United States
Securities and Exchange Commission
Washington, D.C. 20549
Form 10-Q
X QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended JuneSeptember 30, 2002.
OR
___ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
ACT OF 1934
For the transition period from _______________ to _______________.
Commission File Number 1-7978
Black Hills Power, Inc.
Incorporated in South Dakota IRS Identification Number 46-0111677
625 Ninth Street
Rapid City, South Dakota 57701
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 X No
---------- ----------
As of JulyOctober 31, 2002, there were issued and outstanding 23,416,396 shares of
the Registrant's common stock, $1.00 par value, all of which were held
beneficially and of record by Black Hills Corporation.
Reduced Disclosure
The Registrant meets the conditions set forth in General Instruction H (1) (a)
and (b) of Form 10-Q and is therefore filing this Form 10-Q with the reduced
disclosure format.
1
BLACK HILLS POWER, INC.
I N D E X
Page
Number
------
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Statements of Income- 3
Three and SixNine Months Ended
JuneSeptember 30, 2002 and 2001
Condensed Consolidated Balance Sheets- 4
JuneSeptember 30, 2002 and December 31, 2001
Condensed Consolidated Statements of Cash Flows- 5
SixNine Months Ended JuneSeptember 30, 2002 and 2001
Notes to Condensed Consolidated Financial Statements 6-14
Item 2. Results of Operations 15-1815-19
Item 4. Controls and Procedures 19
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 1920
Item 6. Exhibits and Reports on Form 8-K 1920
Signatures 2021
2
BLACK HILLS POWER, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
Three Months SixEnded Nine Months JuneEnded
September 30 JuneSeptember 30
2002 2001 2002 2001
---- ---- ---- ----
(in thousands)
Operating revenues $75,509 $84,077 $143,094 $172,701$77,682 $63,167 $217,744 $227,367
------- ------- -------- --------
Operating expenses:
Fuel and purchased power 13,654 14,763 25,235 44,85318,865 16,617 44,100 61,470
Operations and maintenance 9,165 10,524 16,771 17,4689,387 9,315 26,158 26,785
Administrative and general 9,986 8,403 15,352 15,8578,030 4,333 23,382 20,190
Depreciation and amortization 11,344 6,964 21,604 13,83610,910 8,588 32,514 22,424
Taxes, other than income taxes 3,566 2,899 7,413 5,9343,600 2,973 11,013 8,906
------- ------- -------- --------
47,715 43,553 86,375 97,94850,792 41,826 137,167 139,775
------- ------- -------- --------
Equity in investments of unconsolidated
subsidiaries 907 1,575 3,939 10,077
------- ------- -------- --------
Operating income 27,794 40,524 56,719 74,75327,797 22,916 84,516 97,669
------- ------- -------- --------
Other income and (expense):
Interest expense (12,350) (10,679) (23,652) (21,446)(12,165) (10,982) (35,818) (32,428)
Investment income 593 1,898 1,085 3,841594 1,000 1,678 4,841
Other expense (497) (181) (573) (310)(790) (713) (170) (1,024)
Other income 681 2,801 1,825 4,152
--------90 345 728 4,498
------- ------- -------- --------
(11,573) (6,161) (21,315) (13,763)
--------(12,271) (10,350) (33,582) (24,113)
------- ------- -------- --------
Income from continuing operations before
minority interest, income taxes and change
in accounting principle 16,221 34,363 35,404 60,99015,526 12,566 50,934 73,556
Minority interest (1,836) (2,611) (4,102) (4,571)1,488 163 (2,613) (4,408)
Income taxes (5,254) (11,781) (11,083) (20,199)
--------(6,001) (4,471) (17,087) (24,670)
------- ------- -------- --------
Income from continuing operations, before
change in accounting principle 9,131 19,971 20,219 36,22011,013 8,258 31,234 44,478
Discontinued operation, net of income taxes
(Note 2) - - - 4,832
Change in accounting principle - - 896 -
--------------- ------- -------- --------
Net income $11,013 $ 9,131 $19,971 $21,115 $41,052
========8,258 $ 32,130 $ 49,310
======= ======= ======== ========
The accompanying notes to condensed consolidated financial statements are an
integral part of these condensed consolidated financial statements.
