425: Black Hills Reaffirms 2025 EPS, Eyes Data Center Growth

Black Hills Corporation reaffirmed its 2025 adjusted EPS guidance, reported strong Q3 results, and highlighted significant progress on its $4.7 billion capital plan and a growing pipeline of over 3 gigawatts in data center demand.

Summary

• Reported Q3 2025 adjusted EPS of $0.45, up from $0.35 in Q3 2024, excluding $0.10 per share in merger-related transaction costs.
• Year-to-date adjusted EPS reached $2.68, a 6.3% increase compared to $2.52 for the same period last year, excluding $0.11 per share in merger-related costs.
• Reaffirmed 2025 adjusted EPS guidance in the range of $4.00 to $4.20, representing a 5% growth rate at the midpoint over 2024 EPS.
• Expect to deliver in the upper half of the 4% to 6% long-term EPS growth target starting in 2026.
• Progressed on a $4.7 billion capital plan, including the $350 million Ready Wyoming transmission expansion project on schedule for year-end completion and the 99-megawatt Lange II generation project under construction for H2 2026 service.
• Secured a settlement for the Nebraska rate review, providing $23.9 million in new annual revenue with new rates effective January 1, 2026.
• The pipeline for data center demand has expanded significantly, with over 3 gigawatts under non-disclosure agreements, up from 1+ gigawatts previously disclosed.
• The planned merger with NorthWestern Energy, announced August 19, 2025, is progressing, with joint applications submitted to regulators and an anticipated finalization in the second half of 2026.
• Maintained a healthy balance sheet with credit metrics within targets (55% net debt to total capitalization, 14%-15% FFO to debt) and strong liquidity of over $600 million under the revolving credit facility.

Sentiment

Score: 8

Explanation: Black Hills Corporation delivered strong Q3 results, reaffirmed its full-year guidance, and highlighted significant progress on major capital projects and regulatory initiatives. The substantial pipeline of data center demand presents a compelling growth opportunity, and the planned merger is expected to create a stronger entity. While there were some headwinds like unfavorable weather and increased O&M, the overall outlook is very positive with clear drivers for future growth.

Positives

• Achieved strong Q3 2025 adjusted EPS of $0.45, exceeding Q3 2024 results.
• Reaffirmed 2025 adjusted EPS guidance of $4.00 to $4.20, indicating confidence in full-year performance.
• Successfully completed seven rate reviews since the beginning of last year, including a recent settlement in Nebraska for $23.9 million in new annual revenue.
• The $350 million Ready Wyoming transmission expansion project is on schedule for completion by year-end 2025, enhancing system resiliency and access to market energy.
• Broke ground on the 99-megawatt Lange II generation project, expected to be in service in H2 2026, replacing aging facilities and addressing reserve margin requirements.
• The data center demand pipeline has significantly expanded to over 3 gigawatts under NDA, presenting substantial future growth opportunities.
• Current plans project data center earnings contribution to exceed 10% of total EPS by 2028, based on 500 megawatts of demand.
• Maintained a healthy balance sheet with strong investment-grade credit ratings, meeting net debt to total capitalization and FFO to debt targets.
• Completed planned 2025 equity issuance of $220 million and a $450 million debt offering, ensuring funding for the capital plan and strong liquidity.
• Two of the three Electric Utilities ranked in the top 10 companies for reliability in EEI's most recent report (2024 SAIDI metrics).
• Maintained an industry-leading dividend track record of 55 consecutive years of increases, targeting a 55% to 65% payout ratio.

Negatives

• Q3 2025 GAAP EPS of $0.34 included $0.10 per share of merger-related transaction costs.
• Experienced a $0.07 per share weather headwind in Q3 2025 compared to Q3 2024, primarily due to lower agricultural irrigation demand in Nebraska.
• O&M expenses were higher by $0.08 per share in Q3 2025, including merger-related transaction costs, employee costs, and outside services.
• Financing costs increased by $0.03 per share in Q3 2025 due to higher interest expense and share dilution, partially offset by AFUDC benefits.
• Incurred higher depreciation of $0.02 per share in Q3 2025 due to new assets placed in service.
• The Colorado Clean Energy Plan abandoned negotiations on a 100-megawatt solar project due to increased pricing.

