.6		5.3
Taxes, other than income		2.2		2.2
		40.0		37.6
Operating income		7.1		7.4
Earnings	$	3.8	$	3.8
Retail sales (million kWh)		645.8		612.9
Sales for resale (million kWh)		44.1		166.4
Average cost of fuel and purchased power per kWh	$	.024	$	.020

Three Months Ended March 31, 2007 and 2006 Electric earnings were unchanged at $3.8 million. Higher retail sales volumes and margins were offset by lower sales for resale volumes and increased operation and maintenance expense, largely payroll related.

Natural Gas Distribution

	Three Months Ended March 31,
	2007			2006
(Dollars in millions, where applicable)
Operating revenues	$	136.0		$	152.3
Operating expenses:
Purchased natural gas sold		106.2			128.4
Operation and maintenance		15.5			11.8
Depreciation, depletion and amortization		2.5			2.4
Taxes, other than income		1.7			1.5
		125.9			144.1
Operating income		10.1			8.2
Earnings	$	6.2		$	5.3
Volumes (MMdk):
Sales		15.9			14.2
Transportation		3.4			4.4
Total throughput		19.3			18.6
Degree days (% of normal)*		94	%		85	%
Average cost of natural gas, including transportation, per dk	$	6.70		$	9.01
* Degree days are a measure of the daily temperature-related demand for energy for heating.

Three Months Ended March 31, 2007 and 2006 Earnings at the natural gas distribution business increased $900,000, largely due to increased retail sales volumes, resulting from 10 percent colder weather than last year.

The pass-through of lower natural gas prices is reflected in the decrease in both sales revenues and purchased natural gas sold. The decrease in sales revenues was partially offset by revenues from nonregulated energy-related services. Nonregulated energy-related services also contributed to the operation and maintenance expense increase.

Construction Services

	Three Months Ended March 31,
	2007		2006
	(In millions)
Operating revenues	$	236.8	$	223.8
Operating expenses:
Operation and maintenance		211.7		202.8
Depreciation, depletion and amortization		3.5		3.5
Taxes, other than income		8.8		7.4
		224.0		213.7
Operating income		12.8		10.1
Earnings	$	7.2	$	5.4

Three Months Ended March 31, 2007 and 2006 Construction services earnings increased $1.8 million compared to the first quarter of the comparable prior period due to:

·   Higher construction margins in most regions of $1.7 million (after tax)

·   Increased equipment sales and rentals

·   Earnings from acquisitions made since the comparable prior period, which contributed approximately 19 percent of the earnings increase

Partially offsetting this increase were higher general and administrative expenses of $500,000 (after tax).

Pipeline and Energy Services

	Three Months Ended March 31,
	2007		2006
	(Dollars in millions)
Operating revenues:
Pipeline	$	25.9	$	20.7
Energy services		87.2		105.8
		113.1		126.5
Operating expenses:
Purchased natural gas sold		79.6		97.8
Operation and maintenance		14.1		11.6
Depreciation, depletion and amortization		5.4		4.9
Taxes, other than income		2.7		2.5
		101.8		116.8
Operating income		11.3		9.7
Income from continuing operations		5.7		4.9
Loss from discontinued operations, net of tax		---		(.3	)
Earnings	$	5.7	$	4.6
Transportation volumes (MMdk):
Montana-Dakota		8.0		8.0
Other		20.6		18.1
		28.6		26.1
Gathering volumes (MMdk)		22.1		21.7

Three Months Ended March 31, 2007 and 2006 Pipeline and energy services experienced an increase in earnings of $1.1 million due to:

·   Higher storage services revenue of $1.9 million (after tax)

·   Higher transportation and gathering volumes of $1.0 million (after tax)

Partially offsetting this increase were higher operation and maintenance expense related to the natural gas storage litigation and higher material costs. For more information regarding natural gas storage litigation, see Note 19.

The decrease in energy services revenues and purchased natural gas sold reflects the effect of lower natural gas prices.

Natural Gas and Oil Production

	Three Months Ended March 31,
	2007		2006
(Dollars in millions, where applicable)
Operating revenues:
Natural gas	$	94.0	$	105.4
Oil		24.6		21.0
Other		---		2.0
		118.6		128.4
Operating expenses:
Purchased natural gas sold		.3		2.0
Operation and maintenance:
Lease operating costs		15.5		11.9
Gathering and transportation		4.5		4.7
Other		8.4		7.4
Depreciation, depletion and amortization		29.8		24.5
Taxes, other than income:
Production and property taxes		8.9		9.9
Other		.2		.2
		67.6		60.6
Operating income		51.0		67.8
Earnings	$	30.6	$	41.3
Production:
Natural gas (MMcf)		15,440		15,362
Oil (MBbls)		556		450
Average realized prices (including hedges):
Natural gas (per Mcf)	$	6.08	$	6.86
Oil (per barrel)	$	44.34	$	46.71
Average realized prices (excluding hedges):
Natural gas (per Mcf)	$	5.74	$	6.90
Oil (per barrel)	$	44.34	$	47.65
Production costs, including taxes, per equivalent Mcf:
Lease operating costs	$	.83	$	.66
Gathering and transportation		.24		.26
Production and property taxes		.47		.55
	$	1.54	$	1.47

Three Months Ended March 31, 2007 and 2006 The natural gas and oil production business experienced a $10.7 million decrease in earnings due to:

·   Lower average realized gas prices of 11 percent and lower average realized oil prices of 5 percent

·   Higher depreciation, depletion and amortization expense of $3.3 million (after tax) due to higher depletion rates and increased production

·   Higher lease operating expense of $2.1 million (after tax), largely acquisition and CBNG-related costs

·   Increased general and administrative expense of $600,000 (after tax), primarily due to higher payroll related costs

Partially offsetting the decrease were increased oil production of 24 percent and natural gas production of 1 percent, largely due to increased production in the Rocky Mountain region, including the Baker and Bowdoin fields and the May 2006 Big Horn acquisition, as well as from the South Texas properties.

Construction Materials and Mining

	Three Months Ended March 31,
	2007			2006
	(Dollars in millions)
Operating revenues	$	227.6		$	233.7
Operating expenses:
Operation and maintenance		208.9			215.7
Depreciation, depletion and amortization		22.6			20.1
Taxes, other than income		7.7			8.4
		239.2			244.2
Operating loss		(11.6	)		(10.5	)
Loss	$	(9.8	)	$	(8.9	)
Sales (000's):
Aggregates (tons)		5,557			6,084
Asphalt (tons)		336			333
Ready-mixed concrete (cubic yards)		626			711

Three Months Ended March 31, 2007 and 2006 Construction materials and mining experienced a normal seasonal first quarter loss of $9.8 million. The seasonal loss increased by $900,000 from $8.9 million in 2006. The increased seasonal loss was due to:

·   Lower earnings from ready-mixed concrete operations of $2.1 million (after tax), primarily the result of lower volumes

·   Higher depreciation, depletion and amortization of $1.2 million (after tax), largely the result of higher property, plant and equipment balances

·   Losses from companies acquired since the comparable prior period of $700,000 (after tax)

Partially offsetting the decrease were increased earnings from construction of $3.1 million (after tax) due to higher margins.

Independent Power Production

	Three Months Ended March 31,
	2007			2006
	(Dollars in millions)
Operating revenues	$	---		$	---
Operating expenses:
Operation and maintenance		1.7			1.8
Depreciation, depletion and amortization		.1			.1
Taxes, other than income		.1			.1
		1.9			2.0
Operating loss		(1.9	)		(2.0	)
Income (loss) from continuing operations		(2.8	)		.2
Income from discontinued operations, net of tax		5.3			1.1
Earnings	$	2.5		$	1.3
Net generation capacity (kW)*		437,600			389,600
Electricity produced and sold (thousand kWh)*		238,011			88,497
* Excludes equity method investments.

Three Months Ended March 31, 2007 and 2006 Earnings at the independent power production business increased $1.2 million due to increased income from discontinued operations, net of tax, of $4.2 million, largely due to:

·   Higher income at the Hardin Generating Station which was placed in service in March 2006

·   The absence in 2007 of depreciation expense related to assets held for sale

·   Earnings related to an electric generating facility construction project in Hobbs, New Mexico

Partially offsetting this increase was decreased income from continuing operations, largely due to lower earnings from equity method investments and higher interest expense. The higher interest expense is primarily from debt related to the domestic assets held for sale. For more information, see Note 21.

Other and Intersegment Transactions

Amounts presented in the preceding tables will not agree with the Consolidated Statements of Income due to the Company’s other operations and the elimination of intersegment transactions. The amounts relating to these items are as follows:

	Three Months Ended March 31,
	2007		2006
	(In millions)
Other:
Operating revenues	$	2.4	$	1.8
Operation and maintenance		1.9		1.3
Depreciation, depletion and amortization		.3		.2
Intersegment transactions:
Operating revenues	$	94.1	$	108.0
Purchased natural gas sold		87.3		101.2
Operation and maintenance		6.8		6.8

For further information on intersegment eliminations, see Note 16.

PROSPECTIVE INFORMATION

The following information highlights the key growth strategies, projections and certain assumptions for the Company and its subsidiaries and other matters for each of the Company’s businesses. Many of these highlighted points are “forward-looking statements.” There is no assurance that the Company’s projections, including estimates for growth and changes in revenues and earnings, will in fact be achieved. Please refer to assumptions contained in this section as well as the various important factors listed in Part II, Item 1A - Risk Factors, as well as Part I, Item 1A - Risk Factors in the 2006 Annual Report. Changes in such assumptions and factors could cause actual future results to differ materially from the Company’s targeted growth, revenue and earnings projections.

MDU Resources Group, Inc.

The information noted below excludes any possible gain from the previously announced potential sale of independent power production assets.

·   Earnings per common share for 2007, diluted, are projected in the range of $1.55 to $1.75, an increase from prior guidance of $1.50 to $1.70.

·   The Company expects the percentage of 2007 earnings per common share, diluted, by quarter to be in the following approximate ranges:

o   Second quarter - 25 percent to 30 percent

o   Third quarter - 30 percent to 35 percent

o   Fourth quarter - 25 percent to 30 percent

·   Long-term compound annual growth goals on earnings per share from operations are in the range of 7 percent to 10 percent.

Electric

·   The Company is analyzing potential projects for accommodating load growth and replacing an expired purchased power contract with company-owned generation. This will add to base-load capacity and rate base. New generation is projected to be on line in late 2011 or early 2012. A major commitment decision on the project will be made in late 2007. A filing in North Dakota for prudence approval of the potential 600-MW Big Stone II generation project was made in November 2006. The Company would own approximately 116 MW of the Big Stone II project.

·   In addition, the Company has entered into a contract to build approximately 20 MW of wind-powered electric generation near Baker, Montana. The project includes 13, 1.5-MW wind turbines at a project cost of approximately $37 million. The project is expected to be rate based and on line in late 2007.

Natural gas distribution

·   As discussed in Note 20, the Company has entered into a definitive merger agreement to acquire Cascade. When the acquisition is completed, it is expected to significantly enhance regulated earnings and cash flows.

Construction services

·   The Company anticipates higher average margins in 2007 as compared to 2006, and continues to focus on costs and efficiencies to improve margins.

·   Work backlog as of March 31, 2007, was approximately $747 million, including an acquisition, compared to $439 million at March 31, 2006.

Pipeline and energy services

·   Based on anticipated demand, additional incremental expansions to the Grasslands Pipeline are forecasted over the next few years. The next expansion, to 138,000 Mcf per day, is scheduled for completion in late 2007 and is dependent upon the timing of receipt of necessary regulatory approvals. Through additional compression, the pipeline capacity could ultimately reach 200,000 Mcf per day.

·   In 2007, total gathering and transportation throughput is expected to be consistent with 2006 record levels.

Natural gas and oil production

·   Long-term compound annual growth goals for production are in the range of 7 percent to 10 percent. In 2007, the Company expects a combined natural gas and oil production increase in that range.

·   The Company expects to drill between 300 and 350 wells in 2007, dependent on the timely receipt of regulatory approvals. Currently, this segment’s net combined natural gas and oil production is approximately 200,000 Mcf equivalent to 210,000 Mcf equivalent per day.

·   Earnings guidance reflects estimated natural gas prices for May through December 2007 as follows:

Index*	Price Per Mcf
Ventura	$6.25 to $6.75
NYMEX	$6.75 to $7.25
CIG	$5.25 to $5.75
* Ventura is an index pricing point related to Northern Natural Gas Co.’s system; CIG is an index pricing point related to Colorado Interstate Gas Co.’s system.

During 2006, more than three-fourths of natural gas production was priced at non-NYMEX prices, the majority of which was at Ventura pricing.

·   Earnings guidance reflects estimated NYMEX crude oil prices for April through December 2007 in the range of $58 to $63 per barrel.  

·   The Company has hedged approximately 30 percent to 35 percent of its estimated natural gas production for the last nine months of 2007. For 2008, the Company has hedged approximately 15 percent to 20 percent of its estimated natural gas production. The hedges that are in place as of May 4, 2007, are summarized in the following chart:

Commodity	Index*	Period Outstanding	Forward Notional Volume (MMBtu)	Price Swap or Costless Collar Floor-Ceiling (Per MMBtu)
Natural Gas	Ventura	4/07 - 12/07	1,375,000	$8.00-$11.91
Natural Gas	Ventura	4/07 - 12/07	687,500	$8.00-$11.80
Natural Gas	Ventura	4/07 - 12/07	687,500	$8.00-$11.75
Natural Gas	Ventura	4/07 - 12/07	1,375,000	$7.50-$10.55
Natural Gas	CIG	4/07 - 12/07	1,375,000	$7.40
Natural Gas	CIG	4/07 - 12/07	1,375,000	$7.405
Natural Gas	Ventura	4/07 - 12/07	1,100,000	$8.25-$10.80
Natural Gas	CIG	4/07 - 12/07	687,500	$7.50-$9.12
Natural Gas	Ventura	4/07 - 12/07	1,375,000	$8.29
Natural Gas	Ventura	4/07 - 12/07	1,375,000	$7.85-$9.70
Natural Gas	Ventura	4/07 - 12/07	2,750,000	$7.67
Natural Gas	Ventura	4/07 - 10/07	1,605,000	$7.16
Natural Gas	NYMEX	4/07 - 12/07	1,375,000	$7.50-$8.50
Natural Gas	Ventura	11/07 - 3/08	1,520,000	$8.00-$8.75
Natural Gas	Ventura	1/08 - 3/08	910,000	$9.35
Natural Gas	CIG	1/08 - 3/08	910,000	$7.00-$7.79
Natural Gas	CIG	1/08 - 3/08	910,000	$8.06
Natural Gas	Ventura	4/08 - 10/08	1,070,000	$7.00-$8.05
Natural Gas	Ventura	4/08 - 10/08	1,070,000	$7.00-$8.06
Natural Gas	Ventura	4/08 - 10/08	1,070,000	$7.45
Natural Gas	Ventura	4/08 - 10/08	1,070,000	$7.50-$8.70
Natural Gas	Ventura	4/08 - 10/08	1,070,000	$8.005
Natural Gas	Ventura	1/08 - 12/08	1,830,000	$7.00-$8.45
Natural Gas	Ventura	1/08 - 12/08	1,830,000	$7.50-$8.34
Natural Gas	Ventura	11/08 - 12/08	610,000	$8.85
* Ventura is an index pricing point related to Northern Natural Gas Co.’s system; CIG is an index pricing point related to Colorado Interstate Gas Co.’s system.

Construction materials and mining

·   The Company anticipates higher average margins in 2007 as compared to 2006.

·   Work backlog as of March 31, 2007, of approximately $586 million includes a higher expected average margin than the backlog of $610 million at March 31, 2006.

Independent power production

·   For information regarding the pending sale of the domestic independent power production assets, see Note 21.

NEW ACCOUNTING STANDARDS

For information regarding new accounting standards, see Note 10, which is incorporated by reference.

CRITICAL ACCOUNTING POLICIES INVOLVING SIGNIFICANT ESTIMATES

The Company’s critical accounting policies involving significant estimates include impairment testing of long-lived assets and intangibles, impairment testing of natural gas and oil production properties, revenue recognition, purchase accounting, asset retirement obligations, and pension and other postretirement benefits. There were no material changes in the Company’s critical accounting policies involving significant estimates from those reported in the 2006 Annual Report. For more information on critical accounting policies involving significant estimates, see Part II, Item 7 in the 2006 Annual Report.

LIQUIDITY AND CAPITAL COMMITMENTS

Cash flows

Operating activities Net income before depreciation, depletion and amortization is a significant contributor to cash flows from operating activities. The changes in cash flows from operating activities generally follow the results of operations as discussed in Financial and Operating Data and also are affected by changes in working capital. Cash flows provided by operating activities in the first three months of 2007 decreased $25.7 million from the comparable 2006 period, the result of increased working capital requirements of $51.4 million, largely due to the effects of:

·   Lower natural gas costs and the timing of natural gas costs recoverable through rate adjustments at the natural gas distribution business

·   Lower natural gas prices at the natural gas and oil production business

Partially offsetting the decrease were higher depreciation, depletion and amortization expense of $8.8 million and higher deferred income taxes of $7.8 million.

Investing activities Cash flows used in investing activities in the first three months of 2007 decreased $27.9 million compared to the comparable 2006 period, the result of:

·   Lower investments of $21.5 million, primarily the result of the sale of the Trinity Generating Facility during the first quarter of 2007

·   Decreased cash used in investing activities from discontinued operations of $20.4 million, primarily the result of lower capital expenditures related to the Hardin Generating Facility

Partially offsetting this decrease were increased net capital expenditures of $14.1 million, primarily at the natural gas and oil production and electric businesses.

Financing activities Cash flows used by financing activities in the first three months of 2007 increased $26.2 million from the comparable period in 2006, primarily the result of a decrease in the issuance of long-term debt of $104.2 million, partially offset by a decrease in the repayment of long-term debt of $66.7 million and an increase in the issuance of common stock of $12.2 million.

Defined benefit pension plans

There are no material changes to the Company’s qualified noncontributory defined benefit pension plans from those reported in the 2006 Annual Report. For further information, see Note 17 and Part II, Item 7 in the 2006 Annual Report.

Capital expenditures

Net capital expenditures for the first three months of 2007 were $126.1 million and are estimated to be approximately $1.07 billion for 2007. With the exception of the anticipated acquisition of Cascade, the estimated 2007 capital expenditures exclude potential future acquisitions, proceeds related to the disposal of unidentified assets and potential proceeds related to the sale of domestic independent power production assets. Estimated capital expenditures include those for:

·   System upgrades

·   Routine replacements

·   Service extensions

·   Routine equipment maintenance and replacements

·   Buildings, land and building improvements

·   Pipeline and gathering projects

·   Further enhancement of natural gas and oil production and reserve growth

·   Power generation opportunities, including certain costs for additional electric generating capacity

·   Anticipated acquisition of Cascade

·   Other growth opportunities

Approximately 45 percent of estimated 2007 net capital expenditures are associated with the anticipated acquisition of Cascade. The Company continues to evaluate potential future acquisitions and other growth opportunities; however, they are dependent upon the availability of economic opportunities and, as a result, capital expenditures may vary significantly from the estimated 2007 capital expenditures referred to previously. It is anticipated that all of the funds required for capital expenditures will be met from various sources, including internally generated funds; commercial paper credit facilities at Centennial and MDU Resources Group, Inc., as described below; and through the issuance of long-term debt and the Company’s equity securities.

Capital resources

Certain debt instruments of the Company and its subsidiaries, including those discussed below, contain restrictive covenants, all of which the Company and its subsidiaries were in compliance with at March 31, 2007.

MDU Resources Group, Inc.The Company has a revolving credit agreement with various banks totaling $125 million (with provision for an increase, at the option of the Company on stated conditions and upon regulatory approval, up to a maximum of $150 million). There were no amounts outstanding under the credit agreement at March 31, 2007. The credit agreement supports the Company’s $100 million commercial paper program. Under the Company’s commercial paper program, $1.9 million was outstanding at March 31, 2007. The commercial paper borrowings are classified as long-term debt as they are intended to be refinanced on a long-term basis through continued commercial paper borrowings (supported by the credit agreement, which expires in June 2011).

The Company’s objective is to maintain acceptable credit ratings in order to access the capital markets through the issuance of commercial paper. Minor fluctuations in the Company’s credit ratings have not limited, nor would they be expected to limit, the Company’s ability to access the capital markets. In the event of a minor downgrade, the Company may experience a nominal basis point increase in overall interest rates with respect to its cost of borrowings. If the Company were to experience a significant downgrade of its credit ratings, it may need to borrow under its credit agreement.

Prior to the maturity of the credit agreement, the Company expects that it will negotiate the extension or replacement of this agreement. If the Company is unable to successfully negotiate an extension of, or replacement for, the credit agreement, or if the fees on this facility became too expensive, which the Company does not currently anticipate, the Company would seek alternative funding. One source of alternative funding might involve the securitization of certain Company assets.

To the extent short-term financing is needed for the Cascade acquisition, the Company may utilize bridge financing for up to $310 million. For more information, see Notes 20 and 21.

In order to borrow under the Company’s credit agreement, the Company must be in compliance with the applicable covenants and certain other conditions. For information on the covenants and certain other conditions of the Company’s credit agreement, see Part II, Item 7, in the 2006 Annual Report. The Company was in compliance with these covenants and met the required conditions at March 31, 2007. In the event the Company does not comply with the applicable covenants and other conditions, alternative sources of funding may need to be pursued, as previously described.

There are no credit facilities that contain cross-default provisions between the Company and any of its subsidiaries.

The Company's issuance of first mortgage debt is subject to certain restrictions imposed under the terms and conditions of its Mortgage. Generally, those restrictions require the Company to fund $1.43 of unfunded property or use $1.00 of refunded bonds for each dollar of indebtedness incurred under the Indenture and, in some cases, to certify to the trustee that annual earnings (pretax and before interest charges), as defined in the Indenture, equal at least two times its annualized first mortgage bond interest costs. Under the more restrictive of the tests, as of March 31, 2007, the Company could have issued approximately $470 million of additional first mortgage bonds.

The Company's coverage of fixed charges including preferred dividends was 6.0 times and 6.4 times for the 12 months ended March 31, 2007 and December 31, 2006, respectively. Additionally, the Company's first mortgage bond interest coverage was 27.1 times and 26.0 times for the 12 months ended March 31, 2007 and December 31, 2006, respectively. Common stockholders' equity as a percent of total capitalization (net of long-term debt due within one year) was 65 percent at both March 31, 2007 and December 31, 2006.

The Company has repurchased, and may from time to time seek to repurchase, outstanding first mortgage bonds through open market purchases or privately negotiated transactions. The Company will evaluate any such transactions in light of then existing market conditions, taking into account its liquidity and prospects for future access to capital. As of March 31, 2007, the Company had $57.0 million of first mortgage bonds outstanding, $30.0 million of which were held by the Indenture trustee for the benefit of the Senior Note holders. At such time as the aggregate principal amount of the Company’s outstanding first mortgage bonds, other than those held by the Indenture trustee, is $20 million or less, the Company would have the ability, subject to satisfying certain specified conditions, to require that any debt issued under its Indenture become unsecured and rank equally with all of the Company’s other unsecured and unsubordinated debt (as of March 31, 2007, the only such debt outstanding under the Indenture was $30.0 million in aggregate principal amount of the Company’s 5.98% Senior Notes due in 2033).

On July 27, 2006, the Company entered into a Sales Agency Financing Agreement with Wells Fargo Securities, LLC with respect to the issuance and sale of up to 3,000,000 shares of the Company’s common stock, par value $1.00 per share, together with preference share purchase rights appurtenant thereto. The common stock may be offered for sale, from time to time, in accordance with the terms and conditions of the agreement, which terminates on June 30, 2007. The Company is considering extending the Sales Agency Financing Agreement. Proceeds from the sale of shares of common stock under the agreement are expected to be used for corporate development purposes and other general corporate purposes. The offering would be made pursuant to the Company’s shelf registration statement on Form S-3, as amended, which became effective on September 26, 2003, as supplemented by a prospectus supplement, dated July 27, 2006, filed with the SEC pursuant to Rule 424(b) under the Securities Act of 1933, as amended. The Company has not issued any stock under the Sales Agency Financing Agreement through March 31, 2007.

Centennial Energy Holdings, Inc. Centennial has two revolving credit agreements with various banks and institutions totaling $425 million with certain provisions allowing for increased borrowings. These credit agreements support Centennial’s $400 million commercial paper program. There were no outstanding borrowings under the Centennial credit agreements at March 31, 2007. Under the Centennial commercial paper program, $105.8 million was outstanding at March 31, 2007. The Centennial commercial paper borrowings are classified as long-term debt as Centennial intends to refinance these borrowings on a long-term basis through continued Centennial commercial paper borrowings (supported by Centennial credit agreements). One of these credit agreements is for $400 million, which includes a provision for an increase, at the option of Centennial on stated conditions, up to a maximum of $450 million and expires on August 26, 2010. The second agreement is an uncommitted line for $25 million (previously $20 million), and may be terminated by the bank at any time. As of March 31, 2007, $42.5 million of letters of credit were outstanding, as discussed in Note 19, of which $28.4 million reduced amounts available under these agreements.

Centennial has an uncommitted long-term master shelf agreement that allows for borrowings of up to $550 million. Under the terms of the master shelf agreement, $538.5 million was outstanding at March 31, 2007. The ability to request additional borrowings under this master shelf agreement expires on May 8, 2009. To meet potential future financing needs, Centennial may pursue other financing arrangements, including private and/or public financing.

Centennial’s objective is to maintain acceptable credit ratings in order to access the capital markets through the issuance of commercial paper. Minor fluctuations in Centennial’s credit ratings have not limited, nor would they be expected to limit, Centennial’s ability to access the capital markets. In the event of a minor downgrade, Centennial may experience a nominal basis point increase in overall interest rates with respect to its cost of borrowings. If Centennial were to experience a significant downgrade of its credit ratings, it may need to borrow under its committed bank lines.

Prior to the maturity of the Centennial credit agreements, Centennial expects that it will negotiate the extension or replacement of these agreements, which provide credit support to access the capital markets. In the event Centennial was unable to successfully negotiate these agreements, or in the event the fees on such facilities became too expensive, which Centennial does not currently anticipate, it would seek alternative funding. One source of alternative funding might involve the securitization of certain Centennial assets.

In order to borrow under Centennial’s credit agreements and the Centennial uncommitted long-term master shelf agreement, Centennial and certain of its subsidiaries must be in compliance with the applicable covenants and certain other conditions. For more information on the covenants and certain other conditions for the $400 million credit agreement and the master shelf agreement, see Part II, Item 7, in the 2006 Annual Report. Centennial and such subsidiaries were in compliance with these covenants and met the required conditions at March 31, 2007. In the event Centennial or such subsidiaries do not comply with the applicable covenants and other conditions, alternative sources of funding may need to be pursued as previously described.

Certain of Centennial’s financing agreements contain cross-default provisions. These provisions state that if Centennial or any subsidiary of Centennial fails to make any payment with respect to any indebtedness or contingent obligation, in excess of a specified amount, under any agreement that causes such indebtedness to be due prior to its stated maturity or the contingent obligation to become payable, the applicable agreements will be in default. Certain of Centennial’s financing agreements and Centennial’s practice limit the amount of subsidiary indebtedness.

Williston Basin Interstate Pipeline CompanyWilliston Basin has an uncommitted long-term master shelf agreement that allows for borrowings of up to $100 million. Under the terms of the master shelf agreement, $80.0 million was outstanding at March 31, 2007. The ability to request additional borrowings under this master shelf agreement expires on December 20, 2008.

In order to borrow under its uncommitted long-term master shelf agreement, Williston Basin must be in compliance with the applicable covenants and certain other conditions. For more information on the covenants and certain other conditions for the uncommitted long-term master shelf agreement, see Part II, Item 7, in the 2006 Annual Report. Williston Basin was in compliance with these covenants and met the required conditions at March 31, 2007. In the event Williston Basin does not comply with the applicable covenants and other conditions, alternative sources of funding may need to be pursued.

Off balance sheet arrangements

In connection with the sale of MPX in June 2005 to Petrobras, an indirect wholly owned subsidiary of the Company has agreed to indemnify Petrobras for 49 percent of any losses that Petrobras may incur from certain contingent liabilities specified in the purchase agreement. Centennial has agreed to unconditionally guarantee payment of the indemnity obligations to Petrobras for periods ranging from approximately two to five and a half years from the date of sale. The guarantee was required by Petrobras as a condition to closing the sale of MPX.

Contractual obligations and commercial commitments

There are no material changes in the Company’s contractual obligations relating to long-term debt, operating leases and purchase commitments from those reported in the 2006 Annual Report.

For more information on contractual obligations and commercial commitments, see Part II, Item 7 in the 2006 Annual Report.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company is exposed to the impact of market fluctuations associated with commodity prices, interest rates and foreign currency. The Company has policies and procedures to assist in controlling these market risks and utilizes derivatives to manage a portion of its risk.

Commodity price risk

Fidelity utilizes derivative instruments to manage a portion of the market risk associated with fluctuations in the price of natural gas and oil on its forecasted sales of natural gas and oil production. At March 31, 2007, Fidelity held natural gas swap and collar derivative instruments designated as cash flow hedging instruments and had no outstanding oil derivative instruments. For more information on derivative instruments and commodity price risk, see Part II, Item 7A in the 2006 Annual Report, and Notes 11 and 14.

The following table summarizes hedge agreements entered into by Fidelity as of March 31, 2007. These agreements call for Fidelity to receive fixed prices and pay variable prices.

(Notional amount and fair value in thousands)

	Weighted Average Fixed Price (Per MMBtu)		Forward Notional Volume (In MMBtu's)		Fair Value
Natural gas swap agreements maturing in 2007	$	7.59		8,480	$	5,947
Natural gas swap agreements maturing in 2008	$	7.45		1,070	$	(415	)

	Weighted Average Floor/Ceiling Price (Per MMBtu)		Forward Notional Volume (In MMBtu's)		Fair Value
Natural gas collar agreements maturing in 2007	$	7.82/$10.31		9,273	$	5,644
Natural gas collar agreements maturing in 2008	$	7.24/$8.27		7,620	$	(4,165	)

Interest rate risk

There were no material changes to interest rate risk faced by the Company from those reported in the 2006 Annual Report. For more information on interest rate risk, see Part II, Item 7A in the 2006 Annual Report.

At March 31, 2007 and 2006, and December 31, 2006, the Company had no outstanding interest rate hedges.

Foreign currency risk

MDU Brasil’s equity method investments in the Brazilian Transmission Lines are exposed to market risks from changes in foreign currency exchange rates between the U.S. dollar and the Brazilian Real. For further information on foreign currency risk, see Note 4 in the 2006 Annual Report.

At March 31, 2007 and 2006, and December 31, 2006, the Company had no outstanding foreign currency hedges.

ITEM 4. CONTROLS AND PROCEDURES

The following information includes the evaluation of disclosure controls and procedures by the Company’s chief executive officer and the chief financial officer, along with any significant changes in internal controls of the Company.

Evaluation of disclosure controls and procedures

The term "disclosure controls and procedures" is defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act. These rules refer to the controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports it files under the Exchange Act is recorded, processed, summarized and reported within required time periods. The Company’s chief executive officer and chief financial officer have evaluated the effectiveness of the Company’s disclosure controls and procedures and they have concluded that, as of the end of the period covered by this report, such controls and procedures were effective.

Changes in internal controls

The Company maintains a system of internal accounting controls that is designed to provide reasonable assurance that the Company’s transactions are properly authorized, the Company’s assets are safeguarded against unauthorized or improper use, and the Company’s transactions are properly recorded and reported to permit preparation of the Company’s financial statements in conformity with generally accepted accounting principles in the United States of America. There were no changes in the Company’s internal control over financial reporting that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II -- OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

For information regarding legal proceedings, see Note 19, which is incorporated by reference.

ITEM 1A. RISK FACTORS

This Form 10-Q contains forward-looking statements within the meaning of Section 21E of the Exchange Act. Forward-looking statements are all statements other than statements of historical fact, including without limitation those statements that are identified by the words "anticipates," "estimates," "expects," "intends," "plans," "predicts" and similar expressions.

The Company is including the following factors and cautionary statements in this Form 10-Q to make applicable and to take advantage of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 for any forward-looking statements made by, or on behalf of, the Company. Forward-looking statements include statements concerning plans, objectives, goals, strategies, future events or performance, and underlying assumptions (many of which are based, in turn, upon further assumptions) and other statements that are other than statements of historical facts. From time to time, the Company may publish or otherwise make available forward-looking statements of this nature, including statements contained within Prospective Information. All these subsequent forward-looking statements, whether written or oral and whether made by or on behalf of the Company, also are expressly qualified by these factors and cautionary statements.

Forward-looking statements involve risks and uncertainties, which could cause actual results or outcomes to differ materially from those expressed. The Company's expectations, beliefs and projections are expressed in good faith and are believed by the Company to have a reasonable basis, including without limitation, management's examination of historical operating trends, data contained in the Company's records and other data available from third parties. Nonetheless, the Company's expectations, beliefs or projections may not be achieved or accomplished.

Any forward-looking statement contained in this document speaks only as of the date on which the statement is made, and the Company undertakes no obligation to update any forward-looking statement or statements to reflect events or circumstances that occur after the date on which the statement is made or to reflect the occurrence of unanticipated events. New factors emerge from time to time, and it is not possible for management to predict all of the factors, nor can it assess the effect of each factor on the Company's business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statement.

There are no material changes in the Company’s risk factors from those reported in Part I, Item 1A - Risk Factors of the 2006 Annual Report other than the risk associated with the pending sale of the domestic independent power production assets, as discussed below. These factors and the other matters discussed herein are important factors that could cause actual results or outcomes for the Company to differ materially from those discussed in the forward-looking statements included elsewhere in this document.

Other Risks

The Company’s pending sale of the domestic independent power production assets may be delayed or may not occur if certain conditions are not satisfied.

The completion of the pending sale is subject to the fulfillment of regulatory approvals and closing conditions. The inability to complete the sale in a timely manner could affect the Company’s options for funding the Cascade acquisition, and could result in the Company having to incur additional indebtedness and financing costs.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Between January 1, 2007 and March 31, 2007, the Company issued 83,097 shares of common stock, $1.00 par value, and the preference share purchase rights appurtenant thereto, as part of the consideration paid by the Company in the acquisition of businesses acquired by the Company in a prior period. The common stock and preference share purchase rights issued by the Company in these transactions were issued in a private transaction exempt from registration under the Securities Act of 1933, as amended, pursuant to Section 4 (2) thereof, Rule 506 promulgated thereunder, or both. The classes of persons to whom these securities were sold were either accredited investors or other persons to whom such securities were permitted to be offered under the applicable exemption.

The following table includes information with respect to the issuer’s purchase of equity securities:

ISSUER PURCHASES OF EQUITY SECURITIES

Period	(a) Total Number of Shares (or Units) Purchased (1)	(b) Average Price Paid per Share (or Unit)	(c) Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs (2)	(d) Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs (2)
January 1 through January 31, 2007
February 1 through February 28, 2007	77,834	$26.08
March 1 through March 31, 2007
Total	77,834

(1) Represents shares of common stock withheld by the Company to pay taxes in connection with the vesting of shares granted pursuant to a compensation plan.

(2) Not applicable. The Company does not currently have in place any publicly announced plans or programs to purchase equity securities.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

The Company’s Annual Meeting of Stockholders was held on April 24, 2007. Five proposals were submitted to stockholders as described in the Company’s Proxy Statement dated March 8, 2007, and were voted upon and approved by stockholders at the meeting. The table below briefly describes the proposals and the results of the stockholder votes.

		Shares
	Shares	Against or		Broker
	For	Withheld	Abstentions	Non-Votes
Proposal to elect four directors:  For terms expiring in 2010 --
Terry D. Hildestad	162,206,699	1,678,213	---	---
Dennis W. Johnson	161,958,358	1,926,554	---	---
John L. Olson	160,627,881	3,257,031	---	---
John K. Wilson	162,181,991	1,702,921	---	---
Proposal to increase the authorized shares of common stock	147,112,808	15,757,319	1,014,785	---
Proposal to declassify the board of directors	159,184,819	3,278,410	1,421,683	---
Proposal to ratify the appointment of Deloitte & Touche LLP as the Company’s independent auditors for 2007	162,102,994	1,032,520	749,398	---
Shareholder proposal requesting a  sustainability report	40,135,023	75,528,517	11,998,709	36,229,708

ITEM 6. EXHIBITS

3	Certificate of Amendment, dated April 24, 2007, of Restated Certificate of Incorporation of the Company
10(a)	Centennial Power, Inc. and Colorado Energy Management, LLC Purchase and Sale Agreement by and between Centennial Energy Resources LLC, as Seller, and Montana Acquisition Company LLC, as Buyer, dated April 25, 2007
+10(b)	MDU Resources Group, Inc. Executive Incentive Compensation Plan and Rules and Regulations, as amended February 14, 2007
+10(c)	Montana-Dakota Utilities Co. Executive Incentive Compensation Plan and Rules and Regulations as amended February 14, 2007
+10(d)	WBI Holdings, Inc. Executive Incentive Compensation Plan and Rules and Regulations, as amended February 26, 2007
+10(e)	Knife River Corporation Executive Incentive Compensation Plan and Rules and Regulations, as amended February 26, 2007
+10(f)	MDU Construction Services Group, Inc. Executive Incentive Compensation Plan and Rules and Regulations, as adopted May 2, 2006
12	Computation of Ratio of Earnings to Fixed Charges and Combined Fixed Charges and Preferred Stock Dividends
31(a)	Certification of Chief Executive Officer filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31(b)	Certification of Chief Financial Officer filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32	Certification of Chief Executive Officer and Chief Financial Officer furnished pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

+ Management contract, compensatory plan or arrangement.

