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BKHU - Black Hills News Story

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Black Hills Corp. Reports Strong Third Quarter 2020 Results and Provides Guidance Update

Mon 2nd November, 2020 9:15pm
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Increases 2020 Earnings Guidance to $3.60 to $3.70 Per Share and Introduces
2021 Guidance
* Reports third quarter EPS of $0.58; strong growth compared to the third
quarter of 2019
* Increases 2020 EPS guidance range to $3.60 to $3.70 from $3.45 to $3.65
* Initiates 2021 EPS guidance range of $3.75 to $3.95
* Increases 2020 to 2024 capital investment forecast by $239 million to $2.9
billion
* Increased quarterly dividend 5.6% to $0.565 per share
RAPID CITY, S.D., Nov. 02, 2020 (GLOBE NEWSWIRE) -- Black Hills Corp. (NYSE:
BKH) today announced financial results for the third quarter of 2020. Net
income and net income, as adjusted (non-GAAP) for the third quarter of 2020
compared to the third quarter of 2019 were:

                                          Three Months Ended Sept. 30,                                           Nine Months Ended Sept. 30,                                            
                                          2020                                 2019                              2020                                  2019                             
 (in millions, except per share amounts)  Income          EPS                  Income          EPS               Income           EPS                  Income           EPS             
 GAAP:                                                                                                                                                                                  
 Net income                               $    36.3       $    0.58            $    11.7       $    0.19         $    150.4       $    2.41            $    130.1       $    2.15       
                                                                                                                                                                                        
 Non-GAAP:                                                                                                                                                                              
 Net income, as adjusted (*)              $    36.3       $    0.58            $    26.9       $    0.44         $    155.7       $    2.50            $    145.3       $    2.40       
                                                                                                                                                                                        

* A schedule for the GAAP to non-GAAP adjustment reconciliation is provided
below.

Adjusted earnings of $0.58 per share for the third quarter were up 32%
compared to the same period in the prior year. The increase was driven by new
rates and rider recovery, customer growth and production tax credits for new
wind assets in service. Financial results also reflected $0.11 per share of
weather benefit compared to the third quarter of last year. The net impact
from COVID-19 trended as expected.

“I'm pleased with our excellent quarterly results,” said Linn Evans,
president and CEO of Black Hills Corp. “Our strong third quarter results
reflected solid execution, diligent expense management and favorable weather.
Accordingly, we are increasing our earnings guidance for 2020. We are also
introducing earnings guidance for 2021.

“The ongoing pandemic continues to impact our customers and we remain
focused on serving their needs, including financial assistance and community
giving. We are especially fortunate to operate in regions that have stable and
growing economies, even amidst recent uncertainty. Our team continues to
engage safeguards to protect our people and customers, while delivering
uninterrupted service to 1.3 million homes and businesses that are depending
on us for safe, reliable and clean energy. To continue supporting the needs of
our customers and communities, we added $239 million to our five-year capital
investment forecast.

“Our plan to drive long-term value for all stakeholders continues to deliver
sustainable growth. We are confident in our complementary utility operations
with stable and growing territories, strong financial position and liquidity,
constructive regulatory relationships and our commitment to being Ready to
serve our customers and communities,” concluded Evans.

THIRD QUARTER 2020 HIGHLIGHTS AND UPDATES

Electric Utilities
* During the third quarter, South Dakota Electric and Wyoming Electric
continued construction on the $79 million, 52.5-megawatt Corriedale Wind
Energy Project. The wind facility is being constructed near Cheyenne, Wyoming,
and is jointly owned by South Dakota Electric and Wyoming Electric. The
project will serve large commercial and industrial customers and governmental
agencies participating in the subscription-based Renewable Ready program. The
project is expected to be fully in service in the fourth quarter.
 
* On Oct. 15, Wyoming Electric and affiliate Black Hills Wyoming received
final approval from the Federal Energy Regulatory Commission of a power
purchase agreement to continue serving Wyoming Electric with 60 megawatts of
capacity and energy from the Wygen I power plant owned by Black Hills Wyoming.
The new agreement begins Jan. 1, 2022, and runs through Dec. 31, 2032. 
 
* On Sept. 23, Colorado Electric received approval from the Colorado Public
Utilities Commission for its Renewable Advantage program. The program plans to
add 200 megawatts of renewable solar energy in Colorado by year-end 2023
through a power purchase agreement.
 
* On July 10, Wyoming Electric set a new all-time peak load of 271 megawatts,
surpassing the previous peak of 265 megawatts set in July 2019.
Gas Utilities
* On Sept. 11, Colorado Gas filed a rate review application with the Colorado
commission seeking recovery on significant infrastructure investments in its
7,000-mile natural gas pipeline system. The rate review requests $13.5 million
in new revenue with a capital structure of 50% debt and 50% equity and a
return on equity of 9.95%. The request seeks to implement new rates in the
second quarter of 2021. The company is also requesting a system safety and
integrity rider for five years to recover safety-focused investments in its
system.
 
