Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2025
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission File Number 001-31303
Black Hills Corporation
Incorporated in South Dakota IRS Identification Number 46-0458824
7001 Mount Rushmore Road
Rapid City, South Dakota 57702
Registrant’s telephone number (605) 721-1700
Former name, former address, and former fiscal year if changed since last report
NONE
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer
x
Accelerated Filer
☐
Non-accelerated Filer
Smaller Reporting Company
Emerging Growth Company
If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).Yes ☐ No ☒
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common stock of $1.00 par value
BKH
New York Stock Exchange
Indicate the number of shares outstanding of each of the issuer’s classes of common stock as of the latest practicable date.
Class
Outstanding at May 5, 2025
Common stock, $1.00 par value
72,509,377
shares
TABLE OF CONTENTS
Page
Glossary of Terms and Abbreviations
3
Forward-Looking Information
7
PART I. FINANCIAL INFORMATION
8
Item 1.
Financial Statements - unaudited
Consolidated Statements of Income
Consolidated Statements of Comprehensive Income
9
Consolidated Balance Sheets
10
Consolidated Statements of Cash Flows
12
Consolidated Statements of Equity
13
Condensed Notes to Consolidated Financial Statements
14
Note 1. Management’s Statement
Note 2. Regulatory Matters
15
Note 3. Commitments, Contingencies and Guarantees
16
Note 4. Revenue
Note 5. Financing
18
Note 6. Earnings Per Share
19
Note 7. Risk Management and Derivatives
Note 8. Fair Value Measurements
22
Note 9. Other Comprehensive Income
24
Note 10. Employee Benefit Plans
25
Note 11. Income Taxes
Note 12. Business Segment Information
26
Note 13. Selected Balance Sheet Information
28
Note 14. Subsequent Events
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
29
Executive Summary
Recent Developments
Results of Operations
30
Consolidated Summary and Overview
Non-GAAP Financial Measure
31
Electric Utilities
32
Gas Utilities
35
Corporate and Other
36
Consolidated Interest Expense, Other Income and Income Tax Expense
Liquidity and Capital Resources
37
Cash Flow Activities
38
Capital Resources
39
Credit Ratings
Capital Requirements
40
Critical Accounting Estimates
New Accounting Pronouncements
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
Item 4.
Controls and Procedures
PART II. OTHER INFORMATION
Legal Proceedings
41
Item 1A.
Risk Factors
Unregistered Sales of Equity Securities and Use of Proceeds
Mine Safety Disclosures
Item 5.
Other Information
Item 6.
Exhibits
Signatures
42
2
GLOSSARY OF TERMS AND ABBREVIATIONS
The following terms and abbreviations appear in the text of this report and have the definitions described below:
AFUDC
Allowance for Funds Used During Construction
AOCI
Accumulated Other Comprehensive Income (Loss)
Arkansas Gas
Black Hills Energy Arkansas, Inc., an indirect, wholly-owned subsidiary of Black Hills Utility Holdings, providing natural gas services to customers in Arkansas (doing business as Black Hills Energy).
ASU
Accounting Standards Update as issued by the FASB
ATM
At-the-market equity offering program
Availability
The availability factor of a power plant is the percentage of the time that it is available to provide energy.
BHC
Black Hills Corporation; the Company
Black-box Settlement
Settlement with a utility's commission where the revenue requirement is agreed upon, but the specific adjustments used by each party to arrive at the amount are not specified in public rate orders.
Black Hills Colorado IPP
Black Hills Colorado IPP, LLC a 50.1% owned subsidiary of Black Hills Electric Generation
Black Hills Electric Generation
Black Hills Electric Generation, LLC, a direct, wholly-owned subsidiary of Black Hills Non-regulated Holdings, providing wholesale electric capacity and energy primarily to our affiliate utilities.
Black Hills Electric Parent Holdings
Black Hills Electric Utility Holdings, LLC., a direct, wholly-owned subsidiary of Black Hills Corporation
Black Hills Energy
The name used to conduct the business of our Utilities
Black Hills Energy Renewable Resources (BHERR)
Black Hills Energy Renewable Resources, LLC, a direct, wholly-owned subsidiary of Black Hills Non-regulated Holdings
Black Hills Energy Services
Black Hills Energy Services Company, an indirect, wholly-owned subsidiary of Black Hills Utility Holdings, providing natural gas commodity supply for the Choice Gas Programs (doing business as Black Hills Energy).
Black Hills Non-regulated Holdings
Black Hills Non-regulated Holdings, LLC, a direct, wholly-owned subsidiary of Black Hills Corporation
Black Hills Utility Holdings
Black Hills Utility Holdings, Inc., a direct, wholly-owned subsidiary of Black Hills Corporation (doing business as Black Hills Energy)
Black Hills Wyoming
Black Hills Wyoming, LLC, a direct, wholly-owned subsidiary of Black Hills Electric Generation
Busch Ranch I
A 29 MW wind farm near Pueblo, Colorado, jointly owned by Colorado Electric and Black Hills Electric Generation. Colorado Electric and Black Hills Electric Generation each have a 50% ownership interest in the wind farm. Black Hills Electric Generation provides its share of energy from the wind farm to Colorado Electric through a PPA, which expires in October 2037.
Busch Ranch II
A 59.4 MW wind farm near Pueblo, Colorado owned by Black Hills Electric Generation to provide wind energy to Colorado Electric through a PPA expiring in November 2044.
CEPR
Clean Energy Plan Rider, which is a 1.5% surcharge to fund Colorado Electric's recovery of renewable energy projects under the Clean Energy Plan. In conjunction with the implementation of the CEPR in January 2025, the RESA surcharge was reduced from 2.0% to 1.5%.
Choice Gas Program
Regulator-approved programs in Wyoming and Nebraska that allow certain utility customers to select their natural gas commodity supplier, providing for the unbundling of the commodity service from the distribution delivery service.
Chief Operating Decision Maker (CODM)
Chief Executive Officer
CIAC
Contribution in aid of construction
Clean Energy Plan
2030 Ready Plan that establishes a roadmap and preferred resource portfolio for Colorado Electric to achieve the State of Colorado’s requirement calling upon electric utilities to reduce greenhouse gas emissions by a minimum of 80% from 2005 levels by 2030. The recommended resource portfolio proposes the addition of 350 MW of clean energy resources to Colorado Electric's system. Colorado legislation allows electric utilities to own up to 50% of the renewable generation assets added to comply with the Clean Energy Plan.
Colorado Electric
Black Hills Colorado Electric, LLC, a direct, wholly-owned subsidiary of Black Hills Electric Parent Holdings, providing electric services to customers in Colorado (doing business as Black Hills Energy).
Colorado Gas
Black Hills Colorado Gas, Inc., an indirect, wholly-owned subsidiary of Black Hills Utility Holdings, providing natural gas services to customers in Colorado (doing business as Black Hills Energy).
Consolidated Indebtedness to Capitalization Ratio
Any indebtedness outstanding at such time, divided by capital at such time. Capital being consolidated net worth (excluding non-controlling interest) plus consolidated indebtedness (including letters of credit and certain guarantees issued) as defined within the current Revolving Credit Facility.
Cooling Degree Day
A cooling degree day is equivalent to each degree that the average of the high and the low temperatures for a day is above 65 degrees. The warmer the climate, the greater the number of cooling degree days. Cooling degree days are used in the utility industry to measure the relative warmth of weather and to compare relative temperatures between one geographic area and another. Normal degree days are based on the National Weather Service data for selected locations.
CP Program
Commercial Paper Program
CPCN
Certificate of Public Convenience and Necessity
CPUC
Colorado Public Utilities Commission
CT
Combustion Turbine
Dth
Dekatherm. A unit of energy equal to 10 therms or one million British thermal units (MMBtu)
FASB
Financial Accounting Standards Board
Fitch
Fitch Ratings Inc.