MDU Resources Group, Inc. agrees to furnish to the SEC upon request any instrument with respect to long-term debt that MDU Resources Group, Inc. has not filed as an exhibit pursuant to the exemption provided by Item 601(b)(4)(iii)(A) of Regulation S-K.

SIGNATURES

Pursuant to the requirements of the Exchange Act, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	MDU RESOURCES GROUP, INC.
DATE:  May 8, 2007	BY:	/s/ Vernon A. Raile
		Vernon A. Raile
		Executive Vice President, Treasurer
		and Chief Financial Officer
	BY:	/s/ Doran N. Schwartz
		Doran N. Schwartz
		Vice President and Chief Accounting Officer

EXHIBIT INDEX

Exhibit No.

3	Certificate of Amendment, dated April 24, 2007, of Restated Certificate of Incorporation of the Company
10(a)	Centennial Power, Inc. and Colorado Energy Management, LLC Purchase and Sale Agreement by and between Centennial Energy Resources LLC, as Seller, and Montana Acquisition Company LLC, as Buyer, dated April 25, 2007
+10(b)	MDU Resources Group, Inc. Executive Incentive Compensation Plan and Rules and Regulations, as amended February 14, 2007
+10(c)	Montana-Dakota Utilities Co. Executive Incentive Compensation Plan and Rules and Regulations as amended February 14, 2007
+10(d)	WBI Holdings, Inc. Executive Incentive Compensation Plan and Rules and Regulations, as amended February 26, 2007
+10(e)	Knife River Corporation Executive Incentive Compensation Plan and Rules and Regulations, as amended February 26, 2007
+10(f)	MDU Construction Services Group, Inc. Executive Incentive Compensation Plan and Rules and Regulations, as adopted May 2, 2006
12	Computation of Ratio of Earnings to Fixed Charges and Combined Fixed Charges and Preferred Stock Dividends
31(a)	Certification of Chief Executive Officer filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31(b)	Certification of Chief Financial Officer filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32	Certification of Chief Executive Officer and Chief Financial Officer furnished pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

+ Management contract, compensatory plan or arrangement.

MDU Resources Group, Inc. agrees to furnish to the SEC upon request any instrument with respect to long-term debt that MDU Resources Group, Inc. has not filed as an exhibit pursuant to the exemption provided by Item 601(b)(4)(iii)(A) of Regulation S-K.

EX-3

MDU RESOURCES GROUP, INC.

Certificate of Amendment

of

Restated Certificate of Incorporation

MDU Resources Group, Inc., a corporation duly organized and existing under the laws of the State of Delaware (the “Company”), hereby certifies as follows:

1. That the Board of Directors of the Company, at a meeting duly convened and held on November 16, 2006, adopted proposed amendments to Article FOURTH and Article THIRTEENTH to the Restated Certificate of Incorporation of the Company, as heretofore amended, declaring the advisability of each amendment, and directing that said proposed amendments to Article FOURTH and Article THIRTEENTH be considered at the next annual meeting of the Company by the stockholders entitled to vote in respect thereof, such amendments being set forth in the Company'sProxy Statement for the 2007 Annual Meeting of Stockholders as follows:

RESOLVED, that the Board of Directors of MDU Resources Group, Inc. hereby declares it advisable:

(A) That the number of shares of Common Stock which the Company is authorized to issue be increased from 250,000,000 shares of Common Stock with the par value of $1.00 per share, to 500,000,000 shares with the par value of $1.00 per share, effective at the close of business on the date on which the appropriate Certificate of Amendment to the Company’s Restated Certificate of Incorporation is filed in the office of the Secretary of State of the State of Delaware;

(B) That, in order to effect the foregoing, the Restated Certificate of Incorporation of the Company, as heretofore amended, be further amended by deleting the first paragraph of Article FOURTH, and by inserting in place thereof a new first paragraph of said Article FOURTH to read as follows:

FOURTH. The total number of shares of stock which the Corporation shall have authority to issue is Five Hundred Two Million (502,000,000) divided into four classes, namely, Preferred Stock, Preferred Stock A, Preference Stock, and Common Stock. The total number of shares of such Preferred Stock authorized is Five Hundred Thousand (500,000) shares of the par value of One Hundred Dollars ($100) per share (hereinafter called the “Preferred Stock”) amounting in the aggregate to Fifty Million Dollars ($50,000,000). The total number of shares of such Preferred Stock A authorized is One Million (1,000,000) shares without par value (hereinafter called the “Preferred Stock A”). The total number of shares of such Preference Stock authorized is Five Hundred Thousand (500,000) shareswithout par value (hereinafter called the “Preference Stock”). The total number of shares of such Common Stock authorized is Five Hundred Million (500,000,000) of the par value of One and no/100 Dollars ($1.00) per share (hereinafter called the “Common Stock”), amounting in the aggregate to Five Hundred Million Dollars ($500,000,000).

FURTHER RESOLVED, that the Board of Directors hereby directs that this resolution and above proposed amendments be attached as an exhibit to the proxy statement for the Company’s next Annual or Special Meeting of Stockholders for consideration by the Stockholders entitled to vote in respect thereof.

* * * * * * * * * * * *

RESOLVED, that the Board of Directors of MDU Resources Group, Inc. hereby declares it advisable:

(A)That the Board of Directors of the Company be declassified and the members of the Board of Directors be elected annually, effective at the close of business on the date on which the appropriate Certificate of Amendment to the Company’s Restated Certificate of Incorporation is filed in the office of the Secretary of State of the State of Delaware;

(B)That, in order to effect the foregoing, the Restated Certificate of Incorporation of the Company, as heretofore amended, be further amended by amending Article THIRTEENTH to read as follows:

THIRTEENTH. (a) The business and affairs of the Corporation shall be managed by the Board of Directors consisting of not less than six nor more than fifteen persons. The exact number of directors within the limitations specified in the preceding sentence shall be fixed from time to time by the Board of Directors pursuant to a resolution adopted by two-thirds of the Continuing Directors. The directors need not be elected by ballot unless required by the By-Laws of the Corporation.

At each annual meeting of stockholders, the directors shall be elected for terms expiring at the next annual meeting of stockholders; provided, however, that each director elected at the annual meetings of stockholders held in 2005, 2006 and 2007 shall serve for the full three-year term to which such director was elected. Each director shall hold office for the term for which he is elected or appointed and until his successor shall be elected and qualified or until his death, or until he shall resign or be removed.

In the event of any increase or decrease in the authorized number of directors, each director then serving as such shall nevertheless continue as director until the expiration of his current term, or his earlier resignation, removal from office or death.

(b) Newly created directorships resulting from any increase in the authorized number of directors or any vacancies in the Board of Directors resulting from death, resignation, retirement, disqualification, removal from office or other cause shall be filled by a two-thirds vote of the Continuing Directors then in office, or a sole remaining director, although less than a quorum, and directors so chosen shall hold office for a term expiring at the next annual meeting of stockholders. If one or more directors shall resign from the Board effective as of a future date, such vacancy or vacancies shall be filled pursuant to the provisions hereof, and such new directorship(s) shall become effective when such resignation or resignations shall become effective, and each director so chosen shall hold office for a term expiring at the next annual meeting of stockholders.

(c) Any director or the entire Board of Directors may be removed; however, such removal must be for cause and must be approved as set forth in this Section. Except as may otherwise be provided by law, cause for removal shall be construed to exist only if: (i) the director whose removal is proposed has been convicted, or where a director was granted immunity to testify where another has been convicted, of a felony by a court of competent jurisdiction and such conviction is no longer subject to direct appeal; (ii) such director has been grossly negligent in the performance of his duties to the Corporation; or (iii) such director has been adjudicated by a court of competent jurisdiction to be mentally incompetent, which mental incompetency directly affects his ability as a director of the Corporation, and such adjudication is no longer subject to direct appeal.

Removal for cause, as cause is defined above, must be approved by at least a majority vote of the shares of the Corporation then entitled to be voted at an election for that director, and the action for removal must be brought within three months of such conviction or adjudication.

Notwithstanding the foregoing, and except as otherwise provided by law, in the event that Preferred Stock of the Corporation is issued and holders of any one or more series of such Preferred Stock are entitled, voting separately as a class, to elect one or more directors of the Corporation to serve for such terms as set forth in the Certificate of Incorporation, the provisions of this Article THIRTEENTH, Section (c), shall also apply, in respect to the removal of a director or directors so elected to the vote of the holders of the outstanding shares of that class and not to the vote of the outstanding shares as a whole.

(d) Any directors elected pursuant to special voting rights of one or more series of Preferred Stock, voting as a class, shall be excluded from, and for no purpose be counted in, the scope and operation of the foregoing provisions, unless expressly stated.

FURTHER RESOLVED, that the Board of Directors hereby directs that this resolution and above proposed amendment be attached as an exhibit to the proxy statement for the Company’s next Annual or Special Meeting of Stockholders for consideration by the Stockholders entitled to vote in respect thereof.

The resolutions were attached as Exhibits A and B to the Company's Proxy Statement for the 2007 Annual Meeting of Stockholders, and the body of the Proxy Statement contained a discussion of the proposed amendments.

2. That thereafter, on April 24, 2007, at 11:00 a.m., in accordance with the Bylaws of the Company, and upon notice given in accordance with the laws of the State of Delaware and said Bylaws, the Annual Meeting of Stockholders of the Company was held, and there were present at such meeting, in person or by proxy, the holders of more than a majority of the shares of Common Stock of the Company outstanding and entitled to vote, constituting a quorum of said stockholders.

3. That at said Annual Meeting of Stockholders, the proposals to amend Article FOURTH and Article THIRTEENTH of the Restated Certificate of Incorporation, as heretofore amended, were presented for consideration, and separate votes of the holders of the outstanding shares of Common Stock, voting in person or by proxy, were taken for and against each of the proposed amendments. The necessary number of shares as required by statute or the Restated Certificate of Incorporation voted in favor of the proposals to amend Article FOURTH and Article THIRTEENTH to the Restated Certificate of Incorporation, as heretofore amended.

4. That said amendments to the Restated Certificate of Incorporation of MDU Resources Group, Inc. as hereinbefore set forth have been therefore duly adopted in accordance with the provisions of Section 242 of the General Corporation Laws of the State of Delaware.

IN WITNESS WHEREOF, MDU Resources Group, Inc. has caused its corporate seal to be hereunto affixed, and this Certificate to be signed by authorized officers, on April 24, 2007.

          MDU RESOURCES GROUP, INC.

ATTEST:

/s/ PAUL K. SANDNESSBy: /s/ TERRY D. HILDESTAD

Paul K. Sandness Terry D. Hildestad

Secretary   President and Chief Executive Officer

(SEAL)

EX-10.A

CENTENNIAL POWER, INC. and COLORADO ENERGY MANAGEMENT, LLC

PURCHASE AND SALE AGREEMENT

BY AND BETWEEN

CENTENNIAL ENERGY RESOURCES LLC, as SELLER,

and

MONTANA ACQUISITION COMPANY LLC, as BUYER

Dated as of April 25, 2007

TABLE OF CONTENTS

 ARTICLE I DEFINITIONS

1.1 Definitions

1.2 Certain Interpretive Matters

 ARTICLE II PURCHASE AND SALE

2.1 Transfer of Stock and Membership Interests

2.2 Excluded Assets

2.3 Transfer of Excluded Assets and Discharge of Certain Liabilities

2.4 Guarantee Liabilities

 ARTICLE III THE CLOSING

3.1 Closing

3.2 Payment of Purchase Price

3.3 Purchase Price Adjustment

3.4 Deliveries by Seller

3.5 Deliveries by Buyer

3.6 Mutual Delivery

 ARTICLE IV REPRESENTATIONS, WARRANTIES AND DISCLAIMERS OF SELLER

4.1 Organization; Qualification

4.2 Authority Relative to this Agreement

4.3 Consents and Approvals; No Violation

4.4 Insurance

4.5 Title and Related Matters

4.6 Real Property Leases

4.7 Labor Matters

4.8 Benefit Plans

4.9 Contracts and Leases

4.10 Legal Proceedings, etc.

4.11 Tax Matters

4.12 Compliance With Laws

4.13 Undisclosed Liabilities

4.14 Subsidiaries

4.15 Capitalization

4.16 Financial Statements

4.17 Absence of Certain Changes

4.18 Bankruptcy

4.19 Books and Records

4.20 Project Companies

4.21 Disclaimers

 ARTICLE V REPRESENTATIONS AND WARRANTIES OF BUYER

5.1 Organization

5.2 Authority Relative to this Agreement

5.3 Consents and Approvals; No Violation

5.4 Legal Proceedings

5.5 Inspections

5.6 Securities Laws

 ARTICLE VI COVENANTS OF THE PARTIES

6.1 Conduct of Business

6.2 Access to Information

6.3 Public Statements

6.4 Expenses

6.5 Further Assurances

6.6 Consents and Approvals

6.7 Use of Centennial Marks

6.8 Fees and Commissions

6.9 Tax Matters

6.10 Advice of Changes

6.11 Consents

6.12 Buyer Financial Assurance

6.13 Financing Cooperation

6.14 Employee and Benefit Plans

6.15 Audited Financial Statements

6.16 Hartwell Partnership Distributions

 ARTICLE VII CONDITIONS

7.1 Conditions to Obligations of Buyer

7.2 Conditions to Obligations of Seller

 ARTICLE VIII INDEMNIFICATION

8.1 Indemnification

8.2 Defense of Claims

8.3 Survival

 ARTICLE IX TERMINATION

9.1 Termination

9.2 Procedure and Effect of No-Default Termination

9.3 Termination Fee; Letter of Credit

 ARTICLE X MISCELLANEOUS PROVISIONS

10.1 Amendment and Modification

10.2 Waiver of Compliance; Consents

10.3 Notices

10.4 Assignment

10.5 Governing Law; Venue; Waiver of Jury Trial

10.6 Counterparts

10.7 Interpretation

10.8 Schedules and Exhibits

10.9 Entire Agreement

10.10 U.S. Dollars

PURCHASE AND SALE AGREEMENT

PURCHASE AND SALE AGREEMENT, dated as of April 25, 2007, by and between Centennial Energy Resources LLC, a Delaware limited liability company (“Seller”) and Montana Acquisition Company, LLC, a Delaware limited liability company (“Buyer”). Seller and Buyer are referred to individually as a “Party,” and collectively as the “Parties.”

W I T N E S S E T H

WHEREAS, Seller owns the CPI Stock and the CEM Membership Interests (each as defined herein);

WHEREAS, Buyer desires to purchase, and Seller desires to sell, the CPI Stock and the CEM Membership Interests upon the terms and conditions hereinafter set forth in this Agreement; and

WHEREAS, in order to induce Seller to enter into this Agreement, and as additional consideration therefor, concurrently with the execution and delivery hereof, Buyer is providing to Seller the Buyer LC (as hereinafter defined) in the form attached as Exhibit A hereto, to secure Buyer’s payment of the Termination Fee (as hereinafter defined).

NOW, THEREFORE, in consideration of the mutual covenants, representations, warranties and agreements hereinafter set forth, and intending to be legally bound hereby, the Parties agree as follows.

ARTICLE I

DEFINITIONS

1.1Definitions.  As used in this Agreement, the following terms have the meanings specified in this Section 1.1.

(1)“338 Allocation” has the meaning set forth in Section 6.9(a)(ii).

(2)“338(h)(10) Election Entities” has the meaning set forth in Section 6.9(a)(i).

(3)“754 Allocation Schedule” has the meaning set forth in Section 6.9(a)(iii).

(4)“Adjustment” has the meaning set forth in section 3.3(a).

(5)“Affiliate” has the meaning set forth in Rule 12b-2 of the General Rules and Regulations under the Securities Exchange Act of 1934, as amended.

(6)“Affiliated Group” means, with respect to any entity, a group of entities required or permitted to file consolidated, combined or unitary Tax Returns including such entity.

(7)“Agreement” means this Purchase and Sale Agreement together with the Schedules and Exhibits hereto, as the same may be from time to time amended.

(8)“Assumption Agreement” has the meaning set forth in Section 2.4.

(9)“AT&T CAISO ECN Agreement” has the meaning set forth in Section 2.2(i).

(10)“Audits” has the meaning set forth in Section 4.11(iv).

(11)“Benefit Agreements” has the meaning set forth in Section 4.8.

(12)“Benefit Plans” has the meaning set forth in Section 4.8.

(13)“BIV Generation” means BIV Generation Company, L.L.C., a Delaware limited liability company.

(14)“Brush 1&3 Project” means that certain 75 megawatt gas-fired facility (consisting of one 50 megawatt combined-cycle unit and one 25 megawatt simple-cycle unit) located approximately 90 miles northeast of Denver, Colorado near Brush, Colorado.

(15)“Brush 4D Project” means that certain 138 megawatt gas-fired combined-cycle facility located approximately 90 miles northeast of Denver, Colorado near Brush, Colorado.

(16)“Business Day” means any day other than Saturday, Sunday and any day on which banking institutions in the State of New York are authorized by law or other governmental action to close.

(17)“Buyer” has the meaning set forth in the Preamble.

(18)“Buyer Fundamental Representations” means the representations and warranties contained in Sections 5.1, 5.2 and 5.3.

(19)“Buyer Indemnitee” has the meaning set forth in Section 8.1(b).

(20)“Buyer LC” has the meaning set forth in Section 6.12.

(21)“Buyer Material Adverse Effect” has the meaning set forth in Section 5.3(a).

(22)“Buyer Required Regulatory Approvals” has the meaning set forth in Section 5.3(b).

(23)“Buyer 338 Liability” has the meaning set forth in Section 6.9(a)(i).

(24)“CEM” means Colorado Energy Management, LLC, a Colorado limited liability company and wholly-owned subsidiary of Seller.

(25)“CEM Agreements” means each contract, license, agreement or personal property lease to which CEM or any of its Subsidiaries is a party, other than those which involve expenditures by CEM or any such Subsidiary of less than $250,000 per year.

(26)“CEM Membership Interests” means all of the issued and outstanding membership interests in CEM.

(27)“Centennial Marks” means the name “CENTENNIAL” and other registered or unregistered trademarks, services marks, trade names, logos, designs or color schemes featuring the name “CENTENNIAL”, or any derivative, abbreviation or variation thereof owned or used by Seller.

(28)“Closing” has the meaning set forth in Section 3.1.

(29)“Closing Date” has the meaning set forth in Section 3.1.

(30)“Closing Statement” has the meaning set forth in Section 3.3(b).

(31)“Code” means the Internal Revenue Code of 1986, as amended.

(32)“Commercially Reasonable Efforts” means efforts which are reasonably necessary to cause, or assist in, the consummation of the transactions contemplated by this Agreement and which do not require the performing Party to expend funds, incur expenses or assume liabilities other than those which are reasonable in nature and amount within the context of the transactions contemplated by this Agreement in order for the performing Party to satisfy its obligations hereunder.

(33)“Confidentiality Agreement” means the Confidentiality Agreement, dated January 23, 2007, by and between MDU Resources Group, Inc. and CES Acquisition Corp.

(34)“Continuing Employees” has the meaning set forth in Section 6.14(a).

(35)“CPI” means Centennial Power, Inc., a Delaware corporation and wholly-owned subsidiary of Seller.

(36)“CPI Agreements” means each contract, license, agreement or personal property lease to which CPI or any of its Subsidiaries (other than the Project Companies) is a party, other than those which involve expenditures by CPI or any such Subsidiary of less than $250,000 per year.

(37)“CPI Stock” means all of the issued and outstanding shares of common stock, no par value, of CPI.

(38)“CPP” means Colorado Power Partners, a Colorado general partnership.

(39)“Default Interest Rate” means a rate of interest payable at the lesser of LIBOR plus 200 basis points, or the maximum rate permitted by applicable law.

(40)“Direct Claim” has the meaning set forth in Section 8.2(c).

(41)“Designated Independent Accounting Firm” has the meaning set forth in Section 3.3(d).

(42)“Election” has the meaning set forth in Section 6.9(a)(i).

(43)“Environmental Claim” means any and all pending and/or threatened administrative or judicial actions, suits, orders, claims, liens, notices, notices of violations, investigations, complaints, requests for information, proceedings, or other written communication, whether criminal or civil, pursuant to or relating to any applicable Environmental Law based upon, alleging, asserting, or claiming any actual or potential (a) violation of, or liability under any Environmental Law, (b) violation of any Environmental Permit, or (c) liability for investigatory costs, cleanup costs, removal costs, remedial costs, response costs, natural resource damages, property damage, personal injury, fines, or penalties arising out of, based on, resulting from, or related to the presence, Release, or threatened Release of any Hazardous Substances at any site owned, leased or operated by CPI, CEM or any of their respective Subsidiaries.

(44)“Environmental Condition” means the presence or Releaseto the environment at the site of the Project Facilities of Hazardous Substances, including any migration of those Hazardous Substances through air, soil or groundwater to or from the site of the Project Facilities.

(45)“Environmental Laws” means all applicable Federal, state and local, civil and criminal laws, regulations, rules, ordinances, codes, decrees, judgments, directives, or judicial or administrative orders relating to pollution or protection of the environment, natural resources or human health and safety, including, without limitation, laws relating to Releases or threatened Releases of Hazardous Substances (including, without limitation, Releases to ambient air, surface water, groundwater, land, surface and subsurface strata) or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, Release, transport, disposal or handling of Hazardous Substances. “Environmental Laws” include, without limitation, CERCLA, the Hazardous Materials Transportation Act (49 U.S.C. §§ 1801 et seq.), the Resource Conservation and Recovery Act (42 U.S.C. §§ 6901 et seq.), the Federal Water Pollution Control Act (33 U.S.C. §§ 1251 et seq.), the Clean Air Act (42 U.S.C. §§ 7401 et seq.), the Toxic Substances Control Act (15 U.S.C. §§ 2601 et seq.), the Oil Pollution Act (33 U.S.C. §§ 2701 et seq.), the Emergency Planning and Community Right-to-Know Act (42 U.S.C. §§ 11001 et seq.), and all applicable other state laws analogous to any of the above.

(46)“Environmental Permit” has the meaning set forth in Section 4.20(n)(v).

(47)“Equity Commitment Letter” has the meaning set forth in Section 6.12.

(48)“Excluded Assets” has the meaning set forth in Section 2.2.

(49)“Excluded Agreements” means the AT&T CAISO ECN Agreement, the Hobbs Agreement, the Intercompany Benefit Plans and the Wolcon Closure Agreement.

(50)“Excluded Liabilities” has the meaning set forth in Section 8.1(h).

(51)“Excluded Taxes” has the meaning set forth in Section 8.1(h)(i).

(52)“FERC” means the Federal Energy Regulatory Commission or any successor agency thereto.

(53)“Financial Statements” has the meaning set forth in Section 4.16.

(54)“GAAP” means United States generally accepted accounting principles as in effect on the date of this Agreement.

(55)“Governmental Authority” means any federal, state or local governmental, regulatory or administrative agency, commission, department or board, court or arbitrating body.

(56)“Guarantee Liabilities” has the meaning set forth in Section 2.4.

(57)“Hardin Project” means that certain 120 megawatt (gross) coal-fired facility located approximately 40 miles southeast of Billings, Montana and two miles north of the city of Hardin, Montana.

(58)“Hartwell Partnership” means Hartwell Energy Limited Partnership, a Delaware limited partnership.

(59)“Hartwell Project” means that certain 310 megawatt simple-cycle gas-fired facility located approximately 100 miles northeast of Atlanta, Georgia near Hartwell, Georgia.

(60)“Hazardous Substances” means (a) any petrochemical or petroleum products, oil, radioactive materials, radon gas, asbestos in any form that is or could become friable, urea formaldehyde foam insulation and transformers or other equipment that contain dielectric fluid which may contain levels of polychlorinated biphenyls; (b) any chemicals, materials or substances defined as or included in the definition of “hazardous substances,” “hazardous wastes,” “hazardous materials,” “hazardous constituents,” “restricted hazardous materials,” “extremely hazardous substances,” “toxic substances,” “contaminants,” “pollutants,” “toxic pollutants” or words of similar meaning and regulatory effect under any applicable Environmental Law; and (c) any other chemical, material or substance, exposure to which is prohibited, limited or regulated by any applicable Environmental Law.

(61)“Hobbs Agreement” has the meaning set forth in Section 2.2(c).

(62)“HSR Act” means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.

(63)“Income Tax” means any federal, state or local Tax (a) based upon, measured by or calculated with respect to net income, profits or receipts (including, without limitation, capital gains Taxes and minimum Taxes) or (b) based upon, measured by or calculated with respect to multiple bases (including, without limitation, corporate franchise taxes) if one or more of the bases on which such Tax may be based, measured by or calculated with respect to, is described in clause (a), in each case together with any interest, penalties, or additions to such Tax.

(64)“Indebtedness” means, without duplication, all obligations of CEM, CPI or its Subsidiaries (a) for borrowed money; (b) evidenced by bonds, debentures, notes or similar instruments; (c) in respect of the deferred purchase price of property or services (excluding accounts payable and other current liabilities incurred in the ordinary course of business consistent with past practice which would be reflected in Working Capital); (d) in respect of capital lease obligations; (e) with respect to interest rate and currency cap, collar, hedging or swap agreements; (f) conditional sale or other title retention agreements; (g) reimbursement obligations with respect to letters of credit, bankers acceptances and surety bonds; and (h) under guarantee by CEM, CPI or any Subsidiary on account of any of the foregoing types of indebtedness of any other Person.

(65)“Indemnifiable Loss” has the meaning set forth in Section 8.1(a).

(66)“Indemnifying Party” has the meaning set forth in Section 8.1(d).

(67)“Indemnitee” has the meaning set forth in Section 8.1(c)(i).

(68)“Independent Accounting Firm” means an independent accounting firm of national reputation.

(69)“Initial Closing Statement” has the meaning set forth in Section 3.3(b).

(70)“Inspection” means all tests, reviews, examinations, inspections, investigations, verifications, samplings and similar activities conducted by Buyer or its agents or Representatives with respect to the Project Facilities.

(71)“Intellectual Property Rights” means all common law and statutory rights associated with patents and industrial designs, copyrights, trademarks, trade names, service marks, service names, know-how, processes, trade secrets, inventions, proprietary rights, formulae, research, databases and computer programs.

(72)“Intercompany Benefit Plans” has the meaning set forth in Section 2.2(g).

(73)“Investor Subsidiaries” means the Persons listed as such in Schedule 4.14.

(74)“IRS” means the United States Internal Revenue Service or any successor agency thereto.

(75)“Knowledge” means the actual knowledge of Paul Gatzemeier, Bill Connors, Darcy Neigum, Kari Knudson, Jim Nolan, Trevor Hastings or Rodney Bellendir, assuming Commercially Reasonable Efforts to acquire such knowledge.

(76)“LIBOR” means a rate per annum (rounded upwards if necessary, to the nearest 1/16th of 1%) equal to the arithmetic mean of the offered rate for three month deposits in dollars in the London Interbank Market at approximately 11:00 a.m. (London time), which appears on the Telerate Screen designated as Page 3570 of the Reuters Monitor Money Rates Service.

(77)“Liens” means any mortgages, pledges, liens, security interests, conditional and installment sale agreements, activity and use limitations, conservation or other easements, restrictive covenants, deed restrictions, leases, licenses, other rights of occupancy and any other encumbrances or charges of any kind.

(78)“Major Project Contracts” means all of the Project Contracts, with respect to each Project Company, other that those which involve expenditures by such Project Company of less than $250,000 per year.

(79)“Material Adverse Effect” means any matter that individually or taken as a whole with all other matters that has had or is reasonably likely to cause a material and adverse change in, or effect on, the assets or financial condition of CEM and CPI, or the business or operations of CEM and CPI, providedhowever, that the term Material Adverse Effect shall not include any state of facts, circumstance, change, development, effect, condition or occurrence to the extent resulting from: (a) conditions that generally affect the electric generation industry or the construction services industry, (b) economic conditions affecting the United States securities markets generally and (c) new legal, accounting or regulatory requirements or limitations, except to the extent such matters have an effect on CPI and CEM that is disproportionate in any material respect to the effect on other similarly situated participants in their respective industry.

(80)“Material Contract” has the meaning set forth in Section 6.1.

(81)“MDU Affiliated Group” has the meaning set forth in Section 6.9(b)(i).

(82)“Mountain View Project” means that certain 67 megawatt wind power project consisting of 111 wind turbines and associated equipment located in the San Gorgonio Pass near Palm Springs, California.

(83)“MVPP” means Mountain View Power Partners, LLC, a Delaware limited liability company.

(84)“New 125 Plan” has the meaning set forth in Section 6.14(b).

(85)“Objection Notice” has the meaning set forth in Section 3.3(d).

(86)“Party” or “Parties” has the meaning set forth in the Preamble.

(87)“Permitted Liens” means (a) Liens on property existing at the time of the acquisition thereof by a Project Company, (b) statutory Liens for taxes and other governmental charges not yet due and payable, (c) Liens securing the payment of Taxes that are either due but not delinquent or being contested in good faith and for which adequate reserves in accordance with GAAP have been established, (d) mechanics’, carriers’, workers’, warehouse and other similar Liens arising in the ordinary course of business relating to obligations as to which a Project Company is not in default, (e) zoning, entitlement, conservation restriction and other land use and environmental regulations by Governmental Authorities, (f) Liens, imperfections in title, charges, easements and restrictions which, in the aggregate, do not materially detract from the value of the CPI Stock and the CEM Membership Interests or materially impair the intended use of the property subject thereto, and (g) Liens created by or arising by reason of this Agreement, the Major Project Contracts, the CEM Agreements, the CPI Agreements or the Project Company Agreements.

(88)“Person” means any individual, partnership, limited liability company, joint venture, corporation, trust, unincorporated organization, or governmental entity or any department or agency thereof.

(89)“Pre-Closing Tax Period” means any Tax period ending on or prior to the Closing Date.

(90)“Project” means one or all of the following, as the case may require: the Brush 1&3 Project, the Brush 4D Project, the Mountain View Project, the Hardin Project, the San Joaquin Project, and the Hartwell Project.

(91)“Project Companies” means BIV Generation, CPP, Hartwell Partnership, MVPP, RMP and SJC.

(92)“Project Company Agreement” means, for each of the Project Companies, the limited liability company agreement, partnership agreement, by-laws or other organizational document of such Project Company.

(93)“Project Company Interests” means, in respect of each Project Company, the ownership interest of each Person listed as a direct parent with respect to such Project Company as set forth in Schedule 4.14, together with all of the rights and obligations of such Person under the Project Company Agreement for such Project Company, including without limitation, its rights and obligations as a member, shareholder, or general or limited partner, as the case may be, under such Project Company Agreement or applicable law.

(94)“Project Contracts” means, with respect to a Project Company, all contracts, agreements and commitments, including without limitation, mortgages, indentures and loan agreements, to which such Project Company is a party.

(95)“Project Facilities” means those facilities, land, fixtures, equipment and other assets owned or leased by the Project Companies.

(96)“Project Permits” means, with respect to each Project Company, the material permits, licenses, or similar authorizations from any Governmental Authority required with respect to the business or property of such Project Company as presently conducted or owned.

(97)“Proprietary Information” of a Party means all information about the Party or its Affiliates, including their respective properties or operations, furnished to the other Party or its Representatives by the Party or its Representatives regardless of the manner or medium in which it is furnished, including information provided to a Party pursuant to the Confidentiality Agreement. In addition, after the Closing Date, Proprietary Information includes any non-public information regarding CEM, CPI, the Investor Subsidiaries, the Service Subsidiaries, the Project Companies or the transactions contemplated by this Agreement. Proprietary Information does not include information that: (a) is or becomes generally available to the public (other than as a result of a disclosure by the other Party or its Representatives in violation of a confidentiality agreement); (b) was available to the other Party on a nonconfidential basis prior to its disclosure by the Party or its Representatives; (c) becomes available to the other Party on a nonconfidential basis from a person, other than the Party or its Representatives, who is not otherwise bound by a confidentiality agreement, or is not under any obligation not to transmit the information to the other Party or its Representatives; or (d) is independently developed by the other Party.

(98)“Purchase Price” has the meaning set forth in Section 3.2.

(99)“Real Property Leases” has the meaning set forth in Section 4.6.

(100)“Release” means release, spill, leak, discharge, dispose of, pump, pour, emit, empty, inject, leach, dump or allow to escape into or through the environment.

(101)“Replacement PPA” has the meaning set forth in Section 6.1(b).

(102)“Representatives” of a Party means its directors, officers, employees, agents, partners, advisors (including, without limitation, accountants, counsel, environmental consultants, financial advisors and other authorized representatives) and the Party’s Affiliates, parents and other controlling persons.

(103)“RMP” means Rocky Mountain Power, Inc., a Montana corporation.

(104)“San Joaquin Project” means that certain 48 megawatt simple-cycle gas-fired facility located approximately 73 miles east of San Francisco in Lathrop, California.

(105)“SEC” means the Securities and Exchange Commission and any successor agency thereto.

(106)“Section 338(h)(10) Elections” has the meaning set forth in Section 6.9(a)(i).

(107)“Securities Act” has the meaning set forth in Section 5.6.

(108)“Seller” has the meaning set forth in the Preamble.

(109)“Seller 125 Plan” has the meaning set forth in Section 6.14(b).

(110)“Seller 401(k) Plan” has the meaning set forth in Section 6.14(c).

(111)“Seller Fundamental Representations” means the representations and warranties of Seller contained in Sections 4.1, 4.2, 4.3, 4.5, 4.9(a)(A), 4.14, 4.15 and 4.20(a)-(d) and (k)(iv).

(112)“Seller Health Plan” has the meaning set forth in Section 6.14(a).

(113)“Seller’s Indemnitee” has the meaning set forth in Section 8.1(a).

(114)“Seller’s Required Regulatory Approvals” has the meaning set forth in Section 4.3(b).

(115)“Service Subsidiaries” means the Persons listed as such on Schedule 4.14.

(116)“Shared Assets and Services” means (a) any equipment, hardware, software, materials, technologies; (b) services, including those required for telecommunications, human resources, logistics and accounting; and (c) their related Intellectual Property Rights, purchased or licensed by Seller for the benefit of, and/or which are shared among, CEM, CPI, Seller and/or any Affiliates or Subsidiaries of Seller.

(117)“SJC” means San Joaquin Cogen, L.L.C, a Delaware limited liability company.

(118)“Straddle Period” means any Tax period beginning on or prior to and ending after the Closing Date.

(119)“Subsidiary” when used in reference to any Person means any entity: (a) of which outstanding securities having ordinary voting power to elect a majority of the Board of Directors or other Persons performing similar functions of such entity are owned directly or indirectly by such Person; or (b) that does not have outstanding shares or securities but whose ownership interest representing the right to manage such entity is now or hereafter owned and controlled by such Person directly or indirectly.

(120)“Target Entities” has the meaning set forth in Section 6.9(b)(i).

(121)“Tax Contest” has the meaning set forth in Section 6.9(d)(i).

(122)“Taxes” means (a) all taxes, charges, fees, levies, penalties or other assessments imposed by any federal, state or local taxing authority, including, but not limited to, income, excise, real or personal property, sales, transfer, franchise, payroll, withholding, social security, gross receipts, license, stamp, occupation, employment or other taxes, including any interest, penalties or additions imposed with respect thereto, and (b) any transferee liability in respect of any items described in clause (a) above resulting from a transfer of assets that occurred prior to the Closing Date.

(123)“Tax Return” means any return, report, information return, declaration or other document filed or required to be filed with a taxing authority with respect to Taxes, including any schedule or attachment thereto or amendment thereof.

(124)“Termination Date” has the meaning set forth in Section 9.1(b).

(125)“Third Independent Accounting Firm” has the meaning set forth in Section 3.3(d).

(126)“Third Party Claim” has the meaning set forth in Section 8.2(a).

(127)“Transfer Taxes” has the meaning set forth in Section 6.9(f).

(128)“Treasury Regulations” means the income tax regulations promulgated by the United States Department of Treasury under the Code, including temporary regulations, as such regulations may be amended from time to time (including corresponding provisions of succeeding regulations).

(129)“Wolcon Closure Agreement” has the meaning set forth in Section 2.2(h).

(130)“Working Capital” means the total current assets less total current liabilities, as determined in accordance with GAAP, except that (a) cash and cash equivalents, cash held by CEM for third parties, loan origination fees currently being amortized, prepaid insurance that is non-transferable, Income Tax assets, accounts receivable related to the sale of Lea Power Partners and all intercompany receivables shall be excluded from the calculation of current assets and (b) all deferred revenue amounts (billings in excess of cost) associated with the sale of Lea Power Partners and revenue recognition for the Hobbs project, Brush 4D deferred revenue (EITF 91-6), third party payables associated with third party cash accounts, accrued interest payable on debt, current portion of long-term debt due in one year, accrued employee bonuses, Income Taxes payable, Taxes payable resulting from any transaction or event that is not in the ordinary course of business and occurs after the Closing on the Closing Date, intercompany payables, SO₂ emission credits payable (net of related intangible asset) and accrued allocable payroll Taxes and employee benefit costs for Seller’s employees shall be excluded from the calculation of current liabilities.

(131)“Working Capital Amount” has the meaning set forth in Section 3.3.