* On June 1, Nebraska Gas filed a rate review application with the Nebraska
Public Service Commission to consolidate rate schedules into a new, single
statewide structure and seek recovery on significant infrastructure
investments in its 13,000-mile natural gas pipeline system. The rate review
requests $17.3 million in new revenue with a capital structure of 50% debt and
50% equity and a return on equity of 10%. Interim rates were implemented Sept.
1 and the request seeks to finalize rates in the first quarter of 2021. The
company is also requesting an extension of its system safety and integrity
rider for five years and to align the rider recovery mechanisms across the
consolidated utility.
Power Generation
* On Oct. 15,  Black Hills Wyoming and affiliate Wyoming Electric received
final approval from the Federal Energy Regulatory Commission of a power
purchase agreement - see highlight in Electric Utilities above for more
detail.
Corporate
* On Oct. 27, Black Hills’ board of directors approved a quarterly dividend
of $0.565 per share payable on Dec. 1, 2020, to shareholders of record at the
close of business on Nov. 17, 2020. The dividend reflects 50 consecutive years
of annual dividend increases and 78 consecutive years of paying cash
dividends. 
 
* Effective Oct. 1, Black Hills appointed Barry M. Granger and Scott M.
Prochazka to its board of directors. In anticipation of future board
retirements, the board also temporarily increased its size from 10 to 12
directors.  
 
* On Aug. 3, Black Hills filed a shelf registration statement and dividend
reinvestment and direct stock purchase program with the Securities and
Exchange Commission. In conjunction with these filings, the company also
renewed its at-the-market equity offering program under which it may sell from
time to time shares of its common stock.
2020 EARNINGS GUIDANCE INCREASED

Black Hills is increasing its guidance for 2020 earnings per share available
for common stock, as adjusted (a non-GAAP measure*), to be in a range of $3.60
to $3.70 from $3.45 to $3.65, based on the following updated assumptions:
* Net impact from COVID-19 of $(0.05) to $(0.10) per share;
* Normal weather conditions for the remainder of the year within our utility
service territories, including temperatures, precipitation levels and wind
conditions;
* Normal operations and weather conditions for planned construction,
maintenance and/or capital investment projects;
* Completion of utility regulatory dockets;
* Completion of construction and placing in service the Corriedale Wind Energy
Project by year-end 2020;
* No significant unplanned outages at any of our generating facilities;
* Production tax credits of $14 million associated with wind generation
assets;
* No additional equity issuances in 2020; and
* Capital investment of $733 million in 2020.
 *  Earnings per share, as adjusted, is defined as GAAP Earnings per share, adjusted for expenses and gains that the company believes do not reflect the company’s core operating performance. Examples of these types of adjustments may include unique one-time events, impairment of assets, and acquisition and disposition costs. The company is not able to provide forward-looking quantitative GAAP to non-GAAP reconciliation for 2020 earnings guidance, as adjusted, because we do not know if any unplanned or unique   
    events may occur.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    



 2020 Earnings Guidance Reconciliation                                       
                                             LOW              HIGH           
                                                                             
 Earnings per share (GAAP)                   $    3.52        $    3.62      
 Adjustments**:                                                              
 Impairment of investment                    0.11             0.11           
 Tax on Adjustments**:                                                       
 Impairment of investment                    (0.03      )     (0.03      )   
 Total adjustments                           0.08             0.08           
                                                                             
 Earnings per share, as adjusted (non-GAAP)  $    3.60        $    3.70      
                                                                             



 **  Additional adjustments may occur in the fourth quarter. Adjustments shown reflect the actual adjustments made for the first nine months of the year.  
                                                                                                                                                           

2021 EARNINGS GUIDANCE INITIATED

Black Hills is initiating its guidance for 2021 earnings per share available
for common stock, as adjusted (a non-GAAP measure*), in a range of $3.75 to
$3.95, based on the following assumptions:
* Normal weather conditions within our utility service territories, including
temperatures, precipitation levels and wind conditions;
* Normal operations and weather conditions for planned construction,
maintenance and/or capital investment projects;
* Completion of utility regulatory dockets;
* Completion of construction and placing in service the Corriedale Wind Energy
Project by year-end 2020;
* No significant unplanned outages at any of our generating facilities;
* Production tax credits of $19 million associated with wind generation
assets;
* Equity issuance of $80 million to $100 million through the at-the-market
equity offering program in 2021;
* Capital investment of $733 million in 2020 and $633 million in 2021; and
* No material net impact from COVID-19.
 *  Earnings per share, as adjusted, is defined as GAAP Earnings per share, adjusted for expenses and gains that the company believes do not reflect the company’s core operating performance. Examples of these types of adjustments may include unique one-time events, impairment of assets, and acquisition and disposition costs. The company is not able to provide forward-looking quantitative GAAP to non-GAAP reconciliation for 2021 earnings guidance, as adjusted, because we do not know if any unplanned or unique   
    events may occur.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    

BLACK HILLS CORPORATION
CONSOLIDATED FINANCIAL RESULTS

(Minor differences may result due to rounding)