GAAP
Accounting principles generally accepted in the United States of America
Heating Degree Day
A heating degree day is equivalent to each degree that the average of the high and the low temperatures for a day is below 65 degrees. The colder the climate, the greater the number of heating degree days. Heating degree days are used in the utility industry to measure the relative coldness of weather and to compare relative temperatures between one geographic area and another. Normal degree days are based on the National Weather Service data for selected locations.
HomeServe
We offer HomeServe products to our natural gas residential customers interested in purchasing additional home repair service plans.
Integrated Generation
Non-regulated power generation and mining businesses (Black Hills Electric Generation and WRDC) that are vertically integrated within our Electric Utilities segment.
Iowa Gas
Black Hills Iowa Gas Utility Company, LLC, a direct, wholly-owned subsidiary of Black Hills Utility Holdings, providing natural gas services to customers in Iowa (doing business as Black Hills Energy).
IPP
Independent Power Producer
IRS
United States Internal Revenue Service
IUC
Iowa Utilities Commission
Kansas Gas
Black Hills Kansas Gas Utility Company, LLC, a direct, wholly-owned subsidiary of Black Hills Utility Holdings, providing natural gas services to customers in Kansas (doing business as Black Hills Energy).
KCC
Kansas Corporation Commission
Lange II
A dual fuel (natural gas and diesel oil) electric generation project in Rapid City, South Dakota with an estimated total capacity of 99 MW. This facility will be owned and operated by South Dakota Electric and will be located adjacent to the Lange CT generation facility. This project is expected to be completed by the second half of 2026. The fast-start, dispatchable generation will be comprised of six reciprocating internal combustion engines, with technology to support strong system resiliency, including crucial black start capability to respond quickly to electric load changes. The addition of these resources will replace aging gas-fired and diesel resources planned for retirement in 2027 and support updated planning reserve margin requirements.
Large Power Contract Service (LPCS) Tariff
Innovative tariff solution developed in collaboration with Microsoft and approved by the WPSC in 2016. The LPSC is applicable to Wyoming Electric retail customers with new loads of 13 MW or greater who agree to Black Hills Energy-dispatched, customer-owned generation, on-site for the purpose of providing backup service for the customer’s load and maintaining reliability. If the parties agree through negotiations to electric service through this tariff, a Large Power Service Agreement will be executed. The associated service agreement provides qualifying customers with market-based energy rates and access to renewable energy resources that is not served from utility-owned generation (i.e. minimal capital model for Wyoming Electric). Customers shall not participate in the PCA or TCAM to the extent of service received under the tariff.
4
MMBtu
Million British thermal units
Moody's
Moody's Investors Service, Inc.
MW
Megawatts
MWh
Megawatt-hours
N/A
Not applicable
Nebraska Gas
Black Hills Nebraska Gas, LLC, an indirect, wholly-owned subsidiary of Black Hills Utility Holdings, providing natural gas services to customers in Nebraska (doing business as Black Hills Energy).
NPSC
Nebraska Public Service Commission
OCI
Other Comprehensive Income
PPA
Power Purchase Agreement
PTC
Production Tax Credit
Pueblo Airport Generation
Pueblo Airport Generating Station located in Pueblo, Colorado includes 440 MW of combined cycle gas-fired power generation plants jointly owned by Colorado Electric (240 MW) and Black Hills Colorado IPP (200 MW). Black Hills Colorado IPP operates this facility. The plants commenced operation on January 1, 2012.
Ready Wyoming
A 260-mile, multi-phase transmission expansion project in Wyoming. This transmission project is expected to serve the growing needs of customers by enhancing resiliency of Wyoming Electric’s overall electric system and expanding access to power markets and renewable resources. The project is expected to help Wyoming Electric maintain top-quartile reliability and enable economic development in the Cheyenne, Wyoming region.
RESA
Renewable Energy Standard Adjustment is an incremental retail rate limited to 1.5% for Colorado Electric customers that provides funding for renewable energy projects and programs to comply with Colorado’s Renewable Energy Standard.
Revolving Credit Facility
Our $750 million credit facility used to fund working capital needs, letters of credit and other corporate purposes, which was amended on May 31, 2024, and will terminate on May 31, 2029. This facility includes an accordion feature that allows us to increase total commitments up to $1.0 billion with the consent of the administrative agent, the issuing agents and each bank increasing or providing a new commitment.
RNG
Renewable natural gas
SEC
United States Securities and Exchange Commission
Service Guard Comfort Plan
Appliance protection plan that provides home appliance repair services through on-going monthly service agreements to residential utility customers.
S&P
S&P Global Ratings, a division of S&P Global Inc.
South Dakota Electric
Black Hills Power, Inc., a direct, wholly-owned subsidiary of Black Hills Corporation, providing electric service to customers in Montana, South Dakota and Wyoming (doing business as Black Hills Energy).
TCAM
Transmission Cost Adjustment Mechanism is a WPSC-approved tariff based on a formulaic approach that determines the recovery of Wyoming Electric's transmission costs.
Tech Services
Non-regulated product lines delivered by our Utilities that 1) provide electrical system construction services to large industrial customers of our Electric Utilities, and 2) serve gas transportation customers throughout its service territory by constructing and maintaining customer-owned gas infrastructure facilities, typically through one-time contracts.
Utilities
Black Hills' Electric and Gas Utilities
Wind Capacity Factor
Measures the amount of electricity a wind turbine produces in a given time period relative to its maximum potential.
Winter Storm Uri
February 2021 winter weather event that caused extreme cold temperatures in the central United States and led to unprecedented fluctuations in customer demand and market pricing for natural gas and energy.
WPSC
Wyoming Public Service Commission
WRDC
Wyodak Resources Development Corp., a coal mine which is a direct, wholly-owned subsidiary of Black Hills Non-regulated Holdings, providing coal supply primarily to five on-site, mine-mouth generating facilities at our Gillette Energy Complex (doing business as Black Hills Energy).
Wygen III
A mine-mouth, coal-fired power plant operated by South Dakota Electric with a total capacity of 116 MW located at our Gillette Energy Complex. South Dakota Electric owns 52% of the power plant, MDU owns 25%, and the City of Gillette owns the remaining 23%.
5
Wyoming Electric
Cheyenne Light, Fuel and Power Company, a direct, wholly-owned subsidiary of Black Hills Corporation, providing electric service to customers in the Cheyenne, Wyoming area (doing business as Black Hills Energy).
Wyoming Gas
Black Hills Wyoming Gas, LLC, an indirect, wholly-owned subsidiary of Black Hills Utility Holdings, providing natural gas services to customers in Wyoming (doing business as Black Hills Energy).
6
FORWARD-LOOKING INFORMATION
This Quarterly Report on Form 10-Q includes “forward-looking statements” as defined by the SEC. Forward-looking statements are all statements other than statements of historical fact, including without limitation those statements that are identified by the words “anticipates,” “estimates,” “expects,” “intends,” “plans,” “predicts” and similar expressions, and include statements concerning plans, objectives, goals, strategies, future events or performance, and underlying assumptions and other statements that are other than statements of historical facts. We make these forward-looking statements in reliance on the safe harbor protections provided under the Private Securities Litigation Reform Act of 1995. 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 2024 Annual Report on Form 10-K, Part II, Item 1A of this Quarterly Report on Form 10-Q and other reports that we file with the SEC from time to time, and the following:
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.