1.2Certain Interpretive Matters.  In this Agreement, unless the context otherwise requires, the singular shall include the plural, the masculine shall include the feminine and neuter, and vice versa. The term “includes” or “including” shall mean “including without limitation.” References to a Section, Article, Exhibit or Schedule shall mean a Section, Article, Exhibit or Schedule of this Agreement, and reference to a given agreement or instrument shall be a reference to that agreement or instrument as modified, amended, supplemented and restated through the date as of which such reference is made.

ARTICLE II

PURCHASE AND SALE

2.1Transfer of Stock and Membership Interests.  Upon the terms and subject to the satisfaction of the conditions contained in this Agreement, at the Closing Seller will sell, assign, convey, transfer and deliver to Buyer, and Buyer will purchase and acquire from Seller, free and clear of all Liens, and subject to Section 2.2 and the other terms and conditions of this Agreement, all of Seller’s right, title and interest in and to the CPI Stock and the CEM Membership Interests.

2.2Excluded Assets.  Notwithstanding anything to the contrary in this Agreement, nothing in this Agreement will constitute or be construed as conferring on Buyer, and Buyer is not acquiring, any right, title or interest in or to the following specific assets of CPI and CEM and their respective Subsidiaries, which are hereby specifically excluded from the sale (the “Excluded Assets”):

(a)All cash and cash equivalents, other than cash accounts maintained by CEM for third parties, checkbooks, canceled checks and bank deposits;

(b)All refunds or credits of or against Excluded Taxes or any other Taxes that are the responsibility of Seller pursuant to this Agreement;

(c)The LLC Membership Interest Purchase and Sale Agreement by and between CPI and Hobbs Power Funding, LLC, dated October 20, 2006 (the “Hobbs Agreement”), and any and all rights of CPI thereunder;

(d)Any and all rights of CPI to receive distributions or payments, directly or indirectly, from the Hartwell Partnership with respect or to the extent allocable to all periods prior to the Closing Date as provided in Section 6.16;

(e)The Centennial Marks;

(f)The assets of any employee benefit plan covering employees of CPI, CEM or any of their respective Affiliates, other than the assets of the Seller 125 Plan and the Seller 401(k) Plan held for the benefit of employees of CPI or CEM;

(g)The Benefit Plans identified as the MDU Plans and the Payflex Agreement on Schedule 4.8 (collectively, the “Intercompany Benefit Plans”);

(h)The Wolcon Closure Agreement between RMP and Wolcon, dated March 28, 2005 (the “Wolcon Closure Agreement”), and any and all rights of RMP thereunder;

(i)The First Amended and Restated Form of Connected Entity Access Services Agreement between AT&T Corp. and MVPP, dated July 22, 2004 (the “AT&T CAISO ECN Agreement”), and any and all rights of MVPP thereunder;

(j)All Shared Assets and Services;

(k)The assets set forth on Schedule 2.2(k); and

(l)The insurance policies set forth on Schedules 4.4 and 4.20(k)(ii).

2.3Transfer of Excluded Assets and Discharge of Certain Liabilities.  Not later than immediately prior to the Closing, Seller shall cause each of CPI, CEM and their respective Affiliates, as applicable, to transfer all Excluded Assets, except for those portions of the Shared Assets and Services required for continued use by CPI or CEM (the terms and use of which the Parties shall agree to in good faith prior to the Closing), to Seller or one or more of Seller’s Affiliates, and Seller shall cause CPI, CEM and their respective Affiliates, as applicable, to be discharged and released from all liabilities and obligations arising under the Excluded Agreements. All costs and expenses, including Taxes associated with such transfer shall be for the Seller’s account.

2.4Guarantee Liabilities.  Seller and Buyer shall use their Commercially Reasonable Efforts to cause the release and discharge of Seller and any Affiliate of Seller (other than CEM, CPI, the Investor Subsidiaries, the Service Subsidiaries and the Project Companies) from their obligations under the guarantee or other credit support agreements listed on Schedule 2.4 (the “Guarantee Liabilities”) as of the Closing Date. To the extent that Seller or any such Affiliate of Seller is not fully released and discharged from its obligations under the Guarantee Liabilities, Buyer shall indemnify, defend and hold harmless Seller and any such Affiliates of Seller from and against any and all Indemnifiable Losses asserted against or suffered by Seller or any such Affiliates of Seller relating to or arising out of the Guarantee Liabilities as provided in Section 8.1, and at the Closing, Buyer shall deliver to Seller an Assumption Agreement substantially in the form attached hereto as Exhibit B (the “Assumption Agreement”) pursuant to which Buyer shall assume and agree to discharge when due each and every obligation and liability arising on or after the Closing Date under each of the Guarantee Liabilities.

ARTICLE III

THE CLOSING

3.1Closing.  Upon the terms and subject to the satisfaction of the conditions contained in Article VII of this Agreement, the sale and delivery of the CPI Stock and the CEM Membership Interests to Buyer, the payment of the Purchase Price to Seller, and the consummation of the other respective obligations of the Parties contemplated by this Agreement shall take place at a closing (the “Closing”), to be held at the offices of Thelen Reid Brown Raysman & Steiner LLP, 875 Third Avenue, New York, New York at 10:00 a.m. local time, or another mutually acceptable time and location, on the date that is five (5) Business Days (or such later date as may be provided by Section 6.15 hereof) following the date on which the last of the conditions precedent to Closing set forth in Article VII of this Agreement have been either satisfied or waived by the Party for whose benefit such conditions precedent exist or such other date as the Parties may mutually agree. The date of Closing is hereinafter called the “Closing Date.” The Closing shall be effective for all purposes as of 12:01 a.m. on the Closing Date.

3.2Payment of Purchase Price.  Upon the terms and subject to the satisfaction of the conditions contained in this Agreement, in consideration of the aforesaid sale, assignment, conveyance, transfer and delivery of the CPI Stock and CEM Membership Interests, Buyer will pay or cause to be paid to Seller at the Closing an aggregate amount of Six Hundred Million United States Dollars (U.S. $600,000,000) subject to adjustment as provided in Section 3.3 (the “Purchase Price”) by wire transfer of immediately available funds denominated in U.S. Dollars or by such other means as are agreed upon by Seller and Buyer, as adjusted pursuant to Section 3.3.

3.3Purchase Price Adjustment.

(a)The Purchase Price is premised upon CEM and CPI having as of the Closing Date and delivering to Buyer an aggregate Working Capital of Zero Dollars ($0) (the “Working Capital Amount”). Accordingly, the Purchase Price shall be (i) increased by the amount, if any, by which the aggregate Working Capital of CEM and CPI as of the Closing Date is greater than the Working Capital Amount, or (ii) decreased by the amount, if any, by which the aggregate Working Capital of CEM and CPI as of the Closing Date is less than the Working Capital Amount. Any such adjustment to the Purchase Price shall be effected in accordance with this Section 3.3 (the “Adjustment”).

(b)Seller agrees to prepare and deliver to Buyer at least five (5) Business Days prior to the Closing Date an unaudited consolidated balance sheet and income statement for each of CEM and CPI reflecting the financial condition of each of CEM and CPI as of the most recent month end prior to the Closing Date, together with a statement setting forth (i) the estimated aggregate Working Capital of CEM and CPI as of the Closing Date and (ii) the Adjustment, if any, pursuant to clauses (i) and (ii) of Section 3.3(a), above (the “Initial Closing Statement”). Within sixty (60) days after the Closing Date, Buyer shall prepare and deliver to Seller an unaudited consolidated balance sheet and income statement reflecting the financial condition of each of CEM and CPI as of the Closing Date, together with a statement setting forth (i) the aggregate Working Capital of CEM and CPI as of the Closing Date and (ii) the Adjustment, if any, pursuant to clauses (i) and (ii) of Section 3.3(a) above (the “Closing Statement”). The Initial Closing Statement and the Closing Statement shall be prepared in a manner consistent with the application of the accounting principles, practices and procedures of the Financial Statements and the provisions of this Agreement.

(c)If the Initial Closing Statement sets forth an aggregate Working Capital of CEM and CPI greater than the Working Capital Amount and a corresponding upward adjustment to the Purchase Price, then the Purchase Price payable on the Closing Date shall be increased by an amount equal to such Adjustment. If the Initial Closing Statement sets forth the aggregate Working Capital of CEM and CPI less than the Working Capital Amount and a corresponding downward adjustment to the Purchase Price, then the Purchase Price payable on the Closing Date shall be decreased by an amount equal to such Adjustment. If the aggregate Working Capital of CEM and CPI as set forth on the Closing Statement is different than that included on the Initial Closing Statement, then (i) to the extent that the Working Capital on the Closing Statement is greater than the Working Capital on the Initial Closing Statement, Buyer shall pay to Seller an amount equal to the absolute value of such difference, and (ii) to the extent that the Working Capital on the Closing Statement is less than the Working Capital on the Initial Closing Statement, Seller shall pay to Buyer an amount equal to the absolute value of such difference, subject to Section 3.3(d) below. In each case, such payment shall be made in cash in immediately available funds within twenty (20) days after the date the Closing Statement becomes final under Section 3.3(d). The Purchase Price shall be deemed to be increased or decreased (as the case may be) by the amounts calculated under this Section 3.3(c). The Parties agree that for Income Tax and all other Tax purposes, the Parties shall and shall cause their Affiliates to calculate and timely report such increase or decrease with respect to CPI and CEM on a separate entity basis. The Parties shall promptly agree upon revisions to all of the allocations prepared pursuant to Section 6.9(a) to reflect such increase or decrease, and the Parties shall and shall cause their Affiliates to not take a position on any Tax Return, with any Tax authority, or otherwise that is inconsistent with such calculations and revised allocations, except to the extent specifically required pursuant to this Agreement.

(d)Each Party shall make available to the other Party its work papers used to prepare its respective closing statement, and shall cooperate with the other Party in connection with the preparation thereof. Seller shall notify Buyer in writing within twenty (20) days after receipt by Seller of the Closing Statement of any objection to the items set forth therein, which notice shall include a reasonably detailed explanation of the reasons for each objection by Seller (an “Objection Notice”), provided, that the Seller may only object to the items contained in the Closing Statement to the extent any such item was not prepared in accordance with this Agreement or contains mathematical errors. Any item not so objected to by Seller shall be conclusively deemed to have been approved by Seller and shall be conclusive and binding upon the Parties. If the Parties are unable to resolve such dispute within thirty (30) days after the date of receipt by Seller of the Closing Statement, then Buyer and Seller shall agree upon and designate an Independent Accounting Firm (the “Designated Independent Accounting Firm”) and the Designated Independent Accounting Firm shall, within fifteen (15) days of its appointment, make a final and binding determination solely of the matters that remain in dispute and were properly included in the Objection Notice, and, based on such resolution, a final and binding determination of the Adjustment amount, if any. If Buyer and Seller are unable to agree upon a Designated Independent Accounting Firm, then each of the Buyer and Seller shall designate one Independent Accounting Firm and the two Independent Accounting Firms so selected shall, within ten (10) days after the date on which the later of the two Independent Accounting Firms are appointed, appoint a third Independent Accounting Firm (the “Third Independent Accounting Firm”) and the Third Independent Accounting firm shall, within fifteen (15) days of its appointment, make a final and binding determination solely of the matters that remain in dispute and were properly included in the Objection Notice, and, based on such resolution, a final and binding determination of the Adjustment amount, if any. The Designated Independent Accounting Firm or the Third Independent Accounting Firm, as the case may be, shall act on the following basis: such Independent Accounting Firm shall act as an expert and not as an arbitrator; its terms of reference shall be to determine the appropriate Adjustment within fifteen (15) days of its appointment, having strict regard to the application of the terms of this Agreement to the same (and, for the avoidance of doubt, disregarding other means of calculating the same, to the extent that such means are inconsistent with or not provided for in this Agreement); Buyer and Seller shall each provide such Independent Accounting Firm with all such information as it reasonably requires and the Independent Accounting Firm shall base its decision solely on such written submissions by Buyer and Seller and their respective representatives; such Independent Accounting Firm shall not hold any hearings, hear any oral testimony or otherwise seek or require any other evidence and it may not assign a value greater than the greatest value for such item claimed by either Party or smaller than the smallest value for such item claimed by either Party. The final written determination of such Independent Accounting Firm shall (in the absence of fraud or manifest error) be conclusive and binding on the Parties. The Independent Accounting Firms shall not have the power to amend or modify any terms of this Agreement. The costs of the Independent Accounting Firms shall be borne pro rata by Seller and Buyer in proportion to the difference between the Designated Independent Accounting Firm’s or the Third Independent Accounting Firm’s, as the case may be, final determination of any Adjustment amount and each of Buyer’s and Seller’s determination of such Adjustment amount. For example, if Buyer calculated an Adjustment amount of $100,000, Seller calculated an Adjustment amount of $50,000 and the Designated Independent Accounting Firm or the Third Independent Accounting Firm, as the case may be, calculated an Adjustment amount of $60,000, Buyer would pay that portion of the Independent Accounting Firms’ fees determined by dividing $40,000 ($100,000 - $60,000) by $50,000 ($100,000 - $50,000) (i.e., 80%) and Seller would pay the remaining 20% of such fees.

(e)Any disputed amounts or any amounts not paid within five (5) days of when due and owing, plus interest thereon at the Default Interest Rate which shall have accrued from the due date until the date of payment, shall be paid in accordance with Section 3.3(c) above within ten (10) days after the date the Designated Independent Accounting Firm or the Third Independent Accounting Firm, as the case may be, provides to both Parties its final written determination pursuant to Section 3(d) above. In addition, any amount not paid within ten (10) days of when due if not disputed in accordance with Section 3.3(d) above shall accrue interest at the Default Interest Rate.

(f)Each of the Parties agrees and undertakes to the other to provide all reasonable access, necessary data and information, and to assist in the calculations referred to in this Section 3.3.

3.4Deliveries by Seller.  At the Closing, Seller will deliver, or cause to be delivered, the following to Buyer:

(a)A stock certificate or certificates representing the CPI Stock accompanied by a stock power duly endorsed to Buyer;

(b)The CEM ownership ledger marked with appropriate notations evidencing the transfer of the CEM Membership Interests to Buyer;

(c)Resignations of all directors and officers of CPI, CEM, the Investor Subsidiaries, the Service Subsidiaries and the Project Companies (other than the Hartwell Partnership) effective upon the Closing, and written resignations of any member of the management committee of the Hartwell Partnership designated by Seller or any Affiliate thereof effective upon the Closing.

(d)Copies of any and all governmental and other third party consents, waivers or approvals required with respect to the transfer of the CPI Stock, the CEM Membership Interests, or the consummation of the transactions contemplated by this Agreement;

(e)The opinions of counsel and officer’s certificates contemplated by Section 7.1;

(f)Copies, certified by the Secretary or Assistant Secretary of Seller, of corporate resolutions authorizing the execution and delivery of this Agreement and all of the agreements and instruments to be executed and delivered by Seller in connection herewith, and the consummation of the transactions contemplated hereby;

(g)A certificate of the Secretary or Assistant Secretary of Seller identifying the name and title and bearing the signatures of the officers of Seller authorized to execute and deliver this Agreement and the other agreements and instruments contemplated hereby;

(h)A Certificate of Good Standing with respect to Seller issued by the Secretary of State of the State of Delaware;

(i)A Certificate of Good Standing with respect to CPI issued by the Secretary of State of the State of Delaware;

(j)A Certificate of Good Standing with respect to CEM issued by the Secretary of State of the State of Colorado;

(k)To the extent available, originals of all CPI Agreements, CEM Agreements, Major Project Contracts, Real Property Leases and corporate and limited liability company records of CPI and CEM, respectively, and, if not available, true and correct copies thereof;

(l)Copies of all Project Permits and Environmental Permits held by the Project Companies; and

(m)Such other agreements, documents, instruments and writings as are required to be delivered by Seller at or prior to the Closing Date pursuant to this Agreement or otherwise reasonably required in connection herewith.

3.5Deliveries by Buyer.  At the Closing, Buyer will deliver, or cause to be delivered, the following to Seller:

(a)The Purchase Price by wire transfer of immediately available funds in accordance with Seller’s instructions or by such other means as may be agreed to by Seller and Buyer;

(b)The opinions of counsel and officer’s certificates contemplated by Section 7.2;

(c)Copies, certified by the Secretary or Assistant Secretary of Buyer, of resolutions authorizing the execution and delivery of this Agreement, and all of the agreements and instruments to be executed and delivered by Buyer in connection herewith, and the consummation of the transactions contemplated hereby;

(d)A certificate of the Secretary or Assistant Secretary of Buyer, identifying the name and title and bearing the signatures of the officers of Buyer authorized to execute and deliver this Agreement, and the other agreements contemplated hereby;

(e)Copies of any and all governmental and other third party consents, waivers or approvals obtained by Buyer with respect to the transfer of the CPI Stock, the CEM Membership Interests or the consummation of the transactions contemplated by this Agreement; and

(f)Such other agreements, documents, instruments and writings (including without limitation the Assumption Agreement) as are required to be delivered by Buyer at or prior to the Closing Date pursuant to this Agreement or otherwise reasonably required in connection herewith.

3.6Mutual Delivery.  At the Closing, Seller and Buyer shall execute and deliver to Barclays Bank PLC a notice of termination of the Buyer LC signed by an authorized officer of each of Seller and Buyer in the form of Annex B to the Buyer LC.

ARTICLE IV

REPRESENTATIONS, WARRANTIES AND DISCLAIMERS OF SELLER

Seller represents and warrants to Buyer as follows (each such representation and warranty in respect of the Hartwell Partnership being further limited to the Knowledge of Seller):

4.1Organization; Qualification.  Each of Seller, CEM, CPI, the Investor Subsidiaries and the Service Subsidiaries is a corporation or limited liability company duly incorporated or formed, validly existing and in good standing under the laws of the jurisdiction under which it was incorporated or formed as indicated on Schedule 4.14. CEM, CPI, and each Investor Subsidiary and Service Subsidiary have all requisite corporate or limited liability company power and authority to own, lease, and operate their material properties and assets and to carry on their businesses as is now being conducted. Each of CEM, CPI, the Investor Subsidiaries and Service Subsidiaries is duly qualified to do business as a foreign corporation and is in good standing under the laws of each jurisdiction in which its business, as now being conducted, shall require it to be so qualified, except where the failure to be so qualified has not had, and is not reasonably likely to have, individually or in the aggregate, a Material Adverse Effect. Seller has heretofore delivered to Buyer true, complete and correct copies of its, CEM’s, CPI’s, each Investor Subsidiary’s and each Service Subsidiary’s certificate of incorporation and bylaws or certificate of formation and limited liability company agreement, as applicable, as currently in effect.

4.2Authority Relative to this Agreement.  Seller has full limited liability company power and authority to execute and deliver this Agreement and to consummate the transactions contemplated by it hereby. The execution and delivery of this Agreement by Seller and the consummation by Seller of the transactions contemplated hereby have been duly and validly authorized by all necessary corporate or limited liability company action required on the part of Seller and this Agreement has been duly and validly executed and delivered by Seller. Subject to the receipt of Seller’s Required Regulatory Approvals, this Agreement constitutes the legal, valid and binding agreement of Seller, enforceable against Seller in accordance with its terms, except that such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium or other similar laws affecting or relating to enforcement of creditors’ rights generally and general principles of equity (regardless of whether enforcement is considered in a proceeding at law or in equity).

4.3Consents and Approvals; No Violation.

(a)Except as set forth on Schedule 4.3(a), and other than obtaining Seller’s Required Regulatory Approvals, neither the execution and delivery of this Agreement by Seller nor the consummation by Seller, CEM or CPI of the transactions contemplated hereby will (i) conflict with or result in any breach or violation of any provision of the Amended and Restated Certificate of Incorporation or Bylaws of CPI or the Certificate of Formation or Limited Liability Company Agreement of Seller or CEM, or (ii) require any material consent, approval, authorization, waiver of any right of first refusal, right of first offer or similar preemptive right, or permit of, or filing with, any Person, or (iii) result in a default (or give rise to any right of termination, consent, cancellation or acceleration) under any of the terms, conditions or provisions of any material note, bond, mortgage, indenture, material agreement or other instrument or obligation to which Seller, CEM, CPI, any Investor Subsidiary or any Service Subsidiary is a party or by which it may be bound, or (iv) constitute violations in any material respect of any law, regulation, order, judgment or decree applicable to Seller, CEM, CPI or any Investor Subsidiary or Service Subsidiary.

(b)Except as set forth on Schedule 4.3(b), (the filings and approvals referred to in Schedule 4.3(b) are collectively referred to as the “Seller’s Required Regulatory Approvals”), no consent or approval of, filing with, or notice to, any Governmental Authority by or for Seller, CEM, CPI, any Investor Subsidiary or any Service Subsidiary is necessary for the execution and delivery of this Agreement by Seller, or the consummation by Seller of the transactions contemplated hereby, other than (i) such consents, approvals, filings or notices which, if not obtained or made, will not prevent Seller, CEM or CPI from performing its material obligations hereunder and (ii) such consents, approvals, filings or notices which become applicable to Seller, CEM, CPI, any Investor Subsidiary or any Service Subsidiary as a result of the specific regulatory status of Buyer (or any of its Affiliates) or as a result of any other facts that specifically relate to the business or activities in which Buyer (or any of its Affiliates) is or proposes to be engaged.

4.4Insurance.  Schedule 4.4 lists all material policies of fire, liability, workers’ compensation and other forms of insurance owned or held by, or on behalf of, Seller, CEM, CPI, any Investor Subsidiary or any Service Subsidiary with respect to the business, operations or employees of CEM, CPI, any Investor Subsidiary or any Service Subsidiary, each of which is in full force and effect, all premiums with respect thereto covering all periods up to and including the date hereof have been paid (other than retroactive premiums which may be payable with respect to comprehensive general liability and workers’ compensation insurance policies), and no notice of cancellation or termination has been received with respect to any such policy which was not replaced on substantially similar terms prior to the date of such cancellation.

4.5Title and Related Matters.  Seller has good and valid title to the CPI Stock and the CEM Membership Interests, free and clear of all Liens. Except as set forth on Schedule 4.5, each Person listed on Schedule 4.14 as being the direct parent of the Investor Subsidiaries and the Service Subsidiaries is the record and beneficial owner of all of the issued and outstanding shares of capital stock or membership interests, as applicable, of the such Investor Subsidiaries and Service Subsidiaries and has good and valid title to such capital stock or membership interests, as applicable, free and clear of all Liens. Except as set forth on Schedule 4.5, each Person listed on Schedule 4.14 as being the direct parent of a Project Company is the record and beneficial owner of all such Project Company Interests free and clear of all Liens.

4.6Real Property Leases.  Schedule 4.6 lists, as of the date of this Agreement, all real property leases, easements, licenses and other rights in real property (collectively, the “Real Property Leases”) to which CEM, CPI, any Investor Subsidiary or any Service Subsidiary is a party and which provide for annual payments of more than $50,000. Except as set forth on Schedule 4.6, all such Real Property Leases are valid, binding and enforceable in accordance with their terms, and are in full force and effect; there are no existing material defaults by CEM, CPI or any Investor Subsidiary or Service Subsidiary or, to the Knowledge of Seller, any other party thereunder; and no event has occurred which (whether with or without notice, lapse of time or both) would constitute a material default by CEM, CPI, any Investor Subsidiary or any Service Subsidiary or, to the Knowledge of Seller, any other party thereunder.

4.7Labor Matters.  There are no collective bargaining agreements to which CEM, CPI, any Investor Subsidiary or any Service Subsidiary is a party or is subject. With respect to the business or operations of CEM, CPI, any Investor Subsidiary or any Service Subsidiary, except to the extent set forth on Schedule 4.7 and except such matters as have not had, and are not reasonably likely to have, individually or in the aggregate, a Material Adverse Effect, CEM, CPI, each Investor Subsidiary and each Service Subsidiary is in compliance with all applicable laws respecting employment and employment practices, terms and conditions of employment and wages and hours.

4.8Benefit Plans.  Schedule 4.8 lists all (i) deferred compensation, profit-sharing, retirement and pension plans, including multi-employer plans, and all material bonus, fringe benefit and other employee benefit plans or arrangements maintained or with respect to which contributions are made by CEM or CPI or any of their respective Affiliates in respect of the current or former employees of CEM or CPI, any of the Investor Subsidiaries, any of the Service Subsidiaries or any of the Project Companies connected with the business or operations of CEM and CPI or with respect to which any of CEM, CPI, any Investor Subsidiary, any Service Subsidiary or Project Company has any actual or contingent liability (“Benefit Plans”) and (ii)  each employment, consulting, change in control or severance agreement in respect of the employees of CEM, CPI, any Investor Subsidiary, any Service Subsidiary or any Project Company and with respect to which CEM, CPI, any Investor Subsidiary, any Service Subsidiary or any Project Company may have any actual or contingent liability (collectively, “Benefit Agreements”). All Benefit Plans and Benefit Agreements have been operated in accordance with their terms and applicable law in all material respects. True and complete copies of all Benefit Agreements have been made available to Buyer.

4.9Contracts and Leases.

(a)Schedule 4.9(a) lists (i) each CEM Agreement and (ii) each CPI Agreement, other than any contract, license, agreement or personal property lease which is listed or described on another Schedule or which is an Excluded Asset or Excluded Agreement. Schedule 4.9(a) contains a list of all of the following contracts to which CEM, CPI, any Investor Subsidiary or any Service Subsidiary is a party or by which their respective assets are bound:

(A) contracts respecting Indebtedness; (B) joint venture agreements, partnership agreements, limited liability company agreements and each similar type of contract involving a sharing of profits, losses, costs or liabilities with any other person; (C) contracts not otherwise disclosed herein which materially restrict the ability of CEM, CPI or any of their Subsidiaries to engage in the type of business in which they are currently principally engaged; (D) stock option contracts, warrants and convertible securities for the issuance of capital stock of CEM, CPI or any of their Subsidiaries; (E) contracts restricting the transfer of capital stock of CEM, CPI or any of their Subsidiaries, obligating CEM, CPI or any of their Subsidiaries to issue or repurchase its capital stock or relating to the voting or the election of directors of CEM or CPI; (F) contracts relating to the acquisition or sale by CEM, CPI or any of their Subsidiaries of any operating business or the capital stock or other ownership interest of any other person under which CEM, CPI or any of their Subsidiaries has a continuing liability or obligation; (G) contracts under which there is a continuing obligation to pay any “earnout” payment or deferred or contingent purchase price or any similar payment respecting the purchase of any business or assets; (H) contracts with Seller, any officer or director of CEM, CPI or any of their Subsidiaries, or in the case of any individual any immediate family member of any of the foregoing; and (I) contracts which CEM, CPI or any of their Subsidiaries guarantees the liabilities or obligations of another person.

(b)Except as disclosed in Schedule 4.9(b), each CEM Agreement and CPI Agreement listed on Schedule 4.9(a) (i) constitutes a legal, valid and binding obligation of CEM, CPI, the Investor Subsidiary or the Service Subsidiary party thereto and, to the Knowledge of Seller, constitutes a valid and binding obligation of the other parties thereto and (ii) is in full force and effect.

(c)Except as set forth on Schedule 4.9(c), there are not, under the CEM Agreements or the CPI Agreements, any material defaults or events which, with notice or lapse of time or both, would constitute a material default on the part of CEM, CPI, any Investor Subsidiary or any Service Subsidiary or, to the Knowledge of Seller, any of the other parties thereto.

4.10Legal Proceedings, etc.  Except as set forth on Schedule 4.10, there are no claims, actions, investigations or proceedings pending (or to the Knowledge of Seller overtly threatened) against CEM, CPI, any Investor Subsidiary or any Service Subsidiary before any court, arbitrator or Governmental Authority and to the Knowledge of Seller, there are no facts or circumstances that are reasonably expected to give rise to any such claim, action, proceeding or investigation which, individually or in the aggregate, (a) would reasonably be expected to result, or has resulted, in (i) the institution or threat of legal proceedings to prohibit or restrain the performance by the Seller of this Agreement or the consummation of the transactions contemplated hereby, or (ii) a material impairment of the ability of Seller to perform its obligations under this Agreement or (iii) a material impairment of Buyer’s ability to own, operate and maintain CEM and CPI in the same manner as it is owned, operated and maintained on the Closing Date; or (b) would be reasonably likely to result in losses exceeding One Million Dollars ($1,000,000). Except as set forth on Schedule 4.10, neither CEM, CPI, any Investor Subsidiary nor any Service Subsidiary is subject to any outstanding judgments, rules, orders, writs, injunctions or decrees of any court, arbitrator or Governmental Authority which would, individually or in the aggregate, create a Material Adverse Effect.

4.11Tax Matters.  Except as set forth on Schedule 4.11:

(a)CEM, CPI, each Investor Subsidiary and each Service Subsidiary has duly and timely filed (or there has been filed on its behalf) with the appropriate taxing authorities all material Tax Returns required to be filed by it (after giving effect to any valid extension of time in which to make such filings), and all such Tax Returns were correct in all material respects at the time of filing;

(b)CEM, CPI, each Investor Subsidiary and each Service Subsidiary has, complied in all material respects with applicable laws relating to the withholding of Taxes on payments made to employees, independent contractors, creditors, stockholders, members and third parties and the remittance of such withheld amounts to proper Governmental Authorities;

(c)There are no Liens for Taxes upon the assets or properties of CEM, CPI, any Investor Subsidiary or any Service Subsidiary, except for Permitted Liens;

(d)No federal, state or local audits or examinations (“Audits”) have been initiated and are currently in progress with regard to any Taxes or Tax Returns of CEM, CPI, any Investor Subsidiary or any Service Subsidiary and, to the Knowledge of Seller, none of such entities has received any notice from any taxing authority that any such Audit is currently pending or threatened;

(e)CEM, CPI, the Investor Subsidiaries and the Service Subsidiaries are not parties to, are not bound by, and have no obligation under, any Tax sharing agreement (other than an agreement solely among members of an Affiliated Group the common parent of which is MDU Resources Group, Inc.);

(f)No power of attorney has been granted by CEM, CPI, any Investor Subsidiary or any Service Subsidiary relating to Taxes of such entities, which power of attorney is currently in force;

(g)CEM, CPI, each Investor Subsidiary and each Service Subsidiary have fully and timely paid all material Taxes that are due and payable by such companies to Governmental Authorities (whether or not shown on any Tax Return), and have established adequate reserves in accordance with GAAP for any material Taxes that are not yet due and payable to Governmental Authorities, for all taxable periods, or portions thereof, ending on or before the date hereof;

(h)There are no outstanding agreements entered into by Seller or any of its Affiliates extending or waiving the statutory period of limitations applicable to any claim for, or the period for the collection or assessment or reassessment of, Taxes due from CEM, CPI, any Investor Subsidiary or any Service Subsidiary for any taxable period and no request by Seller or any of its Affiliates for any such waiver or extension is currently pending;

(i)None of CEM, CPI, the Investor Subsidiaries or the Service Subsidiaries has taken any reporting position on a Tax Return, which reporting position (i) if not sustained would be reasonably likely, absent adequate disclosure in accordance with Section 6662(d)(2)(B) of the Code, to subject such entity to a penalty for substantial understatement of federal income Tax under Section 6662 of the Code, and (ii) has not adequately been disclosed on such Tax Return in accordance with Section 6662(d)(2)(B) of the Code;

(j)None of CEM, CPI, the Investor Subsidiaries or the Service Subsidiaries has constituted a “distributing corporation” or a “controlled corporation” (within the meaning of Section 355(a)(1)(A) of the Code) in a distribution of shares described in Section 355 of the Code (i) in the two years prior to the date of this Agreement or (ii) in a distribution that could otherwise be reasonably expected to constitute part of a “plan” or “series of related transactions” (within the meaning of Section 355(e) of the Code) that includes the purchase by Buyer of the CPI Stock and the CEM Membership Interests pursuant to this Agreement;

(k)None of CEM, CPI, the Investor Subsidiaries or the Service Subsidiaries (i) has executed or entered into a closing agreement pursuant to Section 7121 of the Code or any similar provision of state, local or foreign law that would have continuing effect after the Closing Date or (ii) has received any private letter ruling of the IRS or comparable ruling of any other Governmental Authority, in either case that would have continuing effect after the Closing Date;

(l)There is no contract, agreement, plan, or arrangement to which CEM, CPI, any Investor Subsidiary or any Service Subsidiary is a party, covering any employee or former employee of any such entity that, individually or collectively, could reasonably be expected to give rise to the payment of any amount that would not be deductible by Buyer, CEM, CPI, the Investor Subsidiaries or the Service Subsidiaries by reason of Section 280G of the Code;

(m)The Hartwell Partnership has made the election to adjust the basis of its assets described in Section 754 of the Code, and such election is currently in effect; and

(n)Schedule 4.11(n) sets forth the December 31, 2005 adjusted tax basis for federal income tax purposes of CEM, CPI, the Investor Subsidiaries, the Service Subsidiaries and the Project Companies.

4.12Compliance With Laws.  CEM, CPI, each Investor Subsidiary and each Service Subsidiary is in compliance with all applicable laws, rules and regulations with respect to its business or operations except where the failure to be in compliance has not had, and is not reasonably likely to have, individually or in the aggregate, a Material Adverse Effect.

4.13Undisclosed Liabilities.  Except as set forth on Schedule 4.13, neither CEM nor CPI is subject to any material liability or obligation (whether absolute, contingent or otherwise) that has not been accrued or reserved against its Financial Statements, except (a) liabilities arising in the ordinary course of business under any contract or commitment, (b) those liabilities or obligations incurred in the ordinary course of business since December 31, 2006, (c) liabilities that have not had, and are not reasonably likely to have, individually or in the aggregate, a Material Adverse Effect and (d) liabilities or obligations disclosed on any of the Schedules to this Agreement.

4.14Subsidiaries.  Except as set forth on Schedule 4.14, none of CPI, CEM, any Investor Subsidiary or any Service Subsidiary owns any preferred, common or other equity securities of any kind nor any equity or other interests in any other business, legal entity or arrangement.

4.15Capitalization.

(a)The CPI Stock, which consists of 1,000 shares of common stock, no par value, constitutes all of the issued and outstanding shares of capital stock of CPI and is owned beneficially and of record by Seller, free and clear of all Liens. The CPI Stock has been duly authorized and validly issued, and is fully paid and non-assessable. There are no other authorized shares of capital stock of CPI other than the 1,000 shares of common stock comprising the CPI Stock. Neither Seller nor CPI has any obligation, contingent or otherwise, to issue, sell, repurchase, redeem or otherwise acquire any of the CPI Stock or other capital stock of CPI or any equity or debt securities of CPI.

(b)The CEM Membership Interests constitute 100% of the membership interests of CEM and are owned beneficially and of record by Seller, free and clear of all Liens. The CEM Membership Interests have been duly authorized and validly issued, and are fully paid and non-assessable. There are no other authorized membership interests of CEM other than the membership interests comprising the CEM Membership Interests. Seller has no obligation, contingent or otherwise, to issue, sell, repurchase, redeem or otherwise acquire any of the CEM Membership Interests or other ownership interests of CEM or any equity or debt securities of CEM.

(c)None of the membership interests constituting the CEM Membership Interests nor the shares of common stock constituting the CPI Stock have been issued in violation of, or is subject to, any preemptive or subscription rights, rights of first refusal or offer, options, put or call rights, consent rights, restrictive covenants or agreements with any third party other than Buyer. There are no outstanding securities convertible into or exchangeable for the capital stock of CPI or the membership interests of CEM. Except as set forth on Schedule 4.15(c), there are no outstanding options, warrants or other rights (including conversion or preemptive rights and rights of first refusal) or agreements for the purchase from CEM or CPI of any capital stock or other equity interests.

4.16Financial Statements.  Attached hereto as Schedule 4.16 are the unaudited balance sheets and income statements of CEM, CPI, each Project Company, each Investor Subsidiary and each Service Subsidiary and the unaudited combined statements of cash flows of CEM and CPI as of and for the year ended December 31, 2006, and the three-month period ending March 31, 2007 (collectively, the “Financial Statements”). The Financial Statements have been prepared in accordance with GAAP and present fairly the financial condition of CEM, CPI, each Project Company, each Investor Subsidiary and each Service Subsidiary, respectively, as applicable, as of the dates set forth therein and their respective results of operations for the periods set forth therein.

4.17Absence of Certain Changes.  Except as set forth on Schedule 4.17, since December 31, 2006:

(a)Neither CEM, CPI, any Investor Subsidiary nor any Service Subsidiary has suffered any damage, destruction or loss which has not been disclosed to Buyer, whether or not covered by insurance, which has had a Material Adverse Effect;

(b)Without limiting any other representation made by Seller herein, to the Knowledge of Seller, neither CEM, CPI, any Investor Subsidiary nor any Service Subsidiary has suffered or experienced any Material Adverse Effect which has not been disclosed to Buyer which would constitute a breach of any other representation made by Seller herein;

(c)Neither CEM, CPI, any Investor Subsidiary nor any Service Subsidiary has issued or agreed to issue any additional common stock, membership interests or general or limited partnership interests or other equity interests in such Person;

(d)Neither CEM, CPI, any Investor Subsidiary nor any Service Subsidiary has encumbered any of its assets or incurred any Indebtedness, other than unsecured liabilities incurred in the ordinary course of business and consistent with past practice and Permitted Liens;

(e)Neither CEM, CPI, any Investor Subsidiary nor any Service Subsidiary has entered into any contract or agreement, including, without limitation, new loans or capital expenditures, that will bind such Person beyond the Closing and will involve aggregate expenditures in excess of $250,000, except the CEM Agreements and CPI Agreements;

(f)Neither CEM, CPI, any Investor Subsidiary nor any Service Subsidiary has acquired, sold or transferred any material asset of any such Person other than in the ordinary course of business and consistent with past practice; and

(g)Neither CEM, CPI, any Investor Subsidiary nor any Service Subsidiary has amended or changed any of its governing corporate, limited liability company, general partnership or limited partnership documents.