                                                     Three Months Ended Sept. 30,                        Nine Months Ended Sept. 30,                 
                                                     2020                        2019                    2020                     2019               
                                                     (in millions)                                                                                   
 Adjusted operating income ((a)):                                                                                                                    
 Electric Utilities                                  $      52.1                 $      50.7             $     121.7              $     125.2        
 Gas Utilities                                       18.1                        4.7                     139.3                    116.6              
 Power Generation                                    8.7                         11.8                    31.5                     33.9               
 Mining                                              3.5                         3.4                     10.0                     9.4                
 Corporate and Other                                 (0.2          )             —                       (0.1         )           (0.4         )     
 Operating income                                    82.2                        70.6                    302.4                    284.7              
                                                                                                                                                     
 Interest expense, net                               (36.0         )             (33.5         )         (107.0       )           (102.5       )     
 Impairment of investment                            —                           (19.7         )         (6.9         )           (19.7        )     
 Other income (expense), net                         (1.2          )             0.6                     (0.7         )           0.1                
 Income tax benefit (expense)                        (4.7          )             (2.5          )         (25.5        )           (22.1        )     
 Net income                                          40.3                        15.4                    162.3                    140.5              
 Net income attributable to noncontrolling interest  (4.1          )             (3.7          )         (11.8        )           (10.3        )     
 Net income available for common stock               $      36.3                 $      11.7             $     150.4              $     130.1        



 (a)  Adjusted operating income removes the impacts of finance lease accounting relating to the 20-year PPA between Black Hills Colorado IPP and Colorado Electric for the Electric Utilities and Power Generation segments and Corporate and Other. This presentation of segment information does not impact consolidated financial results.  
                                                                                                                                                                                                                                                                                                                                               



                                                             Three Months Ended Sept. 30,                Nine Months Ended Sept. 30,               
                                                             2020                 2019                   2020                 2019                 
 Weighted average common shares outstanding (in thousands):                                                                                        
 Basic                                                       62,575               60,976                 62,310               60,458               
 Diluted                                                     62,630               61,104                 62,362               60,578               
                                                                                                                                                   
 Earnings per share:                                                                                                                               
 Basic -                                                                                                                                           
 Total Basic Earnings Per Share                              $      0.58          $      0.19            $      2.41          $      2.15          
                                                                                                                                                   
 Diluted -                                                                                                                                         
 Total Diluted Earnings Per Share                            $      0.58          $      0.19            $      2.41          $      2.15          
                                                                                                                                                   

CONFERENCE CALL AND WEBCAST

Black Hills will host a live conference call and webcast at 11 a.m. EST on
Tuesday, Nov. 3, 2020, to discuss its financial and operating performance.

To access the live webcast and download a copy of the investor presentation,
go to the Black Hills website at www.blackhillscorp.com, and click on
“Events and Presentations” in the “Investor Relations” section. The
presentation will be posted on the website before the webcast. Listeners
should allow at least five minutes for registering and accessing the
presentation. Those interested in asking a question during the live broadcast
or those without Internet access can call 866-544-7741 if calling within the
United States. International callers can call 724-498-4407. All callers need
to enter the passcode 1479285 when prompted.

For those unable to listen to the live broadcast, a replay will be available
on the company’s website.

EEI FINANCIAL FORUM ATTENDANCE AND UPCOMING SUSTAINABILITY DISCLOSURES

Members of Black Hills’ leadership team will be participating in the Virtual
2020 Edison Electric Institute 55(th) Financial Conference on Nov. 9 and Nov.
10. During the conference, leadership will present to investors and financial
analysts on Tuesday, Nov. 10, at 3:00 p.m. EST. Links to the formal company
presentation and accompanying slides will be available on Black Hills’
website at www.blackhillscorp.com, and click on “Events and Presentations”
in the “Investor Relations” section.

The company also announced that it will release new greenhouse gas emission
reduction goals for its utility operations and publish its updated Corporate
Sustainability Report on Nov. 5.

NON-GAAP FINANCIAL MEASURES

As noted in this news release, in addition to presenting its earnings
information in conformity with Generally Accepted Accounting Principles
(GAAP), the company has provided non-GAAP earnings data reflecting adjustments
for special items as specified in the GAAP to non-GAAP adjustment
reconciliation table below. Net income available for common stock, as
adjusted, is defined as Net income, adjusted for expenses and gains that the
company believes do not reflect the company’s core operating performance.
The company believes that non-GAAP financial measures are useful to investors
because the items excluded are not indicative of the company’s continuing
operating results. The company’s management uses these non-GAAP financial
measures as an indicator for planning and forecasting future periods. These
non-GAAP measures have limitations as analytical tools and should not be
considered in isolation or as a substitute for analysis of our results as
reported under GAAP. The presentation of these non-GAAP financial measures
should not be construed as an inference that future results will not be
affected by unusual, non-routine, or non-recurring items.