ITEM 1. FINANCIAL STATEMENTS
BLACK HILLS CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
Three Months EndedMarch 31,
2025
2024
(in millions, except per share amounts)
Revenue
$
805.2
726.4
Operating expenses:
Fuel, purchased power and cost of natural gas sold
359.7
316.6
Operations and maintenance
153.7
133.6
Depreciation and amortization
69.2
65.9
Taxes other than income taxes
17.6
17.0
Total operating expenses
600.2
533.1
Operating income
205.0
193.3
Other income (expense):
Interest expense incurred net of amounts capitalized
(51.7
)
(46.0
Interest income
0.4
2.0
Other income (expense), net
0.8
(0.8
Total other (expense)
(50.5
(44.8
Income before income taxes
154.5
148.5
Income tax (expense)
(18.1
(16.9
Net income
136.4
131.6
Net income attributable to non-controlling interest
(2.1
(3.7
Net income available for common stock
134.3
127.9
Earnings per share of common stock:
Earnings per share, Basic
1.87
1.88
Earnings per share, Diluted
Weighted average common shares outstanding:
Basic
71.6
68.2
Diluted
71.8
68.3
The accompanying Condensed Notes to Consolidated Financial Statements are an integral part of these Consolidated Financial Statements.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in millions)
Other comprehensive income (loss), net of tax;
Derivative instruments designated as cash flow hedges:
Reclassification of net realized (gains) losses on settled/amortized interest rate swaps (net of tax of $(0.2) and $(0.1), respectively)
0.6
Net unrealized gains (losses) on commodity derivatives (net of tax of $0.0 and $0.0, respectively)
0.1
(0.1
Reclassification of net realized (gains) losses on settled commodity derivatives (net of tax of $(0.1) and $(0.6), respectively)
0.3
Other comprehensive income, net of tax
1.0
2.5
Comprehensive income
137.4
134.1
Less: comprehensive income attributable to non-controlling interest
Comprehensive income available for common stock
135.3
130.4
See Note 9 for additional disclosures.
CONSOLIDATED BALANCE SHEETS
As of
March 31, 2025
December 31, 2024
ASSETS
Current assets:
Cash and cash equivalents
6.6
16.1
Restricted cash and equivalents
7.5
7.3
Accounts receivable, net
377.9
351.2
Materials, supplies and fuel
128.1
153.9
Derivative assets, current
-
Income tax receivable, net
19.7
19.8
Regulatory assets, current
129.3
154.8
Other current assets
38.9
39.2
Total current assets
708.1
742.3
Property, plant and equipment
9,714.6
9,566.5
Less: accumulated depreciation
(1,992.6
(1,936.6
Total property, plant and equipment, net
7,722.0
7,629.9
Other assets:
Goodwill
1,299.5
Intangible assets, net
7.6
Regulatory assets, non-current
252.3
272.9
Other assets, non-current
72.0
70.4
Total other assets, non-current
1,631.1
1,650.4
TOTAL ASSETS
10,061.2
10,022.6
(Continued)
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable
216.8
229.1
Accrued liabilities
253.2
302.2
Derivative liabilities, current
—
4.2
Regulatory liabilities, current
99.0
94.1
Notes payable
59.9
133.8
Current maturities of long-term debt
300.0
Total current liabilities
928.9
763.4
Long-term debt, net of current maturities
3,951.6
4,250.2
Deferred credits and other liabilities:
Deferred income tax liabilities, net
666.5
625.1
Regulatory liabilities, non-current
475.2
474.6
Benefit plan liabilities
122.3
122.9
Other deferred credits and other liabilities
199.6
201.2
Total deferred credits and other liabilities
1,463.6
1,423.8
Commitments, contingencies and guarantees (Note 3)
Equity:
Stockholder's equity -
Common stock $1 par value; 100,000,000 shares authorized; issued 72,544,232 and 71,676,756 shares, respectively
72.5
71.7
Additional paid-in capital
2,238.2
2,193.4
Retained earnings
1,334.8
1,249.1
Treasury stock, at cost - 34,120 and 56,608 shares, respectively
(2.0
(3.3
Accumulated other comprehensive income (loss)
(8.4
(9.4
Total stockholders' equity
3,635.1
3,501.5
Non-controlling interest
82.0
83.7
Total equity
3,717.1
3,585.2
TOTAL LIABILITIES AND TOTAL EQUITY
11
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended March 31,
Operating activities:
Adjustments to reconcile net income to net cash provided by operating activities:
Deferred financing cost amortization
2.4
2.7
Stock compensation
2.6
Deferred income taxes
33.2
16.7
Employee benefit plans
2.2
3.0
Other adjustments, net
3.3
(0.3
Changes in certain operating assets and liabilities:
25.3
30.4
Accounts receivable and other current assets
(42.6
(11.3
Accounts payable and other current liabilities
(56.0
(59.6
Regulatory assets
52.6
54.8
Other operating activities, net
(2.9
Net cash provided by operating activities
227.8
233.4
Investing activities:
Property, plant and equipment additions
(152.9
(176.2
Other investing activities
(2.3
(0.7
Net cash (used in) investing activities
(155.2
(176.9
Financing activities:
Dividends paid on common stock
(48.6
(44.4
Common stock issued
45.6
31.2
Net borrowings (payments) of Revolving Credit Facility and CP Program
(73.9
Distributions to non-controlling interests
(3.8
(5.6
Other financing activities
(1.2
(1.0
Net cash (used in) financing activities
(81.9
(19.8
Net change in cash, restricted cash and cash equivalents
(9.3
36.7
Cash, restricted cash, and cash equivalents beginning of period
23.4
93.0
Cash, restricted cash, and cash equivalents end of period
14.1
129.7
Supplemental cash flow information:
Cash (paid) received during the period:
Interest (net of amounts capitalized)
(48.8
(33.6
Income taxes, net of transferred tax credits (Note 11)
15.2
Non-cash investing and financing activities:
Accrued property, plant, and equipment purchases at March 31,
86.8
37.7
CONSOLIDATED STATEMENTS OF EQUITY
Common Stock
Treasury Stock
Shares
Value
Additional Paid in Capital
Retained Earnings
Non-controlling Interest
Total
(in millions except share amounts)
71,676,756
56,608
2.1
Dividends on common stock ($0.676 per share)
Share-based compensation
103,995
(22,488
1.3
Issuance of common stock
763,481
0.7
45.4
46.1
Issuance costs
(0.5
Distributions to non-controlling interest
72,544,232
34,120
December 31, 2023
68,265,042
68,073
(4.1
2,007.7
1,158.2
(14.8
90.5
3,305.8
3.7
Dividends on common stock ($0.65 per share)
104,181
14,270
(0.6
1.9
1.4
600,355
30.9
31.5
March 31, 2024
68,969,578
69.0
82,343
(4.7
2,040.2
1,241.7
(12.3
88.6
3,422.5
(Reference is made to Notes to Consolidated Financial Statements
included in the Company’s 2024 Annual Report on Form 10-K)
The unaudited Consolidated Financial Statements included herein have been prepared by Black Hills Corporation (together with our subsidiaries the “Company”, “us”, “we”, or “our”), pursuant to the rules and regulations of the SEC. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such rules and regulations; however, we believe that the footnotes adequately disclose the information presented. These Consolidated Financial Statements should be read in conjunction with the consolidated financial statements and the notes included in our 2024 Annual Report on Form 10-K.
Use of Estimates and Basis of Presentation
The information furnished in the accompanying Consolidated Financial Statements reflects certain estimates required and all adjustments, including accruals, which are, in the opinion of management, necessary for a fair presentation of the March 31, 2025, December 31, 2024, and March 31, 2024, financial information. Certain lines of business in which we operate are highly seasonal and our interim results of operations are not necessarily indicative of the results of operations to be expected for an entire year.
Recently Issued Accounting Standards
Improvements to Income Tax Disclosures, ASU 2023-09
In December 2023, the FASB issued ASU 2023-09, Improvements to Income Tax Disclosures, which expands public entities’ annual disclosures by requiring disclosure of tax rate reconciliation amounts and percentages for specific categories, income taxes paid disaggregated by federal and state taxes, and income tax expense disaggregated by federal and state taxes jurisdiction. The ASU is effective for our Annual Report on Form 10-K for the fiscal year ended December 31, 2025, with early adoption permitted. We are currently evaluating the impact of ASU 2023-09 on our consolidated financial statement disclosures.