3
BLACK HILLS POWER, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
June
September 30 December 31
2002 2001
---- ----
(in thousands)
ASSETS
Current assets:
Current assets:
Cash and cash equivalents $ 36,50243,612 $ 14,832
Accounts receivableReceivables (net of allowance for doubtful accounts of $1,974$1,839 and $2,677, respectively) 39,52341,270 32,334
Accounts receivableReceivables - related party 75454,508 9,457
Materials, supplies and fuel 18,46418,873 10,399
Derivative assets 243327 -
Prepaid expenses 14,3609,036 9,822
---------- ----------
109,846----------- -----------
167,626 76,844
---------- --------------------- -----------
Investments 15,44415,820 51,543
---------- --------------------- -----------
Property and equipment 1,407,5971,454,877 1,249,800
Less accumulated depreciation (289,141)(290,901) (240,472)
---------- ----------
1,118,456----------- -----------
1,163,976 1,009,328
---------- ----------
Other assets:
Regulatory asset 4,0714,350 4,071
Goodwill 27,059 25,566
Intangible assets 93,24478,883 85,983
Derivative asset 156assets - 5,746
Other 7,68914,569 10,493
---------- ----------
132,219----------- -----------
124,861 131,859
---------- --------------------- -----------
Total $1,375,965 $1,269,574
========== ==========$ 1,472,283 $ 1,269,574
=========== ===========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Current maturities of long-term debt $ 36,43217,279 $ 35,881
Notes payable 2450,021 450
Notes payable - related party 488,390462,297 447,125
Accounts payable 9,5539,344 13,271
Accounts payable - related party 5181,214 4,385
Accrued liabilities 26,68417,196 16,929
Derivative liability 7,514liabilities 9,168 10,212
---------- ----------
569,115----------- -----------
566,519 528,253
---------- --------------------- -----------
Long-term debt, net of current maturities 475,552560,935 415,314
---------- --------------------- -----------
Deferred credits:
Federal income taxes 61,60279,637 61,239
Regulatory liability 5,8285,612 6,249
Derivative liability 6,255liabilities 9,022 5,949
Other 8,9999,260 11,306
---------- ----------
82,684----------- -----------
103,531 84,743
---------- --------------------- -----------
Minority interest in subsidiaries 22,54916,618 19,536
---------- --------------------- -----------
Stockholder's equity:
Common stock $1 par value; 50,000,000 shares authorized; 23,416,396 shares issued 23,416 23,416
Additional paid-in capital 80,961 80,961
Retained earnings 127,454130,673 121,875
Accumulated other comprehensive loss (5,766)(10,370) (4,524)
---------- ----------
226,065----------- -----------
224,680 221,728
---------- --------------------- -----------
Total $1,375,965 $1,269,574
========== ==========$ 1,472,283 $ 1,269,574
=========== ===========
The accompanying notes to condensed consolidated financial statements are an
integral part of these condensed consolidated financial statements.
4
BLACK HILLS POWER, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
SixNine Months JuneEnded
September 30
2002 2001
---- ----
(in thousands)
Cash flows from operations $33,661 $ 39,03957,110 $52,030
-------- ------- --------
Investing activities:
Property additions (85,987) (195,056)
(Increase) decrease in investments 1,151 (1,272)(132,128) (375,477)
Notes receivable from associated companies, net (46,854) 56,597
Payment for acquisition of net assets, net of cash
acquired (13,243) (10,410)
-------Payment for the acquisition of minority interest (3,617) -
Payment for intangible assets including goodwill - (50,413)
-------- (98,079) (206,738)
---------------
(195,842) (379,703)
-------- --------
Financing activities
Dividends paid (15,536) (14,168)(23,334) (21,667)
Increase in short-term borrowings, net 40,839 69,01664,743 221,325
Subsidiary distributions to minority interests -(916) (1,505)
Long-term debt - issuance 71,003 135,014156,135 (11,034)
Long-term debt - repayments (10,218) (7,781)
-------(29,116) 144,975
-------- 86,088 180,576
---------------
167,512 332,094
-------- --------
Increase in cash and cash equivalents 21,670 12,87728,780 4,421
Cash and cash equivalents:
Beginning of period 14,832 12,697
--------------- --------
End of period $36,502 $25,574
=======$ 43,612 $ 17,118
======== ========
Supplemental disclosure of cash flow information Cash paid during the period
for:
Interest $24,118$36,810 $ 20,82632,931
Income taxes $ 169170 $ 19,944
Stock dividend distribution to Black Hills
Corporation, the parent company of Black Hills
Power, Inc. (Note 2) $ - $89,643$ 89,643
The accompanying notes to condensed consolidated financial statements are an
integral part of these condensed consolidated financial statements.