                                                                                                                                                                                                              
                                                                Three Months Ended Sept. 30,                                           Nine Months Ended Sept. 30,                                            
                                                                2020                                 2019                              2020                                  2019                             
 (In millions, except per share amounts)                        Income          EPS                  Income          EPS               Income           EPS                  Income           EPS             
 Net income available for common stock (GAAP)                   $    36.3       $    0.58            $    11.7       $    0.19         $    150.4       $    2.41            $    130.1       $    2.15       
 Adjustments:                                                                                                                                                                                                 
 Impairment of investment                                       —               —                    19.7            0.32              6.9              0.11                 19.7             0.33            
                                                                                                                                                                                                              
 Tax on Adjustments:                                                                                                                                                                                          
 Impairment of investment                                       —               —                    (4.5       )    (0.07      )      (1.6        )    (0.03      )         (4.5        )    (0.07      )    
                                                                                                                                                                                                              
 Rounding                                                       —               —                    —               —                 —                0.01                 —                (0.01      )    
 Adjustments, net of tax                                        —               —                    15.2            0.25              5.3              0.09                 15.2             0.25            
                                                                                                                                                                                                              
 Net income available for common stock, as adjusted (non-GAAP)  $    36.3       $    0.58            $    26.9       $    0.44         $    155.7       $    2.50            $    145.3       $    2.40       
                                                                                                                                                                                                              

Gross margin (revenue less cost of sales) is considered a non-GAAP financial
measure due to the exclusion of depreciation and amortization from the
measure. The presentation of gross margin is intended to supplement
investors’ understanding of operating performance. Gross margin for our
Electric Utilities is calculated as operating revenue less cost of fuel and
purchased power. Gross margin for our Gas Utilities is calculated as operating
revenue less cost of gas sold. Our gross margin is impacted by the
fluctuations in power purchases and natural gas and other fuel supply costs.
However, while these fluctuating costs impact gross margin as a percentage of
revenue, they only impact total gross margin if the costs cannot be passed
through to customers. Our gross margin measure may not be comparable to other
companies’ gross margin measures. Furthermore, this measure is not intended
to replace operating income as determined in accordance with GAAP as an
indicator of operating performance.

SEGMENT PERFORMANCE SUMMARY

Our segment highlights for the three and nine months ended Sept. 30, 2020,
compared to the three and nine months ended Sept. 30, 2019, are discussed
below.

The following segment information does not include certain intercompany
eliminations. Minor differences in comparative amounts may result due to
rounding. All amounts are presented on a pre-tax basis unless otherwise
indicated.

Certain industries in which we operate are highly seasonal, and revenue from,
and certain expenses for, such operations may fluctuate significantly between
quarterly periods.  Demand for electricity and natural gas is sensitive to
seasonal cooling, heating and industrial load requirements.  In particular,
the normal peak usage season for our electric utilities is June through August
while the normal peak usage season for our gas utilities is November through
March.  Significant earnings variances can be expected between the Gas
Utilities segment’s peak and off-peak seasons.  Due to this seasonal
nature, our results of operations for the three and nine months ended Sept.
30, 2020 and 2019 are not necessarily indicative of the results of operations
to be expected for any other period or for the entire year.

Electric Utilities

                                Three Months Ended Sept. 30,              Variance                Nine Months Ended Sept. 30,               Variance             
                                2020                 2019                 2020 vs. 2019           2020                 2019                 2020 vs. 2019        
                                (in millions)                                                                                                                    
 Gross margin (non-GAAP)        $      123.0         $      119.8         $      3.2              $      336.8         $      333.7         $      3.1           
                                                                                                                                                                 
 Operations and maintenance     47.4                 47.2                 0.2                     145.0                143.0                2.0                  
 Depreciation and amortization  23.4                 22.0                 1.4                     70.1                 65.4                 4.7                  
 Adjusted operating income      $      52.1          $      50.7          $      1.4              $      121.7         $      125.2         $      (3.5   )      



                                             Three Months Ended Sept. 30,                Nine Months Ended Sept. 30,             
 Operating Statistics                        2020                 2019                   2020                2019                
 Quantities Sold (MWh):                                                                                                          
 Retail Sales                                1,453,089            1,454,197              4,109,797           4,088,128           
 Contract Wholesale ( (a))                   129,960              229,369                348,991             646,611             
 Off-system/Power Marketing Wholesale        167,494              160,357                469,590             436,298             
 Total energy sold                           1,750,543            1,843,923              4,928,378           5,171,037           
                                                                                                                                 
 Contracted Power Plant Fleet Availability:                                                                                      
 Coal-fired plants                           97.4       %         94.6       %           94.1       %        90.0       %        
 Natural gas-fired plants and other plants   79.7       %         89.6       %           80.5       %        89.8       %        
 Wind                                        97.7       %         93.7       %           98.3       %        95.0       %        
 Total availability                          86.8       %         91.5       %           86.3       %        90.3       %        
                                                                                                                                 
 Wind capacity factor                        33.2       %         33.8       %           39.3       %        37.1       %        



                                                                                                                                                                                                                                                                                                                                                            
 (a)  Quantities sold for the three and nine months ended Sept. 30, 2020, for certain wholesale contracts have been presented on a net basis. Amounts for the three and nine months ended Sept. 30, 2019 were presented on a gross basis and, due to their immaterial nature, were not revised. This presentation change has no impact on Gross margin.     
                                                                                                                                                                                                                                                                                                                                                            