Disaggregation of Income Statement Expenses, ASU 2024-03
In November 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures, and in January 2025, the FASB issued ASU 2025-01, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures: Clarifying the Effective Date. ASU 2024-03 requires public entities to disclose, in the notes to financial statements, certain costs and expenses, such as purchases of inventory, employee compensation, and costs related to depreciation and amortization. ASU 2024-03, as clarified by ASU 2025-01, is effective for our Annual Report on Form 10-K for the fiscal year ended December 31, 2027, and subsequent interim periods, with early adoption permitted. We are currently evaluating the impact of these standards on our consolidated financial statement disclosures.
We had the following regulatory assets and liabilities:
72.1
109.5
Deferred energy and fuel cost adjustments
69.6
62.8
Deferred gas cost adjustments
3.1
14.5
Gas price derivatives
2.9
Deferred taxes on AFUDC
8.5
8.0
Employee benefit plans and related deferred taxes
87.8
89.0
Environmental
10.7
Loss on reacquired debt
15.3
15.7
Deferred taxes on flow through accounting
91.8
87.7
Decommissioning costs
Other regulatory assets
20.3
24.5
Total regulatory assets
381.6
427.7
Less current regulatory assets
(129.3
(154.8
Regulatory liabilities
Deferred energy and gas costs
70.5
67.8
Employee benefit plan costs and related deferred taxes
36.1
Cost of removal
200.4
197.0
Excess deferred income taxes
235.5
238.5
Colorado renewable energy (a)
27.0
24.1
Other regulatory liabilities
4.7
4.6
Total regulatory liabilities
574.2
568.7
Less current regulatory liabilities
(99.0
(94.1
Regulatory Activity
On June 14, 2024, Colorado Electric filed a rate review with the CPUC seeking recovery of significant infrastructure investments in its 3,200-mile electric distribution and 600-mile electric transmission systems. On March 17, 2025, Colorado Electric received an order from the CPUC for a general rate increase which is expected to generate approximately $17.0 million of new annual revenue based on a weighted average cost of capital of 6.9% with a capital structure in a range of 47% to 49% equity and 51% to 53% debt, and a return on equity in a range of 9.3% to 9.5%. The new rates were effective March 22, 2025. On April 7, 2025, Colorado Electric filed a request with the CPUC for rehearing, re-argument or reconsideration (RRR). On May 6, 2025, Colorado Electric received a final decision from the CPUC related to its RRR request, increasing new annual revenue to approximately $17.5 million.
On May 1, 2024, Iowa Gas filed a rate review with the IUC seeking recovery of significant infrastructure investments in its 5,000-mile natural gas pipeline system. On December 2, 2024, Iowa Gas received final approval from the IUC for a settlement agreement for a general rate increase. The approved Black-box Settlement is expected to generate $15.0 million of new annual revenue based on a weighted average cost of capital of 7.2%. New rates were enacted on January 1, 2025, which replaced interim rates.
On February 3, 2025, Kansas Gas filed a rate review with the KCC seeking recovery of significant infrastructure investments in its 4,765-mile natural gas pipeline system. The rate review requests $17.2 million in new annual revenue with a capital structure of 50% equity and 50% debt and a return on equity of 10.5%. The request seeks to implement new rates in the second half of 2025.
On May 1, 2025, Nebraska Gas filed a rate review with the NPSC seeking recovery of significant infrastructure investments in its 12,900-mile natural gas pipeline system. The rate review requests $34.9 million in new annual revenue with a capital structure of 51% equity and 49% debt and a return on equity of 10.5%. Nebraska statute allows for implementation of interim rates 90 days after filing a rate review. New rates are expected to be effective in the first quarter of 2026.
There have been no significant changes to commitments, contingencies and guarantees from those previously disclosed in Note 3 of our Notes to the Consolidated Financial Statements in our 2024 Annual Report on Form 10-K except as described below.
Transfers of Renewable Tax Credits
In January 2025, we entered into an agreement with a third party to sell our 2024 generated PTCs. In the agreement, we provided indemnifications associated with the proceeds for PTCs transferred to the third party in the event of an adverse change or interpretation of tax law, including whether the related tax credits meet the qualification requirements. We believe the likelihood of having to make any material cash payments under these indemnifications is remote. See Note 11 for additional information.
The following tables depict the disaggregation of revenue, including intercompany revenue, from contracts with customers by customer type and timing of revenue recognition for each of the reportable segments for the three months ended March 31, 2025, and 2024. Sales tax and other similar taxes are excluded from revenues.
Three Months Ended March 31, 2025
Inter-segment Eliminations
Customer types:
Retail
191.3
499.7
691.0
Transportation
57.7
57.6
Wholesale
7.1
Market - off-system sales
11.3
Transmission
12.1
0.2
12.3
Other revenues
13.8
11.1
21.1
Revenue from contracts with customers
235.6
(3.9
800.4
Alternative revenue and other
1.1
4.8
Total revenues
236.7
572.4
Timing of revenue recognition:
Services transferred at a point in time
8.1
Services transferred over time
227.5
792.3
Three Months Ended March 31, 2024
179.6
437.4
617.0
51.7
51.6
12.7
13.0
14.0
10.9
(4.4
20.5
221.4
500.3
(4.5
717.2
8.4
9.2
222.2
508.7
8.7
212.7
708.5
17
Short-term Debt
Revolving Credit Facility and CP Program
Our Revolving Credit Facility and CP Program, which are classified as Notes payable on the Consolidated Balance Sheets, had the following borrowings, outstanding letters of credit, and available capacity as of:
(dollars in millions)
Amount outstanding
Letters of credit (a)
3.5
Available capacity
686.6
612.7
Weighted average interest rates
4.61
%
4.74
Revolving Credit Facility and CP Program borrowing activity was as follows:
Maximum amount outstanding (based on daily outstanding balances)
157.8
Average amount outstanding (based on daily outstanding balances)
92.3
4.60
Financial Covenants
We were in compliance with all of our Revolving Credit Facility covenants as of March 31, 2025. We are required to maintain a Consolidated Indebtedness to Capitalization Ratio not to exceed 0.65 to 1.00. Subject to applicable cure periods, a violation of this covenant would constitute an event of default that entitles the lenders to terminate their remaining commitments and accelerate all principal and interest outstanding. As of March 31, 2025, our Consolidated Indebtedness to Capitalization Ratio was 0.54 to 1.00.
Wyoming Electric was in compliance with all covenants within its financing agreements as of March 31, 2025. Wyoming Electric is required to maintain a debt to capitalization ratio of no more than 0.60 to 1.00. As of March 31, 2025, Wyoming Electric's debt to capitalization ratio was 0.51 to 1.00.
Equity
At-the-Market Equity Offering Program
ATM activity was as follows:
(in millions, except Average price per share amounts)
Proceeds, (net of issuance costs of $(0.5) and $(0.3), respectively)
45.7
Number of shares issued
Average price per share
60.44
52.51
A reconciliation of share amounts used to compute earnings per share in the accompanying Consolidated Statements of Income was as follows:
Weighted average shares - basic
Dilutive effect of equity compensation
Weighted average shares - diluted
Net income available for common stock, per share - Diluted
The following securities were excluded from the diluted earnings per share computation because of their anti-dilutive nature:
(in millions of shares)
Equity compensation
Restricted stock
Anti-dilutive shares excluded from computation of earnings per share
Market and Credit Risk Disclosures
Our activities in the energy industry expose us to a number of risks in the normal operations of our businesses. Depending on the activity, we are exposed to varying degrees of market risk and credit risk.
