FERGUS FALLS, Minn., Aug 4, 2008 (PrimeNewswire via COMTEX) ----Otter Tail Corporation (Nasdaq:OTTR) today announced financial results for the quarter ended June 30, 2008.

Highlights

 * Second quarter revenues of $323.6 million compared with $305.8 million for the second quarter of 2007. * Consolidated
   net income of $3.5 million for the second quarter of 2008 compared with $16.1 million for the second quarter of 2007. * Diluted
   earnings per share of $0.11 for the second quarter of 2008 compared with $0.53 for the second quarter of 2007. 

Announcements

 * On May 21, 2008 the North Dakota Public Service Commission (NDPSC) approved Otter Tail Power Company's request
   for a Renewable Resource Cost Recovery Rider. * On July 30, 2008 the corporation replaced its $75 million line of credit used
   for electric utility operations with a new three-year $170 million line of credit subject to renewal on July 30, 2011. * On
   August 1, 2008 the Minnesota Public Utilities Commission (MPUC) issued an order granting Otter Tail Power Company a 2.9% increase
   in Minnesota retail electric rates. * On August 4, 2008 the Board of Directors declared a quarterly common stock dividend
   of 29.75 cents per share payable September 10, 2008 to shareholders of record on August 15, 2008. * The Board also declared
   quarterly dividends on the corporation's four series of preferred stock, payable August 30, 2008 to shareholders of record
   on August 15, 2008. * The corporation is revising its 2008 diluted earnings per share guidance to be in the range of $1.40
   to $1.65 from its previously announced range of $1.75 to $2.00. 

CEO Overview

"A number of factors adversely affected earnings and caused the second quarter to fall short of expectations, including challenges in our manufacturing segment and the impact of a rate case decision in Minnesota," said John Erickson, president and chief executive officer of Otter Tail Corporation.

Erickson noted that quarterly results in manufacturing declined due to disappointing results at waterfront equipment manufacturer ShoreMaster and wind tower manufacturer DMI Industries. "ShoreMaster's results were affected by reduced sales in a difficult economy and the closing of its California production facility following the completion of a major marina project. But the biggest impact in this segment came from DMI," he said. "Essentially, we are experiencing significant growing pains at DMI as the company ramps up at its newer locations and continues to integrate new customers. DMI is our fastest-growing company and a leader in the flourishing wind energy industry. This will be a year of expanding production capabilities, not one of record-breaking results. However, we see great potential in 2009 and beyond as DMI continues to increase output across its production locations."

The outcome of Otter Tail Power Company's rate case in Minnesota also affected second quarter results. "The approved rate increase was lower than interim rates in effect since the end of November 2007. Minnesota retail customers will receive a rate refund with interest, and the projected refund was recorded as a liability in the second quarter," he said. "In addition, we are seeing the impact of higher energy and fuel costs on the results at our food ingredient and transportation businesses.

"Although we expect improved earnings in the second half of 2008, we do not expect to make up the second quarter shortfall and reach the 2008 earnings guidance set forth last quarter. Therefore, given the second quarter results and uncertainty with economic conditions for the balance of the year, we are lowering earnings per share guidance to a range of $1.40 to $1.65 from our previous guidance of $1.75 to $2.00," Erickson said.

"Overall we are pleased with our long-standing diversification strategy and the opportunities that have emerged in both our electric and nonelectric businesses. We are experiencing growth in the core electric business in 2008. Beyond 2008, we see significant growth prospects in our nonelectric business as well, particularly at DMI Industries. Despite some recent growing pains at DMI, we are investing to position our company to capitalize on the strong opportunity ahead in the wind industry."

Segment Performance Summary

Electric

The electric segment recorded revenues of $68.7 million and net income of $3.3 million in the quarter ended June 30, 2008 compared with revenues of $70.6 million and net income of $5.1 million in the quarter ended June 30, 2007. The decrease in electric revenues was due to a $5.4 million decrease in net revenues from energy trading activities offset by increases in revenues of $1.9 million from retail sales of electricity and $1.5 million from wholesale electricity sales.