5
BLACK HILLS POWER, INC.
Notes to Condensed Consolidated Financial Statements
(unaudited)
(Reference is made to Notes to Consolidated Financial
Statements included in the Company's Annual
Report on Form 10-K)
(1) MANAGEMENT'S STATEMENT
The financial statements included herein have been prepared by Black
Hills Power, Inc. (the Company) without audit, pursuant to the rules
and regulations of the Securities and Exchange Commission. Certain
information and footnote disclosures normally included in financial
statements prepared in accordance with accounting principles generally
accepted in the United States have been condensed or omitted pursuant
to such rules and regulations; however, the Company believes that the
footnotes adequately disclose the information presented. These
financial statements should be read in conjunction with the financial
statements and the notes thereto, included in the Company's 2001 Annual
Report on Form 10-K filed with the Securities and Exchange Commission.
Accounting methods historically employed require certain estimates as
of interim dates. The information furnished in the accompanying
financial statements reflects all adjustments which are, in the opinion
of management, necessary for a fair presentation of the JuneSeptember 30,
2002, December 31, 2001 and JuneSeptember 30, 2001, financial information
and are of a normal recurring nature. The results of operations for the
three and sixnine months ended JuneSeptember 30, 2002, are not necessarily
indicative of the results to be expected for the full year.
(2) NON-CASH DIVIDEND AND DISCONTINUED OPERATIONS
During the quarter ended March 31, 2001, the Company distributed a
non-cash dividend to its parent company, Black Hills Corporation
(Parent). The dividend consisted of 50,000 common shares of Wyodak
Resources Development Corporation (Wyodak), which represents 100
percent ownership of Wyodak. The Company therefore no longer operates
in the coal production segment, oil and natural gas production segment,
fuel marketing segment or communications as the Company had indirectly
owned the companies operating in these segments through its ownership
of Wyodak. As a result, the Company's only subsidiary is Black Hills
Energy Capital and its subsidiaries. The Company's investment in Wyodak
at the time of the distribution was $89.6 million.
The condensed consolidated financial statements and notes to condensed
consolidated financial statements have been restated to reflect the
continuing operations of the Company for all periods presented.
6
The net operating results of discontinued operations are included in
the Condensed Consolidated Statements of Income for the sixnine months
ended JuneSeptember 30, 2001 under the caption "Discontinued operations,
net of income taxes" and are summarized as follows (in thousands):
Revenue $197,274
Income before income taxes 7,849
Federal income taxes 3,017
Net income 4,832
(3) RECLASSIFICATIONS
Certain 2001 amounts in the financial statements have been reclassified
to conform to the 2002 presentation. These reclassifications did not
have an effect on the Company's total stockholder's equity or net
income as previously reported.
(4) RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In June 2001, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 143, "Accounting for
Asset Retirement Obligations" (SFAS 143). SFAS 143 requires that the
fair value of a liability for an asset retirement obligation be
recognized in the period in which it is incurred with associated asset
retirement costs being capitalized as part of the carrying amount of
the long-lived asset. Over time, the liability is accreted to its
present value each period and the capitalized cost is depreciated over
the useful life of the related asset. Management expects towill adopt SFAS 143
effective January 1, 2003 and is currently evaluating the effects
adoption will have on the Company's consolidated financial statements.
