8-K: Black Hills Q3 Earnings Beat, Reaffirms 2025 Guidance

Black Hills Corporation reported strong third-quarter adjusted earnings, reaffirmed its 2025 guidance, and advanced key growth initiatives including a major merger and data center expansion.

Summary

• Third quarter 2025 GAAP diluted earnings per share (EPS) was $0.34, compared to $0.35 in the same period of 2024.
• Third quarter 2025 adjusted EPS was $0.45, excluding $0.10 of merger-related costs, compared to $0.35 in the same period of 2024.
• Year-to-date 2025 GAAP diluted EPS was $2.58, compared to $2.52 in the same period of 2024.
• Year-to-date 2025 adjusted EPS was $2.68, excluding $0.11 of merger-related costs, compared to $2.52 in the same period of 2024.
• Reaffirmed 2025 adjusted earnings guidance in the range of $4.00 to $4.20 per share, excluding merger-related costs.
• Completed planned equity and debt financing activities for 2025, including a $450 million debt offering and $220 million in net equity proceeds.
• Filed a settlement agreement for new customer rates at the Nebraska natural gas utility, including $23.9 million of new annual revenue.
• Completing construction of the Ready Wyoming 260-mile transmission expansion project ($350 million) to be in service by year-end 2025.
• Commenced construction of the Lange II 99 MW generation facility in South Dakota ($280 million) to be in service during the second half of 2026.
• Announced a tax-free, all-stock merger with NorthWestern Energy in August 2025 and filed joint applications for regulatory approval in Montana, Nebraska, and South Dakota in October 2025.
• Expanded the data center load pipeline to more than 3 GW from a previously disclosed pipeline of more than 1 GW, with 500 MW by 2029 included in the current plan.

Sentiment

Score: 8

Explanation: The filing presents strong adjusted financial results, reaffirms guidance, and highlights significant progress on strategic growth initiatives like the NorthWestern Energy merger and data center expansion. Positive regulatory outcomes and strong credit ratings further bolster confidence, despite some GAAP EPS decline and increased merger-related costs.

Positives

• Q3 2025 adjusted EPS of $0.45 significantly increased from $0.35 in Q3 2024, benefiting from new rates and rider recovery of $0.21 per share.
• Year-to-date adjusted EPS of $2.68 improved from $2.52 in 2024, driven by new rates and rider recovery of $0.68 per share and favorable weather.
• Reaffirmed 2025 adjusted earnings guidance of $4.00 to $4.20 per share, reflecting a 5% year-over-year growth at the midpoint.
• Successfully completed planned equity issuance of $220 million and debt refinancing activities for 2025, maintaining a strong balance sheet.
• Secured a unanimous settlement agreement for the Nebraska Gas rate review, pending approval, which includes $23.9 million of new annual revenue.
• Kansas Gas received approval for its rate review, providing approximately $10.8 million of new annual revenue.
• The Ready Wyoming 260-mile electric transmission expansion project ($350 million) is on track for completion and in service by year-end 2025.
• Commenced construction of the 99-megawatt Lange II gas-fired generation project ($280 million) in South Dakota, expected in service in 2H 2026.
• Expanded the data center load pipeline to more than 3 GW, with 500 MW by 2029 expected to contribute 10%+ to EPS starting in 2028.
• The company's board approved a quarterly dividend of $0.676 per share, representing 55 consecutive years of increases, the second-longest track record in the industry.
• Maintained solid investment-grade credit ratings (Moody's Baa2 stable outlook, S&P Global Ratings BBB+ stable outlook).
• Recognized by Escalent as 2025 Most Trusted Utility Brand and 2025 Easiest Utilities to do Business With, indicating strong customer perception and operational excellence.

Negatives

• Q3 2025 GAAP diluted EPS decreased to $0.34 from $0.35 in Q3 2024.
• Electric Utilities operating income decreased $2.7 million in Q3 2025 primarily due to milder weather and higher operating expenses.
• Corporate and Other operating loss increased $4.3 million in Q3 2025, primarily due to $8.4 million of NorthWestern merger-related costs.
• Interest expense, net, increased $4.2 million in Q3 2025 due to higher CP Program borrowings and lower interest income.
• Electric Utilities operating income decreased $10.3 million year-to-date 2025 due to higher operating expenses, unplanned generation outages, lower transmission services revenues, and unfavorable weather.
• Interest expense, net, increased $17.7 million year-to-date 2025 due to higher interest rates on long-term debt and higher CP Program borrowings.
• Total availability for contracted generating facilities decreased to 89.9% in Q3 2025 from 95.1% in Q3 2024, impacted by unplanned outages at Wygen III, Pueblo Airport Generation #4-5, and Busch Ranch I and II.
• The Colorado Public Utilities Commission recommended no further action on the 100-megawatt utility-owned solar project, which was part of the approved Clean Energy Plan portfolio.

Risks

• The accuracy of assumptions on which earnings guidance and long-term growth targets are based.
• Ability to obtain adequate cost recovery for utility operations through regulatory proceedings and favorable rulings on periodic applications to recover costs for capital additions, plant retirements, fuel, transmission, purchased power, and other operating costs, and the timing of new rates.
• Ability to complete the capital program in a cost-effective and timely manner.
• Ability to execute on strategy and financing plans.
• The effects of changing interest rates.
• Ability to achieve greenhouse gas emissions intensity reduction goals.
• The impact of future governmental regulation.
• Ability to overcome the impacts of supply chain disruptions on availability and cost of materials.
• The effects of inflation, tariffs, and volatile energy prices.
• Ability to obtain sufficient insurance coverage at reasonable costs and whether such coverage will protect against significant losses.
• The expected timing and likelihood of completion and ability to realize the anticipated benefits of the proposed merger with NorthWestern Energy Group, Inc., including the timing, receipt, and terms and conditions of any required governmental and regulatory approvals that could reduce anticipated benefits or give rise to the termination of the merger.