Third Quarter 2020 Compared with Third Quarter 2019

Gross margin increased as a result of:

                                               (in millions)        
 Release of TCJA revenue reserves ( (a))       $      1.5           
 Rider recovery                                1.3                  
 Off-system power marketing                    0.9                  
 Weather                                       0.2                  
 Mark-to-market on wholesale energy contracts  (1.4          )      
 COVID-19 impacts                              (0.2          )      
 Other                                         0.9                  
 Total increase in Gross margin (non-GAAP)     $      3.2           



                                                                                                                                                                                                                                                                                                                  
 (a)  In July 2020, regulatory proceedings resolved the last of the Company’s open dockets seeking approval of its TCJA plans. As a result, the Company reversed certain TCJA-related liabilities, which resulted in an increase to Gross margin of $1.5 million for the three months ended Sept. 30, 2020.       
                                                                                                                                                                                                                                                                                                                  

Operations and maintenance expense increased primarily due to COVID-19 related
expenses of $0.5 million for the sequestration of essential employees and $0.3
million of additional bad debt expense which were partially offset by $0.4
million of lower travel, training and employee related expenses.

Depreciation and amortization increased primarily due to a higher asset base
driven by prior year and current year capital expenditures.

Gas Utilities

                                Three Months Ended Sept. 30,              Variance                Nine Months Ended Sept. 30,               Variance             
                                2020                 2019                 2020 vs. 2019           2020                 2019                 2020 vs. 2019        
                                (in millions)                                                                                                                    
 Gross margin (non-GAAP)        $      116.9         $      97.7          $      19.2             $      438.8         $      410.0         $      28.8          
                                                                                                                                                                 
 Operations and maintenance     73.6                 70.2                 3.4                     223.4                225.2                (1.8          )      
 Depreciation and amortization  25.1                 22.8                 2.3                     76.2                 68.2                 8.0                  
 Adjusted operating income      $      18.1          $      4.7           $      13.4             $      139.3         $      116.6         $      22.7          



                                           Three Months Ended Sept. 30,                  Nine Months Ended Sept. 30,                 
 Operating Statistics                      2020                  2019                    2020                  2019                  
 Quantities Sold and Transported (Dth):                                                                                              
 Total gas sales                           9,086,886             8,859,398               65,717,453            70,982,770            
 Total transport and transmission volumes  33,668,174            31,538,815              108,967,182           110,622,285           
                                                                                                                                     

Third Quarter 2020 Compared with Third Quarter 2019

Gross margin increased as a result of:

                                                                (in millions)        
 Weather ((a))                                                  $      8.4           
 New rates                                                      4.9                  
 Mark-to-market on non-utility natural gas commodity contracts  1.8                  
 Customer growth - distribution                                 1.5                  
 Non-Utility - Tech Services                                    0.6                  
 COVID-19 impacts ((b))                                         (0.8          )      
 Other                                                          2.8                  
 Total increase in Gross margin (non-GAAP)                      $      19.2          



                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
 (a)  Weather impacts for the three months ended Sept. 30, 2020 compared to the same period in the prior year include increased irrigation loads to agriculture customers in 2020 in our Nebraska Gas service territory as 2019 was a record precipitation year. Additionally, heating degree days at the Gas Utilities for the three months ended Sept. 30, 2020 were 13% lower than normal compared to 62% lower than normal in the same period in the prior year.      
 (b)  The impacts to Gas Utilities gross margin from COVID-19 were primarily driven by waived customer late payment fees.                                                                                                                                                                                                                                                                                                                                                 
                                                                                                                                                                                                                                                                                                                                                                                                                                                                          

Operations and maintenance expense increased primarily due to higher employee
costs.  COVID-19 impacts to operations and maintenance expense included $1.4
million of additional bad debt expense which was partially offset by $0.7
million of lower travel and training expenses.

Depreciation and amortization increased primarily due to a higher asset base
driven by prior year and current year capital expenditures.

Power Generation

                                Three Months Ended Sept. 30,              Variance                Nine Months Ended Sept. 30,               Variance             
                                2020                 2019                 2020 vs. 2019           2020                 2019                 2020 vs. 2019        
                                (in millions)                                                                                                                    
 Revenue                        $      26.5          $      25.8          $      0.7              $      78.6          $      75.8          $      2.8           
                                                                                                                                                                 
 Fuel expense                   2.3                  2.3                  —                       6.7                  6.9                  (0.2          )      
 Operations and maintenance     10.5                 6.9                  3.6                     24.9                 20.8                 4.1                  
 Depreciation and amortization  4.9                  4.8                  0.1                     15.5                 14.1                 1.4                  
 Adjusted operating income      $      8.7           $      11.8          $      (3.1   )         $      31.5          $      33.9          $      (2.4   )      



                                             Three Months Ended Sept. 30,              Nine Months Ended Sept. 30,         
 Operating Statistics                        2020                2019                  2020              2019              
 Contracted Power Plant Fleet Availability:                                                                                
 Coal-fired plants                           96.1      %         98.0      %           94.5     %        95.2     %        
 Natural gas-fired plants                    99.8      %         97.6      %           99.6     %        98.4     %        
 Wind                                        90.6      %         81.9      %           92.8     %        93.4     %        
 Total availability                          95.8      %         93.6      %           96.3     %        96.5     %        
                                                                                                                           
 Wind capacity factor                        19.4      %         15.0      %           25.7     %        22.1     %        
                                                                                                                           

Third Quarter 2020 Compared with Third Quarter 2019

Revenue increased in the current year driven primarily by increased MWh sold
from new wind assets and additional Black Hills Colorado IPP fired-engine
hours.  Operating expenses increased primarily due to a $3.1 million expense
related to the early retirement of certain assets and higher generation costs
and depreciation from new wind assets.