(5) RECENTLY ADOPTED ACCOUNTING PRONOUNCEMENTS
In June 2001, the FASB issued Statement of Financial Accounting
Standards No. 141, "Business Combinations," (SFAS 141) and No. 142,
"Goodwill and Other Intangible Assets" (SFAS 142). The Company has
adopted SFAS 141, which requires all business combinations initiated
after June 30, 2001 to be accounted for using the purchase method of
accounting. Under SFAS 142, goodwill and intangible assets with
indefinite lives are no longer amortized but the carrying values are
reviewed annually (or more frequently if impairment indicators arise)
for impairment. If the carrying value exceeds the fair value, an
impairment loss shall be recognized. A discounted cash flow approach
was used to determine fair value of the Company's businesses for
purposes of testing for impairment. Intangible assets with a defined
life will continue to be amortized over their useful lives (but with no
maximum life). The Company adopted SFAS 142 on January 1, 2002.
7
The pro forma effects of adopting SFAS No. 142 for the three and
six
monthnine-month periods ended JuneSeptember 30, 2002 and 2001 are as follows (in
thousands):
Three Months Ended SixNine Months Ended
JuneSeptember 30 JuneSeptember 30
2002 2001 2002 2001
---- ---- ---- ----
Net income as reported $9,131 $19,971 $21,115 $41,052$11,013 $ 8,258 $32,130 $49,310
Cumulative effect of change in
accounting principle, net of tax - - (896) -
------------- ------- ------- -------
Income excluding cumulative effect of
change in accounting principle 9,131 19,971 20,219 41,05211,013 8,258 31,234 49,310
Add: goodwill amortization - 375274 - 695
------849
------- ------- ------- -------
Net income excluding cumulative effect of
change in accounting principle and
goodwill amortization $9,131 $20,346 $20,219 $41,747
======$11,013 $ 8,532 $31,234 $50,159
======= ======= ======= =======
The cumulative effect adjustment recognized upon adoption of SFAS 142
was $0.9 million (after tax). The adjustment consisted of income from
the after-tax write-off of negative goodwill from prior acquisitions in
our Independent Power segment. If SFAS 142 had been adopted on January
1, 2001, net income would have been lower for the six monthnine-month period
ended JuneSeptember 30, 2002 by $0.9 million and higher for the three and
six-monthnine-month periods ended JuneSeptember 30, 2001 by $0.4$0.3 million and $0.7$0.8
million, respectively.
The Company's goodwill and intangible assets are contained within the
Independent Power segment. Changes to goodwill and intangible assets
during the six-monthnine-month period ended JuneSeptember 30, 2002, including the
effects of adopting SFAS No. 142, are as follows (in thousands):
Goodwill Other Intangible Assets
-------- -----------------------
Balance at December 31, 2001, net of
accumulated amortization $25,566 $85,983
Change in accounting principle 1,493 -
Additions - 9,504
Amortization expense - (2,243)
------- -------
Balance at June 30, 2002, net of
accumulated amortization $27,059 $93,244
Goodwill Other Intangible Assets
Balance at December 31, 2001, net of
accumulated amortization $25,566 $85,983
Change in accounting principle 1,493 -
Additions - 10,080
Adjustments - (14,108)
Amortization expense - (3,072)
------- -------
Balance at September 30, 2002, net of
accumulated amortization $27,059 $78,883
======= =======
On JuneSeptember 30, 2002, intangible assets totaled $93.2$78.9 million, net of
accumulated amortization of $6.2$7.0 million. Intangible assets are
primarily related to site development fees and above-market long-term
contracts, and all have definite lives ranging from 7 to 40 years, over
which they continue to be amortized. Amortization expense for
intangible assets for the next five years is expected to be
approximately $5.1$4.1 million to
$4.5 million for each year from 2003 to 2007.a year.
Intangible assets increasedasset additions during the six monthnine-month period ended JuneSeptember
30, 2002 as awere primarily the result of a $9.5$9.3 million addition related
to preliminary purchase allocations in the acquisition of additional
ownership interest in the Harbor Cogeneration Facility (see(See Note 11).
This intangible asset primarily relates to an above-marketacquired ownership of
additional interest in a contract termination payment stream at the
Facility.facility.