Net gains from energy trading activities, including net mark-to-market losses and gains on forward energy contracts, were $1.2 million for the quarter ended June 30, 2008 compared with $6.6 million for the quarter ended June 30, 2007. Net gains from energy trading contracts settled in the second quarter of 2008 were $1.3 million compared with $3.2 million in the second quarter of 2007. Trading volumes were higher but profit margins on trades were significantly lower in the second quarter of 2008 compared to the second quarter of 2007. Additionally, second quarter 2007 energy trading revenues included the reversal of a $1.7 million refund accrual recorded in the first quarter of 2007. Net mark-to-market gains on forward energy contracts decreased by $3.5 million between the quarters, mainly as a result of second quarter 2008 reductions in unrealized mark-to-market gains that were recognized on open contracts in the first quarter of 2008.

In an order issued by the MPUC on August 1, 2008 Otter Tail Power Company was granted an increase in Minnesota retail electric rates of approximately 2.9%, compared with a requested increase of approximately 6.7%. The MPUC approved a rate of return on equity of 10.43% on a capital structure with 50.0% equity. An interim rate increase of 5.4% went into effect on November 30, 2007. Otter Tail Power Company will refund Minnesota customers the difference between interim rates and final rates, with interest. Amounts refundable totaling $2.2 million have been recorded as a liability on the corporation's consolidated balance sheet as of June 30, 2008.

The increase in retail revenues reflects $1.5 million in North Dakota Renewable Resource Cost Recovery Rider revenue accrued in the second quarter of 2008 and a 2.7% increase in retail kilowatt-hour (kwh) sales related to a 24% increase in heating degree days. Revenues of $1.5 million in the second quarter of 2008 related to a 5.4% interim rate increase in Minnesota were more than offset by the $2.2 million Minnesota interim rate refund accrual. Wholesale electric revenues from company-owned generation were $4.9 million for the quarter ended June 30, 2008 compared with $3.5 million for the quarter ended June 30, 2007 as a result of a 37.5% increase in wholesale kwh sales combined with a 3.1% increase in the price per kwh sold. The increase in wholesale kwh sales was facilitated by a 1.9% increase in total kwhs generated. Electric operating and maintenance expenses increased $1.1 million mainly as a result of expenses incurred in the second quarter of 2008 to repair and maintain the Hoot Lake Plant Unit 2 generator turbine. Depreciation expenses increased $1.6 million as a result of recent capital additions, including new wind turbines.

Plastics

The plastics segment recorded revenues of $40.6 million and net income of $0.7 million in the quarter ended June 30, 2008 compared with revenues of $39.5 million and net income of $3.4 million in the quarter ended June 30, 2007. The increase in revenues was primarily due to an increase in polyvinyl chloride (PVC) pipe prices. The decrease in net income was due to increases in PVC resin costs.

Manufacturing

The manufacturing segment recorded revenues of $120.3 million and net income of $1.4 million in the quarter ended June 30, 2008 compared with revenues of $104.8 million and net income of $5.3 million in the quarter ended June 30, 2007. DMI Industries, Inc. recorded an increase of $13.0 million in revenue due to increased production. but continued start-up costs incurred in the second quarter of 2008 of $ 2.0million at DMI's Oklahoma plant resulted in a $2.2 million reduction of DMI's net earnings. At the Oklahoma plant, labor and overhead spending has been higher than originally projected and production has not yet reached levels necessary to cover these costs. At BTD, revenues increased $5.5 million, mainly due to the acquisition of Miller Welding & Iron Works in May 2008, but also due to higher prices and increased sales to existing customers. The increased revenues were mostly offset by higher material, labor and benefit costs, resulting in a $0.1 million increase in net income from BTD. Also, BTD's operating income in the second quarter of 2008 was reduced by $0.7 million for the sale of fair-valued inventory at Miller Welding required under business combination accounting rules. At T.O. Plastics, Inc., a revenue increase of $1.1 million was mostly offset by higher material costs resulting in no increase in net income at T.O. Plastics. At ShoreMaster, Inc., revenues decreased $4.1 million as a result of reductions in sales of residential and commercial equipment and the completion of a marina project in California in April 2008. The decreased sales combined with $1.4 million in charges related to the closing of a production facility in California resulted in a $1.9 million decrease in net income from ShoreMaster.