Market Risk
Market risk is the potential loss that may occur as a result of an adverse change in market price, rate or supply. We are exposed but not limited to, the following market risks:
Credit Risk
Credit risk is the risk of financial loss resulting from non-performance of contractual obligations by a counterparty.
We attempt to mitigate our credit exposure by conducting business primarily with high credit quality entities, setting tenor and credit limits commensurate with counterparty financial strength, obtaining master netting agreements, and mitigating credit exposure with less creditworthy counterparties through parental guarantees, cash collateral requirements, letters of credit, and other security agreements.
We perform periodic credit evaluations of our customers and adjust credit limits based upon payment history and the customers’ current creditworthiness, as determined by review of their current credit information. We maintain a provision for estimated credit losses based upon historical experience, changes in current market conditions, expected losses, and any specific customer collection issue that is identified.
Derivatives and Hedging Activity
Our derivative and hedging activities included in the accompanying Consolidated Balance Sheets, Consolidated Statements of Income, and Consolidated Statements of Comprehensive Income are detailed below and in Note 8.
The operations of our Utilities, including natural gas sold by our Gas Utilities and natural gas used by our Electric Utilities’ generation plants or those plants under PPAs where our Electric Utilities must provide the generation fuel (tolling agreements), expose our utility customers to natural gas price volatility. Therefore, as allowed or required by state utility commissions, we have entered into commission approved hedging programs utilizing natural gas futures, options, over-the-counter swaps, and basis swaps to reduce our customers’ underlying exposure to these fluctuations. These transactions are considered derivatives, and in accordance with accounting standards for derivatives and hedging, mark-to-market adjustments are recorded as Derivative assets or Derivative liabilities on the accompanying Consolidated Balance Sheets, net of balance sheet offsetting as permitted by GAAP.
For our regulated Utilities’ hedging plans, unrealized and realized gains and losses, as well as option premiums and commissions on these transactions, are recorded as Regulatory assets or Regulatory liabilities in the accompanying Consolidated Balance Sheets in accordance with the state regulatory commission guidelines. When the related costs are recovered through our rates, the hedging activity is recognized in the Consolidated Statements of Income.
Through Black Hills Energy Services, our non-regulated natural gas commodity supplier, we buy, sell, and deliver natural gas in Nebraska and Wyoming at competitive prices by managing commodity price risk. As a result of these activities, this area of our business is exposed to risks associated with changes in the market price of natural gas. We manage our exposure to such risks using over-the-counter and exchange traded options and swaps with counterparties in anticipation of forecasted purchases and sales during time frames ranging from April 2025 through December 2027. A portion of our over-the-counter swaps have been designated as cash flow hedges to mitigate the commodity price risk associated with deliveries under fixed price forward contracts to deliver gas to our Choice Gas Program customers. The gain or loss on these designated derivatives is reported in AOCI in the accompanying Consolidated Balance Sheets and reclassified into earnings in the same period that the underlying hedged item is recognized in earnings. Effectiveness of our hedging position is evaluated at least quarterly.
The contract or notional amounts and terms of the electric and natural gas derivative commodity instruments held at our Utilities are composed of both long and short positions. We had the following net long and (short) positions as of:
Notional Amounts (MMBtus)
Maximum Term (months) (a)
Natural gas futures purchased
660,000
Natural gas options purchased, net
2,780,000
Natural gas basis swaps purchased
1,080,000
Natural gas over-the-counter swaps, net (b)
2,350,000
3,480,000
20
Natural gas physical contracts, net (c)
(968,990
20,276,230
We have certain derivative contracts which contain credit provisions. These credit provisions may require the Company to post collateral when credit exposure to the Company is in excess of a negotiated line of unsecured credit. At March 31, 2025, the Company posted $0.1 million related to such provisions, which is included in Other current assets on the Consolidated Balance Sheets.
Derivatives by Balance Sheet Classification
The following table presents the fair value and balance sheet classification of our derivative instruments as of:
Balance Sheet Location
March 31,2025
December 31,2024
Derivatives designated as hedges:
Liability derivative instruments:
Current commodity derivatives
Total derivatives designated as hedges
Derivatives not designated as hedges:
Asset derivative instruments:
Noncurrent commodity derivatives
(3.5
Total derivatives not designated as hedges
Derivatives Designated as Hedge Instruments
The impact of cash flow hedges on our Consolidated Statements of Comprehensive Income and Consolidated Statements of Income are presented below for the three months ended March 31, 2025, and 2024. Note that this presentation does not reflect the gains or losses arising from the underlying physical transactions; therefore, it is not indicative of the economic profit or loss we realized when the underlying physical and financial transactions were settled.
Derivatives in Cash Flow Hedging Relationships
Amount of Gain/(Loss) Recognized in OCI
Income Statement Location
Amount of Gain/(Loss) Reclassified from AOCI into Income
Interest rate swaps
Interest expense
Commodity derivatives
0.5
Fuel, purchased power, and cost of natural gas sold
(0.4
(2.6
As of March 31, 2025, $2.7 million of net losses related to our interest rate swaps and commodity derivatives are expected to be reclassified from AOCI into earnings within the next 12 months. As market prices fluctuate, estimated and actual realized gains or losses will change during future periods.
Derivatives Not Designated as Hedge Instruments
The following table summarizes the impacts of derivative instruments not designated as hedge instruments on our Consolidated Statements of Income for the three months ended March 31, 2025, and 2024. Note that this presentation does not reflect the expected gains or losses arising from the underlying physical transactions; therefore, it is not indicative of the economic profit or loss we realized when the underlying physical and financial transactions were settled.
Derivatives Not Designated as Hedging Instruments
Location of Gain/(Loss) on Derivatives Recognized in Income
Amount of Gain/(Loss) on Derivatives Recognized in Income
21
As discussed above, financial instruments used in our regulated Gas Utilities are not designated as cash flow hedges. However, there is no earnings impact because the unrealized gains and losses arising from the use of these financial instruments are recorded as Regulatory assets or Regulatory liabilities. There were no net unrealized gains or losses included in our Regulatory liability or asset accounts related to these financial instruments as of March 31, 2025. The net unrealized losses included in our Regulatory asset accounts related to these financial instruments were $2.9 million as of December 31, 2024.
We use the following fair value hierarchy for determining inputs for our financial instruments. Our assets and liabilities for financial instruments are classified and disclosed in one of the following fair value categories:
Level 1 — Unadjusted quoted prices available in active markets that are accessible at the measurement date for identical unrestricted assets or liabilities. Level 1 instruments primarily consist of highly liquid and actively traded financial instruments with quoted pricing information on an ongoing basis.
Level 2 — Pricing inputs include quoted prices for identical or similar assets and liabilities in active markets other than quoted prices in Level 1, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability, and inputs that are derived principally from, or corroborated by, observable market data by correlation or other means.
Level 3 — Pricing inputs are generally less observable from objective sources. These inputs reflect management’s best estimate of fair value using its own assumptions about the assumptions a market participant would use in pricing the asset or liability.
Assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. Our assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the placement within the fair value hierarchy levels. We record transfers, if necessary, between levels at the end of the reporting period for all of our financial instruments.
Transfers into Level 3, if any, occur when significant inputs used to value the derivative instruments become less observable, such as a significant decrease in the frequency and volume in which the instrument is traded, negatively impacting the availability of observable pricing inputs. Transfers out of Level 3, if any, occur when the significant inputs become more observable, such as when the time between the valuation date and the delivery date of a transaction becomes shorter, positively impacting the availability of observable pricing inputs.