Future Outlook

Black Hills Corporation reaffirms its 2025 adjusted earnings guidance in the range of $4.00 to $4.20 per share, excluding merger-related costs, representing 5% year-over-year growth at the midpoint. The company targets a long-term EPS growth rate of 4% to 6% off a 2023 base of $3.75 per share, aiming for the upper half of this range starting in 2026. A $4.7 billion capital investment plan is forecasted for 2025-2029, prioritizing customer needs and growth. The merger with NorthWestern Energy is expected to close in the second half of 2026, subject to regulatory approvals. The company is also actively expanding its data center load pipeline to over 3 GW, with 500 MW by 2029 expected to contribute 10%+ to EPS starting in 2028.

Management Comments

• "Our team delivered strong financial and operational results while successfully advancing key regulatory and growth initiatives."
• "We completed our planned debt and equity financings for the year, maintaining strong credit quality and liquidity."
• "Our $4.7 billion five-year capital plan prioritizes core customer needs for safety, reliability, and growth."
• "We are advancing our proposed merger with NorthWestern Energy to create a premier Midwest utility presence with enhanced scale, resilience, and opportunities for growth as a combined company."
• "Our joint regulatory filings underscore the transactions substantial benefits for our customers and stakeholders."

Industry Context

The company's focus on expanding its data center load pipeline to over 3 GW, driven by major tech companies like Microsoft and Meta, positions it strongly within the growing demand for energy-intensive data infrastructure. Its commitment to clean energy projects, such as the Colorado Clean Energy Plan and the Lange II gas-fired generation facility, aligns with broader industry trends towards decarbonization and grid modernization. The proposed merger with NorthWestern Energy reflects a strategic move towards consolidation in the utility sector to achieve enhanced scale and resilience, a common theme among regional utilities seeking operational efficiencies and expanded market presence.

Comparison to Industry Standards

• The company's 55 consecutive years of dividend increases is the second-longest track record in the electric and natural gas industry, demonstrating superior shareholder return consistency compared to most peers.
• Black Hills was recognized by Escalent as a 2025 Most Trusted Utility Brand and 2025 Easiest Utilities to do Business With, indicating strong customer satisfaction and operational efficiency relative to industry averages.
• The company's 2024 Overall System SAIDI (System Average Interruption Duration Index), excluding major events, places it in the first quartile of EEI (Edison Electric Institute) Utilities, showcasing industry-leading reliability performance.

Stakeholder Impact

• Shareholders: Positive impact from reaffirmed earnings guidance, long-term EPS growth target, 55 consecutive years of dividend increases, and potential for significant incremental earnings from data center expansion. The merger with NorthWestern Energy aims to create enhanced scale and growth opportunities.
• Customers: Benefits from new rates and rider recovery supporting system safety, reliability, and growth. Projects like Ready Wyoming and Lange II aim to maintain long-term cost stability, enhance system resiliency, and replace aging infrastructure. The Colorado Clean Energy Plan aims to reduce emissions.
• Creditors: Maintained solid investment-grade credit ratings (Baa2 stable by Moody's, BBB+ stable by S&P Global Ratings), indicating continued financial stability.
• Employees: The merger with NorthWestern Energy will involve integration planning, which could impact employees, though the filing emphasizes opportunities for growth as a combined company.

Next Steps

• File an application with the Federal Energy Regulatory Commission (FERC) for merger approval in the fourth quarter of 2025.
• Complete the Ready Wyoming 260-mile transmission expansion project by year-end 2025.
• Anticipate approval of the Colorado Electric 50-megawatt battery storage project by year-end 2025.
• Prepare to file a new Arkansas gas rate review by year-end 2025.
• Prepare to file an abbreviated case for Kansas Gas during Q1 2026, including capital placed in service through Dec. 31, 2025.
• Prepare to file an electric rate review in South Dakota during Q1 2026.
• Expect the Lange II 99 MW generation facility in South Dakota to be in service during the second half of 2026.
• Expect the merger with NorthWestern Energy to close in the second half of 2026, subject to the satisfaction or waiver of certain closing conditions.
• Provide 2026 EPS guidance and an updated capital plan for 2026 to 2030 at the Q4 & Full-year 2025 earnings report.
• Prepare to file a Wildfire Mitigation Plan in Wyoming in accordance with wildfire liability legislation (WY HB192).

Key Dates

Recommendation

Black Hills Corporation delivered strong adjusted earnings, reaffirmed its 2025 guidance, and demonstrated significant progress on strategic growth initiatives, including a major merger and substantial data center expansion opportunities. The company's consistent dividend growth, industry-leading reliability, and favorable regulatory outcomes in key jurisdictions underscore its stable utility business model. While GAAP EPS saw a slight decline due to merger-related costs and some operational headwinds, the underlying adjusted performance and robust capital plan for future growth, particularly in the high-demand data center sector, present a compelling long-term investment case. The expansion of the data center load pipeline to over 3 GW, with 500 MW already planned to contribute 10%+ to EPS by 2028, represents a significant upside incremental to the current plan. The reaffirmed guidance and strategic advancements suggest a positive trajectory for earnings and shareholder value.

Keywords

Utility, Electric Utility, Natural Gas Utility, Earnings Report, Q3 2025, Black Hills Corporation, BKH, NorthWestern Energy Merger, Adjusted EPS, Capital Plan, Rate Review, Transmission Project, Generation Project, Data Center Demand, Renewable Energy, Regulatory Approval, Dividend, Financial Results