Health Services

The health services segment recorded revenues of $30.7 million and a net loss of $0.1 million in the quarter ended June 30, 2008 compared with revenues of $32.5 million and net income of $0.7 million in the quarter ended June 30, 2007. Revenues from scanning and other related services were down $1.9 million while revenues from equipment sales and servicing increased $0.2 million. The imaging side of the business continues to be affected by less than optimal utilization of certain imaging assets.

Food Ingredient Processing

The food ingredient processing segment recorded revenues of $15.9 million and net income of $0.7 million in the quarter ended June 30, 2008 compared with revenues of $18.4 million and net income of $1.5 million in the quarter ended June 30, 2007. The $2.5 million decrease in revenues is due to a 19.4% decrease in pounds of product sold, partially offset by a 7.3% increase in the price per pound of product sold. The decline in sales is due to a reduction in sales to European customers temporarily served in 2007 due to a European crop problem in 2006 and soft demand from major snack customers. Rising fuel oil and natural gas prices have resulted in lower gross profits on products sold.

Other Business Operations

Other business operations recorded revenues of $48.1 million and net income of $0.8 million in the quarter ended June 30, 2008 compared with revenues of $40.6 million and net income of $1.2 million in the quarter ended June 30, 2007. At the construction companies, revenues increased $6.2 million and net income decreased $0.1 million as a result of lower than expected margins on certain construction projects at Midwest Construction Services. In the trucking operations, revenues increased $1.3 million while operating expenses increased $1.5 million due to significant increases in fuel costs that were not able to be immediately passed on to customers and increased labor and equipment costs related to the expansion into heavy-haul services in the fourth quarter of 2007.

Corporate

Corporate expenses, net-of-tax, were $3.2 million in the quarter ended June 30, 2008 compared with $1.1 million in the quarter ended June 30, 2007. The increase is due to interest costs on certain debt held at corporate, increases in stock-based compensation, increases in outside professional services mainly related to the formation of a holding company and increases in claim loss provisions at our captive insurance company between the quarters. Corporate expenses in the second quarter of 2007 included a $0.6 million gain on disposal of assets.

2008 Expectations

Otter Tail Corporation is revising its 2008 earnings guidance to be in a range from $1.40 to $1.65 of diluted earnings per share from its previously announced range of $1.75 to $2.00. Contributing to the revised earnings guidance for 2008 are the following items:

 * The corporation expects increased levels of net income from
   the electric segment in 2008. The increase is attributable to the 2.9% rate increase granted in Minnesota and rate riders
   for wind energy and transmission investments in North Dakota and Minnesota. The increase also anticipates having lower-cost
   generation available for the year, as no major plant shutdowns are planned for Big Stone Plant or Coyote Station in 2008.
   * The corporation expects the plastics segment's 2008 performance to be below normal levels as this segment continues to be
   impacted by the sluggish housing and construction markets. Announced capacity expansions are not expected to have a material
   impact on 2008 results. * The corporation expects a decrease in net income in the manufacturing segment in 2008. Increased
   capacity related to recent expansions and acquisitions as well as the start-up of DMI's wind tower manufacturing plant in
   Oklahoma in 2008 are expected to result in increased levels of revenue. DMI is investing in new facilities and incurring costs
   related to starting up and expanding facilities as well as integrating new customers, in order to prepare for the anticipated
   growth in the wind industry subsequent to 2008. This is expected to result in a decrease in net income in 2008 compared with
   2007. Also, the impact of a softening economy on ShoreMaster is expected to cause a decrease in net income for this segment
   in 2008. Backlog in place on June 30, 2008 in the manufacturing segment to support revenues for the remainder of 2008 is approximately
   $206 million. This compares with $191 million in revenue earned in the third and fourth quarters of 2007. DMI Industries accounts
   for a substantial portion of the 2008 backlog. * The health services segment expects a decline in net income in 2008 due to
   lower utilization levels of certain imaging assets. * The corporation expects net income from its food ingredient processing
   business to be on par with 2007. This business has backlog in place as of June 30, 2008 of 51 million pounds for the remainder
   of 2008 compared with 52 million pounds in the third and fourth quarters of 2007. * The other business operations segment
   is expected to have higher net income in 2008 compared with 2007. Backlog for the construction businesses at the end of the
   second quarter of 2008 was approximately $79 million for the remainder of 2008 compared with $93 million in revenue in the
   third and fourth quarters of 2007. * Corporate general and administrative costs are expected to increase in 2008. 