Recurring Fair Value Measurements
Derivatives
The commodity contracts for our Utilities segments are valued using the market approach and include forward strip pricing at liquid delivery points, exchange-traded futures, options, basis swaps, and over-the-counter swaps and options (Level 2) for wholesale electric energy and natural gas contracts. For exchange-traded futures, options, and basis swap assets and liabilities, fair value was derived using broker quotes validated by the exchange settlement pricing for the applicable contract. For over-the-counter instruments, the fair value is obtained by utilizing a nationally recognized service that obtains observable inputs to compute the fair value, which we validate by comparing our valuation with the counterparty. The fair value of these swaps includes a credit valuation adjustment based on the credit spreads of the counterparties when we are in an unrealized gain position or on our own credit spread when we are in an unrealized loss position. For additional information, see Note 1 of our Notes to the Consolidated Financial Statements in our 2024 Annual Report on Form 10-K.
The following tables set forth, by level within the fair value hierarchy, our gross assets and gross liabilities and related offsetting as permitted by GAAP that were accounted for at fair value on a recurring basis for derivative instruments.
As of March 31, 2025
Level 1
Level 2
Level 3
Cash Collateral and Counterparty Netting (a)
Assets:
Commodity derivatives - Gas Utilities
As of December 31, 2024
(2.2
Liabilities:
Pension and Postretirement Plan Assets
Fair value measurements also apply to the valuation of our pension and postretirement plan assets. Current accounting guidance requires employers to annually disclose information about the fair value measurements of their assets of a defined benefit pension or other postretirement plan. The fair value of these assets is presented in Note 13 to the Consolidated Financial Statements included in our 2024 Annual Report on Form 10-K.
Other Fair Value Measures
The carrying amount of cash and cash equivalents, restricted cash and equivalents, and short-term borrowings approximates fair value due to their liquid or short-term nature. Cash, cash equivalents, and restricted cash are classified in Level 1 in the fair value hierarchy. Notes payable consist of commercial paper borrowings and are not traded on an exchange; therefore, they are classified as Level 2 in the fair value hierarchy.
The following table presents the carrying amounts and fair values of financial instruments not recorded at fair value on the Consolidated Balance Sheets as of:
Carrying Amount
Fair Value
Long-term debt, including current maturities (a)
4,251.6
4,097.8
4,059.1
23
We record deferred gains (losses) in AOCI related to interest rate swaps designated as cash flow hedges, commodity contracts designated as cash flow hedges, and the amortization of components of our defined benefit plans. Deferred gains (losses) for our commodity contracts designated as cash flow hedges are recognized in earnings upon settlement, while deferred gains (losses) related to our interest rate swaps are recognized in earnings as they are amortized.
The following table details reclassifications out of AOCI and into Net income. The amounts in parentheses below indicate decreases to Net income in the Consolidated Statements of Income for the period, net of tax:
Amount Reclassified from AOCI
Location on the Consolidated Statements of Income
Gains and (losses) on cash flow hedges:
Commodity contracts
Income tax
Income tax expense
Total reclassification adjustments related to cash flow hedges, net of tax
(0.9
Total reclassifications
Balances by classification included within AOCI, net of tax on the accompanying Consolidated Balance Sheets were as follows:
Derivatives Designated as Cash Flow Hedges
Interest Rate Swaps
Commodity Derivatives
Employee Benefit Plans
(5.3
Other comprehensive income (loss) before reclassifications
Amounts reclassified from AOCI
0.9
(3.2
As of December 31, 2023
(6.1
(2.5
(6.2
As of March 31, 2024
(5.5
Components of Net Periodic Expense
The components of net periodic expense were as follows:
Defined Benefit Pension Plan
Supplemental Non-qualified Defined Benefit Plans
Non-pension Defined Benefit Postretirement Healthcare Plan
Service cost
Interest cost
4.0
4.1
Expected return on plan assets
(4.2
Net amortization of prior service costs
Recognized net actuarial loss
Net periodic expense (benefit)
Plan Contributions
Contributions made in the first three months of 2025 and anticipated contributions for 2025 are as follows:
Contributions Made
Additional Contributions
Anticipated for 2025
1.8
1.2
Supplemental Non-qualified Defined Benefit and Defined Contribution Plans
Transfers of Production Tax Credits
In August 2022, President Biden signed H.R. 5376 into law, commonly known as the IRA of 2022, or IRA. The IRA contains a tax credit transferability provision that allows us to transfer (e.g. sell) PTCs produced after December 31, 2022, to third parties. In January 2025, under this transferability provision, we entered into an agreement with a third party to sell $17.0 million of our 2024 generated PTCs.
We expect to continue to explore the ability to efficiently monetize our tax credits through third party transferability agreements.
Income Tax (Expense) and Effective Tax Rates
Three Months Ended March 31, 2025, Compared to the Three Months Ended March 31, 2024
Income tax (expense) for the three months ended March 31, 2025, was $(18.1) million compared to $(16.9) million reported for the same period in 2024. For the three months ended March 31, 2025, the effective tax rate was 11.7%, which was comparable to 11.4% for the same period in 2024.
We are a holding company that, through our subsidiaries, conducts our operations through the following reportable segments: Electric Utilities and Gas Utilities. Certain unallocated corporate expenses that support our reportable segments are presented as Corporate and Other.
Our operating segments, which are equivalent to our reportable segments, are based on our method of internal reporting, which is generally segregated by differences in products and services. All of our operations and assets are located within the United States.
Our Electric Utilities segment includes the operating results of the regulated electric utility operations of Colorado Electric, South Dakota Electric, and Wyoming Electric, which supply regulated electric utility services to areas in Colorado, Montana, South Dakota, and Wyoming. We also own and operate non-regulated power generation and mining businesses that are vertically integrated with our Electric Utilities.
Our Gas Utilities segment consists of the operating results of our regulated natural gas utility subsidiaries in Arkansas, Colorado, Iowa, Kansas, Nebraska, and Wyoming.
Corporate and Other consists of certain unallocated expenses for administrative activities that support our operating segments. Corporate and Other also includes business development activities that are not part of our operating segments and inter-segment eliminations.
Our Chief Executive Officer, who is considered to be our CODM, reviews financial information presented on an operating segment basis for purposes of making decisions, allocating resources, and assessing financial performance. Our CODM assesses the performance of our operating segments and decides how to allocate resources based on operating income. Our CODM reviews capital expenditures by operating segment rather than any individual or total asset amount.
Segment information was as follows:
Consolidating Income Statement
Revenue -
External Customers
234.3
570.9
Inter-segment
1.5
Total revenue
67.2
292.6
Operations and maintenance (a) -
Direct
35.7
44.1
(3.0
76.8
Allocated
33.1
43.8
76.9
37.1
32.1
9.3
8.3
Operating income (loss)
54.3
151.5
Interest expense, net
(51.3
219.3
507.1
1.6
261.9
27.5
38.1
63.1
30.0
40.5
35.3
10.0
7.0
64.6
130.8
(44.0
Capital Expenditures (a) for the three months ended March 31,
102.1
86.9
59.0
85.0
Total capital expenditures
162.4
174.3
27
Accounts Receivable and Allowance for Credit Losses
Following is a summary of Accounts receivable, net included in the accompanying Consolidated Balance Sheets as of:
Billed Accounts Receivable
263.6
201.5
Unbilled Revenue
119.2
151.8
Less: Allowance for Credit Losses
(4.9
Account Receivable, net
Changes to allowance for credit losses for the three months ended March 31, 2025 and 2024, respectively, were as follows:
Balance at Beginning of Year
Additions Charged to Costs and Expenses
Recoveries and Other Additions
Write-offs and Other Deductions
Balance at March 31,
3.4
(1.5
4.9
(1.4
3.9
Materials, Supplies and Fuel
The following amounts by major classification are included in Materials, supplies, and fuel on the accompanying Consolidated Balance Sheets as of:
Materials and supplies
108.9
106.1
Fuel - Electric Utilities
6.7
Natural gas in storage
12.5
40.3
Total materials, supplies, and fuel
Accrued Liabilities
The following amounts by major classification are included in Accrued liabilities on the accompanying Consolidated Balance Sheets as of:
Accrued employee compensation, benefits, and withholdings
58.6
85.5
Accrued property taxes
57.0
54.7
Customer deposits and prepayments
41.0
55.6
Accrued interest
55.7
56.4
Other (none of which is individually significant)
40.9
50.0
Total accrued liabilities
(14) Subsequent Events
Except as described in Note 2, there have been no events subsequent to March 31, 2025, which would require recognition in the Consolidated Financial Statements or disclosures.