Risks

• Delays in consummating the potential merger with NorthWestern Energy, including as a result of required regulatory and shareholder approvals, which may not be obtained on the expected timeline, or at all.
• Any event, change, or other circumstance that could give rise to the termination of the merger agreement.
• Required regulatory approvals for the merger being subject to conditions not anticipated by Black Hills and NorthWestern Energy.
• The possibility that any of the anticipated benefits and projected synergies of the potential merger will not be realized or will not be realized within the expected time period.
• Disruption to the parties' businesses as a result of the announcement and pendency of the merger, including potential distraction of management and challenges in retaining and hiring key personnel.
• Reputational risk and the reaction of each company's customers, suppliers, employees, or other business partners to the merger.
• The possibility that the merger may be more expensive to complete than anticipated, including as a result of unexpected factors or events.
• The outcome of any legal or regulatory proceedings that may be instituted against Black Hills or NorthWestern Energy related to the merger agreement or the transaction.
• Risks associated with third-party contracts containing consent and/or other provisions that may be triggered by the proposed transaction.
• Legislative, regulatory, political, market, economic, and other conditions, developments, and uncertainties affecting Black Hills' or NorthWestern Energy's businesses.
• The evolving legal, regulatory, and tax regimes under which Black Hills and NorthWestern Energy operate.
• Restrictions during the pendency of the proposed transaction that may impact Black Hills' or NorthWestern Energy's ability to pursue certain business opportunities or strategic transactions.
• Unpredictability and severity of catastrophic events, including, but not limited to, extreme weather, natural disasters, acts of terrorism, or outbreak of war or hostilities, as well as Black Hills' and NorthWestern Energy's response to any of the aforementioned factors.

Future Outlook

Black Hills Corporation reaffirmed its 2025 adjusted EPS guidance of $4.00-$4.20, representing 5% growth at the midpoint. The company expects to deliver in the upper half of its 4%-6% long-term EPS growth target starting in 2026, driven by its $4.7 billion capital plan and strong customer demand, including significant data center opportunities. An updated financial outlook, including 2026 guidance and 2026-2030 capital plans, will be provided during the Q4 and full year earnings call in February.

Management Comments

• "We're fulfilling our commitment to deliver results for our stakeholders in three key areas... delivering on our financial commitments... executing on our regulatory and growth initiatives... providing excellent operational performance." Linn Evans, President and CEO
• "I'm proud of our teams remarkable work in delivering strong financial results and making significant progress on our key initiatives. We're on track to achieve our earnings guidance for the full year..." Linn Evans, President and CEO
• "Our confidence in achieving our long-term growth target is further strengthened by our $4.7 billion capital plan and strong customer demand including the data center opportunities I previously mentioned." Linn Evans, President and CEO
• "Although we are well positioned as stand-alone companies, this merger will create a stronger, more competitive entity with greater scale and enhanced financial profile and complementary strengths, enabling us to unlock additional value creation opportunities for our customers and our shareholders." Linn Evans, President and CEO (on merger)
• "Our team is executing our strategy exceptionally well. From a financial standpoint, we have successfully accomplished several of our objectives in the current quarter and throughout the year." Kimberly Nooney, Senior Vice President and CFO
• "We remain confident in our ability to meet our adjusted EPS guidance range and remain committed to achieving the financial commitments we made at the beginning of the year." Kimberly Nooney, Senior Vice President and CFO
• "We believe we are well positioned to achieve the upper half of our long-term EPS growth target of 4% to 6% beginning in 2026." Kimberly Nooney, Senior Vice President and CFO
• "I'm excited about our current position, the progress we have made on key initiatives and the promising growth opportunities that lie ahead, all while continuing to provide our customers with safe, reliable and cost-effective energy they rely on every day." Marne Jones, Senior Vice President and Chief Utility Officer
• "We are very excited to be in the final stage of construction on our 260-mile $350 million Ready Wyoming transmission expansion and are just weeks away from the project being placed in service." Marne Jones, Senior Vice President and Chief Utility Officer
• "We're at a pivotal juncture in our company's history. We have large transformative projects coming online in the near term, coupled with a robust pipeline of growth opportunities including expanding data center demand." Linn Evans, President and CEO
• "To be blunt, we're not worried. In fact, some of the things that have happened recently arguably can be helpful to the process." Linn Evans, President and CEO (on Montana regulatory approval for merger)
• "Everything operationally, financially, we're really hitting on all cylinders." Kimberly Nooney, Senior Vice President and CFO
• "Our coal has been tested, analyzed. So we're kind of aware of what's there, but we don't think there's anything that we need to be really happy or concerned about in the near term." Linn Evans, President and CEO (on coal mine asset)

