Black Hills Corp. Reports 2023 Second-Quarter Results and Reaffirms 2023 Earnings Guidance

• Strengthened balance sheet and maintained robust liquidity
• Issued request for proposals for 400 megawatts of renewable resources for Colorado Electric

RAPID CITY, S.D., Aug. 02, 2023 (GLOBE NEWSWIRE) -- Black Hills Corp. (: BKH) today announced financial results for the second quarter of 2023. Net income available for common stock and earnings per share for the three and six months ended June 30, 2023, compared to the three and six months ended June 30, 2022, were:

Earnings of $0.35 per share for the second quarter were driven by new rates, rider recovery and a state income tax true-up of $0.12 per share. Financial results reflected the impact of inflation on higher year-over-year operating expenses and higher interest expense.

“We strengthened our balance sheet, enhanced our liquidity and advanced our strategic initiatives in the first half of 2023,” said Linn Evans, president and CEO of Black Hills Corp. “I’m pleased with our excellent operational performance in delivering safe, reliable service to our customers.

“Our team continued to execute our regulatory plan with the approval of a settlement for new rates in Colorado for our intrastate natural gas pipeline, new rate review filings for our Colorado and Wyoming gas utilities and preparations for a rate review filing in Arkansas by year end. To achieve the goals of our Colorado Clean Energy Plan, we recently issued a request for proposals to add 400 megawatts of renewable and battery storage resources. For our South Dakota electric resource plan, we are currently evaluating bids to add 100 megawatts of rate based renewable resources.

“We are on pace to achieve our earnings guidance for the year. We expect strong cash flows combined with disciplined capital management will result in lower than forecasted interest expense for 2023. For the remainder of the year, we have sharpened our focus on managing expenses given the challenging macroeconomic environment. As we look to the future, we remain confident in our strategy and long-term growth trajectory as clarity around key opportunities continues to emerge,” concluded Evans.

SECOND-QUARTER 2023 HIGHLIGHTS AND UPDATES

Electric Utilities

• On July 31, Colorado Electric issued a request for proposals for 400 megawatts of new resources to be in service between 2026 and 2029 to achieve objectives in its Clean Energy Plan. The plan, which was approved by the Colorado Public Utilities Commission in March 2023, supports the utility’s voluntary election to reduce its greenhouse gas emissions by 80% from 2005 levels by 2030. Under the plan, Black Hills may own up to 200 megawatts of the 400 megawatts of clean energy resources necessary to meet the plan’s emission goals.
• On July 24, Wyoming Electric set a new all-time and summer peak load of 312 megawatts, surpassing the previous peak of 294 megawatts set in July 2022.
• During the second quarter, South Dakota Electric advanced the competitive bidding process in its request for proposals for 100 megawatts of build-transfer renewable energy resources to be in service by mid-year 2026.

Gas Utilities

• On July 12, Rocky Mountain Natural Gas, an intrastate natural gas pipeline in Colorado, received approval from the Colorado Public Utilities Commission of a settlement agreement for its rate review submitted on Oct. 7, 2022. The agreement provides $8.2 million of new annual revenue based on a weighted average cost of capital of 6.93% with a capital structure range of 50% to 52% equity and a return on equity range of 9.5% to 9.7%. The rate review requested $12.3 million of new annual revenue based upon a proposed future test year or $10.3 million of new annual revenue based on an historical test year. New rates based on the historical test year approach were effective July 15, 2023.
• On May 18, Wyoming Gas filed a rate review application with the Wyoming Public Service Commission seeking recovery of approximately $140 million of investments since its last rate review in 2019. The rate review requests $19.3 million in new annual revenue with a capital structure of 52% equity and 48% debt and a return on equity of 10.49%. The company seeks to renew its integrity rider and implement new rates in the first quarter of 2024.
• On May 8, Colorado Gas filed a rate review application with the Colorado Public Utilities Commission seeking recovery of approximately $130 million of investments since its last rate review in 2021. The rate review requests $26.7 million in new annual revenue with a capital structure of 51% equity and 49% debt and a return on equity of 10.49%. The company is seeking new rates in the first quarter of 2024.

Corporate and Other

• On July 24, Black Hills’ board of directors approved a quarterly dividend of $0.625 per share payable on Sept. 1, 2023, to shareholders of record at the close of business on Aug. 18, 2023.
• On June 16, Black Hills filed a shelf registration statement with the Securities and Exchange Commission. In conjunction with this filing, 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 with an aggregate value of up to $400 million. The company’s previous equity offering program was subsequently terminated.
• During the second quarter, Black Hills issued 0.4 million shares of new common stock for net proceeds of $27.4 million under its at-the-market equity offering program. Year to date, the company has issued a total of 0.9 million shares of new common stock for net proceeds of $57.7 million.