Mining

                                           Three Months Ended Sept. 30,              Variance                Nine Months Ended Sept. 30,               Variance             
                                           2020                 2019                 2020 vs. 2019           2020                 2019                 2020 vs. 2019        
                                           (in millions)                                                                                                                    
 Revenue                                   $      15.2          $      15.6          $      (0.4   )         $      45.9          $      45.0          $      0.9           
                                                                                                                                                                            
 Operations and maintenance                8.9                  9.9                  (1.0          )         28.5                 29.0                 (0.5          )      
 Depreciation, depletion and amortization  2.8                  2.3                  0.5                     7.4                  6.7                  0.7                  
 Adjusted operating income                 $      3.5           $      3.4           $      0.1              $      10.0          $      9.4           $      0.6           



                                  Three Months Ended Sept. 30,                  Nine Months Ended Sept. 30,               
 Operating Statistics             2020                 2019                     2020                 2019                 
                                  (in thousands)                                                                          
 Tons of coal sold                940                  969                      2,808                2,720                
 Cubic yards of overburden moved  1,595                2,341                    6,073                6,380                
                                                                                                                          
 Revenue per ton                  $      15.60         $      15.47             $      15.64         $      15.90         
                                                                                                                          

Third Quarter 2020 Compared with Third Quarter 2019

Adjusted operating income (loss) was comparable to the same period in the
prior year.

Corporate and Other

Corporate and Other represents certain unallocated expenses for administrative
activities that support our reportable operating segments.  Corporate and
Other also includes business development activities that are not part of our
operating segments.

                                   Three Months Ended Sept. 30,              Variance                Nine Months Ended Sept. 30,               Variance             
                                   2020                 2019                 2020 vs. 2019           2020                 2019                 2020 vs. 2019        
                                   (in millions)                                                                                                                    
 Adjusted operating income (loss)  $      (0.2   )      $      —             $      (0.2   )         $      (0.1   )      $      (0.4   )      $      0.3           
                                                                                                                                                                    

Third Quarter 2020 Compared with Third Quarter 2019

Adjusted operating income (loss) was comparable to the same period in the
prior year.

Consolidated Interest Expense, Impairment of Investment, Other Income
(Expense) and Income Tax Benefit (Expense)

                              Three Months Ended Sept. 30,              Variance                Nine Months Ended Sept. 30,                 Variance             
                              2020                 2019                 2020 vs. 2019           2020                  2019                  2020 vs. 2019        
                              (in millions)                                                                                                                      
 Interest expense, net        $      (36.0  )      $      (33.5  )      $      (2.5   )         $      (107.0  )      $      (102.5  )      $      (4.5   )      
 Impairment of investment     —                    (19.7         )      19.7                    (6.9           )      (19.7          )      12.8                 
 Other income (expense), net  (1.2          )      0.6                  (1.8          )         (0.7           )      0.1                   (0.8          )      
 Income tax (expense)         (4.7          )      (2.5          )      (2.2          )         (25.5          )      (22.1          )      (3.4          )      
                                                                                                                                                                 

Third Quarter 2020 Compared with Third Quarter 2019

Interest expense, net

The increase in Interest expense, net for the three months ended Sept. 30,
2020, compared to the same period in the prior year was driven by higher debt
balances partially offset by lower interest rates.

Impairment of Investment

For the three months ended Sept. 30, 2019, we recorded a pre-tax non-cash
write-down of $20 million in our investment in equity securities of a
privately held oil and gas company.  The impairment was triggered by
continued adverse changes in future natural gas prices and liquidity concerns
at the privately held oil and gas company. The remaining book value of our
investment is $1.5 million, and this is our only remaining investment in oil
and gas exploration and production activities.

Other Income (Expense)

The variance in Other income (expense), net for the three months ended Sept.
30, 2020, compared to the same period in the prior year, was primarily due to
increased costs for our non-qualified benefit plans which were driven by
market performance on plan assets and increased non-service pension costs
resulting from a change in accounting principle for our defined benefit
pension plan effective January 1, 2020.

Income Tax (Expense)

For the three months ended Sept. 30, 2020, the effective tax rate was 10.3%
compared to 14.0% for the same period in 2019.  The lower effective tax rate
is primarily due to increased tax benefits from federal production tax credits
associated with new wind assets and reversal of accrued excess deferred income
taxes as part of resolving the last of the Company’s open dockets seeking
approval of its TCJA plans.