8
Adjustments of intangible assets during the nine-month period ended
September 30, 2002 primarily relate to final adjustments to the
preliminary purchase price allocation of the Company's third quarter
2001 Las Vegas Cogeneration acquisition.
In August 2001, the FASB issued SFAS 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets". SFAS 144 supersedes FASB
Statement 121, "Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to Be Disposed Of" (SFAS 121) and the accounting
and reporting provisions of Accounting Principles Board Opinion No. 30,
"Reporting the Results of Operations - Reporting the Effects of
Disposal of a Segment of a Business, and Extraordinary, Unusual and
Infrequently Occurring Events and Transactions" (APB 30). SFAS 144
establishes a single accounting model for long-lived assets to be
disposed of by sale as well asand resolves implementation issues related to SFAS
121. The Company adopted SFAS 144 effective January 1, 2002. Adoption
did not have a material impact on the Company's consolidated financial
position, results of operations or cash flows.
(6) COMPREHENSIVE INCOME
The following table presents the components of the Company's
comprehensive income:
Three Months Ended SixNine Months Ended
JuneSeptember 30 JuneSeptember 30
2002 2001 2002 2001
---- ---- ---- ----
(in thousands)
Net income $9,131 $19,971 $21,115 $41,052$11,013 $ 8,258 $32,130 $49,310
Other comprehensive income:
Initial impact of adoption of SFAS 133, net of
minority interest - - - (4,880)
Fair value adjustment on derivatives designated as
cash flow hedges, net of minority interest (3,080) 2,491 (1,242) (966)
------(4,604) (5,355) (5,846) (6,321)
-------- ------- ------- -------
Comprehensive income $6,051 $22,462 $19,873 $35,206
======$ 6,409 $ 2,903 $26,284 $38,109
======== ======= ======= =======
(7) CHANGES IN LONG-TERM DEBT AND NOTES PAYABLE
On March 15,14, 2002, the Company closed on $135 million offive-year senior
secured project-level financing for the Arapahoe and Valmont
Facilities. These projects have a total of 210 megawatts in service and under construction and
are located in the Denver, Colorado area. Proceeds from this financing
were used to refinance $53.8 million of an existing seven-year,
senior
securedsenior-secured term project-level facility, pay down approximately
$50.0 million of short-term credit facility borrowings and
approximately $31.2 million will bewas used for future project construction. At
JuneSeptember 30, 2002, $124.9 millionall of the $135 million financing hashad been
utilized.
On June 18, 2002, wethe Company closed on a $75 million bridge credit
agreement. As of June 30, 2002, there were no borrowings outstanding under this
bridge credit agreement. This credit agreement bridgesbridged the issuance of $75 million of
the CompaniesCompany's First Mortgage Bonds, which wewere issued on August 13,
2002. The termination date of the bridge credit agreement was August
13, 2002, the date on which the First Mortgage Bonds were issued.
Our9
On August 13, 2002, the Company issued $75 million of First Mortgage
Bonds, Series AE, due 2032. The First Mortgage Bonds have a 7.23
percent coupon with interest payable semi-annually, commencing February
15, 2003. Net proceeds from the offering were and will be used to fund
the Company's portion of construction and installation costs for an
AC-DC-AC Converter Station; for general capital expenditures for the
remainder of 2002 and 2003; to repay a portion of current bank
indebtedness; to satisfy bond maturities for certain outstanding first
mortgage bonds due in 2003; and for general corporate purposes.
On September 27, 2002, the Company closed on a $50 million secured
financing for the expansion at our Las Vegas II project, a 224-megawatt
gas-fired generation facility located in North Las Vegas, Nevada, that
expires on November 26, 2002. Proceeds from this financing were used to
pay down related party borrowings.
The Company's credit facilities contain certain restrictive covenants,
including restrictions on the ability of certain subsidiaries with
project level financings to dividend cash to the parent companyParent in the amount
of approximately $14$17.5 million at JuneSeptember 30, 2002. Some of these
credit facilities were amended during the second quarter to remove
default provisions pertaining to credit rating status. The Company
and its
subsidiaries had complied with all the covenants at JuneSeptember 30, 2002.
9
Other than the above transactions, the Company had no other material
changes in its consolidated indebtedness, as reported in Notes 7 and 8
of the Company's 2001 Annual Report on Form 10-K.
(8) RELATED-PARTY TRANSACTIONS
Receivables
The Company has accounts receivable balances related to transactions
with other Black Hills Corporation subsidiaries. The balances were $0.8$0.7
million and $2.5 million as of JuneSeptember 30, 2002 and December 31,
2001, respectively.