2023 EARNINGS GUIDANCE REAFFIRMED

Black Hills reaffirms its guidance for 2023 earnings per share available for common stock to be in the range of $3.65 to $3.85 based on the follow 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;
• Constructive and timely outcomes of utility regulatory dockets;
• No significant unplanned outages at any of our generating facilities;
• Production tax credits of approximately $20 million associated with wind generation assets;
• Capital investment of approximately $615 million;
• Equity issuance of $140 million to $160 million through the at-the-market equity offering program;
• Interest expense of $180 million to $185 million, including debt refinancing activity;* and
• Total operating expense of $600 million to $610 million, excluding fuel, purchased power, cost of natural gas sold, depreciation, depletion and amortization.*

* Guidance assumptions for interest expense and operating expense are being provided for only 2023 due to ongoing volatility in inflation and rising interest rate environments.

2024 EARNINGS GUIDANCE TO BE ANNOUNCED DURING YEAR-END 2023 EARNINGS

Black Hills will provide its annual financial update during its fourth quarter and full-year earnings call. This update in early 2024 will include earnings and dividend guidance for 2024 and the capital investment forecast for 2024 through 2028.

BLACK HILLS CORPORATION
CONSOLIDATED FINANCIAL RESULTS

(Minor differences may result due to rounding)

CONFERENCE CALL AND WEBCAST

Black Hills will host a live conference call and webcast at 11 a.m. EDT on Thursday, August 3, 2023, to discuss financial and operating performance.

To access the live webcast and download a copy of the investor presentation, go to the “Investor Relations” section of the Black Hills website at www.blackhillscorp.com and click on “News and Events” and then “Events & Presentation.” The presentation will be posted on the website before the webcast. Listeners should allow at least five minutes for registering and accessing the presentation. For those unable to listen to the live broadcast, a replay will be available on the company’s website.

To ask a question during the live broadcast, users can access dial-in information and a personal identification number by registering for the event at https://register.vevent.com/register/BI8142d9b423ae478a8dac026d4571f1e0.

A listen-only webcast player and presentation slides can be accessed live at https://edge.media-server.com/mmc/p/oi3c9i79 with a replay of the event available for up to one year.

USE OF NON-GAAP FINANCIAL MEASURES

Gas and Electric Utility Margin

Gas and Electric Utility margin (revenue less cost of sales) is considered a non-GAAP financial measure due to the exclusion of operation and maintenance expenses, depreciation and amortization expenses, and property and production taxes from the measure. The presentation of Gas and Electric Utility margin is intended to supplement investors’ understanding of operating performance.

Electric Utility margin is calculated as operating revenue less cost of fuel and purchased power. Gas Utility margin is calculated as operating revenue less cost of gas sold. Our Gas and Electric Utility margin is impacted by the fluctuations in power purchases and natural gas and other fuel supply costs. However, while these fluctuating costs impact Gas and Electric Utility margin as a percentage of revenue, they only impact total Gas and Electric Utility margin if the costs cannot be passed through to customers.

Our Gas and Electric Utility margin measure may not be comparable to other companies’ Gas and Electric Utility 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

Operating results from our business segments for the three and six months ended June 30, 2023, compared to the three and six months ended June 30, 2022, are discussed below.

Certain lines of business 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 six months ended June 30, 2023 and 2022 are not necessarily indicative of the results of operations to be expected for any other period or for the entire year.

Segment information does not include inter-company eliminations and all amounts are presented on a pre-tax basis unless otherwise indicated. Minor differences in amounts may result due to rounding.

Electric Utilities

Three Months Ended June 30, 2023, Compared with Three Months Ended June 30, 2022

Electric Utility margin increased as a result of:

___________________
(a) Primarily driven by favorable mining volumes due to a prior year planned outage and increased Black Hills Colorado IPP fired-engine hours.

Operations and maintenance expense increased primarily due to $3.8 million of higher generation expenses driven by planned outages and higher materials costs and $1.9 million of higher employee-related expenses.

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

Six Months Ended June 30, 2023, Compared with Six Months Ended June 30, 2022

Electric Utility margin increased as a result of:

____________________
(a) Primarily driven by favorable mining volumes due to a prior year planned outage, mining contract pricing and increased Black Hills Colorado IPP fired-engine hours.

Operations and maintenance expense increased primarily due to $6.2 million of higher mining and generation expenses driven by planned outages and higher fuel and materials costs and $5.4 million of higher employee-related expenses partially offset by a one-time $7.7 million gain on the planned sale of Northern Iowa Windpower assets. Other favorable variances, none of which were individually significant, comprised the remainder of the difference when compared to the same period in the prior year.

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

Gas Utilities