4.18Bankruptcy.  There are no bankruptcy, reorganization, or arrangement proceedings pending against, being contemplated by, or, to the Knowledge of Seller, threatened against CEM or CPI.

4.19Books and Records.  The company records of CEM and CPI have been made available to Buyer prior to the execution of this Agreement and contain a true and complete records, in all material respects, of all material action taken at all meetings and by all written consents in lieu of meetings of boards of directors and other similar governing bodies of said entities.

4.20Project Companies.

(a)Organization; Good Standing. Each of the Project Companies is a limited partnership, limited liability company or corporation duly organized, validly existing and in good standing under the laws of the state of its formation or incorporation, is qualified to do business and is in good standing under the laws of each jurisdiction in which its business as now being conducted shall require it to be so qualified, except where the failure to be so qualified has not had, and is not reasonably likely to have, individually or in the aggregate, a Material Adverse Effect.

(b)Validity of Agreement. Except as set forth on Schedule 4.20(b), the execution, delivery and performance of this Agreement, and the consummation of the transactions contemplated hereby, do not and will not require any material consent or waiver by any Person, or give rise to any rights of first refusal or similar preemptive rights under, conflict with, result in a material breach of any provision of, constitute a material default under, result in the material modification or cancellation of, or give rise to any right of termination or acceleration in respect of, any Project Contracts.

(c)Subsidiaries. Except as set forth on Schedule 4.20(c), none of the Project Companies has any Subsidiaries or otherwise owns or controls, directly or indirectly, any equity interest in any corporation, partnership, joint venture, limited liability company, association or other business entity.

(d)No Options. Except as set forth on Schedule 4.20(d), there are no outstanding options, warrants or other rights (including conversion or preemptive rights and rights of first refusal) or agreements for the purchase from any Project Company of any general or limited partnership interests, membership interests, capital stock or other equity interests, other than any such rights or agreements, if any, set forth in the Project Company Agreement of such Project Company.

(e)Financial Statements; Liabilities. Except as and to the extent (A) shown or provided for in the Financial Statements for the year ended December 31, 2006 with respect to the Project Companies, (B) set forth on Schedule 4.20(e), (C) arising under the Project Contracts, or (D) the existence of which would not constitute a breach of any other representation or warranty made herein to by the Knowledge of Seller, each of the Project Companies has no liabilities or obligations (whether accrued, absolute or contingent) arising prior to December 31, 2006 which are or which would reasonably be expected to become a claim against such Project Company or a Lien, other than a Permitted Lien, against any of the assets or properties of such Project Company, in each case, that has not had, and is not reasonably likely to have, individually or in the aggregate, a Material Adverse Effect.

(f)Absence of Certain Changes. Except as set forth on Schedule 4.20(f), since December 31, 2006:

(i)To the Knowledge of Seller, none of the Project Companies has suffered any damage, destruction or loss which has not been disclosed to Buyer, whether or not covered by insurance, which has had a Material Adverse Effect;

(ii)Without limiting any other representation made by Seller herein, to the Knowledge of Seller, none of the Project Companies has suffered or experienced any Material Adverse Effect which has not been disclosed to Buyer which would constitute a breach of any other representation made by Seller herein;

(iii)None of the Project Companies has issued or agreed to issue any additional common stock, membership interests or general or limited partnership interests or other equity interests in such Project Company;

(iv)None of the Project Companies has encumbered any of its assets or incurred any Indebtedness, other than unsecured liabilities incurred in the ordinary course of business and Permitted Liens; and

(v)None of the Project Companies has entered into any contract or agreement, including, without limitation, new loans or capital expenditures, that will bind such Project Company beyond the Closing and will involve annual expenditures in excess of $250,000, except the Major Project Contracts and the Replacement PPA.

(g)Ownership or Lease of Project Facilities and Equipment. Each Project Company owns, leases or otherwise has the right to use all real property, including all fixtures and improvements situated thereon, and owns, leases or otherwise has the right to use all equipment and personal property, tangible and intangible, in each case which is used in the day to day operations of the business of such Project Company and which is necessary to conduct the business of such Project Company in the manner in which it is presently conducted except where the failure to so own, lease or have the right to use would not materially and adversely effect the business or operation of such Project Company.

(h)Taxes. Except as set forth on Schedule 4.20(h), each of the Project Companies has (i) duly and timely filed (or there has been filed on its behalf) with the appropriate taxing authorities all material Tax Returns required to be filed by it, and all such Tax Returns were correct in all material respects at the time of filing, and (ii) timely paid or caused to have been paid on its behalf all Taxes shown as due on filed Tax Returns.

(i)Rights of Third Parties. Except as set forth on Schedule 4.20(i), none of the Project Companies has entered into any leases, licenses, easements or other agreements, recorded or unrecorded, granting rights to third parties in, or with respect to, any real or personal property of such Project Company other than in the ordinary course of business, and no person or entity has any right to possession or occupancy of any property of such Project Company, in each case except to the extent arising under Permitted Liens, the Major Project Contracts or any leases, licenses, easements or other agreements entered into in the ordinary course of business.

(j)Title to Properties.

(i)Except as set forth on Schedule 4.20(j)(i), each Project Company has good and valid title to all of the properties which such Project Company owns as reflected in the Financial Statements as of and for the period ended December 31, 2006 with respect to the Project Companies, and such properties are not subject to any Lien, other than Permitted Liens.

(ii)Except as set forth on Schedule 4.20(j)(ii), all material leases pursuant to which each Project Company leases personal or real property are valid and are enforceable against such Project Company and, to the Knowledge of Seller, enforceable by such Project Company, in each case in accordance with their respective terms, except to the extent enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws now or hereafter in effect, affecting the enforcement of creditors’ rights generally and general equitable principles regardless of whether such enforceability is considered in a proceeding at law or in equity.

(k)Additional Information. The following additional information concerning the Project Companies is set forth on Schedule 4.20(k):

(i)Major Project Contracts. A list of all of the Major Project Contracts;

(ii)Insurance. A list of all of the current insurance policies for each Project Company;

(iii)Litigation. A description of all litigation and other administrative, arbitration, grievance or other proceedings which, to the Knowledge of Seller, is pending or overtly threatened, in each such case in which any Project Company is a party or is reasonably likely to become a party, or involving any Project Company, its business, its properties, or the Project Company Interests, except actions, if any, instituted by Buyer or any of its Affiliates;

(iv)Indebtedness. A list of all indebtedness for borrowed money of each Project Company in excess of $100,000; and

(v)Project Permits. A list of the Project Permits with respect to each Project Company.

(l)Insurance. The insurance policies listed on Schedule 4.20(k) are in full force and effect.

(m)Default. Except as set forth on Schedule 4.20(m), none of the Project Companies nor, to the Knowledge of Seller, any of the other parties to the Project Contracts, is in material default under, nor has any event occurred which, with notice or the lapse of time or both, would result in a material default on the part of any Project Company under, any of the material Project Contracts. Except as set forth on Schedule 4.20(m), each of the Project Contracts is valid, legally binding and enforceable against the Project Company a party thereto and, to the Knowledge of Seller, enforceable by such Project Company, in each case in accordance with its terms, except to the extent enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws now or hereafter in effect, affecting the enforcement of creditors’ rights generally and general equitable principles regardless of whether such enforceability is considered in a proceeding at law or in equity.

(n)Environmental Matters. Except as set forth on Schedule 4.20(n):

(i)To the Knowledge of Seller, no Releases of Hazardous Substances have occurred at, onto, from, under or in any of the Project Facilities with respect to which remedial action is required by law which has not been completed;

(ii)To the Knowledge of Seller, there are no Environmental Conditions at any of the Project Facilities for which remedial action is required by law which has not been completed;

(iii)There are no Environmental Claims against any Project Company or relating to one or more of the Project Facilities, which are pending or, to the Knowledge of Seller, overtly threatened;

(iv)To the Knowledge of Seller, no underground storage tanks are currently located at any of the Project Facilities;

(v)All material permits, licenses, approvals, consents and orders required under Environmental Laws for the operation of the Project Facilities (each an “Environmental Permit”) as of the date hereof have been obtained, are in effect and are being complied with in all material respects; and

(vi)Seller has (A) disclosed, or upon obtaining Knowledge thereof will disclose prior to Closing, to Buyer all environmental investigation reports of which Seller has Knowledge which have been prepared by any third party since January 1, 2004 relating to environmental conditions at the Project Facilities, and (B) provided, or upon obtaining Knowledge thereof will disclose prior to Closing, to Buyer copies of, and have listed in Schedule 4.20(n), all such reports which, to the Knowledge of Seller, are currently in the Project Companies’ possession.

(o)Labor Matters. There are no collective bargaining agreements to which any of the Project Companies are subject.

(p)Legal and Regulatory Compliance. Except (i) as set forth on Schedule 4.20(p), each Project Company operates its businesses in compliance in all material respects with, and the Project Facilities conform to, all applicable federal, state and local laws and all governmental regulations, and none of the Project Companies has received any written notice of noncompliance with any such laws or regulations relating to events, conditions or occurrences which if not remedied would have a Material Adverse Effect. Except as set forth on Schedule 4.20(p), each Project Company holds the Project Permits with respect to such Project Company, each Project Permit is in full force and effect, and each Project Company is in material compliance with the terms and conditions of its respective Project Permits. The consummation of the transactions contemplated by this Agreement will not give rise to any right of termination, cancellation or consent under the terms, conditions or provisions of any Project Permit.

4.21Disclaimers.  EXCEPT FOR THE REPRESENTATIONS AND WARRANTIES SET FORTH IN THIS ARTICLE IV, THE PROJECT FACILITIES AND ANY OTHER ASSETS OF CPI, CEM, THE INVESTOR SUBSIDIARIES, THE SERVICE SUBSIDIARIES AND THE PROJECT COMPANIES ARE BEING ACQUIRED BY BUYER “AS IS” AND “WHERE IS”, AND EXCEPT FOR SUCH REPRESENTATIONS AND WARRANTIES, SELLER EXPRESSLY DISCLAIMS ANY REPRESENTATIONS OR WARRANTIES OF ANY KIND OR NATURE, EXPRESS, IMPLIED, AT COMMON LAW, STATUTORY OR OTHERWISE, AS TO LIABILITIES, OPERATIONS OF THE PROJECT FACILITIES AND ANY OTHER ASSETS OF CPI, CEM, THE INVESTOR SUBSIDIARIES, THE SERVICE SUBSIDIARIES AND THE PROJECT COMPANIES (COLLECTIVELY, THE “ACQUIRED ASSETS”), THE TITLE, CONDITION, VALUE OR QUALITY OF THE ACQUIRED ASSETS OR THE PROSPECTS (FINANCIAL AND OTHERWISE), RISKS AND OTHER INCIDENTS OF THE ACQUIRED ASSETS, AND SELLER SPECIFICALLY DISCLAIMS ANY REPRESENTATION OR WARRANTY OF MERCHANTABILITY, USAGE, SUITABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE WITH RESPECT TO THE ACQUIRED ASSETS, OR ANY PART THEREOF, OR AS TO THE WORKMANSHIP THEREOF, OR THE ABSENCE OF ANY DEFECTS THEREIN, WHETHER LATENT OR PATENT, OR COMPLIANCE WITH ENVIRONMENTAL REQUIREMENTS, OR THE APPLICABILITY OF ANY GOVERNMENTAL REQUIREMENTS, INCLUDING BUT NOT LIMITED TO ANY ENVIRONMENTAL LAWS, OR WHETHER SELLER POSSESSES SUFFICIENT REAL PROPERTY OR PERSONAL PROPERTY TO OPERATE THE PURCHASED ASSETS. EXCEPT FOR THE REPRESENTATIONS AND WARRANTIES SET FORTH IN THIS ARTICLE IV, SELLER FURTHER SPECIFICALLY DISCLAIMS ANY REPRESENTATION OR WARRANTY REGARDING THE ABSENCE OF HAZARDOUS SUBSTANCES OR LIABILITY OR POTENTIAL LIABILITY ARISING UNDER ENVIRONMENTAL LAWS WITH RESPECT TO THE FOREGOING.

ARTICLE V

REPRESENTATIONS AND WARRANTIES OF BUYER

Buyer represents and warrants to Seller as follows:

5.1Organization. Buyer is a limited liability company, duly organized, validly existing and in good standing under the laws of the state of its organization and has all requisite limited liability company power and authority to own, lease and operate its properties and to carry on its business as is now being conducted. Buyer has heretofore delivered to Seller complete and correct copies of its operating agreement (or other similar governing documents) as currently in effect.

5.2Authority Relative to this Agreement.  Buyer has full organizational power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement by Buyer and the consummation by Buyer of the transactions contemplated hereby have been duly and validly authorized by all necessary limited liability company action required on the part of Buyer. This Agreement has been duly and validly executed and delivered by Buyer. Subject to the receipt of Buyer Required Regulatory Approvals, this Agreement constitutes a legal, valid and binding agreement of Buyer, enforceable against Buyer in accordance with its terms, except that such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium or other similar laws affecting or relating to enforcement of creditors’ rights generally and general principles of equity (regardless of whether enforcement is considered in a proceeding at law or in equity).

5.3Consents and Approvals; No Violation.

(a)Except as set forth on Schedule 5.3(a), and other than obtaining Buyer Required Regulatory Approvals, neither the execution and delivery of this Agreement by Buyer nor the consummation by Buyer of the transactions contemplated hereby will (i) conflict with or result in any breach or violation of any provision of the operating agreement (or other similar governing documents) of Buyer, or (ii) require any consent, approval, authorization or permit of, or filing with or notification to, any Governmental Authority prior to the Closing, or (iii) result in a default (or give rise to any right of termination, cancellation or acceleration) under any of the terms, conditions or provisions of any note, bond, mortgage, indenture, material agreement or other instrument or obligation to which Buyer or any of its Subsidiaries is a party or by which any of their respective assets may be bound, except for such defaults (or rights of termination, cancellation or acceleration) as to which requisite waivers or consents have been obtained or which do not have, and would not reasonably be expected to have, individually or in the aggregate, a material adverse effect on the ability of the Buyer to consummate the transactions contemplated by this Agreement (“Buyer Material Adverse Effect”) or (iv) violate any law, regulation, order, judgment or decree applicable to Buyer, which violations, individually or in the aggregate, would create a Buyer Material Adverse Effect.

(b)Except as set forth on Schedule 5.3(b) (the filings and approvals referred to in such Schedule are collectively referred to as the “Buyer Required Regulatory Approvals”), no consent or approval of, filing with, or notice to, any Governmental Authority is necessary for Buyer’s execution and delivery of this Agreement, or the consummation by Buyer of the transactions contemplated hereby, other than such consents, approvals, filings or notices, which, if not obtained or made, will not prevent Buyer from performing its obligations under this Agreement.

5.4Legal Proceedings.  There are no actions or proceedings pending against Buyer before any court or arbitrator or Governmental Authority, which, individually or in the aggregate, would reasonably be expected to create a Buyer Material Adverse Effect. Buyer is not subject to any outstanding judgments, rules, orders, writs, injunctions or decrees of any court, arbitrator or Governmental Authority which would, individually or in the aggregate, create a Buyer Material Adverse Effect.

5.5Inspections.  Buyer acknowledges and agrees that it has, prior to its execution of this Agreement, had full opportunity to conduct and has completed to its satisfaction Inspections of the Project Facilities. Buyer acknowledges that it is satisfied through such review and Inspections that no further investigation and study on or of the Project Facilities are necessary for the purposes of acquiring the CPI Stock and the CEM Membership Interests.

5.6Securities Laws.  Buyer is an experienced and knowledgeable investor in the U.S. power generation and development business. Prior to entering into this Agreement, Buyer was advised by its counsel, accountants, financial advisors, and such other Persons it has deemed appropriate concerning this Agreement and has relied solely on Seller’s representations and warranties expressly contained herein and an independent investigation and evaluation of, and appraisal and judgment with respect to, the CPI Stock and the CEM Membership Interests and the revenue, price, and expense assumptions applicable thereto. Buyer hereby acknowledges that neither the CPI Stock nor the CEM Membership Interests have been registered under the Securities Act of 1933, as amended (the “Securities Act”), or registered or qualified for sale under any state securities laws and cannot be resold without registration thereunder or exemption therefrom. Buyer is an “accredited investor,” as such term is defined in Regulation D of the Securities Act, and will acquire the CPI Stock and the CEM Membership Interests for its own account and not with a view to a sale or distribution thereof in violation of the Securities Act, and the rules and regulations thereunder, any applicable state blue sky laws or any other applicable securities laws. Buyer has sufficient knowledge and experience in financial and business matters to enable it to evaluate the risks of investment in the CPI Stock and the CEM Membership Interests and has the ability to bear the economic risk of this investment for an indefinite period of time.

ARTICLE VI

COVENANTS OF THE PARTIES

6.1Conduct of Business.

(a)From the date of this Agreement through the Closing Date, except as Buyer may otherwise approve (which approval shall not be unreasonably withheld) or as otherwise expressly contemplated by this Agreement, CEM and CPI shall, and shall cause its Subsidiaries to, (a) conduct their businesses in the ordinary course in accordance with past practice, (b) use Commercially Reasonable Efforts to preserve intact their respective business organizations and goodwill and assets, (c) use Commercially Reasonable Efforts to keep available the services provided by their respective present officers and key employees, and (d) use their Commercially Reasonable Efforts to maintain satisfactory relationships with others having business relationships with CEM and CPI and their Subsidiaries. Except as described in Schedule 6.1(a) or as expressly contemplated by this Agreement or to the extent Buyer otherwise consents in writing, during the period from the date of this Agreement to the Closing Date (which consent shall not be unreasonably withheld), Seller shall not cause or permit CPI, CEM, any Investor Subsidiary, and Service Subsidiary or any Project Company, other than the Hartwell Partnership, to take, and Seller shall not cause or permit CPI or any Investor Subsidiary to exercise any rights under the Hartwell Partnership’s Project Company Agreement to cause the Hartwell Partnership to take, any of the following actions: (i) incur indebtedness for borrowed money, (ii) grant any Liens on its assets, other than Permitted Liens, (iii) enter into any Material Contract or terminate or amend any Material Contract to which any such Person becomes or is a party, (iv) dispose of any material assets of any such Person, (v) make any distribution in respect of the equity securities of or other ownership interest in such Person, except in the ordinary course of business and consistent with past practice of such Person, or as required by such Person’s Project Company Agreement or other governing documents, or as contemplated by, or required to effectuate the provisions of, Section 2.2 of this Agreement, (vi) revoke any election under Section 754 of the Code, (vii) issue any equity or debt securities, (viii) amend its respective Project Company Agreement or other governing documents, (ix) waive, compromise, or settle any material claim, or (x) voluntarily incur any material liability except in the ordinary course of business. For purposes of this Section 6.1, a “Material Contract” shall mean any Major Project Contract and any contract entered into in the ordinary course of business that (x) requires payments by any such Person in excess of $250,000 in the aggregate, or (y) does not provide, either, that the term thereof is three (3) months or less, or that it may be terminated without liability on three (3) months or less notice. Notwithstanding the foregoing, Seller may, from the date hereof and prior to the Closing, take or cause to be taken any such action with respect to the Project Facilities which Seller in good faith determines is necessary, appropriate and advisable to respond to emergency or similar conditions or, in accordance with prudent utility practice to avoid substantial impairment to the Project Facilities. Seller shall give Buyer prompt notice of Seller’s taking any such action and, to the extent practicable under the circumstances, advance notice thereof. On or prior to the Closing, Seller shall assign or cause to be assigned at Seller’s sole cost and expense any Major Project Contracts, CEM Agreements and CPI Agreements to which Seller or any Affiliates or Subsidiaries of Seller is a party to the appropriate Project Company, CEM or CPI.

(b)The Parties hereby acknowledge and agree that Seller shall be entitled to cause and permit the Project Companies to enter into a replacement or extension power purchase agreement for the Brush 4D Project and the right of first offer agreement referred to therein substantially in the form of the drafts thereof referenced on Schedule 6.1(b) with such changes therein as the Parties shall mutually agree, such agreement not to be unreasonably withheld or delayed (collectively, the “Replacement PPA”).

6.2Access to Information.

(a)Between the date of this Agreement and the Closing Date, Seller will, at reasonable times and upon reasonable notice and subject to compliance with all applicable laws and, in the case of the Hartwell Partnership, the Hartwell Partnership’s Project Company Agreement: (i) give Buyer and its Representatives reasonable access to CEM and CPI’s managerial personnel and to all books, records, plans, equipment, offices and other facilities and properties of CEM and CPI and the Project Facilities; (ii) furnish Buyer with such financial and operating data and other information with respect to CEM and CPI as Buyer may from time to time reasonably request, and permit Buyer to make such reasonable Inspections of the properties of CEM and CPI and the Project Facilities as Buyer may request; (iii) furnish Buyer at its request a copy of each material report, schedule or other document filed by CEM or CPI or any of their respective Affiliates with respect to the business or operations of CEM, CPI and the Project Companies with any Governmental Authority; and (iv) furnish Buyer with all such other information as shall be reasonably necessary to enable Buyer to verify the accuracy of the representations and warranties of Seller contained in this Agreement; provided, however, that (A) any such Inspections and investigations shall be conducted in such a manner as not to interfere unreasonably with the business or operations of CEM or CPI or any Project Company, (B) Seller shall not be required to take any action which would constitute a waiver of the attorney-client privilege, and (C) Seller need not supply Buyer with any information which Seller is under a legal or contractual obligation not to supply. Buyer shall not, however, have the right to perform or conduct any environmental sampling or testing at, in, on or underneath any of the Project Facilities.

(b)Each Party shall, and shall use its best efforts to cause its Representatives to, (i) keep all Proprietary Information of the other Party confidential and not to disclose or reveal any such Proprietary Information to any person other than such Party’s Representatives and (ii) not use such Proprietary Information other than in connection with the consummation of the transactions contemplated hereby. The obligations of the Parties under this Section 6.2(b) shall be in full force and effect for two (2) years from the date hereof and will survive the termination of this Agreement, the discharge of all other obligations owed by the Parties to each other and the closing of the transactions contemplated by this Agreement.

(c)For a period of seven (7) years after the Closing Date (or such longer period as may be required by applicable law or by any other provision of this Agreement), Seller and its Representatives shall have reasonable access to all of the books and records of CEM and CPI and/or any of their Subsidiaries, in the possession of Buyer to the extent that such access may reasonably be required by Seller in connection with matters relating to or affected by the business of CEM, CPI or any of their respective Subsidiaries conducted prior to the Closing Date. Such access shall be afforded by Buyer upon receipt of reasonable advance written notice and during normal business hours. Seller shall be solely responsible for any costs or expenses incurred by it or Buyer with respect to such access. If Buyer shall desire to dispose of any books and records upon or prior to the expiration of such seven-year period (or any such longer period), Buyer shall, prior to such disposition, give Seller a reasonable opportunity at Seller’s reasonable expense, to segregate and remove such books and records as Seller may select.

(d)For a period of seven (7) years after the Closing Date (or such longer period as may be required by applicable law or by any other provision of this Agreement), Buyer and its Representatives shall have reasonable access to all of the books and records of Seller and/or any Subsidiaries of Seller, in the possession of Seller to the extent that such access may reasonably be required by Buyer in connection with matters relating to or affected by the business of CEM, CPI or any of their respective Subsidiaries. Such access shall be afforded by Seller upon receipt of reasonable advance written notice and during normal business hours. Buyer shall be solely responsible for any costs or expenses incurred by it or Seller with respect to such access. If Seller shall desire to dispose of any books and records upon or prior to the expiration of such seven-year period (or any such longer period), Seller shall, prior to such disposition, give Buyer a reasonable opportunity at Buyer’s reasonable expense, to segregate and remove such books and records as Buyer may select.

(e)Notwithstanding the terms of Section 6.2(b) above, the Parties agree that prior to the Closing Buyer may reveal or disclose Proprietary Information to any other Persons in connection with Buyer’s financing of its purchase of the CPI Stock and CEM Membership Interests or any equity participation in Buyer’s purchase of the CPI Stock and CEM Membership Interests, provided that such Persons are obligated to maintain the confidentiality of the Proprietary Information in accordance with this Agreement.

(f)Upon the other Party’s prior written approval (which will not be unreasonably withheld or delayed), either Party may provide Proprietary Information of the other Party to the SEC, FERC or any other Governmental Authority with jurisdiction or any stock exchange, as may be necessary to obtain Seller’s Required Regulatory Approvals, or Buyer Required Regulatory Approvals, respectively, or to comply generally with any relevant law or regulation. The disclosing Party will seek confidential treatment for the Proprietary Information provided to any Governmental Authority and the disclosing Party will notify the other Party as far in advance as is practicable of its intention to release to any Governmental Authority any Proprietary Information.

(g)Except as specifically provided herein or in the Confidentiality Agreement, nothing in this Section shall impair or modify any of the rights or obligations of Buyer or its Affiliates under the Confidentiality Agreement, all of which remain in effect until termination of such agreement in accordance with its terms.

(h)Except as may be permitted in the Confidentiality Agreement, Buyer agrees that, prior to the Closing Date, it will not contact any vendors, off-takers, suppliers, employees, or other contracting parties of CEM, CPI or their respective Affiliates with respect to any aspect of the business or operations of CEM, CPI or any Project Company or the transactions contemplated hereby, without the prior written consent of Seller, which consent shall not be unreasonably withheld.

(i)Buyer shall not contact any Governmental Authority regarding any pending, threatened or potential Environmental Claim or with respect to any Environmental Permit relating to the Project Companies without Seller’s prior written consent.

(j)At Buyer’s request, prior to the Closing Date, Seller shall permit Buyer to have one representative located at each of CPI’s and CEM’s main offices for the purpose of observing their business operations. Seller shall cause CPI and CEM to provide Buyer’s representatives with reasonable use of office space, telephone and similar communications and office services and shall provide Buyer’s representatives with reasonable access to representatives of CPI and CEM in order to assist Buyer in making an orderly transition of CPI and CEM and their respective Subsidiaries following the Closing.

6.3Public Statements.  Subject to the requirements imposed by any applicable law or any Governmental Authority or stock exchange, no press release or other public announcement or public statement or comment in response to any inquiry relating to the transactions contemplated by this Agreement shall be issued or made by any Party without the prior approval of the other Parties (which approval shall not be unreasonably withheld). The Parties agree to cooperate in preparing such announcements.

6.4Expenses.  Except to the extent specifically provided herein, whether or not the transactions contemplated hereby are consummated, all costs and expenses incurred in connection with this Agreement and the transactions contemplated hereby shall be borne by the Party incurring such costs and expenses. Notwithstanding anything to the contrary herein, Buyer will be responsible for all filing fees under the HSR Act.

6.5Further Assurances.  Subject to the terms and conditions of this Agreement, each of the Parties hereto shall use its best efforts to take, or cause to be taken, all actions, and to do, or cause to be done, all things necessary, proper or advisable under applicable laws and regulations to consummate and make effective the purchase and sale of the CPI Stock and the CEM Membership Interests pursuant to this Agreement, including without limitation using its best efforts to ensure satisfaction of the conditions precedent to each Party’s obligations hereunder, including obtaining all necessary consents, approvals, and authorizations of third parties and Governmental Authorities required to be obtained in order to consummate the transactions hereunder. Buyer agrees to perform all conditions required of Buyer in connection with Seller’s Required Regulatory Approvals, other than those conditions which would create a Material Adverse Effect on the Buyer or its Subsidiaries after giving effect to the transactions contemplated by this Agreement. None of the Parties hereto shall, without prior written consent of the other Party, take or fail to take any action, which might reasonably be expected to prevent or materially impede, interfere with or delay the transactions contemplated by this Agreement.

6.6Consents and Approvals.

(a)As promptly as practicable after the date of this Agreement, Seller and Buyer, as applicable, shall each file or cause to be filed with the Federal Trade Commission and the United States Department of Justice any notifications required to be filed under the HSR Act and the rules and regulations promulgated thereunder with respect to the transactions contemplated hereby. The Parties shall use their respective Commercially Reasonable Efforts to respond promptly to any requests for additional information made by either of such agencies, and to cause the waiting periods under the HSR Act to terminate or expire at the earliest possible date after the date of filing. Buyer will pay all filing fees under the HSR Act, but each Party will bear its own costs of the preparation and prosecution of any filing.

(b)As promptly as practicable, and in any case within ten (10) days after the date of this Agreement, Seller and Buyer, as applicable, shall file or cause to be filed with the FERC such applications as are necessary to obtain required FERC approval for the various transactions contemplated hereby. The Parties shall consult with each other regarding such filings and shall consider and incorporate in such filings all reasonable comments, if any, submitted by the other Party with respect thereto. If appropriate, the Parties will submit a joint application to the FERC seeking such required approvals. The Parties shall respond promptly to any requests for additional information made by the FERC, and use their respective best efforts to cause regulatory approval to be obtained at the earliest possible date after the date of filing. Each Party will bear its own costs of the preparation and prosecution of any such filing.

(c)As promptly as practicable after the date of this Agreement, Buyer and Seller shall make all such other filings and applications with Governmental Authorities seeking any other approval or authorization as may be required for the consummation of the transactions contemplated hereby. The Parties shall respond promptly to any requests for additional information made by any such Governmental Authority and shall use their respective best efforts to obtain any such approval at the earliest possible date after the date of the filing. Each Party shall bear its own costs of the preparation and prosecution of such filings.

6.7Use of Centennial Marks.  Effective upon the Closing Date, Seller grants Buyer a perpetual, irrevocable, royalty-free license to use the name and trademark “CENTENNIAL POWER”. Buyer acknowledges and agrees that Seller is the owner of the Intellectual Property Rights in the trademark “CENTENNIAL POWER” when used in connection with the provision of energy, power and other related services. Buyer further acknowledges and agrees that it obtains no Intellectual Property Rights to or any other right to use the Centennial Marks other than as provided in this Section 6.7. Buyer agrees never to challenge Seller’s (or its Affiliates’) ownership of the Centennial Marks or any application for registration thereof or any existing registration thereof or any other rights of Seller or its Affiliates therein as a result, directly or indirectly, of Buyer’s ownership of the CPI Stock and the CEM Membership Interests. Buyer further agrees never to apply for, either directly or through its Affiliates and/or successors and permitted assigns, any federal or state trademark, service mark or any other Intellectual Property Right featuring the term “CENTENNIAL POWER” or any variation, deviation, modification or abbreviation thereof. Buyer warrants that its provision of services or products under the trade name “CENTENNIAL POWER” shall conform to the quality and standards adhered to by Seller and that Seller shall have the right, upon reasonable request, to review and modify, for quality assurance purposes, Buyer’s use of the trademark “CENTENNIAL POWER” in Buyer’s advertising and marketing. Within sixty (60) days after the Closing Date, Buyer shall, except for the trademark “CENTENNIAL POWER”, (i) remove the Centennial Marks from the assets of CPI, CEM, the Project Companies, the Investor Subsidiaries and the Service Subsidiaries, including signage at the Project Facilities, and provide written verification thereof to Seller promptly after completing such removal and (ii) return or destroy (with proof of destruction) all other assets of CPI, CEM, the Project Companies, the Investor Subsidiaries and the Service Subsidiaries that contain any Centennial Marks that are not removable.

6.8Fees and Commissions.  Seller, on the one hand, and Buyer, on the other hand, represent and warrant to the other that, no broker, finder or other Person is entitled to any brokerage fees, commissions or finder’s fees in connection with the transaction contemplated hereby by reason of any action taken by the Party making such representation, except that Seller has engaged, and shall bear the liability for the commissions and fees of, Goldman, Sachs & Co. in connection with the transactions contemplated hereby. Seller, on the one hand, and Buyer, on the other hand, will pay to the other or otherwise discharge, and will indemnify and hold the other harmless from and against, any and all claims or liabilities for all brokerage fees, commissions and finder’s fees incurred by reason of any action taken by the indemnifying party.

6.9Tax Matters.

(a)Section 338(h)(10) Elections.

(i)Seller and Buyer shall jointly make or cause to be made timely and irrevocable elections under Section 338(h)(10) of the Code (the “Election”) with respect to the sale of each of CPI and CEM and the deemed sale of each of the Investor Subsidiaries, the Service Subsidiaries and the Project Companies constituting corporations for federal income Tax purposes, except that no such elections shall be made with respect to Hartwell Power Company (such entities for which elections shall be made, the “338(h)(10) Election Entities”). In addition, Seller and Buyer shall jointly make all elections under state and local Tax law comparable to the elections under Section 338(h)(10) or Section 338(g) as available, unless such state or locality does not have a provision comparable to Section 338(h)(10) or Section 338(g), in which case no election shall be made in such state or locality (together with the Election, the “Section 338(h)(10) Elections”). Seller and Buyer shall and shall cause their respective Subsidiaries and Affiliates to (i) treat the Section 338(h)(10) Elections as valid, (ii) file all Tax Returns in a manner consistent with such Section 338(h)(10) Elections and (iii) take no position contrary thereto. Seller shall be responsible for and shall timely pay or cause to be timely paid to applicable Governmental Authorities all Income Taxes imposed on Seller and all 338(h)(10) Election Entities that are attributable to the making of the Section 338(h)(10) Elections, provided, however, that for any state or local jurisdiction that imposes Income Tax on both the sale (or deemed sale) of the stock of a 338(h)(10) Election Entity and the deemed sale of assets of such 338(h)(10) Election Entity, Seller shall be responsible for only the Income Tax imposed on the sale (or deemed sale) of the stock of such 338(h)(10) Election Entity and Buyer shall be responsible for and shall timely pay or cause to be timely paid to applicable Governmental Authorities all Income Taxes imposed on the deemed sale of assets of such 338(h)(10) Election Entity (such Taxes for which Buyer is responsible, the “Buyer 338 Liability”).

(ii)Prior to the Closing, Buyer shall (A) determine the amount of the adjusted grossed-up basis and aggregate deemed sales price with respect to each of the 338(h)(10) Election Entities and the allocation of such amounts among the assets of each of the 338(h)(10) Election Entities on a separate entity basis in accordance with Section 338(h)(10) of the Code and applicable Treasury Regulations thereunder and (B) deliver a schedule of all such determinations to Seller and provide Seller with a reasonable opportunity to review, comment on, and consent to such schedule prior to the Closing, which consent shall not be unreasonably withheld or delayed (the “338 Allocation”). Buyer shall promptly revise the 338 Allocation to reflect the Adjustment, as finally determined pursuant to Section 3.3 of the Agreement and Buyer shall promptly forward a draft of the revised 338 Allocation to Seller for Seller’s consent, which consent shall not be unreasonably withheld or delayed. Seller and Buyer shall take, and shall cause their respective Affiliates to take, no action inconsistent with, or fail to take any action necessary for the validity of each Section 338(h)(10) Election, and shall adopt and utilize, and cause their respective Affiliates to adopt and utilize, the asset values prescribed in the 338 Allocation (as revised by Seller and Buyer) in making such allocations for the purpose of all Tax Returns filed by them, and shall not voluntarily take any action inconsistent therewith upon examination of any Tax Return, in any refund claim, in any litigation or otherwise with respect to such Tax Returns. Buyer and Seller shall notify and provide the other with reasonable assistance in the event of an examination, audit or other proceeding regarding the agreed upon allocations.

(iii)The Purchase Price allocable to Hartwell Independent Power Partners, Inc. and Hart County IPP, Inc. and the share of each such entity of the liabilities of the Hartwell Partnership shall be allocated among the assets of the Hartwell Partnership as of the Closing Date in accordance with a schedule to be prepared in accordance with the rules under Code Sections 743(b), 751, 755 and 1060 (the “754 Allocation Schedule”). Buyer shall deliver a draft of the 754 Allocation Schedule to Seller and the Hartwell Partnership as soon as practicable after the date of this Agreement, and Buyer, Seller and the Hartwell Partnership shall mutually agree upon the 754 Allocation Schedule at or prior to the Closing. Buyer and Seller shall not, and Seller shall use all Commercially Reasonable Efforts to cause the Hartwell Partnership to not, unreasonably withhold its approval and consent with respect to the 754 Allocation Schedule. Buyer and Seller agree that the 754 Allocation Schedule shall be amended to reflect any post-Closing adjustments to the allocation that are required by applicable federal income Tax law. Unless otherwise required by applicable law, Buyer and Seller agree to act, and to cause their Affiliates and the Hartwell Partnership to act, in accordance with the computations and allocations contained in the 754 Allocation Schedule (taking into account any such amendment thereto) in any relevant Tax Returns or similar filings (including forms or reports, if any, required to be filed pursuant to Code Section 1060), to cooperate in the preparation of any such filings, to timely file such filings in the manner required by applicable law and to not take any position inconsistent with such 754 Allocation Schedule in any Tax Return, in any refund claim, in any litigation, or otherwise.

(b)Return Filing, Payments, Refunds and Credits.