Risk Factors and Forward-Looking Statements that Could Affect Future Results

The information in this release includes certain forward-looking information, including 2008 expectations, made under the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Although the corporation believes its expectations are based on reasonable assumptions, actual results may differ materially from those expectations. The following factors, among others, could cause actual results for the corporation to differ materially from those discussed in the forward-looking statements:

 * The corporation is
   subject to federal and state legislation, regulations and actions that may have a negative impact on its business and results
   of operations. * Actions by the regulators of the electric segment could result in rate reductions, lower revenues and earnings
   or delays in recovering capital expenditures. * Future operating results of the electric segment will be impacted by the outcome
   of rate rider filings in Minnesota for transmission and wind energy investments. * Certain costs currently included in the
   Fuel Clause Adjustment (FCA) in retail rates may be excluded from recovery through the FCA but may be subject to recovery
   through rates established in a general rate case. Further, all, or portions of, gross margins on asset-based wholesale electric
   sales may become subject to refund through the FCA as a result of a general rate case. * Weather conditions or changes in
   weather patterns can adversely affect the corporation's operations and revenues. * Electric wholesale margins could be further
   reduced as the Midwest Independent Transmission System Operator market becomes more efficient. * Electric wholesale trading
   margins could be reduced or eliminated by losses due to trading activities. * The corporation's electric generating facilities
   are subject to operational risks that could result in unscheduled plant outages, unanticipated operation and maintenance expenses
   and increased power purchase costs. * Wholesale sales of electricity from excess generation could be affected by reductions
   in coal shipments to the Big Stone and Hoot Lake plants due to supply constraints or rail transportation problems beyond the
   corporation's control. * The corporation's electric segment has capitalized $9.8 million in costs related to the planned construction
   of a second electric generating unit at its Big Stone Plant site as of June 30, 2008. Should approvals of permits not be received
   on a timely basis, the project could be at risk. If the project is abandoned for permitting or other reasons, these capitalized
   costs and others incurred in future periods may be subject to expense and may not be recoverable. * Federal and state environmental
   regulation could cause the corporation to incur substantial capital expenditures which could result in increased operating
   costs. * Existing or new laws or regulations addressing climate change or reductions of greenhouse gas emissions by federal
   or state authorities, such as mandated levels of renewable generation or mandatory reductions in carbon dioxide (CO2) emission
   levels or taxes on CO2 emissions, that result in increases in electric service costs could negatively impact the corporation's
   net income, financial position and operating cash flows if such costs cannot be recovered through rates granted by ratemaking
   authorities in the states where the electric utility provides service or through increased market prices for electricity.
   * The corporation may not be able to respond effectively to deregulation initiatives in the electric industry, which could
   result in reduced revenues and earnings. * The corporation's manufacturer of wind towers operates in a market that has been
   influenced by the existence of a Federal Production Tax Credit. This tax credit is scheduled to expire on December 31, 2008.
   Should this tax credit not be renewed, the revenues and earnings of this business could be reduced. * The corporation's plans
   to grow and diversify through acquisitions and capital projects may not be successful and could result in poor financial performance.
   * The corporation's ability to own and expand its nonelectric businesses could be limited by state law. * Competition is a
   factor in all of the corporation's businesses. * Economic uncertainty could have a negative impact on the corporation's future
   revenues and earnings. * Volatile financial markets and changes in the corporation's debt rating could restrict the corporation's
   ability to access capital and could increase borrowing costs and pension plan expenses. * The price and availability of raw
   materials could affect the revenue and earnings of the corporation's manufacturing segment. * The corporation's food ingredient
   processing segment operates in a highly competitive market and is dependent on adequate sources of raw materials for processing.
   Should the supply of these raw materials be affected by poor growing conditions, this could negatively impact the results
   of operations for this segment. * The corporation's food ingredient processing and wind tower manufacturing businesses could
   be adversely affected by changes in foreign currency exchange rates. * The corporation's plastics segment is highly dependent
   on a limited number of vendors for PVC resin, many of which are located in the Gulf Coast regions, and a limited supply of
   resin. The loss of a key vendor or an interruption or delay in the supply of PVC resin could result in reduced sales or increased
   costs for this business. Reductions in PVC resin prices could negatively impact PVC pipe prices, profit margins on PVC pipe
   sales and the value of PVC pipe held in inventory. * Changes in the rates or method of third-party reimbursements for diagnostic
   imaging services could result in reduced demand for those services or create downward pricing pressure, which would decrease
   revenues and earnings for the corporation's health services segment. * The corporation's health services business may be unable
   to renew and continue to maintain the dealership arrangements with Philips Medical, which are scheduled to expire on December
   31, 2008. * Actions by regulators of the corporation's health services segment could result in monetary penalties or restrictions
   in the corporation's health services operations. * A significant failure or an inability to properly bid or perform on projects
   by the corporation's construction businesses could lead to adverse financial results. 