At December 31, 2001, theThe Company also had an unsecuredhas extended a line of credit outstanding from Black Hills Corporationto the Parent, which is
due on demand. Outstanding advances were $53.8 million at September 30,
2002 and $6.9 million at December 31, 2001. Interest income received on
the note was $224,000 and $262,000 for $6.9
million.the three and nine-month periods
ended September 30, 2002. Advances under these notes bear interest at a
variable rate that does not exceed prime and is receivable monthly.
Note Payable
The Company has an unsecured line of credit with Black Hills
Generation, an indirect subsidiary of Black Hills Corporation, whichthe Parent. Although the line of
credit is due on demand, however, Black Hills Generation has agreed not to
demand payment until such time as outside financing is obtained.
Borrowings under the note bear interest at prime rate (4.75 percent at
JuneSeptember 30, 2002) and interest is payable monthly. Borrowings were
$484.4$462.3 million at JuneSeptember 30, 2002 and $447.2$447.1 million at December 31,
2001. Interest expense on the borrowings under the note for the three
months and sixnine months ended JuneSeptember 30, 2002 was $5.6$5.9 million and
$11.0$16.9 million, respectively.
In addition, the Company has an unsecured line of credit
with Black Hills Corporation in the amount of $3.8 million. Borrowings
under the note bear interest at 3.0 percent and interest is payable
monthly.10
Other Balances and Transactions
In addition to the above transactions, the Company purchased natural
gas to fuel its combustion turbine from Enserco Energy, an indirect
subsidiary of Black Hills Corporation.the Parent. The amount purchased during the three and
six monthnine-month periods ended JuneSeptember 30, 2002 was approximately $1.3$2.5
million and $2.5$4.9 million, respectively and is included in "Fuel and
purchased power" on the Condensed Consolidated Statements of Income.
The Company also received revenues of approximately $0.1 million and
$0.2 million for the three and six monthnine-month periods, ended June 30, 2002,respectively, from
Black Hills Generation, an indirect subsidiary of Black Hills
Corporation, for the transmission of electricity.
In the opinion of management, the described related-party transactions
have been fair and reasonable to the Company and have been entered into
under terms and rates substantially the same as those transactions
entered into with unrelated third parties in the ordinary course of
business.
10
(9) SUMMARY OF INFORMATION RELATING TO SEGMENTS OF THE COMPANY'S BUSINESS
The Company's reportable segments are those that are based on the
Company's method of internal reporting, which generally segregates the
strategic business groups due to differences in products, services and
regulation. Prior to the first quarter of 2001, the Company reported
six operating segments consisting of Electric, Mining, Oil and Gas,
Fuel Marketing, Independent Power and Communications. Due to the
distribution of Wyodak common stock as described in Note 2, the Company
no longer has companies operating in the Mining, Oil and Gas, Fuel
Marketing and Communications segments.
The Company's operations are now conducted through two business
segments. As of JuneSeptember 30, 2002, substantially all of the Company's
operations and assets are located within the United States. The two
segments consist of: Electric, which supplies electric utility service
to western South Dakota, northeastern Wyoming and southeastern Montana;
and Independent Power, which produces and sells power to wholesale
customers.
Segment information follows the same accounting policies as described
in Note 1 of the Company's 2001 Annual Report on Form 10-K. Segment
information included in the accompanying Condensed Consolidated Balance
Sheets and Condensed Consolidated Statements of Income is as follows
(in thousands):
Income from Continuing
Operating Revenues Operations
------------------ ----------
Quarter to Date
JuneEnded
September 30, 2002
Electric $38,303 $6,792$45,291 $ 8,304
Independent power 37,206 2,33932,391 2,709
-------- -------
Total $75,509 $9,131
======= ======
Income from Continuing
Operating Revenues Operations
------------------ ----------
Quarter to Date
June 30, 2001
Electric $61,601 $16,784
Independent power 22,476 3,187
-------- -------
Total $84,077 $19,971$77,682 $11,013
======= =======
11
Income from Continuing
Operating Revenues Operations
------------------ ----------Quarter Ended
September 30, 2001
Electric $43,518 $ 7,929
Independent power 19,649 329
-------- --------
Total $63,167 $ 8,258
======= ========
Income from Continuing
Operating Revenues Operations
Year to Date
JuneSeptember 30, 2002
Electric $ 75,494 $14,614$120,786 $22,918
Independent power 67,600 5,605
--------96,958 8,316
---------- -------
Total $143,094 $20,219$217,744 $31,234
======== =======
Income from Continuing
Operating Revenues Operations
------------------ ----------
Year to Date
JuneSeptember 30, 2001
Electric $132,180 $34,124$175,698 $42,053
Independent power 40,521 2,096
--------51,669 2,425
---------- -------
Total $172,701 $36,220$227,367 $44,478
======== =======
Other than the following transactions, the Company had no other
material changes in total assets of its reporting segments, as reported
in Note 15 of the Company's 2001 Annual Report on Form 10-K, beyond
changes resulting from normal operating activities.