(i)Seller shall prepare or cause to be prepared and file or cause to be filed all Federal, state and local Tax Returns for (x) CEM, CPI, the Investor Subsidiaries, the Service Subsidiaries and the Project Companies (other than Hartwell Partnership) (the “Target Entities”) for all Pre-Closing Tax Periods of such entities, including the consolidated federal income Tax Return of MDU Resources Group, Inc. for the Tax period ending on December 31, 2007, and (y) any Affiliated Group that includes any of the Target Entities (other than an Affiliated Group that has no members other than two or more of the Target Entities) (an “MDU Affiliated Group”). Each such Tax Return shall be prepared in a manner consistent with past practice. Buyer shall not, and shall cause its Affiliates not to, amend, refile, modify or revoke such Tax Returns (or any notification or election relating thereto) without the prior written consent of Seller, which consent shall not be unreasonably withheld or delayed; provided, for the avoidance of doubt, that the Seller shall be deemed to have reasonably withheld its consent if any such action by Buyer or its Affiliates could reasonably be expected to have an adverse impact upon any Taxes or Tax Returns (or Tax attribute) of Seller or any of its Affiliates for any Tax period ending on or prior to the Closing Date or any Straddle Period. Buyer and Seller shall act in good faith to resolve any disputes, but in the event Buyer and Seller do not resolve any disputed items by agreement, either Buyer or Seller may refer such dispute to an Independent Accounting Firm for resolution, and the decision of the Independent Accounting Firm shall be final and binding on Buyer and Seller and their respective Affiliates. The costs, expenses and fees of the Independent Accounting Firm shall be borne equally by Seller, on the one hand, and Buyer, on the other hand. Buyer shall and shall cause its Affiliates to timely provide Seller with all information as Seller shall reasonably request in connection with the preparation of such Tax Returns. Seller and its Affiliates shall be responsible for payment of any Income Taxes, and shall be entitled to any refunds or credits of Income Taxes, shown as due on such Tax Returns, except that Buyer and its Affiliates shall be responsible for the timely payment of any Buyer 338 Liability and any Income Taxes resulting from any transaction or event that is not in the ordinary course of business and occurs after the Closing on the Closing Date. Buyer shall timely pay or cause to be timely paid all Taxes (other than Income Taxes) shown as due on such Tax Returns. The income or loss or other items to be reported on the federal income Tax Return to be filed for CEM, CPI, the Investor Subsidiaries, the Service Subsidiaries and the Project Companies (other than the Hartwell Partnership) for the period that began on January 1, 2007 and ends on the Closing Date shall be based upon a closing of the books as of the close of business on the Closing Date, consistent with Treasury Regulation Section 1.1502-76(b). Buyer and Seller shall use Commercially Reasonable Efforts to cause the Investor Subsidiaries’ distributive shares of the income or loss of the Hartwell Partnership for the fiscal year that includes the Closing Date to be reported in the Tax Return described in the preceding sentence and determined based upon a hypothetical closing of the books of Hartwell Partnership as of the Closing Date, consistent with Treasury Regulation Section 1.1502-76(b)(2)(vi)(A). Notwithstanding anything in this Agreement to the contrary, Buyer and Seller agree that all transactions and events in respect of any of the Target Entities and the Hartwell Partnership that are not in the ordinary course of business and occur after the Closing on the Closing Date shall be reported on the Tax Return(s) of Buyer and its Affiliates to the extent required or permitted by Treasury Regulation section 1.338-1(d) or 1.1502-76(b)(1)(ii)(B) or other applicable federal or state Tax law.

(ii)Buyer shall, except to the extent that such Tax Returns are the responsibility of Seller under Section 6.9(b)(i), timely prepare and file or cause to be timely prepared and filed all Tax Returns of CEM, CPI, the Investor Subsidiaries, the Service Subsidiaries and the Project Companies (other than Hartwell Partnership). For any Straddle Period Tax Return that is the responsibility of Buyer under this Section 6.9(b)(ii), Buyer shall, and shall cause its Affiliates to, prepare such Tax Return in a manner consistent with past practices and with all Tax Returns prepared or caused to be prepared by Seller pursuant to Section 6.9(b)(i) with respect to the entity in question, and Buyer shall deliver to Seller for its review, comment and approval (which approval shall not be unreasonably withheld) a copy of each such proposed Tax Return (accompanied, in the case of each Income Tax Tax Return, by an allocation of the Income Taxes shown to be due on such Tax Return between the portion of such Straddle Period ending on the Closing Date and the portion of such Straddle Period beginning after the Closing Date) at least thirty Business Days prior to (a) the due date for filing such Tax Return (giving effect to any validly obtained extensions), or (b) if there is no due date for filing, the actual filing date thereof. Buyer shall and shall cause its Affiliates to not unreasonably fail to reflect any comments received from Seller. Buyer shall timely pay or cause to be timely paid all Taxes shown as due on such Tax Returns. Seller shall reimburse Buyer for Income Taxes shown to be due on such Tax Returns as filed, to the extent allocable to the portion of such Straddle Period ending on the Closing Date, and Buyer shall promptly pay to Seller the amount of Income Taxes allocable to the portion of such Straddle Period beginning after the Closing Date to the extent such Income Taxes were paid on or prior to the Closing Date. Buyer shall promptly pay to Seller the amount of any refunds or credits of Income Taxes allocable to the portion of such Straddle Period ending on the Closing Date. For purposes of this Agreement, in the case of any Straddle Period, Income Taxes allocable to the portion of such Straddle Period ending on the Closing Date shall be computed as if the Tax period ended on the Closing Date, except that any Buyer 338 Liability and any Income Taxes resulting from any transaction or event that is not in the ordinary course of business and occurs after the Closing on the Closing Date shall be allocable to the portion of such Straddle Period beginning after the Closing Date. Buyer shall not, and shall cause its Affiliates to not, amend, refile, modify or revoke any Straddle Period Tax Return (or any notification or election relating thereto) without the prior written consent of Seller, which consent shall not be unreasonably withheld; provided, for the avoidance of doubt, that the Seller shall be deemed to have reasonably withheld its consent if any such action by Buyer or its Affiliates could reasonably be expected to have an adverse impact upon any Taxes or Tax Returns (or Tax attribute) of Seller or any of its Affiliates for any Tax period ending on or prior to the Closing Date or any Straddle Period. Buyer and Seller shall act in good faith to resolve any disputes, but in the event Buyer and Seller do not resolve any disputed items by agreement, either Buyer or Seller may refer such dispute to an Independent Accounting Firm for resolution, and the decision of the Independent Accounting Firm shall be final and binding on Buyer and Seller and their respective Affiliates. The costs, expenses and fees of the Independent Accounting Firm shall be borne equally by Seller, on the one hand, and Buyer, on the other hand.

(iii)Seller and its Affiliates shall be entitled to any refunds or credits of or against any Excluded Taxes and any other Taxes for which Seller or its Affiliates are responsible pursuant to this Agreement. Buyer shall, at Seller's reasonable request, file or cause the relevant entity to file for and use Commercially Reasonable Efforts to obtain any refund or credit to which Seller and its Affiliates are entitled.

(iv)Buyer shall, and shall cause its Affiliates to, promptly forward to Seller and its Affiliates or reimburse Seller and its Affiliates for any refunds or credits of Taxes due Seller and its Affiliates (pursuant to the terms of this Section 6.9) after receipt thereof.

(v)Buyer shall, and shall cause its Affiliates to, elect, where permitted by applicable law, to carry forward any item of loss, deduction or credit which arises in any Tax period beginning after the Closing Date.

(c)Cooperation on Tax Matters.

(i)Buyer and Seller shall (and each shall cause CEM, CPI, the Investor Subsidiaries, the Service Subsidiaries and the Project Companies to) cooperate fully, as and to the extent reasonably requested by the other Party, in connection with the preparation and filing of Tax Returns pursuant to this Section and in connection with any audit, litigation or other proceeding with respect to Taxes for any Tax period ending on or prior to the Closing Date. Such cooperation shall include the retention and (upon the other Party’s request) the provision of records and information which are reasonably relevant to any such audit, litigation or other proceeding and making employees (to the extent such employees were responsible for the preparation, maintenance or interpretation of information and documents relevant to Tax matters or to the extent required as witnesses in any Tax proceedings), available on a mutually convenient basis to provide additional information and explanation of any material provided hereunder. The Parties agree (A) to retain, and (in the case of Buyer) to cause CEM, CPI, the Investor Subsidiaries, the Service Subsidiaries and the Project Companies to retain, all books and records with respect to Income Tax matters pertinent to CEM, CPI, the Investor Subsidiaries, the Service Subsidiaries and the Project Companies relating to any Tax period beginning before the Closing Date until six months after the expiration of the statute of limitations (and, to the extent notified by Buyer or Seller, any extensions thereof) of the respective Tax periods, and to abide by all record retention obligations imposed by law or pursuant to agreements entered into with any taxing authority, and (B) to give the other Party reasonable written notice prior to transferring, destroying or discarding any such books and records and, if the other Party so requests, Buyer or Seller, as the case may be, shall allow the other Party to take possession of such books and records.

(ii)Buyer and Seller further agree, upon request, to use their best efforts to obtain any certificate or other document from any Governmental Authority or any other Person as may be necessary to mitigate, reduce or eliminate any Tax that could be imposed with respect to the transactions contemplated hereby.

(iii)At Seller's request, Buyer shall cause CEM, CPI, the Investor Subsidiaries, the Service Subsidiaries and the Project Companies to make and/or join with Seller and any of Seller’s Affiliates in making after Closing any election for which such entity’s consent is required for any Tax period (or portion thereof) ending on or prior to the Closing Date, if the making of such election does not have a material adverse impact on Buyer (or any of its Affiliates) for any Tax period beginning after the Closing Date.

(d)Contests.

(i)Seller and Buyer shall notify the other Party in writing within fourteen (14) days or such shorter period as may be required thereby of receipt by it or any of its Affiliates of written notice of any pending or threatened Tax examination, audit or other administrative or judicial proceeding (a “Tax Contest”) that could reasonably be expected to result in an indemnification obligation of such other Party pursuant to this Agreement and such timely notice shall specify in reasonable detail the basis for any claim included therein and shall include a copy of the relevant portion of any correspondence received from the taxing authority. If the recipient of such notice of a Tax Contest fails to provide such timely notice to such other Party, it shall not be entitled to indemnification for any Taxes arising in connection with such Tax Contest, but only to the extent, if any, that such failure or delay shall have adversely affected the indemnifying Party’s ability to defend against, settle, or satisfy any action, suit or proceeding against it, or any damage, loss, claim, or demand for which the indemnified Party is entitled to indemnification hereunder, and the indemnifying Party’s indemnity obligations shall be reduced to the extent of any Tax or other liability incurred as a result of the delay or failure to receive such timely notice.

(ii)If a Tax Contest relates to any Taxes for which Seller is liable in full hereunder, Seller shall at its expense control the defense and settlement of such Tax Contest. If such Tax Contest relates to any Taxes for which Buyer is liable in full hereunder, Buyer shall at its own expense control the defense and settlement of such Tax Contest. The Party not in control of the defense shall have the right to observe the conduct of any Tax Contest at its expense, including through its own counsel and other professional experts. Buyer and Seller shall jointly represent CEM, CPI, any Investor Subsidiary, any Service Subsidiary or any Project Company in any Tax Contest relating to Taxes for which both are liable hereunder, and fees and expenses related to such representation shall be paid equally by Buyer and Seller.

(iii)Notwithstanding anything to the contrary in Section 6.9(d)(ii), to the extent that an issue raised in any Tax Contest controlled by one Party or jointly controlled could materially affect the liability for Taxes of the other Party, the controlling Party shall not, and neither Party in the case of joint control shall, enter into a final settlement without the consent of the other Party, which consent shall not be unreasonably withheld. Where a Party reasonably withholds its consent to any final settlement, that Party may continue or initiate further proceedings, at its own expense, and the liability of the Party that wished to settle (as between the consenting and the non-consenting Party) shall not exceed the liability that would have resulted from the proposed final settlement including interest, additions to Tax, and penalties that have accrued at that time, and the non-consenting Party shall indemnify the consenting Party for any liability in excess of liability that would have resulted from the proposed final settlement.

(iv)Notwithstanding any other provision of this Agreement to the contrary, if a Tax Contest results in an increase in Income Taxes for which Seller is liable hereunder and such increase is attributable to adjustments based on timing differences which will reverse in Tax periods ending subsequent to the Closing Date, Buyer shall promptly pay to Seller, upon Seller's written request, an amount equal to the present value of the reduction in Income Taxes payable by the Buyer and its Affiliates in future Tax periods by reason of such reversal, determined by using a discount rate of 6% and an assumed Tax rate of 40%, and by assuming that such reduction in Income Taxes will occur in the year or years of reversal.

(e)Tax Sharing Agreements. Any Tax sharing agreement or similar arrangement between Seller or any Affiliate of Seller (other than CEM, CPI, the Investor Subsidiaries, the Service Subsidiaries and the Project Companies) on the one hand, and any of CEM, CPI, the Investor Subsidiaries, the Service Subsidiaries or the Project Companies on the other hand shall be terminated with respect to CEM, CPI, the Investor Subsidiaries, the Service Subsidiaries and the Project Companies, as applicable, as of the Closing Date.

(f)Certain Taxes. Notwithstanding anything in this Agreement to the contrary, all transfer, documentary, sales, use, stamp, registration and other such Taxes and fees (including any penalties and interest) incurred in connection with this Agreement, whether imposed upon Seller, Buyer, CEM, CPI, any Investor Subsidiary, any Service Subsidiary or any Project Company (“Transfer Taxes”), shall be borne 50 percent by Seller and 50 percent by Buyer. Seller and Buyer shall, and shall cause their respective Affiliates, to prepare and timely file all necessary Tax Returns and other documentation with respect to all such Transfer Taxes, and, if required by applicable law, Buyer shall, and shall cause CEM, CPI, the Investor Subsidiaries, Service Subsidiaries and Project Companies to, join in the execution of all such Tax Returns and other documentation. All costs and expenses incurred in connection with the filing of all such Tax Returns and documentation hereunder shall be borne by Buyer.

(g)Disputes. In the event that a dispute arises between Seller and Buyer as to the amount of Taxes, or indemnification, whether or not attributable to CEM or CPI, the Parties shall attempt in good faith to resolve such dispute, and any agreed upon amount shall be paid to the appropriate Party. If such dispute is not resolved thirty (30) days thereafter, the Parties shall submit the dispute to an Independent Accounting Firm mutually appointed by Seller and Buyer for resolution, which resolution shall be final, conclusive and binding on the Parties. Notwithstanding anything in this Agreement to the contrary, the fees and expenses of the Independent Accounting Firm in resolving the dispute shall be borne equally by Seller and Buyer. Any payment required to be made as a result of the resolution of the dispute by the Independent Accounting Firm shall be made within ten (10) days after such resolution, together with any interest determined by the Independent Accounting Firm to be appropriate.

(h)Alternative Structure. The Parties agree to discuss in good faith alternative structures to complete the transactions contemplated by this Agreement, but Buyer acknowledges that (x) no such alternatives shall delay the Closing Date or increase the risks or costs of the transactions to Seller or decrease the net after-tax proceeds received by Seller from the transactions and (y) that Seller shall have no obligation to agree to any such alternative structure.

6.10Advice of Changes.  Prior to the Closing, each Party will promptly advise the other in writing with respect to any matter arising after execution of this Agreement of which that Party obtains knowledge and which, if existing or occurring at the date of this Agreement, would have been required to be set forth in this Agreement, including any of the Schedules hereto, or of any breach of any representation or warranty or of any other condition or circumstance that would excuse a Party of timely performance of its obligations hereunder. Subject to Buyer’s consent, Seller may cause CEM, CPI, the Investor Subsidiaries, the Service Subsidiaries or the Project Companies to amend, substitute or otherwise modify any CEM Agreement, CPI Agreement or Project Contract to the extent that any such agreement expires by its terms prior to the Closing Date. Nothing contained herein shall relieve Seller or Buyer of any breach of representation, warranty or covenant under this Agreement existing as of the date hereof or any subsequent date as of which such representation, warranty or covenant shall have been made; provided, however, that Seller shall have no liability to Buyer for any breach of any representation, warranty or covenant hereunder which results from Buyer withholding its consent under the immediately preceding sentence. Notwithstanding the foregoing, Seller shall be entitled to cause BIV Generation and Brush Power, LLC to enter into the Replacement PPA subject to Section 6.1(b) hereof.

6.11Consents.  Seller shall use Commercially Reasonable Efforts to obtain all consents and approvals for the consummation of the transactions contemplated hereby required under any CEM Agreement, CPI Agreement or Major Project Contract, and all required waivers of any rights of first refusal, rights of first offer, or similar preemptive rights with respect to any of the Project Company Interests necessary in order to consummate the transactions contemplated by this Agreement.

6.12Buyer Financial Assurance. Simultaneous with the execution and delivery of this Agreement, Buyer is providing to Seller (a) an irrevocable standby letter of credit from Barclays Bank PLC in the stated amount of $50 million (the “Buyer LC”) which shall permit, subject to the terms and conditions of this Agreement, Seller to draw up to $50 million in payment of the Termination Fee, and (b) an equity commitment letter (the “Equity Commitment Letter”) from Natural Gas Partners VIII L.P. dated the date hereof, addressed to Buyer confirming the commitment and availability of not less than $120 million, which funds will be provided to Buyer on or before the Closing Date in order to fund a portion of the payment of the Purchase Price.

6.13Financing Cooperation.  At Buyer’s request, Seller shall, and shall use its reasonable efforts to cause CEM, CPI and their respective Subsidiaries to, provide reasonable cooperation with Buyer and Buyer’s lenders in connection with Buyer obtaining debt financing for the consummation of the transactions contemplated hereby, including making representatives of such parties available at reasonable times in connection with the syndication of such debt financing and related activities.

6.14Employee and Benefit Plans.

(a)Except as specifically provided in this Section 6.14, Seller shall, and shall cause, CEM, CPI, the Investor Subsidiaries, the Service Subsidiaries and the Project Companies to take all necessary actions, including compliance with all applicable Laws, such that (i) immediately prior to the Closing, none of these entities shall sponsor, maintain, participate in, contribute to or have an obligation to contribute to any Benefit Plan or Benefit Agreement on or after the Closing, and (ii) Seller shall retain all Liabilities with respect to the Benefit Plans and Benefit Agreements, including but not limited to liability for all employer contributions required to be made to a Benefit Plan which is a cash or deferred arrangement qualified under Section 401(a) and 401(k) of the Code. As of the Closing Date, Buyer shall waive all pre-existing condition limitations under Buyer’s health care plan for employees continuing in employment with Buyer on and after the Closing Date (“Continuing Employees”) and covered by the health care plan in which CEM, CPI, the Investor Subsidiaries, Service Subsidiaries and any of the Project Companies participated immediately prior to the Closing Date (the “Seller Health Plan”), and shall provide such health care coverage substantially similar in the aggregate to the Seller Health Plan effective as of the Closing Date without the application of any eligibility period for coverage. In addition, with respect to Continuing Employees, Buyer shall cause its health care plan to credit all employee payments toward deductible and co-payment obligations limits under the Seller Health Plan for the plan year that includes the Closing Date as if such payments had been made for similar purposes under Buyer’s health care plan during the plan year that includes the Closing Date.

(b)Notwithstanding the provisions of Section 6.14(a), Seller shall spin-off and transfer all of the obligations and liabilities of any Benefit Plan that is a Section 125 flexible spending plan (the “Seller 125 Plan”) attributable to employees of CPI and CEM and their dependents and beneficiaries to a Section 125 flexible spending plan to be established by CEM (the “New 125 Plan”) immediately prior to the Closing Date, and the New 125 Plan shall credit each such employee's flexible spending account with the balance so transferred. Each employee eligible to participate in the New 125 Plan shall be permitted to continue his or her election in effect under the New 125 Plan for the remainder of the calendar year in which the Closing shall occur, subject to the limitation on contributions contained in the Seller 125 Plan, and CEM shall honor any such election, and the New 125 Plan shall honor (and shall be solely liable for) any claims incurred by an employee in the calendar year, which would otherwise be an eligible expense under the Seller 125 Plan, whether or not such expense was incurred before, on or after the Closing Date. Seller shall provide Buyer with all information reasonably requested by Buyer in order for CEM and the New 125 Plan to satisfy the obligations set forth in this Section 6.14(b). As soon as administratively practicable following the Closing Date, Seller shall pay to Buyer the balance of CPI and CEM employees’ accounts under the Seller 125 Plan; provided, however, that if the balance of CPI and CEM employees’ accounts under the Seller 125 Plan is less than zero, Buyer shall pay to Seller the amount by which such balance is less than zero.

(c)Notwithstanding the provisions of Section 6.14(a), as soon as practicable following the Closing Date, Seller shall fully vest the account balances of each CPI and CEM employee who is a participant in the Benefit Plan that is a 401(k) plan (the “Seller 401(k) Plan”) and shall offer each such participant the opportunity to rollover such participant’s account balance to a defined contribution 401(k) plan established or maintained by Buyer or CEM that is a qualified tax or deferred arrangement under Code Sections 401(a) and 401(k). Such rollover shall be in the form of a direct rollover in accordance with Section 401(a)(31) of the Code and other applicable provisions of ERISA and the Code and shall include the opportunity for participants to rollover all participant loan accounts and liabilities under the Seller 401(k) Plan.

6.15Audited Financial Statements.  Seller shall deliver to Buyer the audited balance sheet, income statement and statement of cash flows of CEM and CPI as of and for the year ended December 31, 2006, (which audited financial statements shall not vary in any material respect from the Financial Statements), as promptly as possible, but in no event later than one (1) Business Day after such audited financial statements are available. Seller agrees that Buyer may, upon written request, postpone the Closing Date by one day for each day beyond May 1, 2007 that Buyer has not received such audited financial statements.

6.16Hartwell Partnership Distributions.  Promptly (but in any event not later than three (3) Business Days) after Buyer’s receipt thereof, Buyer shall remit to Seller by wire transfer in immediately available funds, Seller’s share of Hartwell Partnership distributions or payments with respect to or to the extent allocable to all periods prior to the Closing Date. The Parties agree that Seller’s allocable share of such distributions or payments shall be based on the number of days of Seller’s indirect ownership of the Hartwell Partnership during the period to which such distribution or payment relates divided by the total number of days during such period.

ARTICLE VII

CONDITIONS

7.1Conditions to Obligations of Buyer.  The obligation of Buyer to effect the purchase of the CPI Stock and the CEM Membership Interests and the other transactions contemplated by this Agreement shall be subject to the fulfillment at or prior to the Closing Date (or the waiver in writing by Buyer) of the following conditions:

(a)The waiting period under the HSR Act applicable to the consummation of the sale of the CPI Stock and the CEM Membership Interests contemplated hereby shall have expired or been terminated;

(b)No preliminary or permanent injunction or other order or decree by any federal or state court or Governmental Authority which prevents the consummation of the sale of the CPI Stock and the CEM Membership Interests contemplated herein shall have been issued and remain in effect (each Party agreeing to use its best efforts to have any such injunction, order or decree lifted) and no statute, rule or regulation shall have been enacted by any state or federal government or Governmental Authority which prohibits the consummation of the sale of the CPI Stock and the CEM Membership Interests;

(c)Buyer shall have received all of Buyer’s Required Regulatory Approvals, and such approvals shall be in form and substance reasonably satisfactory (including no materially adverse conditions) to Buyer;

(d)Seller shall have performed and complied in all material respects with the covenants and agreements contained in this Agreement which are required to be performed and complied with by Seller on or prior to the Closing Date;

(e)Each of the Seller Fundamental Representations shall have been true and correct as of the date of this Agreement and shall be true and correct as of the Closing Date as if made at and as of such date (except those representations and warranties that address matters only as of a specified date, the truth and correctness of which shall be determined as of that specified date); and Seller’s other representations and warranties made in Article IV (without regard to any materiality or Material Adverse Effect qualification therein) shall have been true and correct as of the date of this Agreement and shall be true and correct on the Closing Date as if made at and as of the Closing Date (except those representations and warranties that address matters only as of a specified date, the truth and correctness of which shall be determined as of that specified date), except for such failures to be true and correct which could not reasonably be expected to constitute, individually or in the aggregate, a Material Adverse Effect;

(f)Buyer shall have received certificates from an authorized officer of Seller, dated the Closing Date, to the effect that, to such officer’s knowledge, the conditions set forth in Section 7.1(d) and (e) have been satisfied by Seller;

(g)Buyer shall have received an opinion from Seller’s counsel reasonably acceptable to Buyer, dated the Closing Date and reasonably satisfactory in form and substance to Buyer and its counsel, substantially to the effect that:

(i)Seller is a limited liability company validly existing and in good standing under the laws of the State of Delaware and has the limited liability company power and authority to execute and deliver the Agreement and to consummate the transactions contemplated thereby; and the execution and delivery of the Agreement by Seller and the consummation of the sale of the CPI Stock and the CEM Membership Interests and the other transactions contemplated thereby have been duly and validly authorized by all necessary limited liability company action required on the part of Seller;

(ii)The Agreement has been duly and validly executed and delivered by Seller and constitutes a legal, valid and binding agreement of Seller enforceable in accordance with its terms, except that such enforceability may be limited by applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or other similar laws affecting or relating to enforcement of creditors’ rights generally and general principles of equity (regardless of whether enforcement is considered in a proceeding at law or in equity);

(iii)The execution, delivery and performance of the Agreement by Seller does not (A) conflict with the Certificate of Formation or Limited Liability Company Agreement of Seller or (B) to the knowledge of such counsel, constitute a violation of or default under those agreements or instruments set forth on a schedule attached to the opinion and which have been identified to such counsel as all the agreements and instruments which are material to the business or financial condition of Seller;

(iv)No consent or approval of, filing with, or notice to, any Governmental Authority is necessary for the execution and delivery of this Agreement by Seller, or the consummation by Seller of the transactions contemplated hereby, other than (i) such consents, approvals, filings or notices set forth on Schedule 4.3(b) each of which have been obtained or made or which, if not obtained or made, will not prevent Seller from performing its material obligations hereunder and (ii) such consents, approvals, filings or notices which become applicable to Seller as a result of the specific regulatory status of Buyer (or any of its Affiliates) or as a result of any other facts that specifically relate to the business or activities in which Buyer (or any of its Affiliates) is or proposes to be engaged; and

(v)The CPI Stock and the CEM Membership Interests are owned of record, and to such counsel’s knowledge, beneficially by Seller free and clear of all Liens. Each of the CPI Stock and the CEM Membership Interests has been duly authorized and validly issued, and is fully paid and non-assessable. There are no authorized shares of capital stock of CPI other than the 1,000 shares of common stock comprising the CPI Stock and there are no other authorized membership interests of CEM other than the membership interests comprising the CEM Membership Interests. Upon the consummation of the transactions contemplated in the Agreement, Buyer will have good and valid title to the CPI Stock and the CEM Membership Interests, to such counsel’s knowledge, free and clear of all Liens.

In rendering the foregoing opinion, Seller’s counsel may rely on opinions of in-house counsel and counsel as to local laws reasonably acceptable to Buyer.

(h)Seller shall have delivered, or caused to be delivered, to Buyer at the Closing, Seller’s closing deliveries described in Section 3.4;

(i)Since the date of this Agreement, no Material Adverse Effect shall have occurred and be continuing;

(j)Seller’s Required Regulatory Approvals shall contain no conditions or terms which could reasonably be expected to have a Material Adverse Effect;

(k)All consents and approvals for the consummation of the transactions contemplated hereby required under any CEM Agreement, CPI Agreement or Major Project Contract, and all waivers of any rights of first refusal, rights of first offer, or similar preemptive rights with respect to any of the Project Company Interests arising in connection with the transactions contemplated by this Agreement, shall have been obtained; and

(l)Each of CPI, CEM and RMP, as applicable, shall have been discharged and released from all liabilities and obligations arising under the Excluded Agreements.

7.2Conditions to Obligations of Seller.  The obligation of Seller to effect the sale of the CPI Stock and CEM Membership Interests and the other transactions contemplated by this Agreement shall be subject to the fulfillment at or prior to the Closing Date (or the waiver by Seller) of the following conditions:

(a)The waiting period under the HSR Act applicable to the consummation of the sale of the CPI Stock and the CEM Membership Interests contemplated hereby shall have expired or been terminated;

(b)No preliminary or permanent injunction or other order or decree by any federal or state court which prevents the consummation of the sale of the CPI Stock and the CEM Membership Interests contemplated herein shall have been issued and remain in effect (each Party agreeing to use its best efforts to have any such injunction, order or decree lifted) and no statute, rule or regulation shall have been enacted by any state or federal government or Governmental Authority in the United States which prohibits the consummation of the sale of the CPI Stock and the CEM Membership Interests;

(c)Seller shall have received all of Seller’s Required Regulatory Approvals applicable to it, in form and substance reasonably satisfactory (including no materially adverse conditions) to Seller;

(d)All consents and approvals for the consummation of the sale of the CPI Stock and the CEM Membership Interests contemplated hereby required under the terms of any note, bond, mortgage, indenture, material agreement or other instrument or obligation to which Seller is a party or by which Seller, CEM or CPI may be bound, shall have been obtained, other than those which if not obtained, would not, individually and in the aggregate, create a Material Adverse Effect;

(e)Buyer shall have performed and complied in all material respects with the covenants and agreements contained in this Agreement which are required to be performed and complied with by Buyer on or prior to the Closing Date;

(f)Each of the Buyer Fundamental Representations shall have been true and correct as of the date of this Agreement and shall be true and correct as of the Closing Date as if made at and as of such date (except those representations and warranties that address matters only as of a specified date, the truth and correctness of which shall be determined as of that specified date); and Buyer’s other representations and warranties made in Article V (without regard to any materiality or Material Adverse Effect qualification therein) shall have been true and correct as of the date of this Agreement and shall be true and correct on the Closing Date as if made at and as of the Closing Date (except those representations and warranties that address matters only as of a specified date, the truth and correctness of which shall be determined as of that specified date), except for such failures to be true and correct which could not reasonably be expected to constitute, individually or in the aggregate, a Material Adverse Effect;

(g)Seller shall have received a certificate from an authorized officer of Buyer, dated the Closing Date, to the effect that, to such officer’s knowledge, the conditions set forth in Sections 7.2(e) and (f) have been satisfied by Buyer;

(h)Seller shall have received an opinion from Buyer’s counsel reasonably acceptable to Seller, dated the Closing Date and satisfactory in form and substance to Seller and its counsel, substantially to the effect that:

(i)Buyer is a Delaware limited liability company duly organized, validly existing and in good standing under the laws of the state of its organization and has the full limited liability company power and authority to own, lease and operate its material assets and properties and to carry on its business as is now conducted, and to execute and deliver the Agreement and to consummate the transactions contemplated thereby; and the execution and delivery of the Agreement by Buyer and the consummation of the transactions contemplated thereby have been duly authorized by all necessary corporate action required on the part of Buyer;

(ii)The Agreement has been duly and validly executed and delivered by Buyer, and constitutes a legal, valid and binding agreement of Buyer, enforceable against Buyer, in accordance with its terms, except that such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or other similar laws affecting or relating to enforcement of creditor’s rights generally and general principles of equity (regardless of whether enforcement is considered in a proceeding at law or in equity);

(iii)The execution, delivery and performance of the Agreement by Buyer does not (A) conflict with the operating agreement (or other organizational documents), as currently in effect, of Buyer or (B) to the knowledge of such counsel, constitute a violation of or default under those agreements or instruments set forth on a Schedule attached to the opinion and which have been identified to such counsel as all the agreements and instruments which are material to the business or financial condition of Buyer; and

(iv)No consent or approval of, filing with, or notice to, any Governmental Authority is necessary for Buyer’s execution and delivery of the Agreement, or the consummation by Buyer of the transactions contemplated hereby, other than (a) Buyer’s Required Regulatory Approvals each of which has been obtained or made and (b) such consents, approvals, filings or notices, which, if not obtained or made, will not prevent Buyer from performing its obligations under the Agreement.

(i)Buyer shall have delivered, or caused to be delivered, to Seller at the Closing, Buyer’s closing deliveries described in Section 3.5.

ARTICLE VIII

INDEMNIFICATION

8.1Indemnification.

(a)Buyer shall indemnify, defend and hold harmless Seller, its officers, directors, employees, shareholders, Affiliates, their respective successors, permitted assigns and agents (each, a “Seller’s Indemnitee”) from and against any and all claims, demands, suits, losses, liabilities, damages, obligations, payments, costs and expenses (including, without limitation, the costs and expenses of any and all actions, suits, proceedings, assessments, judgments, settlements and compromises relating thereto, costs of investigation and enforcement under this Article VIII and reasonable attorneys’ fees and reasonable disbursements in connection therewith) (each, an “Indemnifiable Loss”), asserted against or suffered by any Seller’s Indemnitee relating to, resulting from or arising out of (i) any breach by Buyer of any representation, warranty, covenant or agreement of Buyer contained in this Agreement or in any certificate delivered by or on behalf of Buyer pursuant to this Agreement, (ii) any loss or damages directly resulting from or arising out of any negligent act or omission or willful misconduct of Buyer or Buyer’s Representatives in connection with Buyer’s Inspections, (iii) any Third Party Claims against any Seller’s Indemnitee arising out of or in connection with Buyer’s ownership or operation of CEM or CPI on or after the Closing Date, (iv) any Third Party Claim asserted against any Seller’s Indemnitee by any member or partner of any Project Company resulting from or arising out of any deemed sale or exchange of an interest in such Project Company resulting from any of the Section 338(h)(10) Elections made or caused to be made by Seller and Buyer pursuant to Section 6.9(a) and (v) the Guarantee Liabilities.

(b)Seller shall indemnify, defend and hold harmless Buyer, its officers, directors, employees, shareholders, Affiliates, their respective successors, permitted assigns and agents (each, a “Buyer Indemnitee”) from and against any and all Indemnifiable Losses asserted against or suffered by any Buyer Indemnitee relating to, resulting from or arising out of (i) any breach by Seller of any representation, warranty, covenant or agreement of Seller contained in this Agreement or in any certificate delivered by or on behalf of Seller pursuant to this Agreement, (ii) the Excluded Liabilities and (iii) any Third Party Claims against a Buyer Indemnitee arising out of or in connection with (x) Seller’s ownership or operation of CEM or CPI prior to the Closing Date, (y) CEM, CPI or Seller’s ownership or operation of the Excluded Assets prior to, on or after the Closing Date and (z) the Excluded Liabilities.

(c)Notwithstanding anything to the contrary contained herein:

(i)Any Person entitled to receive indemnification under this Agreement (an “Indemnitee”) shall use Commercially Reasonable Efforts to mitigate all losses, damages and the like relating to a claim under these indemnification provisions, including availing itself of any defenses, limitations, rights of contribution, claims against third Persons and other rights at law or equity. The Indemnitee’s Commercially Reasonable Efforts shall include the reasonable expenditure of money to mitigate or otherwise reduce or eliminate any loss or expenses for which indemnification would otherwise be due, and the Indemnitor shall reimburse the Indemnitee for the Indemnitee’s reasonable expenditures in undertaking the mitigation; and

(ii)Any Indemnifiable Loss shall be net of (A) the dollar amount of any insurance or other proceeds, net of any reasonable expenses, actually received by the Indemnitee or any of its Affiliates with respect to the Indemnifiable Loss, and (B) Tax benefits to the Indemnitee or any of its Affiliates, to the extent realized or reasonably expected to be realized by the Indemnitee or any of its Affiliates. Any Party seeking indemnity hereunder shall use Commercially Reasonable Efforts to seek coverage (including both costs of defense and indemnity) under applicable insurance policies with respect to any such Indemnifiable Loss and the reasonable costs of such Commercially Reasonable Efforts shall be an indemnifiable claim under this Agreement.

(d)The expiration or termination of any representation, warranty or covenant or agreement shall not affect the Parties’ obligations under this Section 8.1 if the Indemnitee provided the Person required to provide indemnification under this Agreement (the “Indemnifying Party”) with proper notice of the claim or event for which indemnification is sought prior to such expiration, termination or extinguishment.

(e)Except to the extent otherwise provided in Article IX, the rights and remedies of Seller and Buyer under this Article VIII are exclusive and in lieu of any and all other rights and remedies which Seller and Buyer may have under this Agreement or otherwise for monetary relief, with respect to (i) any breach of or failure to perform any covenant, agreement, or representation or warranty set forth in this Agreement, after the occurrence of the Closing, or (ii) liabilities of CEM or CPI being assumed by Buyer or the Excluded Liabilities, as the case may be; provided, however, that the provisions of this Section 8.1(e) shall not prevent or limit (i) a claim of, or a cause of action arising from, fraud or (ii) a cause of action to obtain equitable remedies. The indemnification obligations of the Parties set forth in this Article VIII apply only to matters arising out of this Agreement.

(f)Notwithstanding anything to the contrary herein, no Party (including an Indemnitee) shall be entitled to recover from any other Party (including an Indemnifying Party) for any liabilities, damages, obligations, payments losses, costs, or expenses under this Agreement any amount in excess of the actual compensatory damages, court costs and reasonable attorney’s and other advisor fees suffered by such Party. Buyer and Seller waive any right to recover punitive, incidental, special, exemplary and consequential damages arising in connection with or with respect to this Agreement. The provisions of this Section 8.1(f) shall not apply to (i) a claim of or cause of action arising from fraud or (ii) indemnification for a Third Party Claim or (iii) with respect to the Guarantee Liabilities.