ABOUT BLACK HILLS CORP.

Black Hills Corp. (NYSE: BKH) is a customer-focused, growth-oriented utility
company with a tradition of improving life with energy and a vision to be the
energy partner of choice. Based in Rapid City, South Dakota, the company
serves 1.28 million natural gas and electric utility customers in eight
states: Arkansas, Colorado, Iowa, Kansas, Montana, Nebraska, South Dakota and
Wyoming. More information is available at www.blackhillscorp.com,
www.blackhillscorp.com/corporateresponsibility and www.blackhillsenergy.com.

CAUTION REGARDING FORWARD-LOOKING STATEMENTS

This presentation includes “forward-looking statements” as defined by the
Securities and Exchange Commission. We make these forward-looking statements
in reliance on the safe harbor protections provided under the Private
Securities Litigation Reform Act of 1995. All statements, other than
statements of historical facts, included in this presentation that address
activities, events or developments that we expect, believe or anticipate will
or may occur in the future are forward-looking statements. This includes,
without limitations, our 2020 and 2021 earnings guidance and the impacts of
the COVID-19 pandemic on our business. These forward-looking statements are
based on assumptions which we believe are reasonable based on current
expectations and projections about future events and industry conditions and
trends affecting our business. However, whether actual results and
developments will conform to our expectations and predictions is subject to a
number of risks and uncertainties that, among other things, could cause actual
results to differ materially from those contained in the forward-looking
statements, including without limitation, the risk factors described in Item
1A of Part I of our 2019 Annual Report on Form 10-K and other reports that we
file with the SEC from time to time, and the following:
* The accuracy of our assumptions on which our earnings guidance is based;
 
* Our ability to obtain adequate cost recovery for our utility operations
through regulatory proceedings and favorable rulings on periodic applications
to recover costs for capital additions, plant retirements and decommissioning,
fuel, transmission, purchased power, and other operating costs and the timing
in which new rates would go into effect;
 
* Our ability to complete our capital program in a cost-effective and timely
manner;
 
* Our ability to execute on our strategy, including: targeting a 50 to 60
percent dividend payout ratio and continuing our track record of continuous
annual dividend increases;
 
* Our ability to successfully execute our financing plans;
 
* Board of Directors’ approval of any future quarterly dividends;
 
* The impact of future governmental regulation; and
 
* Other factors discussed from time to time in our filings with the SEC.
New factors that could cause actual results to differ materially from those
described in forward-looking statements emerge from time-to-time, and it is
not possible for us to predict all such factors, or the extent to which any
such factor or combination of factors may cause actual results to differ from
those contained in any forward-looking statement. We assume no obligation to
update publicly any such forward-looking statements, whether as a result of
new information, future events or otherwise.

(Minor differences may result due to rounding.)

                                               Consolidating Income Statement                                                                                                                                                 
 Three Months Ended Sept. 30, 2020             Electric Utilities                           Gas Utilities        Power Generation        Mining         Corporate         Other Inter- Co Eliminations        Total           
                                               (in millions)                                                                                                                                                                  
 Revenue                                       $              195.2                         $      142.1         $       1.9             $    7.3       $     —           $           —                       $    346.6      
 Intercompany revenue                          5.7                                          1.8                  24.6                    7.9            87.1              (127.0                  )           —               
 Fuel, purchased power and cost of gas sold    77.9                                         27.0                 2.3                     —              —                 (35.6                   )           71.7            
 Gross margin (non-GAAP)                       123.0                                        116.9                24.2                    15.2           87.1              (91.5                   )           274.9           
                                                                                                                                                                                                                              
 Operations and maintenance                    47.4                                         73.6                 10.5                    8.9            68.9              (73.1                   )           136.3           
 Depreciation, depletion and amortization      23.4                                         25.1                 4.9                     2.8            6.8               (6.7                    )           56.3            
 Adjusted operating income (loss)              52.1                                         18.1                 8.7                     3.5            11.4              (11.6                   )           82.2            
                                                                                                                                                                                                                              
 Interest expense, net                                                                                                                                                                                        (36.0       )   
 Impairment of investment                                                                                                                                                                                     —               
 Other income (expense), net                                                                                                                                                                                  (1.2        )   
 Income tax benefit (expense)                                                                                                                                                                                 (4.7        )   
 Net income (loss)                                                                                                                                                                                            40.3            
 Net income attributable to noncontrolling interest                                                                                                                                                           (4.1        )   
 Net income (loss) available for common stock                                                                                                                                                                 $    36.3       



                                                                                                                                                                                                                                  
                                               Consolidating Income Statement                                                                                                                                                     
 Nine Months Ended Sept. 30, 2020              Electric Utilities                           Gas Utilities        Power Generation        Mining          Corporate         Other Inter- Co Eliminations        Total              
                                               (in millions)                                                                                                                                                                      
 Revenue                                       $              520.7                         $      662.5         $       5.8             $    21.5       $     —           $           —                       $     1,210.6      
 Intercompany revenue                          17.5                                         3.3                  72.8                    24.3            259.3             (377.2                  )           —                  
 Fuel, purchased power and cost of gas sold    201.4                                        227.0                6.7                     —               —                 (103.9                  )           331.2              
 Gross margin (non-GAAP)                       336.8                                        438.8                71.9                    45.9            259.2             (273.2                  )           879.4              
                                                                                                                                                                                                                                  
