10-K: Black Hills Corporation Releases 10-K Filing for Fiscal Year 2024

Black Hills Corporation releases its 10-K filing, detailing financial performance and strategic initiatives for the fiscal year ended December 31, 2024.

Summary

• Black Hills Corporation released its 10-K filing, reporting financial results for the year ended December 31, 2024.
• The company operates through two segments: Electric Utilities and Gas Utilities.
• Electric Utilities serves approximately 225,000 customers with 1,394 MW of generation and 9,196 miles of transmission and distribution lines.
• Gas Utilities serves approximately 1,128,000 customers with 4,648 miles of transmission pipelines and 44,524 miles of distribution lines.
• The company's strategy focuses on people and culture, operational excellence, transformation, and growth.
• Capital expenditures for 2024 totaled $798 million, with plans for approximately $4.7 billion over the next five years.
• The company aims to reduce GHG emissions intensity for Electric Utilities by 40% by 2030 and 70% by 2040, and achieve net zero emissions by 2035 for Gas Utilities.
• The Board of Directors declared a quarterly dividend of $0.676 per share in January 2025, equivalent to an annual dividend of $2.704 per share.
• The company's senior unsecured debt is rated Baa2 (Stable) by Moody's and BBB+ (Stable) by S&P.

Sentiment

Score: 6

Explanation: The document presents a mixed sentiment. While the company demonstrates a commitment to growth, sustainability, and shareholder returns, there are also challenges related to unplanned generation outages, regulatory risks, and potential economic headwinds. The overall outlook is cautiously optimistic.

Positives

• The company is expanding its partnerships with data centers and blockchain customers.
• The company is expanding its transmission capabilities with the Ready Wyoming project.
• The company is proactively integrating alternative and renewable energy into its utility energy supply.
• The company has a track record of annual dividend increases for shareholders.
• The company is exploring value generation with natural gas storage assets and expanding RNG interconnections.
• The company acquired a RNG production facility at a landfill in Dubuque, Iowa.

Negatives

• Electric Utilities operating income decreased $15.8 million primarily due to unfavorable impacts from unplanned generation outages in 2024, lower off-system excess energy sales, higher insurance expense, and one-time benefits in 2023.
• Wygen I and Pueblo Airport Generation #4-5 experienced unplanned generation outages that had a $8.3 million negative impact to Operating income.

Risks

• The company's continued success is dependent on execution of its business plan and growth strategy, including its capital investment program.
• The company may be subject to unfavorable or untimely federal and state regulatory outcomes.
• Costs could significantly increase to achieve or maintain compliance with existing or future environmental laws, regulations or requirements including those associated with climate change.
• Failure to attract and retain an appropriately qualified and engaged workforce could have a negative impact on our operations and long-term business strategy.
• Liability from fires could have a negative impact on our operations or financial performance, and our protocols may not prevent such liability.
• Supply chain challenges could negatively impact our operations.
• Cybersecurity incidents, terrorism, or other malicious acts targeting our key technology systems could disrupt our operations, lead to a loss or misuse of confidential and proprietary information, or cause reputational or other harm.
• Our financial performance depends on the successful operation of electric generating facilities, electric and natural gas transmission and distribution systems, natural gas storage facilities and a coal mine.
• The nature of our business subjects us to climate-related risk, stemming from both physical risk and transition risk of climate change, over varying time horizons.
• Our operations are subject to various conditions that can result in fluctuations in customer usage, including customer growth and general economic conditions in our service territories, weather conditions, and responses to price increases and technological improvements.
• If macroeconomic or other conditions adversely affect operations or require us to make changes to our strategic business plan, we may be forced to record a non-cash goodwill impairment charge.
• A sub-investment grade credit rating could impact our ability to access capital markets.
• We may be unable to obtain financing on reasonable terms needed to refinance debt, fund planned capital expenditures or otherwise execute our operating strategy.
• We may be unable to obtain insurance coverage, and the coverage we currently have may not apply or may be insufficient to cover a significant loss.
• Costs associated with our healthcare plans and other benefits could increase significantly.
• We have a holding company corporate structure with multiple subsidiaries.
• Market performance or changes in key valuation assumptions could require us to make significant unplanned contributions to our pension plan and other retiree benefit plans.
• Our use of derivative financial instruments as hedges against commodity prices and financial market risks could result in material financial losses.

Future Outlook

The company plans to fund its capital plan and strategic objectives by using cash generated from operating activities and various financing alternatives, which could include its Revolving Credit Facility, its CP Program, and the issuance of common stock under its ATM program or in an opportunistic block trade. In 2025, the company plans to renew its Equity Distribution Sales Agreement and assess the renewal of its shelf registration statement. The company also plans to re-finance its $300 million, 3.95%, senior unsecured notes due January 2026, at or before maturity date.

Industry Context

The announcement reflects the ongoing trends in the utility industry, including investments in infrastructure upgrades, renewable energy projects, and compliance with environmental regulations. The company's focus on customer-centric solutions and sustainable operations aligns with the broader industry shift towards cleaner energy and enhanced grid reliability.

Comparison to Industry Standards

• Black Hills Corporation's credit ratings are comparable to those of other investment-grade utilities, such as MDU Resources Group, Inc. (MDU), which also operates in the energy sector.
• The company's dividend payout ratio of 55% to 65% is within the typical range for utilities, which are often favored by investors for their stable dividend income.
• The company's renewable energy goals are in line with industry trends and regulatory mandates, similar to those of PacifiCorp and other utilities in the Western United States.
• The company's capital expenditure plans are significant, reflecting the need for infrastructure modernization and expansion, which is a common theme among utilities like NextEra Energy and Southern Company.

Management Changes

Legal Proceedings

• GT Resources, LLC v. Black Hills Corporation, Case No. 2020CV30751 (U.S. District Court for the City and County of Denver, Colorado): On April 13, 2022, a jury awarded $41 million for claims made by GT Resources, LLC (GTR) against BHC and two of its subsidiaries. On October 19, 2023, the Appellate Court reversed and remanded the case with directions limiting any retrial to the narrow issue of whether there was improper interference with the prospective conveyance of the concession.

Stakeholder Impact

• The company's performance and strategic initiatives impact shareholders through dividend payments and stock value.
• Employees are affected by the company's human capital resources policies, compensation programs, and safety initiatives.
• Customers are impacted by the reliability and cost of energy services, as well as the company's efforts to reduce its carbon footprint.
• Communities are affected by the company's investments in infrastructure and economic development, as well as its commitment to environmental stewardship.

Next Steps

• Colorado Electric plans to file a CPCN for utility-owned resources by mid-2025.
• South Dakota Electric expects to request a CPCN from the WPSC in the first quarter of 2025.
• The Ready Wyoming project is expected to be completed in multiple segments through 2025.
• The company intends to implement a PSPS framework in 2025.
• The company plans to renew its Equity Distribution Sales Agreement and assess the renewal of its shelf registration statement in 2025.
• The company plans to re-finance its $300 million, 3.95%, senior unsecured notes due January 2026, at or before maturity date.

Key Dates

Keywords

Black Hills Corporation, financial results, electric utilities, gas utilities, capital expenditures, GHG emissions, renewable energy, credit rating, regulatory matters, risk factors