8-K: Black Hills Corp. Exceeds Earnings Guidance, Increases Capital Forecast and Dividend

Black Hills Corp. reported full-year 2023 earnings per share of $3.91, exceeding their guidance, and announced an increased five-year capital plan and a higher quarterly dividend.

Summary

• Black Hills Corp. announced its fourth-quarter and full-year 2023 financial results, with earnings per share (EPS) for the year reaching $3.91, surpassing the initial guidance range of $3.65 to $3.85.
• The company's improved performance was driven by new rates and customer growth, which contributed $0.63 per share, along with disciplined capital and expense management.
• These positive factors offset the impacts of inflation and $0.28 per share of unfavorable weather and mark-to-market adjustments.
• Black Hills Corp. has increased its quarterly dividend, marking 54 consecutive years of annual dividend increases.
• The company is initiating its 2024 EPS guidance range at $3.80 to $4.00 per share, reflecting a 4% increase from the 2023 guidance.
• The five-year capital forecast has been increased by $800 million to $4.3 billion for the period from 2024 through 2028.
• The company's net income available for common stock was $262.2 million for 2023, compared to $258.4 million in 2022.

Sentiment

Score: 8

Explanation: The document presents a positive outlook with strong financial results, increased guidance, and a commitment to growth and shareholder returns. The company exceeded earnings guidance, increased its dividend, and is investing in renewable energy projects. There are some minor negative points, but the overall tone is optimistic.

Positives

• The company's 2023 earnings per share of $3.91 exceeded the guidance range of $3.65 to $3.85.
• Black Hills Corp. has a strong track record of increasing dividends, with 54 consecutive years of annual increases.
• The company's net debt to capitalization ratio improved to 57.3% from 60.8% year-over-year.
• The company is initiating a higher 2024 EPS guidance range of $3.80 to $4.00.
• The company is expanding its renewable energy portfolio with the acquisition of a renewable natural gas production facility.
• The company is progressing with its strategic growth initiatives, including the Ready Wyoming transmission project and renewable energy projects in South Dakota and Colorado.
• The company has secured new rates and rider recovery, contributing $0.63 per share to 2023 earnings.
• The company has a long history of dividend payouts to shareholders, with 82 consecutive years of payouts.

Negatives

• Unfavorable weather and mark-to-market adjustments negatively impacted 2023 earnings by $0.28 per share.
• Gas Utility margin decreased by $3.0 million for the full year 2023 compared to 2022.
• The company experienced a decrease in revenue for both electric and gas utilities for the three and twelve months ended Dec 31, 2023 compared to the same periods in 2022.
• The company's operating income for gas utilities decreased by $15.4 million for the full year 2023 compared to 2022.
• The company's total quantities of gas sold decreased for both the three and twelve months ended Dec 31, 2023 compared to the same periods in 2022.

Risks

• The company's future performance is subject to the accuracy of assumptions used in their earnings guidance.
• The company's ability to recover costs through regulatory proceedings and favorable rulings is a risk.
• The company faces risks related to completing its capital program in a cost-effective and timely manner.
• The company's performance is subject to the effects of changing interest rates.
• The company's ability to achieve its greenhouse gas emissions intensity reduction goals is a risk.
• The company is subject to the impact of future governmental regulation.
• The company faces risks related to supply chain disruptions on the availability and cost of materials.
• The company is subject to the effects of inflation and volatile energy prices.

Future Outlook

Black Hills Corp. is initiating its 2024 earnings guidance range at $3.80 to $4.00 per share and remains confident in achieving its 4% to 6% long-term earnings per share growth target. The company is also increasing its five-year capital plan to $4.3 billion.

Management Comments

• Linn Evans, president and CEO of Black Hills Corp., stated that the team delivered on financial objectives during an inflationary macroeconomic environment.
• Evans also mentioned that the company achieved its financial targets, advanced key strategic initiatives, executed its capital plan, and delivered excellent operational performance.
• Evans expressed excitement about the progress the team continues to make on strategic growth initiatives.
• Evans concluded that the company remains confident in achieving its 4% to 6% long-term earnings per share growth target.

Industry Context

This announcement reflects a trend in the utility industry towards increased investment in renewable energy and grid modernization. Black Hills Corp.'s focus on expanding its renewable portfolio and upgrading its transmission infrastructure aligns with broader industry goals of transitioning to cleaner energy sources and enhancing grid reliability. The company's successful rate reviews and dividend increases also demonstrate its ability to navigate the regulatory landscape and provide value to shareholders.

Comparison to Industry Standards

• Black Hills Corp.'s 54 consecutive years of dividend increases is a strong performance, placing them second in the electric and natural gas industry for consecutive annual dividend increases, with only one other company having a longer track record.
• The company's debt to capitalization ratio of 57.3% is within the range of other investment grade utility companies, such as Xcel Energy (around 55%) and Duke Energy (around 50-60%).
• The company's planned capital expenditure of $4.3 billion over five years is comparable to other mid-sized utilities, such as Alliant Energy, which has a similar capital expenditure plan.
• The company's focus on renewable energy projects, such as the 400 MW project in Colorado, is in line with industry trends and similar to projects being undertaken by companies like NextEra Energy and Southern Company.
• The company's return on equity (ROE) in the range of 9.30% to 10.5% is within the typical range for regulated utilities, which generally aim for ROEs between 9% and 11%.

Stakeholder Impact

• Shareholders will benefit from the increased dividend and the company's strong financial performance.
• Customers will benefit from the company's investments in infrastructure and renewable energy.
• Employees will benefit from the company's continued growth and success.
• The company's investments in renewable energy will have a positive impact on the environment.

Next Steps

• The company will host a conference call and webcast on February 8, 2024, to discuss financial and operating performance.
• The company plans to file additional rate reviews for Iowa Gas and Colorado Electric in 2024.
• The company will finalize project details to add 100 megawatts of utility-owned renewable wind generation in South Dakota by mid-2026.
• The company anticipates filing a plan to Colorado regulators by mid-year regarding the addition of 400 megawatts of renewable resources by 2029.
• The company's annual meeting of shareholders will be held on April 23, 2024.
• The company plans to mail the Annual Report and Proxy Statement on or about March 15, 2024.

Key Dates

Keywords

Earnings, Utilities, Renewable Energy, Dividends, Capital Expenditure, Rate Review, Transmission, Natural Gas, Electric, Financial Results