For a further discussion of other risk factors and cautionary statements, refer to reports the corporation files with the Securities and Exchange Commission.

About The Corporation: Otter Tail Corporation has interests in diversified operations that include an electric utility, manufacturing, health services, food ingredient processing and infrastructure businesses which include plastics, construction and transportation. Otter Tail Corporation stock trades on the NASDAQ Global Select Market under the symbol OTTR. The latest investor and corporate information is available at www.ottertail.com. Corporate offices are located in Fergus Falls, Minnesota, and Fargo, North Dakota.

The Otter Tail Corporation logo is available at http://www.primenewswire.com/newsroom/prs/?pkgid=4958

See Otter Tail Corporation's results of operations for the three and six months ended June 30, 2008 and 2007 in the attached financial statements.

Consolidated Statements of Income, Consolidated Balance Sheets -- Assets, Consolidated Balance Sheets -- Liabilities and Equity

 Otter Tail Corporation Consolidated Statements of Income For the Three
   and Six Months Ended June 30, 2008 and 2007 In thousands, except share and per share amounts (not audited) Quarter Ended June
   30, Year-to-Date June 30, 2008 2007 2008 2007 Operating Revenues by Segment: Electric $ 68,666 $ 70,572 $ 166,256 $ 160,552
   Plastics 40,645 39,525 62,995 77,344 Manufacturing 120,342 104,786 217,937 191,011 Health Services 30,740 32,452 60,005 65,415
   Food Ingredient Processing 15,913 18,403 31,811 37,898 Other Business Operations 48,080 40,587 86,190 75,733 Corporate Revenue
   and Intersegment Eliminations (786) (481) (1,357) (988) ---------- ---------- ---------- ---------- Total Operating Revenues
   323,600 305,844 623,837 606,965 Operating Expenses: Fuel and Purchased Power 24,964 25,098 63,854 67,534 Nonelectric Cost
   of Goods Sold (depreciation included below) 204,235 176,973 369,458 341,632 Electric Operating and Maintenance Expense 30,320
   29,178 59,687 58,579 Nonelectric Operating and Maintenance Expense 36,242 31,377 70,989 62,135 Plant Closure Costs 1,412 --
   1,412 -- Depreciation and Amortization 16,124 12,947 31,037 26,040 ---------- ---------- ---------- ---------- Total Operating
   Expenses 313,297 275,573 596,437 555,920 Operating Income (Loss) by Segment: Electric 5,576 10,046 27,201 21,519 Plastics
   1,408 6,001 2,589 10,868 Manufacturing 4,464 11,207 5,139 17,145 Health Services 65 1,471 (868) 3,283 Food Ingredient Processing
   1,297 2,304 2,990 3,085 Other Business Operations 1,603 2,094 (1,056) 2,417 Corporate (4,110) (2,852) (8,595) (7,272) ----------
   ---------- ---------- ---------- Total Operating Income 10,303 30,271 27,400 51,045 Interest Charges 7,043 5,026 13,754 9,894
   Other Income 626 340 1,588 613 Income Taxes 369 9,482 3,487 15,253 Net Income (Loss) by Segment Electric 3,276 5,076 16,026
   10,998 Plastics 652 3,398 1,272 6,226 Manufacturing 1,396 5,335 780 7,874 Health Services (88) 708 (779) 1,656 Food Ingredient
   Processing 685 1,543 1,808 1,992 Other Business Operations 794 1,157 (971) 1,234 Corporate (3,198) (1,114) (6,389) (3,469)
   ---------- ---------- ---------- ---------- Total Net Income 3,517 16,103 11,747 26,511 Preferred Stock Dividend 184 184 368
   368 ---------- ---------- ---------- ---------- Balance for Common: $ 3,333 $ 15,919 $ 11,379 $ 26,143 ---------- ----------
   ---------- ---------- Average Number of Common Shares Outstanding: Basic 29,993,484 29,685,745 29,905,782 29,594,499 Diluted
   30,300,207 29,940,868 30,198,967 29,843,953 Earnings Per Common Share: Basic $ 0.11 $ 0.54 $ 0.38 $ 0.88 Diluted $ 0.11 $
   0.53 $ 0.38 $ 0.88 