(g)Notwithstanding anything to the contrary herein, (i) except as provided in (ii) - (iv) below, neither Party shall be liable to the other Party for Indemnifiable Losses relating to, resulting from or arising out of a breach of representation or warranty (other than the Seller Fundamental Representations and the Buyer Fundamental Representations), unless and until the amount of such Indemnifiable Losses exceeds Two Hundred Fifty Thousand Dollars ($250,000), in the aggregate, in which event the respective Party shall then only be liable for the amount of such excess, but only up to the aggregate amount of 5% of the Purchase Price, provided that such Party’s liability and obligation must be asserted by the other Party within the applicable survival period specified in Section 8.3, (ii) Seller’s liability and obligation to Buyer for an Indemnifiable Loss relating to, resulting from or arising out of a breach of representation or warranty with respect to (A) Sections 4.11 (Tax Matters) and 4.20(h) (Taxes) and (B) Section 4.8 (Benefit Plans) shall not be limited in amount but must be asserted by Buyer on or before the termination of the related survival period set forth in Section 8.3; (iii) Buyer’s liability and obligation for Indemnifiable Losses arising out of the Guarantee Liabilities shall not be limited in either amount or the time when Seller may assert a claim with respect thereto; and (iv) and Seller’s liability and obligation for Indemnifiable Losses arising out of the Excluded Liabilities shall not be limited in either amount or the time when Buyer may assert a claim with respect thereto.

(h)“Excluded Liabilities” means

(i)Any liabilities or obligations in respect of (A) Income Taxes of CEM, CPI, or any of the Investor Subsidiaries, Service Subsidiaries or Project Companies for Tax periods (or portions thereof) beginning before and ending on or before the Closing Date, determined in a manner consistent with the provisions of Section 6.9(b) (other than Buyer 338 Liability and Income Taxes resulting from any transaction or event that occurs after the Closing on the Closing Date and is not in the ordinary course of business), (B)  Income Taxes payable by CEM, CPI, any Investor Subsidiary, any Service Subsidiary or any Project Company solely by reason of being severally liable for the Income Tax of Seller or any MDU Affiliated Group pursuant to Treasury Regulation Section 1.1502-6 or any analogous state or local Tax law, (C) any Income Taxes arising out of the deemed sale of assets resulting from the Section 338(h)(10) Elections (other than Buyer 338 Liability), (D) Transfer Taxes for which Seller is responsible pursuant to Section 6.9(f), and (E) Taxes (other than Income Taxes and Transfer Taxes) of CEM, CPI, or any of the Investor Subsidiaries, Service Subsidiaries, or Project Companies for Tax periods (or portions thereof) beginning before and ending on or before the Closing Date, which in the case of any Straddle Period, shall be deemed to be the amount of such Tax for the entire Straddle Period multiplied by a fraction, the numerator of which is the number of days during the portion of the Straddle Period ending on the Closing Date and the denominator of which is the total number of days in the Straddle Period, (F) any losses incurred by Buyer based upon CEM, CPI or any of their Subsidiaries being affiliated under Code Section 414 or ERISA Section 4001(a)(14) on or prior to the Closing Date with Seller and/or any Affiliates or Subsidiaries of Seller; provided, however, that in the case of clauses (D) and (E), such liability or obligation only to the extent that it exceeds the accrual for such Taxes reflected as a liability in Working Capital, as finally determined pursuant to Section 3.3 (collectively, “Excluded Taxes”) and (G) any liability or obligation with respect to Indebtedness of CEM, CPI or any of their Subsidiaries, on the one hand, to their Affiliates, on the other hand (other than Affiliates which are either Investor Subsidiaries, Project Companies or Service Subsidiaries);

(ii)Any fines, penalties or costs imposed by a Governmental Authority resulting from (A) an investigation, proceeding, request for information or inspection before or by a Governmental Authority either pending prior to or arising after the Closing Date but only regarding acts which occurred prior to the Closing Date, or (B) illegal acts, willful misconduct or gross negligence of CEM or CPI prior to the Closing Date; and

(iii)Liabilities and obligations arising at anytime under the Excluded Agreements.

(i)For purposes of determining the amount of Indemnifiable Losses arising from a breach of any representation, warranty, covenant or obligation of the Parties to this Agreement, but not for purposes of determining whether any such representation, warranty, covenant or obligation has been breached or is inaccurate, limitations or qualifications as to dollar amount, materiality or Material Adverse Effect (or similar concept) set forth in such representation, warranty, covenant or obligation shall be disregarded.

8.2Defense of Claims.

(a)If any Indemnitee receives notice of the assertion of any claim or of the commencement of any claim, action, or proceeding made or brought by any Person who is not a party to this Agreement or any Affiliate of a Party to this Agreement (a “Third Party Claim”) with respect to which indemnification is to be sought from an Indemnifying Party, the Indemnitee shall give such Indemnifying Party reasonably prompt written notice thereof, but in any event such notice shall not be given later than ten (10) calendar days after the Indemnitee’s receipt of written notice of such Third Party Claim. Such notice shall describe the nature of the Third Party Claim in reasonable detail and shall indicate the estimated amount, if practicable, of the Indemnifiable Loss that has been or may be sustained by the Indemnitee. The Indemnifying Party will have the right to participate in or, by giving written notice to the Indemnitee, to elect to assume the defense of any Third Party Claim at such Indemnifying Party’s expense and by such Indemnifying Party’s own counsel, provided that the counsel for the Indemnifying Party who shall conduct the defense of such Third Party Claim shall be reasonably satisfactory to the Indemnitee. The Indemnitee shall cooperate in good faith in such defense at such Indemnitee’s own expense. If an Indemnifying Party elects not to assume the defense of any Third Party Claim, the Indemnitee may compromise or settle such Third Party Claim over the objection of the Indemnifying Party, which settlement or compromise shall conclusively establish the Indemnifying Party’s liability pursuant to this Agreement.

(b)If, within ten (10) calendar days after an Indemnitee provides written notice to the Indemnifying Party of any Third Party Claims, the Indemnitee receives written notice from the Indemnifying Party that such Indemnifying Party has elected to assume the defense of such Third Party Claim as provided in Section 8.2(a), the Indemnifying Party will not be liable for any legal expenses subsequently incurred by the Indemnitee in connection with the defense thereof for so long as the Indemnifying Party shall continue the diligent defense of such Third Party Claim. Without the prior written consent of the Indemnitee, the Indemnifying Party shall not enter into any settlement of any Third Party Claim which would lead to liability or create any financial or other obligation or restriction on the part of the Indemnitee. If a firm offer is made to settle a Third Party Claim would not lead to liability or the creation of a financial or other obligation or restriction on the part of the Indemnitee and the Indemnifying Party desires to accept and agree to such offer, the Indemnifying Party shall give written notice to the Indemnitee to that effect. If the Indemnitee fails to consent to such firm offer within ten (10) calendar days after its receipt of such notice, the Indemnifying Party shall be relieved of its obligations to defend such Third Party Claim and the Indemnitee may contest or defend such Third Party Claim. In such event, the maximum liability of the Indemnifying Party as to such Third Party Claim will be the amount of such settlement offer plus reasonable costs and expenses paid or incurred by Indemnitee up to the date of said notice.

(c)Any claim by an Indemnitee on account of an Indemnifiable Loss which does not result from a Third Party Claim (a “Direct Claim”) shall be asserted by giving the Indemnifying Party reasonably prompt written notice thereof, stating the nature of such claim in reasonable detail and indicating the estimated amount, if practicable, but in any event such notice shall not be given later than ten (10) calendar days after the Indemnitee becomes aware of such Direct Claim, and the Indemnifying Party shall have a period of thirty (30) calendar days within which to respond to such Direct Claim. If the Indemnifying Party does not respond within such thirty (30) calendar day period, the Indemnifying Party shall be deemed to have accepted such claim. If the Indemnifying Party fails to accept such claim, the Indemnitee will be free to seek enforcement of its right to indemnification under this Agreement.

(d)If the amount of any Indemnifiable Loss, at any time subsequent to the making of an indemnity payment in respect thereof, is reduced by recovery, settlement or otherwise under or pursuant to any insurance coverage, or pursuant to any claim, recovery, settlement or payment by, from or against any other entity, the amount of such reduction, less any costs, expenses or premiums incurred in connection therewith (together with interest thereon from the date of payment thereof at the publicly announced prime rate then in effect as published in the Wall Street Journal shall promptly be repaid by the Indemnitee to the Indemnifying Party.

(e)A failure to give timely notice as provided in this Section 8.2 shall not affect the rights or obligations of any Party hereunder except if, and only to the extent that, as a result of such failure, the Party which was entitled to receive such notice was actually prejudiced as a result of such failure.

(f)Notwithstanding the foregoing, the Parties agree and acknowledge that (i) Seller shall be entitled exclusively to control, defend and settle any litigation, administrative or regulatory proceeding arising out of or related to any Excluded Liabilities, and Buyer agrees to cooperate fully at Seller’s expense in connection therewith and (ii) Buyer shall be entitled exclusively to control, defend and settle any litigation, administrative or regulatory proceeding, arising out of or related to any Guarantee Liabilities, and Seller agrees to cooperate fully at Buyer’s expense in connection therewith.

8.3Survival.  The representations and warranties given or made by any Party to this Agreement or in any certificate or other writing furnished in connection herewith shall survive the Closing for a period of 575 days after the Closing Date and shall thereafter terminate and be of no further force or effect, except that (i) the Seller Fundamental Representations and the Buyer Fundamental Representations shall survive indefinitely, (ii) all representations and warranties relating to Sections 4.11 and 4.20(h) shall survive the Closing for a period of thirty (30) days following the applicable statutes of limitation taking into account any extensions or waivers thereof, and (iii) the representations and warranties in Section 4.20(n) shall survive the Closing for a period of 36 months after the Closing Date.

The covenants and obligations of Seller and Buyer set forth in this Agreement, including without limitation the indemnification obligations of the Parties under Article VIII hereof, shall survive the Closing indefinitely, and each Party shall be entitled to the full performance thereof by the other Party hereto without limitation as to time or amount (except as otherwise specifically set forth herein).

ARTICLE IX

TERMINATION

9.1Termination.

(a)This Agreement may be terminated at any time prior to the Closing Date by mutual written consent of Seller and Buyer.

(b)This Agreement may be terminated by Seller or Buyer if (i) any Federal or state court of competent jurisdiction shall have issued an order, judgment or decree permanently restraining, enjoining or otherwise prohibiting the Closing, and such order, judgment or decree shall have become final and nonappealable or (ii) any statute, rule, order or regulation shall have been enacted or issued by any Governmental Authority which, directly or indirectly, prohibits the consummation of the Closing; or (iii) the Closing contemplated hereby shall have not occurred on or before the day which is 120 days from the date of this Agreement (the “Termination Date”), provided, however, that so long as such Party has complied with Section 6.5 of this Agreement, the Termination Date (x) may be extended by Buyer for up to thirty (30) days if any of Buyer Required Regulatory Approvals shall not have been obtained and (y) may be extended by Seller for up to thirty (30) days if any of Seller Required Regulatory Approvals shall not have been obtained; and provided, further, that the right to terminate this Agreement under this Section 9.1(b)(iii) shall not be available to any Party whose failure to fulfill any obligation under this Agreement has been the cause of, or resulted in, the failure of the Closing to occur on or before such date.

(c)So long as such Party has complied with Section 6.5 of this Agreement, this Agreement may be terminated by Buyer if any of Buyer Required Regulatory Approvals, the receipt of which is a condition to the obligation of Buyer to consummate the Closing as set forth in Section 7.1(c), shall have been denied (and a petition for rehearing or refiling of an application initially denied without prejudice shall also have been denied) or shall have been granted but contains terms or conditions which do not satisfy the closing condition in Section 7.1(c).

(d)So long as such Party has complied with Section 6.5 of this Agreement, this Agreement may be terminated by Seller, if any of Seller’s Required Regulatory Approvals, the receipt of which is a condition to the obligation of Seller to consummate the Closing as set forth in Section 7.2(c), shall have been denied (and a petition for rehearing or refiling of an application initially denied without prejudice shall also have been denied) or shall have been granted but contains terms or conditions which do not satisfy the closing condition in Section 7.2(c).

(e)This Agreement may be terminated by Buyer if there has been a material violation or breach by Seller of any covenant, representation or warranty contained in this Agreement which has resulted in a Material Adverse Effect and such violation or breach is not cured by the earlier of the Closing Date or the date thirty (30) days after receipt by Seller of notice specifying particularly such violation or breach, and such violation or breach has not been waived by Buyer.

(f)This Agreement may be terminated by Seller, if there has been a material violation or breach by Buyer of any covenant, representation or warranty contained in this Agreement and such violation or breach is not cured by the earlier of the Closing Date or the date thirty (30) days after receipt by Buyer of notice specifying particularly such violation or breach, and such violation or breach has not been waived by Seller.

(g)This Agreement may be terminated by Seller if either the Equity Commitment Letter or the Buyer LC shall no longer remain in full force and effect.

9.2Procedure and Effect of No-Default Termination.  In the event of termination of this Agreement by either or both of the Parties pursuant to Section 9.1, written notice thereof shall forthwith be given by the terminating Party to the other Party, whereupon, if this Agreement is terminated pursuant to any of Sections 9.1(a) through (d), the liabilities of the Parties hereunder will terminate, except as otherwise expressly provided in this Agreement, and thereafter neither Party shall have any recourse against the other by reason of this Agreement.

9.3Termination Fee; Letter of Credit.  Seller may immediately draw upon the Buyer LC in an amount equal to $50 million (the “Termination Fee”) if this Agreement is terminated by Seller pursuant to Sections 9.1(b)(iii), 9.1(f) or 9.1(g); provided, that Seller shall not be in breach of this Agreement in such a manner that would entitle Buyer to terminate this Agreement in accordance with Section 9.1(e), and provided further, that in the case of termination pursuant to Section 9.1(b)(iii), the failure of the Closing Date to occur was due to the breach by Buyer of its obligations to complete the transactions contemplated hereby when required to do so in accordance with this Agreement. The Parties acknowledge and agree that if Seller shall terminate this Agreement as provided immediately above, Seller’s damages would be difficult or impossible to quantify with reasonable certainty, and accordingly the payment provided for in this Section 9.3 is a payment of liquidated damages (and not penalties) which is a based on the Parties’ estimate of the damages Seller will suffer or incur as a result of the event giving rise to such payment and the resultant termination of this Agreement. Buyer irrevocably waives any right it may have to raise as a defense that any such liquidated damages are excessive or punitive. For greater certainty, the Parties agree that the right to receive payment of the amount determined pursuant to this Section 9.3 in the manner provided herein is the sole and exclusive remedy of Seller. There shall be no liability of any shareholder, partner, member, director, officer, employee, advisor or representative of Buyer or Seller or any Affiliate thereof, whether to Buyer or Seller, as the case may be, or any other Person (including any shareholder, partner, member, director, officer, employee, advisor or representative thereof) in connection with any liability or other obligation of Buyer or Seller or any Affiliate thereof, whether hereunder or otherwise in connection with the transactions contemplated hereby.

ARTICLE X

MISCELLANEOUS PROVISIONS

10.1Amendment and Modification.  Subject to applicable law, this Agreement may be amended, modified or supplemented only by written agreement of Seller and Buyer.

10.2Waiver of Compliance; Consents.  Except as otherwise provided in this Agreement, any failure of any of the Parties to comply with any obligation, covenant, agreement or condition herein may be waived by the Party entitled to the benefits thereof only by a written instrument signed by the Party granting such waiver, but such waiver of such obligation, covenant, agreement or condition shall not operate as a waiver of, or estoppel with respect to, any subsequent failure to comply therewith.

10.3Notices.  All notices and other communications hereunder shall be in writing and shall be deemed given if delivered personally or by facsimile transmission, or mailed by overnight courier or registered or certified mail (return receipt requested), postage prepaid, to the recipient Party at its address (or at such other address or facsimile number for a Party as shall be specified by like notice; provided, however, that notices of a change of address shall be effective only upon receipt thereof):

(a)If to Seller, to:

Centennial Energy Resources LLC

1200 West Century Avenue

Bismarck, North Dakota 58503

Attention: General Counsel

Facsimile: (701) 530-1731

with a copy to:

Thelen Reid Brown Raysman & Steiner LLP

875 Third Avenue

New York, New York 10022

Attention: Douglas E. Davidson, Esq.

Facsimile: (212) 603-2001

(b)if to Buyer, to:

c/o CES Acquisition Corp.

575 Broadway, 3^rd Floor

New York, New York 10012

Attention: Christopher L. Ryan

Facsimile: (212) 343-9949

with a copy to:

National Gas Partners

125 East John Carpenter Freeway, Suite 600

Irving, Texas 75062

Attention: Christopher Ray

Facsimile: (972) 432-1441

and

Paul, Weiss, Rifkind, Wharton & Garrison LLP

1285 Avenue of the Americas

New York, New York 10019-6064

Attention: Carl L. Reisner, Esq.

Facsimile: (212) 492-0017

10.4Assignment.  This Agreement and all of the provisions hereof shall be binding upon and inure to the benefit of the Parties hereto and their respective successors and permitted assigns, but neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by either Party hereto, including by operation of law, without the prior written consent of the other Party. Notwithstanding the foregoing, Buyer may (i) assign its rights pursuant to this Agreement to its Affiliates, (ii) designate one or more of its Affiliates to perform its obligations hereunder with the prior written consent of Seller (which consent shall not be unreasonably withheld) and (iii) assign its rights, but not its obligations, under this Agreement to any of its financing sources without the consent of the Seller. This Agreement is not intended to confer upon any other Person except the Parties hereto any rights, interests, obligations or remedies hereunder. No provision of this Agreement shall create any third party beneficiary rights in any employee or former employee of Seller (including any beneficiary or dependent thereof) in respect of continued employment or resumed employment, and no provision of this Agreement shall create any rights in any such Persons in respect of any benefits that may be provided, directly or indirectly, under any employee benefit plan or arrangement except as expressly provided for thereunder.

10.5Governing Law; Venue; Waiver of Jury Trial.  This Agreement shall be governed by and construed in accordance with the law of the State of New York (without giving effect to conflict of law principles) as to all matters, including but not limited to matters of validity, construction, effect, performance and remedies. THE PARTIES HERETO AGREE THAT VENUE IN ANY AND ALL ACTIONS AND PROCEEDINGS RELATED TO THE SUBJECT MATTER OF THIS AGREEMENT SHALL BE IN THE STATE AND FEDERAL COURTS IN AND FOR NEW YORK COUNTY, NEW YORK, WHICH COURTS SHALL HAVE EXCLUSIVE JURISDICTION FOR SUCH PURPOSE, AND THE PARTIES HERETO IRREVOCABLY SUBMIT TO THE EXCLUSIVE JURISDICTION OF SUCH COURTS AND IRREVOCABLY WAIVE THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF ANY SUCH ACTION OR PROCEEDING. SERVICE OF PROCESS MAY BE MADE IN ANY MANNER RECOGNIZED BY SUCH COURTS. EACH OF THE PARTIES HERETO IRREVOCABLY WAIVES ITS RIGHT TO A JURY TRIAL WITH RESPECT TO ANY ACTION OR CLAIM ARISING OUT OF ANY DISPUTE IN CONNECTION WITH THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.

10.6Counterparts.  This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

10.7Interpretation.  The articles, section and schedule headings contained in this Agreement are solely for the purpose of reference, are not part of the agreement of the parties and shall not in any way affect the meaning or interpretation of this Agreement.

10.8Schedules and Exhibits.  Except as otherwise provided in this Agreement, all Exhibits and Schedules referred to herein are intended to be and hereby are specifically made a part of this Agreement. Each Schedule to this Agreement shall be deemed to include and incorporate all disclosures made on the other Schedules to this Agreement.

10.9Entire Agreement.  This Agreement and the Confidentiality Agreement, including the Exhibits, Schedules, documents, certificates and instruments referred to herein or therein, embody the entire agreement and understanding of the Parties hereto in respect of the transactions contemplated by this Agreement. There are no restrictions, promises, representations, warranties, covenants or undertakings, other than those expressly set forth or referred to herein or therein. It is expressly acknowledged and agreed that there are no restrictions, promises, representations, warranties, covenants or undertakings contained in any material made available to Buyer pursuant to the terms of the Confidentiality Agreement including, without limitation, the Confidential Information Memorandum dated January 2007. This Agreement supersedes all prior agreements and understandings between the Parties (other than the Confidentiality Agreement) with respect to such transactions.

10.10U.S. Dollars.  Unless otherwise stated, all dollar amounts set forth herein are United States (U.S.) dollars.

IN WITNESS WHEREOF, Seller and Buyer have caused this Agreement to be signed by their respective duly authorized officers as of the date first above written.

CENTENNIAL ENERGY RESOURCES LLC	MONTANA ACQUISITION COMPANY LLC
By: /s/ Paul Gatzemeier Name:Paul Gatzemeier Title:President and CEO	By: /s/ Paul B. Prager Name:Paul B. Prager Title:President

EX-10.B

MDU RESOURCES GROUP, INC.

EXECUTIVE INCENTIVE COMPENSATION PLAN

____________________________________________________________

I.PURPOSE

The purpose of the Executive Incentive Compensation Plan (the "Plan") is to provide an incentive for key executives of MDU Resources Group, Inc. (the "Company") to focus their efforts on the achievement of challenging and demanding corporate objectives. The Plan is designed to reward successful corporate performance as measured against specified performance goals as well as exceptional individual performance. When corporate performance reaches or exceeds the performance targets and individual performance is exemplary, incentive compensation awards, in conjunction with salaries, will provide a level of compensation which recognizes the skills and efforts of the key executives.

II.BASIC PLAN CONCEPT

The Plan provides an opportunity to earn annual incentive compensation based on the achievement of specified annual performance objectives. A target incentive award for each individual within the Plan is established based on the position level and actual base salary, provided, however, that the Compensation Committee of the Board of Directors (the “Committee”) in its sole discretion, may, instead of actual base salary, use the assigned salary grade market value (midpoint) (“Salary”). The target incentive award represents the amount to be paid, subject to the achievement of the performance objective targets established each year. Larger incentive awards than target may be authorized when performance exceeds targets; lesser or no amounts may be paid when performance is below target.

It is recognized that during a Plan Year major unforeseen changes in economic and environmental conditions or other significant factors beyond the control of management may substantially affect the ability of the Plan Participants to achieve the specified performance goals. Therefore, in its review of corporate performance the Committee, in consultation with the Chief Executive Officer of the Company, may modify the performance targets. However, it is contemplated that such target modifications will be necessary only in years of unusually adverse or favorable external conditions.

III.ADMINISTRATION

The Plan shall be administered by the Committee with the assistance of the Chief Executive Officer of the Company. The Committee shall approve annually, prior to the beginning of each Plan Year, the list of eligible Participants, and the target incentive award level for each position within the Plan. The Plan’s performance targets for the year shall be approved by the Committee no later than its regularly scheduled February meeting during that Plan Year. The Committee shall have final discretion to determine actual award payment levels, method of payment, and whether or not payments shall be made for any Plan Year.

The Board of Directors of the Company may, at any time and from time to time, alter, amend, supersede or terminate the Plan in whole or in part, provided that no termination, amendment or modification of the Plan shall adversely affect in any material way an award that has met all requirements for payment without the written consent of the Participant holding such award, unless such termination, modification or amendment is required by applicable law.

IV.ELIGIBILITY

Executives who are determined by the Committee to have a key role in both the establishment and achievement of Company objectives shall be eligible to participate in the Plan.

Nothing in the Plan shall interfere with or limit in any way the right of the Company to terminate any Participant’s employment at any time, for any reason or no reason in the Company’s sole discretion, or confer upon any Participant any right to continue in the employment of the Company. No executive shall have the right to be selected to receive an award under the Plan, or, having been so selected, to be selected to receive a future award.

V. PLAN PERFORMANCE MEASURES

Performance measures shall be established that consider shareholder and customer interests. These measures shall be evaluated annually based on achievement of specified goals.

The performance measure reflective of shareholder’s interest will be the percentage attainment of corporate goals, as determined each year by the Committee. This measure may be applied at the corporate level for individuals, such as the Chief Executive Officer, or at the business unit level for individuals whose major or sole impact is on business unit results.

Individual performance will be assessed based on the achievement of annually established individual objectives.

Threshold, target and maximum award levels will be established annually for each performance measure and business unit. The Committee will retain the right to make all interpretations as to the actual attainment of the desired results and will determine whether any circumstances beyond the control of management need to be considered.

VI.  TARGET INCENTIVE AWARDS

Target incentive awards will be expressed as a percentage of each Participant’s Salary. These percentages shall vary by position and reflect larger reward opportunity for positions having greater effect on the establishment and accomplishment of the Company’s or business unit’s objectives. An exhibit showing the target awards as a percentage of Salary for eligible positions will be attached to this Plan at the beginning of each Plan Year.

VII. INCENTIVE FUND DETERMINATION

The target incentive fund is the sum of the individual target incentive awards for all eligible Participants. Once the incentive targets have been determined by the Committee, a target incentive fund shall be established and accrued ratably by the Company. The incentive fund and accruals may be adjusted during the year.

At the close of each Plan Year, the Chief Executive Officer of the Company will prepare an analysis showing the Company's or business unit's performance in relation to each of the performance measures employed. This will be provided to the Committee for review and comparison to threshold, target and maximum performance levels. In addition, any recommendations of the Chief Executive Officer will be presented at this time. The Committee will then determine the amount of the target incentive fund earned.

VIII.INDIVIDUAL AWARD DETERMINATION

Each individual Participant's award will be based first upon the level of performance achieved by the Company or business unit and secondly based upon the individual's performance. The performance measures applicable for assessing individual performance will be established at the beginning of each Plan Year. The assessment by the Committee, after consultation with the Chief Executive Officer, of achievement relative to the established performance measures, as determined by a percentage from 0 percent to 200 percent, will be applied to the Participant's target incentive award which has been first adjusted for Company or business unit performance.

IX. PAYMENT OF AWARDS

Except as provided below or as otherwise determined by the Committee, in order to receive an award under the Plan, the Participant must remain in the employment of the Company or business unit for the entire Plan Year. If a Participant terminates employment with the Company pursuant to Section 5.01 of the Company’s Bylaws which provides for mandatory retirement for certain officers on their 65th birthday (or terminates employment with a subsidiary of the Company pursuant to a similar subsidiary Bylaw provision) and if the Participant’s 65th birthday occurs during the Plan Year, determination of whether the performance measures have been met will be made at the end of the Plan Year, and to the extent met, payment of the award will be made to the Participant, prorated. Proration of awards shall be based upon the number of full months elapsed from and including January to and including the month in which the Participant’s 65th birthday occurs.

An individual Participant who transfers between the Company and business units may receive a prorated award at the discretion of the Committee. Payments made under this Plan will not be considered part of compensation for pension purposes. Payments when made will be in cash. Incentive awards may be deferred if the appropriate elections have been executed prior to the end of the Plan Year. Deferred amounts will accrue interest at a rate determined annually by the Committee.

In the event of a "Change in Control" (as defined by the Committee in its Rules and Regulations) then any award deferred by each Participant shall become immediately payable to the Participant in cash, together with accrued interest thereon to the date of payment. In the event the Participant files suit to collect the Participant's deferred award then all of the court costs, other expenses of litigation, and attorneys' fees shall be paid by the Company in the event the Participant prevails upon any of the Participant's claims for payment of a deferred award.

X.ACCOUNTING RESTATEMENTS

This Section X shall apply to incentive awards granted to all Participants in the Plan. Notwithstanding anything in the Plan or the Plan's Rules and Regulations to the contrary, if the Company's audited financial statements are restated, the Committee may, in accordance with the Company's Guidelines for Repayment of Incentives Due to Accounting Restatements, take such actions as it deems appropriate (in its sole discretion) with respect to

(a)unpaid incentive awards under the Plan (including incentive awards relating to completed Plan Years, but with respect to which payments have not yet been made or deferred) ("Outstanding Awards") and

(b)prior incentive awards that were paid (or deferred) within the 3 year period preceding the restatement ("Prior Awards"), provided such Prior Awards were not paid prior to the date the Plan was amended to add this Section X,

if the calculation of the amounts payable, paid or deferred under such awards are, or would have been, directly impacted by the restatement, including, without limitation, (i) securing (or causing to be secured) repayment of some or all payments made pursuant to (or deferrals relating to) Prior Awards, (ii) making (or causing to be made) additional payments (or crediting additional deferrals), (iii) reducing or otherwise adjusting the amount payable pursuant to Outstanding Awards and/or (iv) causing the forfeiture of Outstanding Awards. The Committee may, in its sole discretion, take different actions pursuant to this Section X with respect to different awards, different Participants (or beneficiaries) and/or different classes of awards or Participants (or beneficiaries). The Committee has no obligation to take any action permitted by this Section X. The Committee may consider any factors it chooses in taking (or determining whether to take) any action permitted by this Section X, including, without limitation, the following:

(A)The reason for the restatement of the financial statements;

(B)The amount of time between the initial publication and subsequent restatement of the financial statements; and

(C)The Participant's current employment status, and the viability of successfully obtaining repayment.

If the Committee requires repayment of all or part of a Prior Award, the amount of repayment may be based on, among other things, the difference between the amount paid to the individual and the amount that the Committee determines in its sole discretion should have been paid based on the restated results. The Committee shall determine whether repayment shall be effected (i) by seeking repayment from the Participant, (ii) by reducing (subject to applicable law and the terms and conditions of the applicable plan, program or arrangement) the amount that would otherwise be provided to the Participant under any compensatory plan, program or arrangement maintained by the Company or any of its affiliates, (iii) by withholding payment of future increases in compensation (including the payment of any discretionary bonus amount) or grants of compensatory awards that would otherwise have been made in accordance with the Company's otherwise applicable compensation practices, or (iv) by any combination of the foregoing. Additionally, by accepting an incentive award under the Plan, Participants acknowledge and agree that the Committee may take any actions permitted by this Section X with respect to Outstanding Awards to the extent repayment is to be made pursuant to another plan, program or arrangement maintained by the Company or any of its affiliates.

MDU RESOURCES GROUP, INC.

EXECUTIVE INCENTIVE COMPENSATION PLAN

RULES AND REGULATIONS

The Compensation Committee of the Board of Directors of MDU Resources Group, Inc. (the "Company") adopted Rules and Regulations for the administration of the Executive Incentive Compensation Plan (the "Plan") on February 9, 1983, following adoption of the Plan by the Board of Directors of the Company on November 4, l982.

I.DEFINITIONS

The following definitions shall be used for purposes of these Rules and Regulations and for the purposes of administering the Plan:

1. The "Committee" shall be the Compensation Committee of the Board of Directors of the Company.

2. The "Company" shall refer to MDU Resources Group, Inc. alone and shall not refer to its utility division or to any of its subsidiary corporations.

3. "Participants" for any Plan Year shall be those executives who have been approved by the Committee as eligible for participation in the Plan for such Plan Year.

4. "Payment Date" shall be the date set by the Committee for payment of awards, other than those awards deferred pursuant to Section IX of the Plan and Section VII of these Rules and Regulations.

5. The "Plan" shall refer to the Executive Incentive Compensation Plan.

6. The "Plan Year" shall be the calendar year.

7. "Change in Control" shall mean the earlier of the following to occur: (a) the public announcement by the Company or by any person (which shall not include the Company, any subsidiary of the Company or any employee benefit plan of the Company or of any subsidiary of the Company) ("Person") that such Person, who or which, together with all Affiliates and Associates (within the meanings ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under the Securities Exchange Act of 1934, as amended (17 C.F.R. 240.12b-2)) of such Person, shall be the beneficial owner of twenty percent (20%) or more of the voting stock then outstanding; (b) the commencement of, or after the first public announcement of any Person to commence, a tender or exchange offer the consummation of which would result in any Person becoming the beneficial owner of voting stock aggregating thirty percent (30%) or more of the then outstanding voting stock; (c) the announcement of any transaction relating to the Company required to be described pursuant to the requirements of Item 6(e) of Schedule 14A of Regulation 14A of the Securities and Exchange Commission under the Securities Exchange Act of 1934 (17 C.F.R. 240.14a-101, item 6(e)); (d) a proposed change in the constituency of the Board of Directors of the Company such that, during any period of two (2) consecutive years, individuals who at the beginning of such period constitute the Board of Directors of the Company cease for any reason to constitute at least a majority thereof, unless the election or nomination for election by the shareholders of the Company of each new Director was approved by a vote of at least two-thirds (2/3) of the directors then still in office who were members of the Board of Directors of the Company at the beginning of the period; or (e) any other event which shall be deemed by a majority of the Compensation Committee of the Board of Directors of the Company to constitute a "Change in Control."

8. The "Prime Rate" shall be the base rate on corporate loans posted by at least 75 percent of the nation's largest banks as reported in The Wall Street Journal.

9. “Retirement” means the later of the day the Participant attains age 55 or the day the Participant ceases to be an employee of the Company, its utility division or any of its subsidiary corporations.

II.ADMINISTRATION

1. The Committee shall have the full power to construe and interpret the Plan and to establish and to amend these Rules and Regulations for its administration.

2. No member of the Committee shall participate in a decision as to their own eligibility for, or award of, an incentive award payment.

3. Prior to the beginning of each Plan Year, the Committee shall approve a list of eligible executives and notify those so approved that they are eligible to participate in the Plan for such Plan Year.

4. Prior to the beginning of each Plan Year, the Committee shall approve an Annual Operating Plan. The Annual Operating Plan shall include the Plan's performance measures and target incentive award levels for each salary grade covered by the Plan for the following Plan Year. The Plan’s performance targets for the year shall be approved by the Committee no later than its regularly scheduled February meeting during the Plan Year. The Annual Operating Plan, insofar as it is relevant to each individual Participant, shall be made available by the Committee to each Participant in the Plan at the beginning of each Plan Year.

5. The Committee shall have final discretion to determine actual award payment levels, method of payment, and whether or not payments shall be made for any Plan Year. However, unless the Plan's performance objectives are met for the Plan Year, no award shall be made for that Plan Year. Performance targets modified pursuant to Section II of the Plan will be deemed performance targets for purposes of determining whether or not these targets have been met.

III.PLAN PERFORMANCE MEASURES

1. The Committee shall establish the percentage attainment of corporate performance measure and the percentage attainment of individual goals measure. The Committee may establish more or fewer performance measures as it deems necessary.

2. The corporate performance measure may be set by reference to earnings, return on invested capital or any other measure or combination of measures deemed appropriate by the Committee. It may be established for the Company or for the individual business unit.

3. Individual performance will be assessed based on the achievement of annually established individual objectives.

4. Plan performance measures may be applied at the corporate level for individuals such as the Chief Executive Officer whose major or sole impact is Company-wide, or at the business unit level for individuals whose major or sole impact is on the business unit results. The Annual Operating Plan shall contain a list of individuals to whom the Plan performance measures will be applied at the corporate level and a list of those individuals for whom the Plan performance measures will be applied at the business unit level. The relevant business unit for each individual will be identified.

5. The Committee shall set threshold, target and maximum award levels for the performance measures, for each business unit, and for the Company. Those levels shall be included in the Annual Operating Plan.

6. The Committee will retain the authority to determine whether or not the actual attainment of these measures has been made.

IV.TARGET INCENTIVE AWARDS

1. Target incentive awards will be a percentage of each Participant’s Salary, as defined in the Plan.

2. Target incentive awards shall be set by the Committee annually and will be included in the Annual Operating Plan.

V.INCENTIVE FUND DETERMINATION

1. The target incentive fund is the sum of the individual target incentive awards for all eligible Participants.

2. Once individual incentive targets have been determined, a target incentive fund shall be established and accrued ratably by the Company. The incentive fund and accruals may be adjusted during the year.

3. As soon as practicable following the close of each Plan Year, the Chief Executive Officer will provide the Committee with an analysis showing the Company's and each relevant business unit's performance in relation to the performance measures. The Committee will review the analysis and determine, in its sole discretion, the amount of the actual incentive fund.

4. In determining the actual incentive fund, the Committee may consider any recommendations of the Chief Executive Officer.

VI.INDIVIDUAL AWARD DETERMINATION

1. The Committee shall have the sole discretion to determine each individual Participant's award. The Committee's decision will be based first upon the level of performance achieved by the Company or business unit and second upon the individual's performance.

2. The Committee, after consultation with the Chief Executive Officer, shall set the award as a percentage from 0 percent to 200 percent of the Participant's target incentive award, adjusted for Company or business unit performance.

VII.PAYMENT OF AWARDS

1. On the date the Committee determines the awards to be made to individual Participants, it shall also establish the Payment Date.

2. Except as provided below or as the Committee otherwise determines, in order to receive an award under the Plan, a Participant must remain in the employment of the Company for the entire Plan Year.

3. If a Participant terminates employment with the Company pursuant to Section 5.01 of the Company’s Bylaws which provides for mandatory retirement for certain officers on their 65^th birthday (or terminates employment with a subsidiary of the Company pursuant to a similar subsidiary Bylaw provision) and if the Participant’s 65^th birthday occurs during the Plan Year, determination of whether the performance measures have been met will be made at the end of the Plan Year, and to the extent met, payment of the award will be made to the Participant, prorated. Proration of awards shall be based upon the number of full months elapsed from and including January to and including the month in which the Participant’s 65^th birthday occurs.

4. Payment of the awards shall be made in cash. Payments shall be made on the Payment Date unless the Participant has deferred, in whole or in part, the receipt of the award by making an election on the deferral form attached hereto, prior to the end of the Plan Year immediately preceding the Payment Date.

5. In the event a Participant has elected to defer receipt of all or a portion of the award, the Company shall set up an account in the Participant's name. The amount of the Participant's award to the extent deferred will be credited to the Participant's account on the Payment Date.

6. The balance credited to an account of a Participant who has elected to defer receipt of an award will be an unsecured, unfunded obligation of the Company.

7. Interest shall accrue on the balance credited to a Participant's account from the date the balance is credited. The rate of interest shall be the Prime Rate plus 1 percentage point as reported on the last business day of the preceding year to be effective on January 1 of each new Plan Year.