The Independent Power segment had a net addition to non working capital
assets of approximately $75$106 million primarily related to ongoing
construction of the expansions at the Las Vegas Cogeneration II and
Arapahoe facilities and the acquisition of additional ownership
interest at the Harbor Cogeneration facility (Note 11).
12
(10) RISK MANAGEMENT ACTIVITIES
The Company actively manages its exposure to certain market risks as
described in Note 3 of the Company's 2001 Annual Report on Form 10-K.
Included in the accompanying Condensed Consolidated Balance Sheets as
of JuneSeptember 30, 2002 and December 31, 2001, are derivative assets of
$0.4$0.3 million and $5.7 million and derivative liabilities of $13.8$18.2
million and $16.2 million, respectively, related to fixed-for-float
interest rate swaps on projectcertain financings. These transactions are
accounted for as cash flow hedges and have been determined to be fully
effective. Because these hedges are fully effective, the entire
derivative fair value is recorded in accumulated other comprehensive
income. These swaps had a current notional amount of $215.0$213.6 million and
a weighted average interest rate of 6.05.99 percent at JuneSeptember 30, 2002
and a current notional amount of $316.4 million and a weighted average
interest rate of 5.85 percent at December 31, 2001.
The Company anticipates a portion of the unrealized losses recorded in
accumulated other comprehensive income will be realized as increased
interest expense in the next 12 months. Based on JuneSeptember 30, 2002
market interest rates, $7.5$9.1 million will be realized as additional
interest expense during the next 12 months. Estimated and realized
amounts will likely change during the next year as market interest
rates change.
12
At JuneSeptember 30, 2002, the Company had $359.2$365.9 million of outstanding,
floating-rate debt of which $144.1$152.3 million was not offset with interest
rate swap transactions that effectively convert the debt to a fixed
rate.
At December 31, 2001, the Company had a $100 million forward starting
floating-to-fixed interest rate swap to hedge the anticipated floating
rate debt financing related to the Company's Las Vegas Cogeneration
expansion. This swap terminated during the second quarter 2002 and
resulted in a $1.1 million gain. This swap was treated as a cash flow
hedge and accordingly in the second quarter of 2002 the resulting gain
will continue to bewas carried in Accumulated Other Comprehensive Income on the Condensed
Consolidated Balance Sheet and was to be amortized over the life of the
anticipated long-term financing. In the third quarter of 2002, this
cash flow hedge was determined to be ineffective due to uncertainties
about the eventual timing and form of financing for this project. As a
result, the $1.1 million was taken into earnings. The gain was offset
by the expensing of approximately $1.0 million of deferred financing
costs related long-termto the anticipated financing.
In addition, the Company entered into a $50 million treasury lock to
hedge a portion of the Company's $75 million First Mortgage Bond
offering completed in August 2002 (Note 13)7). The treasury lock effectively fixes, at current rates, the interest rate for the first
28.5 years of the 30-year bonds. The treasury lockcash
settled on August 8, 2002, the bond pricing date, and resulted in a
$1.8 million loss. This treasury lock was treated as a cash flow hedge
and accordingly the resulting loss which will continue
to beis carried in Accumulated Other
Comprehensive IncomeLoss on the Condensed Consolidated Balance Sheet and
amortized over the life of the related bonds as additional interest
expense.