Industry Context

The utility sector is experiencing significant demand growth from large load customers, particularly data centers, driven by AI and hyperscale computing needs. This creates substantial opportunities for utilities with favorable service territories and flexible tariff structures, like Black Hills. There is also an ongoing transition towards clean energy, requiring strategic investments in renewables and battery storage, while balancing reliability and cost-effectiveness. Regulatory environments continue to play a crucial role in rate recovery and project approvals. Mergers and acquisitions are a strategic avenue for utilities to achieve greater scale, enhance financial profiles, and unlock additional value creation opportunities.

Comparison to Industry Standards

• Two of Black Hills' three Electric Utilities ranked in the top 10 companies in EEI's most recent report based upon 2024 SAIDI metrics, indicating industry-leading reliability.
• The company has an industry-leading dividend track record of 55 consecutive years of increasing dividends, demonstrating consistent shareholder returns.

Legal Proceedings

• Joint applications submitted to regulators in Montana, Nebraska, and South Dakota for approval of the merger with NorthWestern Energy.
• Preparation to file a Wildfire Mitigation Plan in Wyoming for commission approval in accordance with wildfire liability legislation, aiming to obtain significant liability protections.

Stakeholder Impact

• Shareholders are expected to benefit from long-term value creation through EPS growth, increased scale from the merger, and a dependable, increasing dividend. The significant data center demand pipeline offers substantial upside potential.
• Customers will benefit from enhanced system reliability and resiliency, increased access to market energy (including renewables) from projects like Ready Wyoming, and cost-effective energy solutions. New rates from regulatory reviews will recover necessary investments and increased service costs.
• Employees may experience potential disruption and distraction during the pendency of the merger, as noted in the forward-looking statements.
• Suppliers and other business partners may be impacted by the proposed merger and changes in business operations.
• Creditors are positively impacted by the company's maintained strong investment-grade credit rating, healthy balance sheet, and robust liquidity, ensuring financial stability and repayment capacity.

Next Steps

• Complete the 260-mile Ready Wyoming transmission expansion project by year-end 2025.
• Transition Meta's new AI data center in Cheyenne from construction power to permanent service later this year.
• Anticipate receiving procedural schedules and commencing the discovery process for the NorthWestern Energy merger this quarter.
• File the Wyoming Wildfire Mitigation Plan this month for commission approval.
• Anticipate approval of the Nebraska rate review settlement in December, with new rates effective January 1, 2026.
• Prepare to file a gas rate review in Arkansas to recover investments and support growth.
• Prepare for an electric rate review in South Dakota to recover customer-focused investments, including the Lange II project.
• Present an updated financial outlook, including earnings guidance for 2026 and capital investment plans for 2026-2030, during the Q4 and full year earnings call in February 2026.
• Place the 99-megawatt Lange II generation project in service in the second half of 2026.
• Secure all necessary approvals to finalize the merger with NorthWestern Energy within the second half of 2026.
• Place the 50-megawatt utility-owned battery storage project in Colorado in service in 2027.
• Continue negotiating on the 200-megawatt PPA for solar projects in Colorado.

Key Dates

Recommendation

Black Hills Corporation delivered strong Q3 2025 results, reaffirming its full-year adjusted EPS guidance and projecting upper-half long-term EPS growth. The company is executing effectively on a $4.7 billion capital plan, with major projects like Ready Wyoming and Lange II nearing completion or under construction, which will drive future rate base growth and earnings. The most compelling upside is the rapidly expanding data center demand pipeline, with over 3 gigawatts under NDA, significantly exceeding prior expectations. This represents a substantial, long-term growth driver with a flexible tariff structure that allows for utility-like returns. The planned merger with NorthWestern Energy is also on track to create a larger, more competitive entity. The company maintains a healthy balance sheet, strong credit metrics, and a consistent dividend track record. These factors, combined with successful regulatory management and industry-leading reliability, position Black Hills for robust future performance, making it a strong buy for long-term investors.

Keywords

Black Hills Corporation, BKH, Earnings, Q3 2025, Utility, Energy, Data Centers, Merger, NorthWestern Energy, Capital Plan, EPS Guidance, Regulatory, Transmission, Generation, Battery Storage, Clean Energy, Wyoming, South Dakota, Nebraska, Colorado, Arkansas, Dividends