 Otter Tail Corporation Consolidated Balance Sheets Assets In thousands (not audited) June 30,
   December 31, 2008 2007 Current Assets Cash and Cash Equivalents $ -- $ 39,824 Accounts Receivable: Trade--Net 154,456 151,446
   Other 17,527 14,934 Inventories 112,233 97,214 Deferred Income Taxes 7,216 7,200 Accrued Utility and Cost-of-Energy Revenues
   13,402 32,501 Costs and Estimated Earnings in Excess of Billings 70,578 42,234 Other 30,531 15,299 ---------- ---------- Total
   Current Assets 405,943 400,652 ---------- ---------- Investments 9,200 10,057 Other Assets 25,139 24,500 Goodwill 107,228
   99,242 Other Intangibles--Net 36,470 20,456 Deferred Debits Unamortized Debt Expense and Reacquisition Premiums 6,537 6,986
   Regulatory Assets and Other Deferred Debits 40,157 38,837 ---------- ---------- Total Deferred Debits 46,694 45,823 ----------
   ---------- Plant Electric Plant in Service 1,051,644 1,028,917 Nonelectric Operations 306,755 257,590 ---------- ----------
   Total 1,358,399 1,286,507 Less Accumulated Depreciation and Amortization 528,725 506,744 ---------- ---------- Plant--Net
   of Accumulated Depreciation and Amortization 829,674 779,763 Construction Work in Progress 96,806 74,261 Net Plant 926,480
   854,024 ---------- ---------- Total $1,557,154 $1,454,754 ========== ========== 

 Otter Tail Corporation Consolidated
   Balance Sheets Liabilities and Equity In thousands (not audited) June 30, December 31, 2008 2007 Current Liabilities Short-Term
   Debt $ 186,600 $ 95,000 Current Maturities of Long-Term Debt 3,376 3,004 Accounts Payable 148,317 141,390 Accrued Salaries
   and Wages 23,997 29,283 Accrued Taxes 9,194 11,409 Other Accrued Liabilities 20,566 13,873 ---------- ---------- Total Current
   Liabilities 392,050 293,959 ---------- ---------- Pensions Benefit Liability 40,637 39,429 Other Postretirement Benefits Liability
   30,979 30,488 Other Noncurrent Liabilities 21,448 23,228 Deferred Credits Deferred Income Taxes 109,099 105,813 Deferred Tax
   Credits 17,790 16,761 Regulatory Liabilities 63,439 62,705 Other 316 275 ---------- ---------- Total Deferred Credits 190,644
   185,554 ---------- ---------- Capitalization Long-Term Debt, Net of Current Maturities 341,630 342,694 Class B Stock Options
   of Subsidiary 1,255 1,255 Cumulative Preferred Shares 15,500 15,500 Cumulative Preference Shares -- -- Common Shares, Par
   Value $5 Per Share 150,624 149,249 Premium on Common Shares 114,669 108,885 Retained Earnings 256,867 263,332 Accumulated
   Other Comprehensive Income 851 1,181 ---------- ---------- Total Common Equity 523,011 522,647 Total Capitalization 881,396
   882,096 Total $1,557,154 $1,454,754 ========== ========== 

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SOURCE: Otter Tail Corporation

Otter Tail Corporation Media contact: Amy Richardson, Director of Communications
   (701) 451-3580 (866) 410-8780 Investor contact: Loren Hanson, Director of Shareholder Services (218) 739-8481 (800) 664-1259
   

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