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussions should be read in conjunction with the Notes contained herein and Management's Discussion and Analysis of Financial Condition and Results of Operations appearing in our 2024 Annual Report on Form 10-K
We are a customer-focused energy solutions provider with a mission of Improving Life with Energy for more than 1.35 million customers and 800+ communities we serve. Our aspiration is to be the trusted energy partner across our growing eight-state footprint, including Arkansas, Colorado, Iowa, Kansas, Montana, Nebraska, South Dakota, and Wyoming. Our strategy is centered on four priorities: People & Culture—build a team that wins together, Operational Excellence—relentlessly deliver on our commitment to serve our customers, Transformation—be a simple and connected company and Growth—grow to be a dominant long-term energy provider.
We conduct our business operations through two operating segments: Electric Utilities and Gas Utilities. Certain unallocated corporate expenses that support our operating segments are presented as Corporate and Other. We conduct our utility operations under the name Black Hills Energy predominantly in rural areas of the Rocky Mountains and Midwestern states. We consider ourself a domestic electric and natural gas utility company.
We have provided energy and served customers for 141 years, since the 1883 gold rush days in Deadwood, South Dakota. Throughout our history, the common thread that unites the past to the present is our commitment to serve our customers and communities. By being responsive and service focused, we can help our customers and communities thrive while meeting rapidly changing customer expectations.
Business Segment Recent Developments
Certain lines of business in which we operate are highly seasonal, and revenue from, and certain expenses for, such operations may fluctuate significantly among 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 months ended March 31, 2025, and 2024, and our financial condition as of March 31, 2025, and December 31, 2024, are not necessarily indicative of the results of operations and financial condition to be expected as of or for any other period or for the entire year.
All amounts are presented on a pre-tax basis unless otherwise indicated. Minor differences in amounts may result due to rounding.
2025 vs 2024 Variance
Operating income (loss):
(10.3
20.7
Corporate and Other (a)
11.7
(7.3
6.4
Weighted average common shares outstanding, Diluted
Total earnings per share of common stock, Diluted
0.00
Three Months Ended March 31, 2025, Compared to the Three Months Ended March 31, 2024:
The variance to the prior year included the following:
Segment Operating Results
A discussion of operating results from our business segments follows. Unless otherwise indicated, segment information does not include inter-segment eliminations.
Non-GAAP Financial Measures
The following discussion includes financial information prepared in accordance with GAAP and a “non-GAAP financial measure", Electric and Gas Utility margin. Generally, a non-GAAP financial measure is a numerical measure of a company’s financial performance, financial position or cash flows that excludes (or includes) amounts that are included in (or excluded from) the most directly comparable measure calculated and presented in accordance with GAAP. We define Electric and Gas Utility margin as operating revenue less cost of fuel, purchased power and cost of natural gas sold. Electric and Gas Utility margin is a non-GAAP financial measure due to the exclusion of operation and maintenance expenses determined to be directly attributable to revenue-producing activities, depreciation and amortization expenses, and taxes other than income taxes from the measure.
We believe that Gas and Electric Utility margin provides a useful basis for evaluating our segment operating results since our Utilities have regulatory mechanisms that allow them to pass prudently incurred costs of energy through to the customer in current rates. As a result, management uses Gas and Electric Utility margin internally when assessing the financial performance of our operating segments as this measure excludes the majority of revenue fluctuations caused by changes in these costs of energy. Similarly, the presentation of Gas and Electric Utility margin is intended to supplement investors’ understanding of operating performance.
Our Electric and Gas Utility margin measure may not be comparable to other companies’ Electric and Gas Utility margin measures. The following table includes a reconciliation of Electric and Gas Utility margin to Gross margin, the most directly comparable GAAP measure:
(67.2
(54.8
(292.6
(261.9
Operations and maintenance (a)
(41.9
(36.0
(46.2
(42.8
(37.1
(35.3
(32.1
(30.4
(10.0
(8.3
(7.0
Gross margin (GAAP)
81.2
86.1
193.2
166.6
41.9
36.0
46.2
42.8
Electric and Gas Utility margin (non-GAAP)
169.5
167.4
279.8
246.8
Operating results for the Electric Utilities were as follows:
Fuel and purchased power
12.4
Electric Utility margin (non-GAAP) (a)
68.8
57.5
115.2
102.8
Electric Utility margin increased as a result of the following:
Retail customer growth and usage
New rates and rider recovery
Weather
Unplanned generation outages
(1.1
Off-system excess energy sales
Other
Operations and maintenance expense increased primarily due to $2.8 million of expenses related to unplanned generation outages, $2.8 million of higher outside services expenses; $1.9 million of higher employee-related expenses and $1.3 million of higher insurance expense.
Depreciation and amortization was comparable to the same period in the prior year.
Taxes other than income taxes was comparable to the same period in the prior year.
Operating Statistics
Quantities Sold
(in GWh)
Retail Revenue -
Residential
66.4
62.5
406.4
388.8
Commercial
517.2
511.8
Industrial
48.2
43.5
609.8
553.6
Municipal
4.5
4.3
34.6
34.2
Other Retail
Subtotal Retail Revenue - Electric
179.7
1,568.0
1,488.4
147.8
176.0
173.6
115.6
12.6
Other (a)
14.9
14.8
Total Revenue and Quantities Sold
1,889.4
1,780.0
Other Uses, Losses, or Generation, net (b)
101.8
Total Energy
1,983.5
1,881.8
72.4
69.7
532.3
555.7
80.6
682.0
621.1
66.6
60.8
645.8
575.2
10.8
29.3
28.0
Quantities Generated and Purchased by Fuel Type
Generated:
Coal (a)
599.9
680.7
Natural Gas and Oil
512.1
523.4
Wind
175.4
174.0
Total Generated
1,287.4
1,378.1
Purchased:
Coal, Natural Gas, Oil, and Other Market Purchases (a)
375.7
288.9
Wind and Solar (b)
320.4
214.8
Total Purchased
696.1
503.7
Total Generated and Purchased
33
Quantities Generated and Purchased
184.3
161.6
South Dakota Electric (a)
478.9
534.6
215.2
404.9
466.7
90.2
211.3
100.6
Wyoming Electric (b)
376.1
295.7
18.5
17.2
Heating Degree Days
Actual
Variance from Normal
2,733
9%
2,507
(6)%
3,438
5%
3,134
(9)%
3,140
2,986
(5)%
Combined (a)
3,060
7%
2,820
(7)%
Contracted generating facilities Availability(a) by fuel type
Coal (b)
86.3%
95.6%
Natural gas and diesel oil (b)
91.6%
96.7%
Wind (b)
90.3%
Total Availability
89.3%
95.5%
Wind Capacity Factor (a)
40.0%
39.8%
34
Operating results for the Gas Utilities were as follows:
63.7
Cost of natural gas sold
30.7
Gas Utility margin (non-GAAP) (a)
33.0
87.9
78.6
1.7
128.3
116.0
Gas Utility margin increased as a result of the following:
21.5
Transport and transmission
Mark-to-market on non-utility natural gas commodity contracts
Operations and maintenance expense increased primarily due to $4.1 million of higher employee related expenses, $1.8 million of higher insurance expense, and $1.4 million of higher bad debt expense driven by increased revenues.