8. Interest shall be compounded and credited to the account monthly.

9. A Participant may elect to defer any percentage, not to exceed l00, of an annual award.

10. A Participant electing to defer any part of an award must elect one of the following dates for payment:

(1) Payment Date next following termination of employment with the Company or an affiliated company; or

(2) Payment Date of the fifth year following the year in which the award may be made.

11. A Participant may elect to receive the deferred amounts accumulated in the Participant's account in monthly installments, not to exceed 120. In the event the Participant elects to receive the amounts in the Participant's account in more than one installment, interest shall continue to accrue on the balance remaining in their account at the applicable rate or rates determined annually by the Committee.

12. In the event of the death of a Participant in whose name a deferred account has been set up, the Company shall, within six months thereafter, pay to the Participant's estate or the designated beneficiary the entire amount in the deferred account.

13. In the event of a "Change in Control" then any award deferred by each Participant shall become immediately payable to the Participant. In the event the Participant files suit to collect a deferred award then all of the Participant's court costs, other expenses of litigation, and attorneys' fees shall be paid by the Company in the event the Participant prevails upon any of the Participant's claims for payment.

EX-10.C

MONTANA-DAKOTA UTILITIES CO.

EXECUTIVE INCENTIVE COMPENSATION PLAN

____________________________________________________________

I. PURPOSE

The purpose of the Executive Incentive Compensation Plan (the "Plan") is to provide an incentive for key executives of Montana-Dakota Utilities Co. to focus their efforts on the achievement of challenging and demanding corporate objectives. The Plan is designed to reward successful corporate performance as measured against specified performance goals as well as exceptional individual performance. When utility performance reaches or exceeds the performance targets and individual performance is exemplary, incentive compensation awards, in conjunction with salaries, will provide a level of compensation which recognizes the skills and efforts of the key executives. In this Plan, MDU Resources Group, Inc. is defined as the "Company" while Montana-Dakota Utilities Co. is defined as the "Utility Company."

II.BASIC PLAN CONCEPT

The Plan provides an opportunity to earn annual incentive compensation based on the achievement of specified annual performance objectives. A target incentive award for each individual within the Plan is established based on the position level and actual base salary, provided, however, that the Compensation Committee of the Board of Directors of the Company (the “Committee”) in its sole discretion, may, instead of actual base salary, use the assigned salary grade market value (midpoint) (“Salary”). The target incentive award represents the amount to be paid, subject to the achievement of the performance objective targets established each year. Larger incentive awards than target may be authorized when performance exceeds targets; lesser or no amounts may be paid when performance is below target.

It is recognized that during a Plan Year major unforeseen changes in economic and environmental conditions or other significant factors beyond the control of management may substantially affect the ability of the Plan Participants to achieve the specified performance goals. Therefore, in its review of corporate performance the Committee, in consultation with the Chief Executive Officer of the Company, may modify the performance targets. However, it is contemplated that such target modifications will be necessary only in years of unusually adverse or favorable external conditions.

III.ADMINISTRATION

The Plan shall be administered by the Committee with the assistance of the Chief Executive Officer of the Company. The Committee shall approve annually, prior to the beginning of each Plan Year, the list of eligible Participants, and the target incentive award level for each position within the Plan. The Plan’s performance targets for the year shall be approved by the Committee no later than its regularly scheduled February meeting during that Plan Year. The Committee shall have final discretion to determine actual award payment levels, method of payment, and whether or not payments shall be made for any Plan Year.

The Board of Directors of the Company may, at any time and from time to time, alter, amend, supersede or terminate the Plan in whole or in part, provided that no termination, amendment or modification of the Plan shall adversely affect in any material way an award that has met all requirements for payment without the written consent of the Participant holding such award, unless such termination, modification or amendment is required by applicable law.

IV.ELIGIBILITY

Executives who are determined by the Committee to have a key role in both the establishment and achievement of Utility Company objectives shall be eligible to participate in the Plan.

Nothing in the Plan shall interfere with or limit in any way the right of the Utility Company to terminate any Participant’s employment at any time, for any reason or no reason in the Utility Company’s sole discretion, or confer upon any Participant any right to continue in the employment of the Utility Company. No executive shall have the right to be selected to receive an award under the Plan, or, having been so selected, to be selected to receive a future award.

V.PLAN PERFORMANCE MEASURES

Performance measures shall be established that consider shareholder and customer interests. These measures shall be evaluated annually based on achievement of specified goals.

The performance measure reflective of shareholders’ interest will be the percentage attainment of corporate goals, as determined each year by the Committee. This measure may be applied at the corporate level for individuals whose major or sole impact is Utility Company-wide, or at the business unit level for individuals whose major or sole impact is on business unit results.

Individual performance will be assessed based on the achievement of annually established individual objectives.

Threshold, target and maximum award levels will be established annually for each performance measure and business unit. The Committee will retain the right to make all interpretations as to the actual attainment of the desired results and will determine whether any circumstances beyond the control of management need to be considered.

VI.TARGET INCENTIVE AWARDS

Target incentive awards will be expressed as a percentage of each Participant’s Salary. These percentages shall vary by position and reflect larger reward opportunity for positions having greater effect on the establishment and accomplishment of the Utility Company’s or business unit’s objectives. An exhibit showing the target awards as a percentage of Salary for eligible positions will be attached to this Plan at the beginning of each Plan Year.

VII.INCENTIVE FUND DETERMINATION

The target incentive fund is the sum of the individual target incentive awards for all eligible Participants. Once the incentive targets have been determined by the Committee, a target incentive fund shall be established and accrued ratably by the Utility Company. The incentive fund and accruals may be adjusted during the year.

At the close of each Plan Year, the Chief Executive Officer of the Company will prepare an analysis showing the Utility Company's and business unit's performance in relation to each of the performance measures employed. This will be provided to the Committee for review and comparison to threshold, target and maximum performance levels. In addition, any recommendations of the Chief Executive Officer will be presented at this time. The Committee will then determine the amount of the target incentive fund earned.

VIII.INDIVIDUAL AWARD DETERMINATION

Each individual Participant's award will be based first upon the level of performance achieved by the Utility Company or business unit and secondly based upon the individual's performance. The performance measures applicable for assessing individual performance will be established at the beginning of each Plan Year. The assessment by the Committee, after consultation with the Chief Executive Officer, of achievement relative to the established performance measures, as determined by a percentage from 0 percent to 200 percent, will be applied to the Participant's target incentive award which has been first adjusted for Utility Company or business unit performance.

IX.PAYMENT OF AWARDS

Except as provided below or as otherwise determined by the Committee, in order to receive an award under the Plan, the Participant must remain in the employment of the Utility Company or business unit for the entire Plan Year. If a Participant terminates employment with the Utility Company pursuant to a mandatory retirement provision in the Utility Company’s Bylaws that provides for mandatory retirement of certain officers on their 65th birthday (or terminates employment with a subsidiary of the Company pursuant to a similar subsidiary Bylaw provision), and if the Participant's 65th birthday occurs during the Plan Year, determination of whether the performance measures have been met will be made at the end of the Plan Year, and to the extent met, payment of the award will be made to the Participant, prorated. Proration of awards shall be based upon the number of full months elapsed from and including January to and including the month in which the Participant's 65th birthday occurs. An individual Participant who transfers between the Utility Company and the Company or any business unit of the Company may receive a prorated award at the discretion of the Committee. Payments made under this Plan will not be considered part of compensation for pension purposes. Payments when made will be in cash. Incentive awards may be deferred if the appropriate elections have been executed prior to the end of the Plan Year. Deferred amounts will accrue interest at a rate determined annually by the Committee.

In the event of a "Change in Control" (as defined by the Committee in its Rules and Regulations) then any award deferred by each Participant shall become immediately payable to the Participant in cash, together with accrued interest thereon to the date of payment. In the event the Participant files suit to collect the Participant's deferred award then all of the court costs, other expenses of litigation, and attorneys' fees shall be paid by the Utility Company in the event the Participant prevails upon any of the Participant's claims for payment of a deferred award.

X.ACCOUNTING RESTATEMENTS

This Section X shall apply to incentive awards granted to all Participants in the Plan. Notwithstanding anything in the Plan or the Plan's Rules and Regulations to the contrary, if the Utility Company's audited financial statements are restated, the Committee may, in accordance with the Company's Guidelines for Repayment of Incentives Due to Accounting Restatements, take such actions as it deems appropriate (in its sole discretion) with respect to

(a)unpaid incentive awards under the Plan (including incentive awards relating to completed Plan Years, but with respect to which payments have not yet been made or deferred) ("Outstanding Awards") and

(b)prior incentive awards that were paid (or deferred) within the 3 year period preceding the restatement ("Prior Awards"), provided such Prior Awards were not paid prior to the date the Plan was amended to add this Section X,

if the calculation of the amounts payable, paid or deferred under such awards are, or would have been, directly impacted by the restatement, including, without limitation, (i) securing (or causing to be secured) repayment of some or all payments made pursuant to (or deferrals relating to) Prior Awards, (ii) making (or causing to be made) additional payments (or crediting additional deferrals), (iii) reducing or otherwise adjusting the amount payable pursuant to Outstanding Awards and/or (iv) causing the forfeiture of Outstanding Awards. The Committee may, in its sole discretion, take different actions pursuant to this Section X with respect to different awards, different Participants (or beneficiaries) and/or different classes of awards or Participants (or beneficiaries). The Committee has no obligation to take any action permitted by this Section X. The Committee may consider any factors it chooses in taking (or determining whether to take) any action permitted by this Section X, including, without limitation, the following:

(A)The reason for the restatement of the financial statements;

(B)The amount of time between the initial publication and subsequent restatement of the financial statements; and

(C)The Participant's current employment status, and the viability of successfully obtaining repayment.

If the Committee requires repayment of all or part of a Prior Award, the amount of repayment may be based on, among other things, the difference between the amount paid to the individual and the amount that the Committee determines in its sole discretion should have been paid based on the restated results. The Committee shall determine whether repayment shall be effected (i) by seeking repayment from the Participant, (ii) by reducing (subject to applicable law and the terms and conditions of the applicable plan, program or arrangement) the amount that would otherwise be provided to the Participant under any compensatory plan, program or arrangement maintained by the Company or any of its affiliates, (iii) by withholding payment of future increases in compensation (including the payment of any discretionary bonus amount) or grants of compensatory awards that would otherwise have been made in accordance with the Company's otherwise applicable compensation practices, or (iv) by any combination of the foregoing. Additionally, by accepting an incentive award under the Plan, Participants acknowledge and agree that the Committee may take any actions permitted by this Section X with respect to Outstanding Awards to the extent repayment is to be made pursuant to another plan, program or arrangement maintained by the Company or any of its affiliates.

MONTANA-DAKOTA UTILITIES CO.

EXECUTIVE INCENTIVE COMPENSATION PLAN

RULES AND REGULATIONS

The Compensation Committee of the Board of Directors of MDU Resources Group, Inc. (the "Company") adopted Rules and Regulations for the administration of the Executive Incentive Compensation Plan (the "Plan") on February 9, 1983, following adoption of the Plan by the Board of Directors of the Company on November 4, l982.

I.DEFINITIONS

The following definitions shall be used for purposes of these Rules and Regulations and for the purposes of administering the Plan:

1. The "Committee" shall be the Compensation Committee of the Board of Directors of the Company.

2. The "Company" shall refer to MDU Resources Group, Inc. alone and shall not refer to its utility division or to any of its subsidiary corporations.

3. The "Utility Company" shall refer to Montana-Dakota Utilities Co., a Division of MDU Resources Group, Inc.

4. "Participants" for any Plan Year shall be those executives who have been approved by the Committee as eligible for participation in the Plan for such Plan Year.

5. "Payment Date" shall be the date set by the Committee for payment of awards, other than those awards deferred pursuant to Section IX of the Plan and Section VII of these Rules and Regulations.

6. The "Plan" shall refer to the Executive Incentive Compensation Plan.

7. The "Plan Year" shall be the calendar year.

8. "Change in Control" shall mean the earlier of the following to occur: (a) the public announcement by the Company or by any person (which shall not include the Company, any subsidiary of the Company or any employee benefit plan of the Company or of any subsidiary of the Company) ("Person") that such Person, who or which, together with all Affiliates and Associates (within the meanings ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under the Securities Exchange Act of 1934, as amended (17 C.F.R. 240.12b-2)) of such Person, shall be the beneficial owner of twenty percent (20%) or more of the voting stock of the Company then outstanding; (b) the commencement of, or after the first public announcement of any Person to commence, a tender or exchange offer the consummation of which would result in any Person becoming the beneficial owner of voting stock aggregating thirty percent (30%) or more of the then outstanding voting stock of the Company; (c) the announcement of any transaction relating to the Company required to be described pursuant to the requirements of Item 6(e) of Schedule 14A of Regulation 14A of the Securities and Exchange Commission under the Securities Exchange Act of 1934 (17 C.F.R. 240.14a-101, item 6(e)); (d) a proposed change in the constituency of the Board of Directors of the Company such that, during any period of two (2) consecutive years, individuals who at the beginning of such period constitute the Board of Directors of the Company cease for any reason to constitute at least a majority thereof, unless the election or nomination for election by the shareholders of the Company of each new Director was approved by a vote of at least two-thirds (2/3) of the directors then still in office who were members of the Board of Directors of the Company at the beginning of the period; (e) the sale or other disposition of all or substantially all of the assets of the Utility Company, other than to a subsidiary of the Company; or (f) any other event which shall be deemed by a majority of the Compensation Committee of the Board of Directors of the Company to constitute a "Change in Control."

9. The "Prime Rate" shall be the base rate on corporate loans posted by at least 75 percent of the nation's largest banks as reported in The Wall Street Journal.

10. “Retirement” means the later of the day the Participant attains age 55 or the day the Participant ceases to be an employee of the Company, its utility division or any of its subsidiary corporations.

II.ADMINISTRATION

1. The Committee shall have the full power to construe and interpret the Plan and to establish and to amend these Rules and Regulations for its administration.

2. No member of the Committee shall participate in a decision as to their own eligibility for, or award of, an incentive award payment.

3. Prior to the beginning of each Plan Year, the Committee shall approve a list of eligible executives and notify those so approved that they are eligible to participate in the Plan for such Plan Year.

4. Prior to the beginning of each Plan Year, the Committee shall approve an Annual Operating Plan. The Annual Operating Plan shall include the Plan's performance measures and target incentive award levels for each salary grade covered by the Plan for the following Plan Year. The Plan’s performance targets for the year shall be approved by the Committee no later than its regularly scheduled February meeting during the Plan Year. The Annual Operating Plan, insofar as it is relevant to each individual Participant, shall be made available by the Committee to each Participant in the Plan at the beginning of each Plan Year.

5. The Committee shall have final discretion to determine actual award payment levels, method of payment, and whether or not payments shall be made for any Plan Year. However, unless the Plan's performance objectives are met for the Plan Year, no award shall be made for that Plan Year. Performance targets modified pursuant to Section II of the Plan will be deemed performance targets for purposes of determining whether or not these targets have been met.

III.PLAN PERFORMANCE MEASURES

1. The Committee shall establish the percentage attainment of corporate performance measure and the percentage attainment of individual goals measure. The Committee may establish more or fewer performance measures as it deems necessary.

2. The corporate performance measure may be set by reference to earnings, return on invested capital or any other measure or combination of measures deemed appropriate by the Committee. It may be established for the Utility Company or for the individual business unit.

3. Individual performance will be assessed based on the achievement of annually established individual objectives.

4. Plan performance measures may be applied at the corporate level for individuals whose major or sole impact is Utility Company-wide, or at the business unit level for individuals whose major or sole impact is on the business unit results. The Annual Operating Plan shall contain a list of individuals to whom the Plan performance measures will be applied at the corporate level and a list of those individuals for whom the Plan performance measures will be applied at the business unit level. The relevant business unit for each individual will be identified.

5. The Committee shall set threshold, target and maximum award levels for the performance measures, for each business unit, and for the Utility Company. Those levels shall be included in the Annual Operating Plan.

6. The Committee will retain the authority to determine whether or not the actual attainment of these measures has been made.

IV.TARGET INCENTIVE AWARDS

1. Target incentive awards will be a percentage of each Participant’s Salary, as defined in the Plan.

2. Target incentive awards shall be set by the Committee annually and will be included in the Annual Operating Plan.

V.INCENTIVE FUND DETERMINATION

1. The target incentive fund is the sum of the individual target incentive awards for all eligible Participants.

2. Once individual incentive targets have been determined, a target incentive fund shall be established and accrued ratably by the Utility Company. The incentive fund and accruals may be adjusted during the year.

3. As soon as practicable following the close of each Plan Year, the Chief Executive Officer will provide the Committee with an analysis showing the Utility Company's and each relevant business unit's performance in relation to the performance measures. The Committee will review the analysis and determine, in its sole discretion, the amount of the actual incentive fund.

4. In determining the actual incentive fund, the Committee may consider any recommendations of the Chief Executive Officer.

VI.INDIVIDUAL AWARD DETERMINATION

1. The Committee shall have the sole discretion to determine each individual Participant's award. The Committee's decision will be based first upon the level of performance achieved by the Utility Company or business unit and second upon the individual's performance.

2. The Committee, after consultation with the Chief Executive Officer, shall set the award as a percentage from 0 percent to 200 percent of the Participant's target incentive award, adjusted for Utility Company or business unit performance.

VII.PAYMENT OF AWARDS

1. On the date the Committee determines the awards to be made to individual Participants, it shall also establish the Payment Date.

2. Except as provided below or as the Committee otherwise determines, in order to receive an award under the Plan, a Participant must remain employed by the Utility Company or one of its business units for the entire Plan Year.

3. If a Participant terminates employment with the Utility Company pursuant to a mandatory retirement provision in the Utility Company’s Bylaws that provides for mandatory retirement of certain officers on their 65th birthday (or terminates employment with a subsidiary of the Company pursuant to a similar subsidiary Bylaw provision), and if the Participant’s 65th birthday occurs during the Plan Year, determination of whether the performance measures have been met will be made at the end of the Plan Year, and to the extent met, payment of the award will be made to the Participant, prorated. Proration of awards shall be based upon the number of full months elapsed from and including January to and including the month in which the Participant’s 65th birthday occurs.

4. Payment of the awards shall be made in cash. Payments shall be made on the Payment Date unless the Participant has deferred, in whole or in part, the receipt of the award by making an election on the deferral form attached hereto, prior to the end of the Plan Year immediately preceding the Payment Date.

5. In the event a Participant has elected to defer receipt of all or a portion of the award, the Utility Company shall set up an account in the Participant’s name. The amount of the Participant’s award to the extent deferred will be credited to the Participant's account on the Payment Date.

6. The balance credited to an account of a Participant who has elected to defer receipt of an award will be an unsecured, unfunded obligation of the Utility Company.

7. Interest shall accrue on the balance credited to a Participant's account from the date the balance is credited. The rate of interest shall be the Prime Rate plus 1 percentage point as reported on the last business day of the preceding year to be effective on January 1 of each new Plan Year.

8. Interest shall be compounded and credited to the account monthly.

9. A Participant may elect to defer any percentage, not to exceed l00, of an annual award.

10. A Participant electing to defer any part of an award must elect one of the following dates for payment:

(1) Payment Date next following termination of employment with the Utility Company or an affiliated company; or

(2) Payment Date of the fifth year following the year in which the award may be made.

11. A Participant may elect to receive the deferred amounts accumulated in the Participant's account in monthly installments, not to exceed 120. In the event the Participant elects to receive the amounts in the Participant's account in more than one installment, interest shall continue to accrue on the balance remaining in their account at the applicable rate or rates determined annually by the Committee.

12. In the event of the death of a Participant in whose name a deferred account has been set up, the Utility Company shall, within six months thereafter, pay to the Participant's estate or the designated beneficiary the entire amount in the deferred account.

13. In the event of a "Change in Control" then any award deferred by each Participant shall become immediately payable to the Participant. In the event the Participant files suit to collect a deferred award then all of the Participant's court costs, other expenses of litigation, and attorneys' fees shall be paid by the Utility Company in the event the Participant prevails upon any of the Participant's claims for payment.

EX-10.D

WBI HOLDINGS, INC.

EXECUTIVE INCENTIVE COMPENSATION PLAN

____________________________________________________________

I.PURPOSE

The purpose of the Executive Incentive Compensation Plan (the "Plan") is to provide an incentive for key executives of WBI Holdings, Inc. (the "Company") and any subsidiaries participating in the Plan (each a "Subsidiary", and together, the "Subsidiaries") to focus their efforts on the achievement of challenging and demanding corporate objectives. The Plan is designed to reward successful corporate performance calculated from January 1 to December 31 of each Plan Year, as measured against specified performance goals as well as exceptional individual performance. When corporate or subsidiary performance reaches or exceeds the performance targets and individual performance is exemplary, incentive compensation awards, in conjunction with salaries, will provide a level of compensation which recognizes the skills and efforts of the key executives.

II.BASIC PLAN CONCEPT

The Plan provides an opportunity to earn annual incentive compensation based on the achievement of specified annual performance objectives. A target incentive award for each individual within the Plan is established based on the position level and actual base salary, provided, however, that the Compensation Committee of the Board of Directors (the "Committee") of the Company in its sole discretion may, instead of actual base salary, use the assigned salary grade market value (midpoint) ("Salary"). The target incentive award represents the amount to be paid, subject to the achievement of the performance objective targets established each year. Larger incentive awards than target may be authorized when performance exceeds targets; lesser or no amounts may be paid when performance is below target.

It is recognized that during a Plan Year major unforeseen changes in economic and environmental conditions or other significant factors beyond the control of management may substantially affect the ability of the Plan Participants to achieve the specified performance goals. Therefore, in its review of corporate performance the Committee, in consultation with the Chief Executive Officer of MDU Resources Group, Inc., may modify the performance targets. However, it is contemplated that such target modifications will be necessary only in years of unusually adverse or favorable external conditions.

III.ADMINISTRATION

The Plan shall be administered by the Committee with the assistance of the President of the Company. The Committee shall approve annually, prior to the beginning of each Plan Year, the list of eligible Participants, and the target incentive award level for each position within the Plan. The Plan's performance targets for the year shall be approved by the Committee no later than its regularly scheduled February meeting during that Plan Year. The Committee shall have final discretion to determine actual award payment levels, method of payment, and whether or not payments shall be made for any Plan Year.

The Board of Directors of the Company may, at any time and from time to time, alter, amend, supersede or terminate the Plan in whole or in part, provided that no termination, amendment or modification of the Plan shall adversely affect in any material way an award that has met all requirements for payment without the written consent of the Participant holding such award, unless such termination, modification or amendment is required by applicable law.

IV.ELIGIBILITY

Key executives of the Company or the Subsidiaries who are determined by the Committee to have a key role in both the establishment and achievement of Company and/or Subsidiary objectives shall be eligible to participate in the Plan.

Nothing in the Plan shall interfere with or limit in any way the right of the Company or any Subsidiary to terminate any Participant's employment at any time, for any reason or no reason in the Company's or a Subsidiary's sole discretion, or confer upon any Participant any right to continue in the employment of the Company or any Subsidiary. No executive shall have the right to be selected to receive an award under the Plan, or, having been so selected, to be selected to receive a future award.

V.PLAN PERFORMANCE MEASURES

Performance measures shall be established that consider shareholder and customer interests. These measures shall be evaluated annually based on achievement of specified goals.

The performance measure reflective of shareholders' interest will be the percentage attainment of corporate goals, as determined each year by the Committee. This measure may be applied at the Company level for some individuals, such as the President, whose major or sole impact is Company-wide, or at the Subsidiary level for individuals whose major or sole impact is on Subsidiary results.

Individual performance will be assessed based on the achievement of annually established individual objectives.

Threshold, target and maximum award levels will be established annually for each performance measure. The Committee will retain the right to make all interpretations as to the actual attainment of the desired results and will determine whether any circumstances beyond the control of management need to be considered.

VI.TARGET INCENTIVE AWARDS

Target incentive awards will be expressed as a percentage of each Participant's Salary. These percentages shall vary by position and reflect larger reward opportunity for positions having greater effect on the establishment and accomplishment of the Company's or a Subsidiary's objectives. A schedule showing the target awards as a percentage of Salary for eligible positions will be prepared by the Committee for each Plan Year.

VII.INCENTIVE FUND DETERMINATION

The target incentive fund is the sum of the individual target incentive awards for all eligible Participants. Once the incentive targets have been determined by the Committee, a target incentive fund shall be established and accrued ratably by the Company. The incentive fund and accruals may be adjusted during the year.

After the close of each Plan Year, the Company will prepare an analysis showing the Company's and each Subsidiary's performance in relation to each of the performance measures employed. This will be provided to the Committee for review and comparison to threshold, target and maximum performance levels. In addition, any recommendations of the President will be presented at this time. The Committee will then determine the amount of the target incentive fund earned.

VIII.INDIVIDUAL AWARD DETERMINATION

Each individual Participant's award will be based first upon the level of performance achieved by the Company and/or the Subsidiary and secondly based upon the individual's performance. The criteria applicable for assessing individual performance will be approved by the Committee no later than its regularly scheduled February meeting during the Plan Year. The assessment by the Committee, after consultation with the President, of achievement relative to the established criteria, as determined by a percentage from 0 percent to 200 percent, will be applied to the Participant's target incentive award which has been first adjusted for Company or Subsidiary performance.

IX.PAYMENT OF AWARDS

Except as provided below or as otherwise determined by the Committee, in order to receive an award under the Plan, the Participant must remain in the employment of the Company or the Subsidiary for the entire Plan Year. If a Participant terminates employment with the Company pursuant to Section 5.01 of the Company's Bylaws which provides for mandatory retirement for certain officers on their 65th birthday (or terminates employment with a Subsidiary pursuant to a similar Subsidiary Bylaw provision) and if the Participant's 65th birthday occurs during the Plan Year, determination of whether the performance measures have been met will be made at the end of the Plan Year, and to the extent met, payment of the award will be made to the Participant, prorated. Proration of awards shall be based upon the number of full months elapsed from and including January to and including the month in which the Participant's 65th birthday occurs.

A Participant who transfers between the Company or a Subsidiary and another company in the MDU Resources Group, Inc. system may receive a prorated award at the discretion of the Committee.

Payments made under this Plan will not be considered part of compensation for pension purposes. Payments will be made in cash no later than March 15 of the year following the end of the calendar year for which the award is earned. Incentive awards may be deferred if the appropriate elections have been executed on or prior to December 31 of the year preceding the Plan Year for which such incentive awards are earned or, if later, within 30 days after a Participant first becomes eligible for the Plan. Deferred amounts will accrue interest at a rate determined annually by the Committee.

In the event of a "Change in Control" (as defined by the Committee in its Rules and Regulations), any award deferred by a Participant shall become immediately payable to the Participant in cash, together with accrued interest thereon to the date of payment. In the event the Participant files suit to collect the Participant's deferred award, all of the court costs, other expenses of litigation, and attorneys' fees shall be paid by the Company in the event the Participant prevails upon any of the Participant's claims for payment of a deferred award.

X.ACCOUNTING RESTATEMENTS. This Section X shall apply only to incentive awards granted to Participants in the Plan who are employees of the Company. Notwithstanding anything in the Plan or the Plan's Rules and Regulations to the contrary, if the Company's audited financial statements are restated, the Committee may, in accordance with the Company's Guidelines for Repayment of Incentives Due to Accounting Restatements, take such actions as it deems appropriate (in its sole discretion) with respect to

(a)unpaid incentive awards under the Plan (including incentive awards relating to completed Plan Years, but with respect to which payments have not yet been made or deferred) ("Outstanding Awards") and

(b)prior incentive awards that were paid (or deferred) within the 3 year period preceding the restatement ("Prior Awards"), provided such Prior Awards were not paid prior to the date the Plan was amended to add this Section X,

if the calculation of the amounts payable, paid or deferred under such awards are, or would have been, directly impacted by the restatement, including, without limitation, (i) securing (or causing to be secured) repayment of some or all payments made pursuant to (or deferrals relating to) Prior Awards, (ii) making (or causing to be made) additional payments (or crediting additional deferrals), (iii) reducing or otherwise adjusting the amount payable pursuant to Outstanding Awards and/or (iv) causing the forfeiture of Outstanding Awards. The Committee may, in its sole discretion, take different actions pursuant to this Section X with respect to different awards, different Participants (or beneficiaries) and/or different classes of awards or Participants (or beneficiaries). The Committee has no obligation to take any action permitted by this Section X. The Committee may consider any factors it chooses in taking (or determining whether to take) any action permitted by this Section X, including, without limitation, the following:

(A)The reason for the restatement of the financial statements;

(B)The amount of time between the initial publication and subsequent restatement of the financial statements; and

(C)The Participant's current employment status, and the viability of successfully obtaining repayment.

If the Committee requires repayment of all or part of a Prior Award, the amount of repayment may be based on, among other things, the difference between the amount paid to the individual and the amount that the Committee determines in its sole discretion should have been paid based on the restated results. The Committee shall determine whether repayment shall be effected (i) by seeking repayment from the Participant, (ii) by reducing (subject to applicable law and the terms and conditions of the applicable plan, program or arrangement) the amount that would otherwise be provided to the Participant under any compensatory plan, program or arrangement maintained by the Company or any of its affiliates, (iii) by withholding payment of future increases in compensation (including the payment of any discretionary bonus amount) or grants of compensatory awards that would otherwise have been made in accordance with the Company's otherwise applicable compensation practices, or (iv) by any combination of the foregoing. Additionally, by accepting an incentive award under the Plan, Participants acknowledge and agree that the Committee may take any actions permitted by this Section X with respect to Outstanding Awards to the extent repayment is to be made pursuant to another plan, program or arrangement maintained by the Company or any of its affiliates.

WBI HOLDINGS, INC.

EXECUTIVE INCENTIVE COMPENSATION PLAN

RULES AND REGULATIONS

The Compensation Committee of the Board of Directors of WBI Holdings, Inc. (formerly known as Williston Basin Interstate Pipeline Company) (the "Company") hereby adopts the following Rules and Regulations for the administration of the Executive Incentive Compensation Plan (the "Plan").

I.DEFINITIONS

The following definitions shall be used for purposes of these Rules and Regulations and for the purpose of administering the Plan:

1. The "Committee" shall be the Compensation Committee of the Board of Directors of the Company.

2. The "Company" shall refer to WBI Holdings, Inc.

3. "Participants" for any Plan Year shall be those key executives of the Company or Subsidiaries who have been approved by the Committee as eligible for participation in the Plan for such Plan Year.

4. "Payment Date" shall be the date set by the Committee for payment of awards, other than those awards deferred pursuant to Section IX of the Plan and Section VII of these Rules and Regulations, which shall be no later than March 15 of the year following the end of the calendar year for which the award is earned.

5. The "Plan" shall refer to the WBI Holdings, Inc. Executive Incentive Compensation Plan.

6.The "Plan Year" shall be January 1 through December 31.

7. "Change in Control" shall mean the earliest of the following to occur: (a) the sale or other disposition of all or substantially all of the assets of the Company, other than to a subsidiary of MDU Resources Group, Inc. or to a subsidiary of the Company; or (b) the sale or other disposition of voting stock of the Company, other than to a subsidiary of MDU Resources Group, Inc. or to a subsidiary of the Company, such that, immediately following such sale or other disposition, MDU Resources Group, Inc. and/or its subsidiaries would own less than 50 percent of the outstanding voting stock of the Company; or (c) the sale or other disposition of voting stock of the Company, other than to a subsidiary of MDU Resources Group, Inc. or to a subsidiary of the Company, such that, immediately following such sale or other disposition, MDU Resources Group, Inc, and/or its subsidiaries would no longer possess the ability to elect a majority of the Board of Directors of the Company.

8. The "Prime Rate" shall be the base rate on corporate loans posted by at least 75 percent of the nation's largest banks as reported in The Wall Street Journal.

  9. "Retirement" means the later of the day the Participant attains age 55 or the day the Participant ceases to be an employee of the Company, MDU Resources Group, Inc. or any subsidiary of MDU Resources Group, Inc.

10. "Subsidiary" means any subsidiary of the Company participating in the Plan.

II.ADMINISTRATION

1. The Committee shall have the full power to construe and interpret the Plan and to establish and to amend these Rules and Regulations for its administration.

2. No member of the Committee shall participate in a decision as to that member's own eligibility for, or award of, an incentive award payment.

3. Prior to the beginning of each Plan Year, the Committee shall approve a list of eligible key executives and notify those so approved that they are eligible to participate in the Plan for such Plan Year.

4. Prior to the beginning of each Plan Year, the Committee shall approve an Annual Operating Plan. The Annual Operating Plan shall include the Plan's performance measures and target incentive award levels for each salary grade covered by the Plan for the following Plan Year. The Committee shall set threshold, target and maximum award levels for performance. These levels shall be included in the Annual Operating Plan. The Plan's performance targets for the year shall be approved by the Committee no later than its regularly scheduled February meeting during the Plan Year. The Annual Operating Plan, insofar as it is relevant to each individual Participant, shall be made available by the Committee to each Participant in the Plan.

5. The Committee shall have final discretion to determine actual award payment levels and whether or not payments shall be made for any Plan Year. However, unless the Plan's performance objectives are met for the Plan Year, no award shall be made for that Plan Year. Performance targets modified pursuant to Section II of the Plan will be deemed performance targets for purposes of determining whether or not these targets have been met.

III. PLAN PERFORMANCE MEASURES

1. The Committee shall establish the percentage attainment of corporate performance measure and the percentage attainment of individual goals measure. The Committee may establish more or fewer performance measures as it deems necessary.

2. The corporate performance measure may be set by reference to earnings, return on invested capital or any other measure or combination of measures deemed appropriate by the Committee. It may be established for the Company or for a Subsidiary.

3. Individual performance will be assessed based on the achievement of annually established individual objectives.

4. Plan performance measures may be applied at the Company level for individuals such as the President whose major or sole impact is Company-wide, or at the Subsidiary level for individuals whose major or sole impact is on Subsidiary results. The Annual Operating Plan shall contain a list of individuals to whom the Plan performance measures will be applied at the Company level and a list of those individuals for whom the Plan performance measures will be applied at the Subsidiary level. The relevant Subsidiary for each individual will be identified.

5. The Committee shall set threshold, target and maximum award levels for the performance measures for each Subsidiary and for the Company. Those levels shall be included in the Annual Operating Plan.

6. The Committee will retain the authority to determine whether or not the actual attainment of these measures has been made.

IV.TARGET INCENTIVE AWARDS

1. Target incentive awards will be a percentage of each Participant's Salary, as defined in the Plan.

2. Target incentive awards shall be set by the Committee annually and will be included in the Annual Operating Plan.

V.INCENTIVE FUND DETERMINATION

1. The target incentive fund is the sum of the individual target incentive awards for all eligible Participants.

2. Once individual incentive targets have been determined, a target incentive fund shall be established and accrued ratably by the Company. The incentive fund and accruals may be adjusted during the year.

3. As soon as practicable following the close of each Plan Year, the President will provide the Committee with an analysis showing the Company's and each Subsidiary's performance in relation to the performance measures. The Committee will review the analysis and determine, in its sole discretion, the amount of the actual incentive fund.

4. In determining the actual incentive fund, the Committee may consider any recommendations of the President.

VI.INDIVIDUAL AWARD DETERMINATION

1. The Committee shall have the sole discretion to determine each individual Participant's award. The Committee's decision will be based first upon the level of performance achieved by the Company and/or the Subsidiary and secondly upon the individual's performance.

2. The Committee, after consultation with the President, shall set the award as a percentage from 0 percent to 200 percent of the Participant's target incentive award, adjusted for Company or Subsidiary performance.

VII.PAYMENT OF AWARDS

1. On the date the Committee determines the awards to be made to individual Participants, it shall also establish the Payment Date.

2. Except as provided below or as the Committee otherwise determines, in order to receive an award under the Plan, a Participant must remain in the employment of the Company or the Subsidiary for the entire Plan Year.

3. A Participant who transfers between the Company or a Subsidiary and another company in the MDU Resources Group, Inc. system may receive a prorated award at the discretion of the Committee.

4. If a Participant terminates employment with the Company pursuant to Section 5.01 of the Company's Bylaws which provides for mandatory retirement for certain officers on their 65th birthday (or terminates employment with a Subsidiary pursuant to a similar Subsidiary Bylaw provision) and if the Participant's 65th birthday occurs during the Plan Year, determination of whether the performance measures have been met will be made at the end of the Plan Year, and to the extent met, payment of the award will be made to the Participant, prorated. Proration of awards shall be based upon the number of full months elapsed from and including January to and including the month in which the Participant's 65th birthday occurs.

5. Payment of the award shall be made in cash. Payments shall be made on the Payment Date unless the Participant has deferred, in whole or in part, the receipt of the award by making an election on the deferral form provided by the Company, on or prior to December 31 of the year preceding the Plan Year for which such incentive awards are earned or, if later, within 30 days after a Participant first becomes eligible for the Plan.

6. In the event a Participant has elected to defer receipt of all or a portion of the award, the Company shall set up an account in the Participant's name. The amount of the Participant's award to the extent deferred will be credited to the Participant's account on the Payment Date.

7. The balance credited to an account of a Participant who has elected to defer receipt of an award will be an unsecured, unfunded obligation of the Company.

8. Interest shall accrue on the balance credited to a Participant's account from the date the balance is credited. The rate of interest shall be the Prime Rate plus 1 percentage point as reported on the last business day of the preceding year to be effective on January 1 of each new Plan Year.

9. Interest shall be compounded and credited to the account monthly.

 10.A Participant may elect to defer any percentage, not to exceed l00, of an annual award.

 11.A Participant electing to defer any part of an award must elect one of the following dates for payment:

(a) Payment Date next following termination of employment with the Company or an affiliated company; or

(b) Payment Date of the fifth year following the year in which the award may be made.