 Operations and maintenance                    145.0                                        223.4                24.9                    28.5            210.1             (224.2                  )           407.6              
 Depreciation, depletion and amortization      70.1                                         76.2                 15.5                    7.4             19.1              (18.9                   )           169.4              
 Adjusted operating income (loss)              121.7                                        139.3                31.5                    10.0            30.0              (30.1                   )           302.4              
                                                                                                                                                                                                                                  
 Interest expense, net                                                                                                                                                                                         (107.0         )   
 Impairment of investment                                                                                                                                                                                      (6.9           )   
 Other income (expense), net                                                                                                                                                                                   (0.7           )   
 Income tax benefit (expense)                                                                                                                                                                                  (25.5          )   
 Net income (loss)                                                                                                                                                                                             162.3              
 Net income attributable to noncontrolling interest                                                                                                                                                            (11.8          )   
 Net income (loss) available for common stock                                                                                                                                                                  $     150.4        



                                               Consolidating Income Statement                                                                                                                                                 
 Three Months Ended Sept. 30, 2019             Electric Utilities                           Gas Utilities        Power Generation        Mining         Corporate         Other Inter- Co Eliminations        Total           
                                               (in millions)                                                                                                                                                                  
 Revenue                                       $              186.0                         $      130.2         $       2.2             $    7.1       $     —           $           —                       $    325.5      
 Intercompany revenue                          5.3                                          0.5                  23.6                    8.5            80.3              (118.3                  )           —               
 Fuel, purchased power and cost of gas sold    71.6                                         33.0                 2.3                     —              —                 (33.4                   )           73.5            
 Gross margin (non-GAAP)                       119.8                                        97.7                 23.5                    15.6           80.3              (84.9                   )           252.0           
                                                                                                                                                                                                                              
 Operations and maintenance                    47.2                                         70.2                 6.9                     9.9            66.5              (71.1                   )           129.6           
 Depreciation, depletion and amortization      22.0                                         22.8                 4.8                     2.3            5.4               (5.3                    )           51.9            
 Adjusted operating income (loss)              50.7                                         4.7                  11.8                    3.4            8.4               (8.4                    )           70.6            
                                                                                                                                                                                                                              
 Interest expense, net                                                                                                                                                                                        (33.5       )   
 Impairment of investment                                                                                                                                                                                     (19.7       )   
 Other income (expense), net                                                                                                                                                                                  0.6             
 Income tax benefit (expense)                                                                                                                                                                                 (2.5        )   
 Net income (loss)                                                                                                                                                                                            15.4            
 Net income attributable to noncontrolling interest                                                                                                                                                           (3.7        )   
 Net income (loss) available for common stock                                                                                                                                                                 $    11.7       
                                                                                                                                                                                                                              



                                                                                                                                                                                                                                  
                                               Consolidating Income Statement                                                                                                                                                     
 Nine Months Ended Sept. 30, 2019              Electric Utilities                           Gas Utilities        Power Generation        Mining          Corporate         Other Inter- Co Eliminations        Total              
                                               (in millions)                                                                                                                                                                      
 Revenue                                       $              524.1                         $      705.3         $       7.1             $    20.7       $     —           $           —                       $     1,257.2      
 Intercompany revenue                          16.6                                         2.0                  68.6                    24.3            255.6             (367.1                  )           —                  
 Fuel, purchased power and cost of gas sold    207.0                                        297.3                6.9                     —               0.1               (97.9                   )           413.5              
 Gross margin (non-GAAP)                       333.7                                        410.0                68.8                    45.0            255.4             (269.2                  )           843.8              
                                                                                                                                                                                                                                  
 Operations and maintenance                    143.0                                        225.2                20.8                    29.0            211.9             (225.4                  )           404.6              
 Depreciation, depletion and amortization      65.4                                         68.2                 14.1                    6.7             16.3              (16.1                   )           154.5              
 Adjusted operating income (loss)              125.2                                        116.6                33.9                    9.4             27.3              (27.7                   )           284.7              
                                                                                                                                                                                                                                  
 Interest expense, net                                                                                                                                                                                         (102.5         )   
 Impairment of investment                                                                                                                                                                                      (19.7          )   
 Other income (expense), net                                                                                                                                                                                   0.1                
 Income tax benefit (expense)                                                                                                                                                                                  (22.1          )   
 Net income (loss)                                                                                                                                                                                             140.5              
 Net income attributable to noncontrolling interest                                                                                                                                                            (10.3          )   
 Net income (loss) available for common stock                                                                                                                                                                  $     130.1        



 Investor Relations:                                             
 Jerome E. Nichols                                               
 Phone                     605-721-1171                          
 Email                     investorrelations@blackhillscorp.com  
                                                                 
 Media Contact:                                                  
 24-hour Media Assistance  888-242-3969                          

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