Quantities Sold and Transported
(Dth in millions)
344.1
297.8
27.8
118.5
5.1
Other Retail (a)
14.7
16.0
Subtotal Retail Revenue - Gas
41.7
50.4
46.7
Other (b)
15.0
19.6
96.1
88.4
124.8
110.7
13.2
12.0
115.8
117.7
12.9
61.8
13.5
66.1
50.3
9.7
130.2
114.3
29.6
27.1
48.7
53.9
Arkansas Gas (a)
1,957
2%
1,772
(12)%
2,837
2,743
(3)%
3,288
(1)%
2,898
(16)%
Kansas Gas (a)
2,616
10%
2,291
3,039
2,802
3,323
3%
3,156
Combined (b)
3,082
1%
2,865
(8)%
Corporate and Other operating results, including inter-segment eliminations, were as follows:
Operating loss was comparable to the same period in the prior year.
Interest expense, net increased primarily due to higher interest rates and lower interest income on lower cash and cash equivalents balances.
Other income (expense), net was comparable to the same period in the prior year.
Income tax (expense) was comparable to the same period in the prior year. For the three months ended March 31, 2025, the effective tax rate was 11.7%, which was comparable to 11.4% for the same period in 2024.
The following table provides an informational summary of our liquidity and capital structure as of:
Available capacity under Revolving Credit Facility and CP Program (a)
Available liquidity
693.2
628.8
Capital structure
Short-term debt
359.9
Long-term debt
Total debt
4,311.5
4,384.0
Total stockholders' equity (excludes non-controlling interest)
Total capitalization
7,946.6
7,885.5
Debt to capitalization
Long-term debt to total debt
91.7
96.9
Future Financing Plans
We plan to fund our capital plan and strategic objectives by using cash generated from operating activities and various financing alternatives, which could include our Revolving Credit Facility, our CP Program, and the issuance of common stock under our ATM program or in an opportunistic block trade. In 2025, we plan to renew our Equity Distribution Sales Agreement, which allows us to sell shares of common stock, from time to time, through our ATM program utilizing our shelf registration statement. We also plan to re-finance our $300 million, 3.95%, senior unsecured notes due January 2026, at or before maturity date.
CASH FLOW ACTIVITIES
The following tables summarize our cash flows for the three months ended March 31, 2025:
Operating Activities:
Non-cash adjustments to Net income
112.9
90.4
22.5
Total earnings
249.3
222.0
27.3
Materials, supplies and fuel, Accounts receivable and other current assets
(17.3
19.1
(36.4
3.6
Net inflow (outflow) from changes in certain operating assets and liabilities
(20.7
14.3
(35.0
Other operating activities
Net cash provided by operating activities was $5.6 million lower than the same period in 2024. The variance to the prior year was primarily attributable to:
Investing Activities:
Capital expenditures
23.3
(1.6
21.7
Net cash used in investing activities was $21.7 million lower than the same period in 2024. The variance to the prior year was primarily attributable to lower capital expenditures which were primarily driven by timing of projects and the prior year Black Hills Energy Renewable Resources' acquisition of a RNG production facility at a landfill in Dubuque, Iowa.
Financing Activities:
14.4
Short-term and long-term debt borrowings (repayments), net
(0.2
(62.1
Net cash used in financing activities was $62.1 million higher than the same period in 2024. The variance to the prior year was primarily attributable to:
CAPITAL RESOURCES
See Note 5 of the Condensed Notes to Consolidated Financial Statements for recent financing updates and financial covenants information.
CREDIT RATINGS
The following table represents the credit ratings and outlook and risk profile of BHC as of the date of this report:
Rating Agency
Senior Unsecured Rating
Outlook
S&P (a)
BBB+
Stable
Moody's (b)
Baa2
The following table represents the credit rating of South Dakota Electric as of the date of this report:
Senior Secured Rating
A
We have not had any triggering events (i.e. an acceleration of repayment of outstanding indebtedness, an increase in interest costs, or the posting of additional cash collateral) tied to our stock price and have not executed any transactions that require us to issue equity based on our credit ratings.
CAPITAL REQUIREMENTS
Capital Expenditures
Actual (a)
Forecasted (b)
Capital Expenditures by Segment(minor differences may result due to rounding)
2025 (c)
2026
2027
2028
2029
102
550
432
383
615
435
59
431
386
412
447
1
162
1,002
859
822
1,089
909
Common Stock Dividends
Dividends paid on our common stock totaled $48.6 million for the three months ended March 31, 2025, or $0.676 per share. On April 22, 2025, our board of directors declared a quarterly dividend of $0.676 per share payable June 1, 2025, equivalent to an annual dividend of $2.704 per share. The amount of any future cash dividends to be declared and paid, if any, will depend upon, among other things, our financial condition, funds from operations, the level of our capital expenditures, restrictions under our Revolving Credit Facility, and our future business prospects.
A summary of our critical accounting estimates is included in our 2024 Annual Report on Form 10-K. There were no material changes made as of March 31, 2025.
See Note 1 of the Condensed Notes to Consolidated Financial Statements for a description of recent accounting pronouncements, if any, and our expectation of their impact on our results of operations and financial condition.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There have been no material changes to our quantitative and qualitative disclosures about market risk previously disclosed in Item 7A of our 2024 Annual Report on Form 10-K.
ITEM 4. CONTROLS AND PROCEDURES
Our Chief Executive Officer and Chief Financial Officer evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of March 31, 2025. Based on their evaluation, they have concluded that our disclosure controls and procedures were effective at March 31, 2025.
Our disclosure controls and procedures are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
Changes in Internal Control over Financial Reporting
During the quarter ended March 31, 2025, there have been no changes in our internal controls over financial reporting that have materially affected, or are reasonably likely, to materially affect our internal control over financial reporting.
ITEM 1. LEGAL PROCEEDINGS
For information regarding legal proceedings, see Note 3 in Item 8 of our 2024 Annual Report on Form 10-K.
ITEM 1A. RISK FACTORS
There are no material changes to the risk factors previously disclosed in Item 1A of Part I in our 2024 Annual Report on Form 10-K.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
The following table contains monthly information about our acquisitions of equity securities for the three months ended March 31, 2025:
Period
Total Number of Shares Purchased (a)
Average Price Paid per Share
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs
Maximum Number (or Approximate Dollar Value) of Shares That May Yet Be Purchased Under the Plans or Programs
January 1, 2025 - January 31, 2025
58.56
February 1, 2025 - February 28, 2025
19,925
59.61
March 1, 2025 - March 31, 2025
61.16
19,927
ITEM 4. MINE SAFETY DISCLOSURES
Information concerning mine safety violations or other regulatory matters required by Sections 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act is included in Exhibit 95.
ITEM 5. OTHER INFORMATION
None of our directors or officers adopted, modified, or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement during the three months ended March 31, 2025.
ITEM 6. EXHIBITS
Exhibits filed herewithin are designated by an asterisk (*). All exhibits not so designated are incorporated by reference to a prior filing, as indicated.
Exhibit Number
Description
31.1*
Certification of Chief Executive Officer pursuant to Rule 13a - 14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes - Oxley Act of 2002.
31.2*
Certification of Chief Financial Officer pursuant to Rule 13a - 14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes - Oxley Act of 2002.
32.1*
Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes - Oxley Act of 2002.
32.2*
Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes - Oxley Act of 2002.
95*
Mine Safety and Health Administration Safety Data.
101.INS*
Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
101.SCH*
Inline XBRL Taxonomy Extension Schema with Embedded Linkbase Documents
104*
Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
/s/ Linden R. Evans
Linden R. Evans, President and
/s/ Kimberly F. Nooney
Kimberly F. Nooney, Senior Vice President and
Chief Financial Officer
Dated:
May 8, 2025