12. At the same time a Participant makes a deferral election, a Participant may elect to receive the deferred amounts accumulated in the Participant's account in monthly installments, not to exceed 120. In the event the Participant elects to receive the amounts in the Participant's account in more than one installment, interest shall continue to accrue on the balance remaining in their account at the applicable rate or rates determined annually by the Committee.

13. In the event of the death of a Participant in whose name a deferred account has been set up, the Company shall, within six months thereafter, pay to the Participant's estate or the designated beneficiary the entire amount in the deferred account.

14. In the event of a "Change in Control" any award deferred by a Participant shall become immediately payable to the Participant. In the event the Participant files suit to collect a deferred award, all of the Participant's court costs, other expenses of litigation, and attorneys' fees shall be paid by the Company in the event the Participant prevails upon any of the claims for payment.

EX-10.E

KNIFE RIVER CORPORATION

EXECUTIVE INCENTIVE COMPENSATION PLAN

__________________________________________________

I.PURPOSE

The purpose of the Executive Incentive Compensation Plan (the "Plan") is to provide an incentive for key executives of Knife River Corporation (the "Company") and any subsidiaries participating in the Plan (each a "Subsidiary", and together, the "Subsidiaries") to focus their efforts on the achievement of challenging and demanding corporate objectives. The Plan is designed to reward successful corporate performance calculated from January 1 to December 31 of each Plan Year, as measured against specified performance goals as well as exceptional individual performance. When corporate or subsidiary performance reaches or exceeds the performance targets and individual performance is exemplary, incentive compensation awards, in conjunction with salaries, will provide a level of compensation which recognizes the skills and efforts of the key executives.

II.BASIC PLAN CONCEPT

The Plan provides an opportunity to earn annual incentive compensation based on the achievement of specified annual performance objectives. A target incentive award for each individual within the Plan is established based on the position level and actual base salary, provided, however, that the Compensation Committee of the Board of Directors (the "Committee") of the Company in its sole discretion may, instead of actual base salary, use the assigned salary grade market value (midpoint) ("Salary"). The target incentive award represents the amount to be paid, subject to the achievement of the performance objective targets established each year. Larger incentive awards than target may be authorized when performance exceeds targets; lesser or no amounts may be paid when performance is below target.

It is recognized that during a Plan Year major unforeseen changes in economic and environmental conditions or other significant factors beyond the control of management may substantially affect the ability of the Plan Participants to achieve the specified performance goals. Therefore, in its review of corporate performance the Committee, in consultation with the Chief Executive Officer of MDU Resources Group, Inc., may modify the performance targets. However, it is contemplated that such target modifications will be necessary only in years of unusually adverse or favorable external conditions.

III.ADMINISTRATION

The Plan shall be administered by the Committee with the assistance of the President of the Company. The Committee shall approve annually, prior to the beginning of each Plan Year, the list of eligible Participants, and the target incentive award level for each position within the Plan. The Plan's performance targets for the year shall be approved by the Committee no later than its regularly scheduled February meeting during that Plan Year. The Committee shall have final discretion to determine actual award payment levels, method of payment, and whether or not payments shall be made for any Plan Year.

The Board of Directors of the Company may, at any time and from time to time, alter, amend, supersede or terminate the Plan in whole or in part, provided that no termination, amendment or modification of the Plan shall adversely affect in any material way an award that has met all requirements for payment without the written consent of the Participant holding such award, unless such termination, modification or amendment is required by applicable law.

IV. ELIGIBILITY

Key executives of the Company or the Subsidiaries who are determined by the Committee to have a key role in both the establishment and achievement of Company and/or Subsidiary objectives shall be eligible to participate in the Plan.

Nothing in the Plan shall interfere with or limit in any way the right of the Company or any Subsidiary to terminate any Participant's employment at any time, for any reason or no reason in the Company's or a Subsidiary's sole discretion, or confer upon any Participant any right to continue in the employment of the Company or any Subsidiary. No executive shall have the right to be selected to receive an award under the Plan, or, having been so selected, to be selected to receive a future award.

V.PLAN PERFORMANCE MEASURES

Performance measures shall be established that consider shareholder and customer interests. These measures shall be evaluated annually based on achievement of specified goals.

The performance measure reflective of shareholders' interest will be the percentage attainment of corporate goals, as determined each year by the Committee. This measure may be applied at the Company level for some individuals, such as the President, whose major or sole impact is Company-wide, or at the Subsidiary level for individuals whose major or sole impact is on Subsidiary results.

Individual performance will be assessed based on the achievement of annually established individual objectives.

Threshold, target and maximum award levels will be established annually for each performance measure. The Committee will retain the right to make all interpretations as to the actual attainment of the desired results and will determine whether any circumstances beyond the control of management need to be considered.

VI. TARGET INCENTIVE AWARDS

Target incentive awards will be expressed as a percentage of each Participant's Salary. These percentages shall vary by position and reflect larger reward opportunity for positions having greater effect on the establishment and accomplishment of the Company's or a Subsidiary's objectives. A schedule showing the target awards as a percentage of Salary for eligible positions will be prepared by the Committee for each Plan Year.

VII.INCENTIVE FUND DETERMINATION

The target incentive fund is the sum of the individual target incentive awards for all eligible Participants. Once the incentive targets have been determined by the Committee, a target incentive fund shall be established and accrued ratably by the Company. The incentive fund and accruals may be adjusted during the year.

After the close of each Plan Year, the Company will prepare an analysis showing the Company's and each Subsidiary's performance in relation to each of the performance measures employed. This will be provided to the Committee for review and comparison to threshold, target and maximum performance levels. In addition, any recommendations of the President will be presented at this time. The Committee will then determine the amount of the target incentive fund earned.

VIII.INDIVIDUAL AWARD DETERMINATION

Each individual Participant's award will be based first upon the level of performance achieved by the Company and/or the Subsidiary and secondly based upon the individual's performance. The criteria applicable for assessing individual performance will be approved by the Committee no later than its regularly scheduled February meeting during the Plan Year. The assessment by the Committee, after consultation with the President, of achievement relative to the established criteria, as determined by a percentage from 0 percent to 200 percent, will be applied to the Participant's target incentive award which has been first adjusted for Company or Subsidiary performance.

IX.PAYMENT OF AWARDS

Except as provided below or as otherwise determined by the Committee, in order to receive an award under the Plan, the Participant must remain in the employment of the Company or the Subsidiary for the entire Plan Year. If a Participant terminates employment with the Company pursuant to Section 5.01 of the Company's Bylaws which provides for mandatory retirement for certain officers on their 65th birthday (or terminates employment with a Subsidiary pursuant to a similar Subsidiary Bylaw provision) and if the Participant's 65th birthday occurs during the Plan Year, determination of whether the performance measures have been met will be made at the end of the Plan Year, and to the extent met, payment of the award will be made to the Participant, prorated. Proration of awards shall be based upon the number of full months elapsed from and including January to and including the month in which the Participant's 65th birthday occurs.

A Participant who transfers between the Company or a Subsidiary and another company in the MDU Resources Group, Inc. system may receive a prorated award at the discretion of the Committee.

Payments made under this Plan will not be considered part of compensation for pension purposes. Payments will be made in cash no later than March 15 of the year following the end of the calendar year for which the award is earned. Incentive awards may be deferred if the appropriate elections have been executed on or prior to December 31 of the year preceding the Plan Year for which such incentive awards are earned or, if later, within 30 days after a Participant first becomes eligible for the Plan. Deferred amounts will accrue interest at a rate determined annually by the Committee.

In the event of a "Change in Control" (as defined by the Committee in its Rules and Regulations), any award deferred by a Participant shall become immediately payable to the Participant in cash, together with accrued interest thereon to the date of payment. In the event the Participant files suit to collect the Participant's deferred award, all of the court costs, other expenses of litigation, and attorneys' fees shall be paid by the Company in the event the Participant prevails upon any of the Participant's claims for payment of a deferred award.

X.ACCOUNTING RESTATEMENTS

This Section X shall apply only to incentive awards granted to Participants in the Plan who are employees of the Company. Notwithstanding anything in the Plan or the Plan's Rules and Regulations to the contrary, if the Company's audited financial statements are restated, the Committee may, in accordance with the Company's Guidelines for Repayment of Incentives Due to Accounting Restatements, take such actions as it deems appropriate (in its sole discretion) with respect to

(a)unpaid incentive awards under the Plan (including incentive awards relating to completed Plan Years, but with respect to which payments have not yet been made or deferred) ("Outstanding Awards") and

(b)prior incentive awards that were paid (or deferred) within the 3 year period preceding the restatement ("Prior Awards"), provided such Prior Awards were not paid prior to the date the Plan was amended to add this Section X,

if the calculation of the amounts payable, paid or deferred under such awards are, or would have been, directly impacted by the restatement, including, without limitation, (i) securing (or causing to be secured) repayment of some or all payments made pursuant to (or deferrals relating to) Prior Awards, (ii) making (or causing to be made) additional payments (or crediting additional deferrals), (iii) reducing or otherwise adjusting the amount payable pursuant to Outstanding Awards and/or (iv) causing the forfeiture of Outstanding Awards. The Committee may, in its sole discretion, take different actions pursuant to this Section X with respect to different awards, different Participants (or beneficiaries) and/or different classes of awards or Participants (or beneficiaries). The Committee has no obligation to take any action permitted by this Section X. The Committee may consider any factors it chooses in taking (or determining whether to take) any action permitted by this Section X, including, without limitation, the following:

(A)The reason for the restatement of the financial statements;

(B)The amount of time between the initial publication and subsequent restatement of the financial statements; and

(C)The Participant's current employment status, and the viability of successfully obtaining repayment.

If the Committee requires repayment of all or part of a Prior Award, the amount of repayment may be based on, among other things, the difference between the amount paid to the individual and the amount that the Committee determines in its sole discretion should have been paid based on the restated results. The Committee shall determine whether repayment shall be effected (i) by seeking repayment from the Participant, (ii) by reducing (subject to applicable law and the terms and conditions of the applicable plan, program or arrangement) the amount that would otherwise be provided to the Participant under any compensatory plan, program or arrangement maintained by the Company or any of its affiliates, (iii) by withholding payment of future increases in compensation (including the payment of any discretionary bonus amount) or grants of compensatory awards that would otherwise have been made in accordance with the Company's otherwise applicable compensation practices, or (iv) by any combination of the foregoing. Additionally, by accepting an incentive award under the Plan, Participants acknowledge and agree that the Committee may take any actions permitted by this Section X with respect to Outstanding Awards to the extent repayment is to be made pursuant to another plan, program or arrangement maintained by the Company or any of its affiliates.

KNIFE RIVER CORPORATION

EXECUTIVE INCENTIVE COMPENSATION PLAN

RULES AND REGULATIONS

__________________________________________________

The Compensation Committee of the Board of Directors of Knife River Corporation (formerly known as Knife River Coal Mining Company) (the "Company") hereby adopts the following Rules and Regulations for the administration of the Executive Incentive Compensation Plan (the "Plan").

I.DEFINITIONS

The following definitions shall be used for purposes of these Rules and Regulations and for the purpose of administering the Plan:

1. The "Committee" shall be the Compensation Committee of the Board of Directors of the Company.

2. The "Company" shall refer to Knife River Corporation.

3. "Participants" for any Plan Year shall be those key executives of the Company or Subsidiaries who have been approved by the Committee as eligible for participation in the Plan for such Plan Year.

4. "Payment Date" shall be the date set by the Committee for payment of awards, other than those awards deferred pursuant to Section IX of the Plan and Section VII of these Rules and Regulations, which shall be no later than March 15 of the year following the end of the calendar year for which the award is earned.

5. The "Plan" shall refer to the Knife River Corporation Executive Incentive Compensation Plan.

6. The "Plan Year" shall be January 1 through December 31.

7. "Change in Control" shall mean the earliest of the following to occur: (a) the sale or other disposition of all or substantially all of the assets of the Company, other than to a subsidiary of MDU Resources Group, Inc. or to a subsidiary of the Company; or (b) the sale or other disposition of voting stock of the Company, other than to a subsidiary of MDU Resources Group, Inc. or to a subsidiary of the Company, such that, immediately following such sale or other disposition, MDU Resources Group, Inc. and/or its subsidiaries would own less than 50 percent of the outstanding voting stock of the Company; or (c) the sale or other disposition of voting stock of the Company, other than to a subsidiary of MDU Resources Group, Inc. or to a subsidiary of the Company, such that, immediately following such sale or other disposition, MDU Resources Group, Inc., and/or its subsidiaries would no longer possess the ability to elect a majority of the Board of Directors of the Company.

8. The "Prime Rate" shall be the base rate on corporate loans posted by at least 75 percent of the nation's largest banks as reported in The Wall Street Journal.

9. "Retirement" means the later of the day the Participant attains age 55 or the day the Participant ceases to be an employee of the Company, MDU Resources Group, Inc. or any Subsidiary of MDU Resources Group, Inc.

10. "Subsidiary" means any Subsidiary of the Company participating in the Plan.

II. ADMINISTRATION

1. The Committee shall have the full power to construe and interpret the Plan and to establish and to amend these Rules and Regulations for its administration.

2. No member of the Committee shall participate in a decision as to that member's own eligibility for, or award of, an incentive award payment.

3. Prior to the beginning of each Plan Year, the Committee shall approve a list of eligible key executives and notify those so approved that they are eligible to participate in the Plan for such Plan Year.

4. Prior to the beginning of each Plan Year, the Committee shall approve an Annual Operating Plan. The Annual Operating Plan shall include the Plan's performance measures and target incentive award levels for each salary grade covered by the Plan for the following Plan Year. The Committee shall set threshold, target and maximum award levels for performance. These levels shall be included in the Annual Operating Plan. The Plan's performance targets for the year shall be approved by the Committee no later than its regularly scheduled February meeting during the Plan Year. The Annual Operating Plan, insofar as it is relevant to each individual Participant, shall be made available by the Committee to each Participant in the Plan.

5. The Committee shall have final discretion to determine actual award payment levels and whether or not payments shall be made for any Plan Year. However, unless the Plan's performance objectives are met for the Plan Year, no award shall be made for that Plan Year. Performance targets modified pursuant to Section II of the Plan will be deemed performance targets for purposes of determining whether or not these targets have been met.

III.  PLAN PERFORMANCE MEASURES

1. The Committee shall establish the percentage attainment of corporate performance measure and the percentage attainment of individual goals measure. The Committee may establish more or fewer performance measures as it deems necessary.

2. The corporate performance measure may be set by reference to earnings, return on invested capital or any other measure or combination of measures deemed appropriate by the Committee. It may be established for the Company or for a Subsidiary.

3. Individual performance will be assessed based on the achievement of annually established individual objectives.

4. Plan performance measures may be applied at the Company level for individuals such as the President whose major or sole impact is Company-wide, or at the Subsidiary level for individuals whose major or sole impact is on Subsidiary results. The Annual Operating Plan shall contain a list of individuals to whom the Plan performance measures will be applied at the Company level and a list of those individuals for whom the Plan performance measures will be applied at the Subsidiary level. The relevant Subsidiary for each individual will be identified.

5. The Committee shall set threshold, target and maximum award levels for the performance measures, for each Subsidiary and for the Company. Those levels shall be included in the Annual Operating Plan.

6. The Committee will retain the authority to determine whether or not the actual attainment of these measures has been made.

IV.TARGET INCENTIVE AWARDS

1. Target incentive awards will be a percentage of each Participant's Salary, as defined in the Plan.

2. Target incentive awards shall be set by the Committee annually and will be included in the Annual Operating Plan.

V. INCENTIVE FUND DETERMINATION

1. The target incentive fund is the sum of the individual target incentive awards for all eligible Participants.

2. Once individual incentive targets have been determined, a target incentive fund shall be established and accrued ratably by the Company. The incentive fund and accruals may be adjusted during the year.

3. As soon as practicable following the close of each Plan Year, the President will provide the Committee with an analysis showing the Company's and each Subsidiary's performance in relation to the performance measures. The Committee will review the analysis and determine, in its sole discretion, the amount of the actual incentive fund.

4. In determining the actual incentive fund, the Committee may consider any recommendations of the President.

VI. INDIVIDUAL AWARD DETERMINATION

1. The Committee shall have the sole discretion to determine each individual Participant's award. The Committee's decision will be based first upon the level of performance achieved by the Company and/or the Subsidiary and secondly upon the individual's performance.

2. The Committee, after consultation with the President, shall set the award as a percentage from 0 percent to 200 percent of the Participant's target incentive award, adjusted for Company or Subsidiary performance.

VII. PAYMENT OF AWARDS

1. On the date the Committee determines the awards to be made to individual Participants, it shall also establish the Payment Date.

2. Except as provided below or as the Committee otherwise determines, in order to receive an award under the Plan, a Participant must remain in the employment of the Company or the Subsidiary for the entire Plan Year.

3. A Participant who transfers between the Company or a Subsidiary and another company in the MDU Resources Group, Inc. system may receive a prorated award at the discretion of the Committee.

4. If a Participant terminates employment with the Company pursuant to Section 5.01 of the Company's Bylaws which provides for mandatory retirement for certain officers on their 65^th birthday (or terminates employment with a Subsidiary pursuant to a similar Subsidiary Bylaw provision) and if the Participant's 65^th birthday occurs during the Plan Year, determination of whether the performance measures have been met will be made at the end of the Plan Year, and to the extent met, payment of the award will be made to the Participant, prorated. Proration of awards shall be based upon the number of full months elapsed from and including January to and including the month in which the Participant's 65^th birthday occurs.

5. Payment of the award shall be made in cash. Payments shall be made on the Payment Date unless the Participant has deferred, in whole or in part, the receipt of the award by making an election on the deferral form provided by the Company, on or prior to December 31 of the year preceding the Plan Year for which such incentive awards are earned or, if later, within 30 days after a Participant first becomes eligible for the Plan.

6. In the event a Participant has elected to defer receipt of all or a portion of the award, the Company shall set up an account in the Participant's name. The amount of the Participant's award to the extent deferred will be credited to the Participant's account on the Payment Date.

7. The balance credited to an account of a Participant who has elected to defer receipt of an award will be an unsecured, unfunded obligation of the Company.

8. Interest shall accrue on the balance credited to a Participant's account from the date the balance is credited. The rate of interest shall be the Prime Rate plus 1 percentage point as reported on the last business day of the preceding year to be effective on January 1 of each new Plan Year.

9. Interest shall be compounded and credited to the account monthly.

  10. A Participant may elect to defer any percentage, not to exceed 100, of an annual award.

  11. A Participant electing to defer any part of an award must elect one of the following dates for payment:

(a) Payment Date next following termination of employment with the Company or an affiliated company; or

(b) Payment Date of the fifth year following the year in which the award may be made.

12. At the same time a Participant makes a deferral election, a Participant may elect to receive the deferred amounts accumulated in the Participant's account in monthly installments, not to exceed 120. In the event the Participant elects to receive the amounts in the Participant's account in more than one installment, interest shall continue to accrue on the balance remaining in their account at the applicable rate or rates determined annually by the Committee.

13. In the event of the death of a Participant in whose name a deferred account has been set up, the Company shall, within six months thereafter, pay to the Participant's estate or the designated beneficiary the entire amount in the deferred account.

14. In the event of a "Change in Control" any award deferred by a Participant shall become immediately payable to the Participant. In the event the Participant files suit to collect a deferred award, all of the Participant's court costs, other expenses of litigation, and attorneys' fees shall be paid by the Company in the event the Participant prevails upon any of the claims for payment.

EX-10.F

MDU CONSTRUCTION SERVICES GROUP, INC.

EXECUTIVE INCENTIVE COMPENSATION PLAN

____________________________________________________________

I.PURPOSE

The purpose of the Executive Incentive Compensation Plan (the "Plan") is to provide an incentive for key executives of MDU Construction Services Group, Inc. (formerly known as Utility Services, Inc.) (the "Company") and any subsidiaries participating in the Plan (each a "Subsidiary", and together, the "Subsidiaries") to focus their efforts on the achievement of challenging and demanding corporate objectives. The Plan is designed to reward successful corporate performance calculated from January 1 to December 31 of each Plan Year, as measured against specified performance goals as well as exceptional individual performance. When corporate or subsidiary performance reaches or exceeds the performance targets and individual performance is exemplary, incentive compensation awards, in conjunction with salaries, will provide a level of compensation which recognizes the skills and efforts of the key executives.

II.BASIC PLAN CONCEPT

The Plan provides an opportunity to earn annual incentive compensation based on the achievement of specified annual performance objectives. A target incentive award for each individual within the Plan is established based on the position level and actual base salary, provided, however, that the Compensation Committee of the Board of Directors (the "Committee") of the Company in its sole discretion may, instead of actual base salary, use the assigned salary grade market value (midpoint) ("Salary"). The target incentive award represents the amount to be paid, subject to the achievement of the performance objective targets established each year. Larger incentive awards than target may be authorized when performance exceeds targets; lesser or no amounts may be paid when performance is below target.

It is recognized that during a Plan Year major unforeseen changes in economic and environmental conditions or other significant factors beyond the control of management may substantially affect the ability of the Plan Participants to achieve the specified performance goals. Therefore, in its review of corporate performance the Committee, in consultation with the Chief Executive Officer of MDU Resources Group, Inc., may modify the performance targets. However, it is contemplated that such target modifications will be necessary only in years of unusually adverse or favorable external conditions.

III.ADMINISTRATION

The Plan shall be administered by the Committee with the assistance of the President of the Company. The Committee shall approve annually, prior to the beginning of each Plan Year, the list of eligible Participants, and the target incentive award level for each position within the Plan. The Plan's performance targets for the year shall be approved by the Committee no later than its regularly scheduled February meeting during that Plan Year. The Committee shall have final discretion to determine actual award payment levels, method of payment, and whether or not payments shall be made for any Plan Year.

The Board of Directors of the Company may, at any time and from time to time, alter, amend, supersede or terminate the Plan in whole or in part, provided that no termination, amendment or modification of the Plan shall adversely affect in any material way an award that has met all requirements for payment without the written consent of the Participant holding such award, unless such termination, modification or amendment is required by applicable law.

IV.ELIGIBILITY

Key executives of the Company or the Subsidiaries who are determined by the Committee to have a key role in both the establishment and achievement of Company and/or Subsidiary objectives shall be eligible to participate in the Plan.

Nothing in the Plan shall interfere with or limit in any way the right of the Company or any Subsidiary to terminate any Participant's employment at any time, for any reason or no reason in the Company's or a Subsidiary's sole discretion, or confer upon any Participant any right to continue in the employment of the Company or any Subsidiary. No executive shall have the right to be selected to receive an award under the Plan, or, having been so selected, to be selected to receive a future award.

V.PLAN PERFORMANCE MEASURES

Performance measures shall be established that consider shareholder and customer interests. These measures shall be evaluated annually based on achievement of specified goals.

The performance measure reflective of shareholders' interest will be the percentage attainment of corporate goals, as determined each year by the Committee. This measure may be applied at the Company level for some individuals, such as the President, whose major or sole impact is Company-wide, or at the Subsidiary level for individuals whose major or sole impact is on Subsidiary results.

Individual performance will be assessed based on the achievement of annually established individual objectives.

Threshold, target and maximum award levels will be established annually for each performance measure. The Committee will retain the right to make all interpretations as to the actual attainment of the desired results and will determine whether any circumstances beyond the control of management need to be considered.

VI.TARGET INCENTIVE AWARDS

Target incentive awards will be expressed as a percentage of each Participant's Salary. These percentages shall vary by position and reflect larger reward opportunity for positions having greater effect on the establishment and accomplishment of the Company's or a Subsidiary's objectives. A schedule showing the target awards as a percentage of Salary for eligible positions will be prepared by the Committee for each Plan Year.

VII.INCENTIVE FUND DETERMINATION

The target incentive fund is the sum of the individual target incentive awards for all eligible Participants. Once the incentive targets have been determined by the Committee, a target incentive fund shall be established and accrued ratably by the Company. The incentive fund and accruals may be adjusted during the year.

After the close of each Plan Year, the Company will prepare an analysis showing the Company's and each Subsidiary's performance in relation to each of the performance measures employed. This will be provided to the Committee for review and comparison to threshold, target and maximum performance levels. In addition, any recommendations of the President will be presented at this time. The Committee will then determine the amount of the target incentive fund earned.

VIII.INDIVIDUAL AWARD DETERMINATION

Each individual Participant's award will be based first upon the level of performance achieved by the Company and/or the Subsidiary and secondly based upon the individual's performance. The criteria applicable for assessing individual performance will be approved by the Committee no later than its regularly scheduled February meeting during the Plan Year. The assessment by the Committee, after consultation with the President, of achievement relative to the established criteria, as determined by a percentage from 0 percent to 200 percent, will be applied to the Participant's target incentive award which has been first adjusted for Company or Subsidiary performance.

IX.PAYMENT OF AWARDS

Except as provided below or as otherwise determined by the Committee, in order to receive an award under the Plan, the Participant must remain in the employment of the Company or the Subsidiary for the entire Plan Year. If a Participant terminates employment with the Company pursuant to Section 5.01 of the Company's Bylaws which provides for mandatory retirement for certain officers on their 65th birthday (or terminates employment with a Subsidiary pursuant to a similar Subsidiary Bylaw provision) and if the Participant's 65th birthday occurs during the Plan Year, determination of whether the performance measures have been met will be made at the end of the Plan Year, and to the extent met, payment of the award will be made to the Participant, prorated. Proration of awards shall be based upon the number of full months elapsed from and including January to and including the month in which the Participant's 65th birthday occurs.

A Participant who transfers between the Company or a Subsidiary and another company in the MDU Resources Group, Inc. system may receive a prorated award at the discretion of the Committee.

Payments made under this Plan will not be considered part of compensation for pension purposes. Payments will be made in cash no later than March 15 of the year following the end of the calendar year for which the award is earned.

X.ACCOUNTING RESTATEMENTS

This Section X shall apply only to incentive awards granted to Participants in the Plan who are employees of the Company. Notwithstanding anything in the Plan or the Plan's Rules and Regulations to the contrary, if the Company'saudited financial statements are restated, the Committee may, in accordance with the Company's Guidelines for Repayment of Incentives Due to Accounting Restatements, take such actions as it deems appropriate (in its sole discretion) with respect to

(a)unpaid incentive awards under the Plan (including incentive awards relating to completed Plan Years, but with respect to which payments have not yet been made) ("Outstanding Awards") and

(b)prior incentive awards that were paid within the 3 year period preceding the restatement ("Prior Awards"), provided such Prior Awards were not paid prior to the date the Plan was amended to add this Section X,

if the calculation of the amounts payable or paid under such awards are, or would have been, directly impacted by the restatement, including, without limitation, (i) securing (or causing to be secured) repayment of some or all payments made pursuant to Prior Awards, (ii) making (or causing to be made) additional payments, (iii) reducing or otherwise adjusting the amount payable pursuant to Outstanding Awards and/or (iv) causing the forfeiture of Outstanding Awards. The Committee may, in its sole discretion, take different actions pursuant to this Section X with respect to different awards, different Participants (or beneficiaries) and/or different classes of awards or Participants (or beneficiaries). The Committee has no obligation to take any action permitted by this Section X. The Committee may consider any factors it chooses in taking (or determining whether to take) any action permitted by this Section X, including, without limitation, the following:

(A)The reason for the restatement of the financial statements;

(B)The amount of time between the initial publication and subsequent restatement of the financial statements; and

(C)The Participant's current employment status, and the viability of successfully obtaining repayment.

If the Committee requires repayment of all or part of a Prior Award, the amount of repayment may be based on, among other things, the difference between the amount paid to the individual and the amount that the Committee determines in its sole discretion should have been paid based on the restated results. The Committee shall determine whether repayment shall be effected (i) by seeking repayment from the Participant, (ii) by reducing (subject to applicable law and the terms and conditions of the applicable plan, program or arrangement) the amount that would otherwise be provided to the Participant under any compensatory plan, program or arrangement maintained by the Company or any of its affiliates, (iii) by withholding payment of future increases in compensation (including the payment of any discretionary bonus amount) or grants of compensatory awards that would otherwise have been made in accordance with the Company's otherwise applicable compensation practices, or (iv) by any combination of the foregoing. Additionally, by accepting an incentive award under the Plan, Participants acknowledge and agree that the Committee may take any actions permitted by this Section X with respect to Outstanding Awards to the extent repayment is to be made pursuant to another plan, program or arrangement maintained by the Company or any of its affiliates.

MDU CONSTRUCTION SERVICES GROUP, INC.

EXECUTIVE INCENTIVE COMPENSATION PLAN

RULES AND REGULATIONS

The Compensation Committee of the Board of Directors of MDU Construction Services Group, Inc. (formerly known as Utility Services, Inc.) (the "Company") hereby adopts the following Rules and Regulations for the administration of the Executive Incentive Compensation Plan (the "Plan").

I.DEFINITIONS

The following definitions shall be used for purposes of these Rules and Regulations and for the purpose of administering the Plan:

1. The "Committee" shall be the Compensation Committee of the Board of Directors of the Company.

2. The "Company" shall refer to MDU Construction Services Group, Inc.

3. "Participants" for any Plan Year shall be those key executives of the Company or Subsidiaries who have been approved by the Committee as eligible for participation in the Plan for such Plan Year.

4. "Payment Date" shall be the date set by the Committee for payment of awards, which shall be no later than March 15 of the year following the end of the calendar year for which the award is earned.

5. The "Plan" shall refer to the MDU Construction Services Group, Inc. Executive Incentive Compensation Plan.

6. The "Plan Year" shall be January 1 through December 31.

7. "Retirement" means the later of the day the Participant attains age 55 or the day the Participant ceases to be an employee of the Company, MDU Resources Group, Inc. or any subsidiary of MDU Resources Group, Inc.

8. "Subsidiary" means any subsidiary of the Company participating in the Plan.

II.ADMINISTRATION

1. The Committee shall have the full power to construe and interpret the Plan and to establish and to amend these Rules and Regulations for its administration.

2. No member of the Committee shall participate in a decision as to that member's own eligibility for, or award of, an incentive award payment.

3. Prior to the beginning of each Plan Year, the Committee shall approve a list of eligible key executives and notify those so approved that they are eligible to participate in the Plan for such Plan Year.

4. Prior to the beginning of each Plan Year, the Committee shall approve an Annual Operating Plan. The Annual Operating Plan shall include the Plan's performance measures and target incentive award levels for each salary grade covered by the Plan for the following Plan Year. The Committee shall set threshold, target and maximum award levels for performance. These levels shall be included in the Annual Operating Plan. The Plan's performance targets for the year shall be approved by the Committee no later than its regularly scheduled February meeting during the Plan Year. The Annual Operating Plan, insofar as it is relevant to each individual Participant, shall be made available by the Committee to each Participant in the Plan.

5. The Committee shall have final discretion to determine actual award payment levels and whether or not payments shall be made for any Plan Year. However, unless the Plan's performance objectives are met for the Plan Year, no award shall be made for that Plan Year. Performance targets modified pursuant to Section II of the Plan will be deemed performance targets for purposes of determining whether or not these targets have been met.

III.PLAN PERFORMANCE MEASURES

1. The Committee shall establish the percentage attainment of corporate performance measure and the percentage attainment of individual goals measure. The Committee may establish more or fewer performance measures as it deems necessary.

2. The corporate performance measure may be set by reference to earnings, return on invested capital or any other measure or combination of measures deemed appropriate by the Committee. It may be established for the Company or for a Subsidiary.

3. Individual performance will be assessed based on the achievement of annually established individual objectives.

4. Plan performance measures may be applied at the Company level for individuals such as the President whose major or sole impact is Company-wide, or at the Subsidiary level for individuals whose major or sole impact is on Subsidiary results. The Annual Operating Plan shall contain a list of individuals to whom the Plan performance measures will be applied at the Company level and a list of those individuals for whom the Plan performance measures will be applied at the Subsidiary level. The relevant Subsidiary for each individual will be identified.

5. The Committee shall set threshold, target and maximum award levels for the performance measures for each Subsidiary and for the Company. Those levels shall be included in the Annual Operating Plan.

6. The Committee will retain the authority to determine whether or not the actual attainment of these measures has been made.

IV.TARGET INCENTIVE AWARDS

1. Target incentive awards will be a percentage of each Participant's Salary, as defined in the Plan.

2. Target incentive awards shall be set by the Committee annually and will be included in the Annual Operating Plan.

V.INCENTIVE FUND DETERMINATION

1. The target incentive fund is the sum of the individual target incentive awards for all eligible Participants.

2. Once individual incentive targets have been determined, a target incentive fund shall be established and accrued ratably by the Company. The incentive fund and accruals may be adjusted during the year.

3. As soon as practicable following the close of each Plan Year, the President will provide the Committee with an analysis showing the Company's and each Subsidiary's performance in relation to the performance measures. The Committee will review the analysis and determine, in its sole discretion, the amount of the actual incentive fund.

4. In determining the actual incentive fund, the Committee may consider any recommendations of the President.

VI.INDIVIDUAL AWARD DETERMINATION

1. The Committee shall have the sole discretion to determine each individual Participant's award. The Committee's decision will be based first upon the level of performance achieved by the Company and/or the Subsidiary and secondly upon the individual's performance.

2. The Committee, after consultation with the President, shall set the award as a percentage from 0 percent to 200 percent of the Participant's target incentive award, adjusted for Company or Subsidiary performance.

VII.PAYMENT OF AWARDS

1. On the date the Committee determines the awards to be made to individual Participants, it shall also establish the Payment Date.

2. Except as provided below or as the Committee otherwise determines, in order to receive an award under the Plan, a Participant must remain in the employment of the Company or the Subsidiary for the entire Plan Year.

3. A Participant who transfers between the Company or a Subsidiary and another company in the MDU Resources Group, Inc. system may receive a prorated award at the discretion of the Committee.

4. If a Participant terminates employment with the Company pursuant to Section 5.01 of the Company's Bylaws which provides for mandatory retirement for certain officers on their 65th birthday (or terminates employment with a Subsidiary pursuant to a similar Subsidiary Bylaw provision) and if the Participant's 65th birthday occurs during the Plan Year, determination of whether the performance measures have been met will be made at the end of the Plan Year, and to the extent met, payment of the award will be made to the Participant, prorated. Proration of awards shall be based upon the number of full months elapsed from and including January to and including the month in which the Participant's 65th birthday occurs.

5. Payment of the award shall be made in cash. Payments shall be made on the Payment Date.

EX-12

MDU RESOURCES GROUP, INC.

COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES

AND COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS

	Twelve Months Ended March 31, 2007				Year Ended December 31, 2006
	(In thousands of dollars)
Earnings Available for Fixed Charges:
Net Income (a)		$	294,310			$	303,353
Income Taxes			159,492				166,072
			453,802				469,425
Rents (b)			8,277				7,688
Interest (c)			77,994				74,531
Total Earnings Available for Fixed Charges		$	540,073			$	551,644
Preferred Dividend Requirements		$	685			$	685
Ratio of Income Before Income Taxes to Net Income			154	%			154	%
Preferred Dividend Factor on Pretax Basis			1,055				1,055
Fixed Charges (d)			89,178				84,898
Combined Fixed Charges and Preferred Stock Dividends		$	90,233			$	85,953
Ratio of Earnings to Fixed Charges			6.1x				6.5x
Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividends			6.0x				6.4x

(a)   Net income excludes undistributed income for equity investees.

(b)   Represents interest portion of rents estimated at 33 1/3%.

(c)   Represents interest, amortization of debt discount and expense on all indebtedness and amortization of interest capitalized, and excludes amortization of gains or losses on reacquired debt (which, under the Federal Energy Regulatory Commission Uniform System of Accounts, is classified as a reduction of, or increase in, interest expense in the Consolidated Statements of Income) and interest capitalized.

(d)   Represents rents (as defined above), interest, amortization of debt discount and expense on all indebtedness, and excludes amortization of gains or losses on reacquired debt (which, under the Federal Energy Regulatory Commission Uniform System of Accounts, is classified as a reduction of, or increase in, interest expense in the Consolidated Statements of Income).

EX-31.A

CERTIFICATION

I, Terry D. Hildestad, certify that:

1. I have reviewed this quarterly report on Form 10-Q of MDU Resources Group, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e))and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: May 8, 2007

/s/ Terry D. Hildestad

Terry D. Hildestad

President and Chief Executive Officer

EX-31.B

CERTIFICATION

I, Vernon A. Raile, certify that:

1. I have reviewed this quarterly report on Form 10-Q of MDU Resources Group, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e))and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: May 8, 2007

/s/ Vernon A. Raile

Vernon A. Raile

Executive Vice President,

Treasurer and Chief Financial Officer

EX-32

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906

OF THE SARBANES-OXLEY ACT OF 2002

Each of the undersigned, Terry D. Hildestad, the President and Chief Executive Officer, and Vernon A. Raile, the Executive Vice President, Treasurer and Chief Financial Officer, of MDU Resources Group, Inc. (the "Company"), DOES HEREBY CERTIFY that:

1. The Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2007 (the "Report") fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934; and

2. Information contained in the Report fairly presents, in all material respects, the financial condition and results of operation of the Company.

IN WITNESS WHEREOF, each of the undersigned has executed this statement this 8th day of May, 2007.

/s/ Terry D. Hildestad

        Terry D. Hildestad

President and Chief Executive Officer

/s/ Vernon A. Raile

  Vernon A. Raile

Executive Vice President, Treasurer

and Chief Financial Officer

A signed original of this written statement required by Section 906 has been provided to MDU Resources Group, Inc. and will be retained by MDU Resources Group, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.