At June 30, 2002, the
treasury lock had a fair market value of $0.13
(11) ACQUISITIONS
On March 15, 2002, the Company paid $25.7 million to acquire an
additional 30 percent interest in the Harbor Cogeneration Facility
(Harbor), a 98-megawatt gas-fired plant located in Wilmington,
California. This acquisition was funded through borrowings from a
related party and givesparty. At September 30, 2002 the Company had an 8388 percent
ownership interest and voting control ofin Harbor.
The Company's investment in Harbor prior to the above acquisition was
accounted for under the equity method of accounting and included in
Investments on the accompanying Condensed Consolidated Balance Sheets.
The above acquisition gave the Company majority ownership and voting
control of Harbor, therefore,Harbor. Therefore, the Company now includes the accounts of
Harbor in its consolidated financial statements.
The above acquisition has been accounted for under the purchase method
of accounting and, accordingly, the purchase price has been allocated
to the acquired assets and liabilities based on preliminary estimates
of the fair values of the assets purchased and the liabilities assumed
as of the date of acquisition. The estimated purchase price allocations
are subject to adjustment, generally within one year of the date of the
acquisition. The purchase price and related acquisition costs exceeded
the fair values assigned to net tangible assets by approximately $9.5$9.3
million, which was recorded as long-lived intangible assets.
The impact of this acquisition was not material in relation to the
Company's results of operations. Consequently, pro forma information is
not presented.
13
(12) LEGAL PROCEEDINGS
In June 2002, a forest fire damaged approximately 10,80011,000 acres of
private and government land located near Deadwood and Lead, South
Dakota. The fire destroyed approximately 20 structures (seven houses
and 13 outbuildings) and caused the evacuation of the cities of Lead
and Deadwood for approximately 48 hours.
The cause of the fire was investigated by the State of South Dakota.
SaggingAlleged contact between power lines owned by usthe Company and
undergrowth were implicated as the cause. We haveThe Company has initiated ourits
own investigation into the cause of the fire, including the hiring of
expert fire investigators and that investigation is continuing.
Although we haveThe Company has been put on notice of potential private civil claims
nofor property damage and business loss. In addition, the State of South
Dakota initiated a civil action or regulatory proceeding has been initiated against us at this
time.in the Seventh Judicial Circuit Court,
Pennington County, South Dakota, seeking recovery of damages for fire
suppression costs, reclamation and remediation. If however, it is determined
that sagging power lines owned by
us wereline contact was the cause of the fire, and that we werethe Company
was negligent in the maintenance of those power lines, wethe Company
could be liable for resultant damages. Although weManagement cannot predict the
outcome of either ourthe Company's investigation, or the viability of
potential claims, managementclaims. Management believes that any such claims will not
have a material adverse effect on ourthe Company's financial condition or
results of operations.
(13) SUBSEQUENT EVENT
On August 13, 2002, the Company issued $75 million of First Mortgage
Bonds, Series AE, due 2032. The Mortgage Bonds have a 7.23% coupon with
interest payable semi-annually, commencing February 15, 2003. Net
proceeds from the offering were and will be used to fund the Company's
portion of construction and installation costs for an AC-DC-AC
Converter Station; for general capital expenditures for the remainder
of 2002 and 2003; to repay a portion of current bank indebtedness; to
satisfy bond maturities for certain outstanding first mortgage bonds
due in 2003; and for general corporate purposes.
14
ITEM 2. RESULTS OF OPERATIONS
Consolidated Results
Three Months Ended JuneSeptember 30, 2002 Compared to Three Months Ended
JuneSeptember 30, 2001. Consolidated net income for the three months ended
JuneSeptember 30, 2002 was $9.1$11.0 million compared to $20.0$8.3 million in the
same period of the prior year. The decreaseincrease in net income is a result
of decreasedincreased generating capacity, increased earnings from additional
ownership of an energy partnership and increased off-system sales
and increased depreciation expense,partially offset by increased generating capacity.depreciation expense.
Consolidated revenues for the three months ended JuneSeptember 30, 2002
were $75.5$77.7 million compared to $84.1$63.2 million for the same period of the
prior year. The decreaseincrease in revenues was a result of decreased prices
forincreased
off-system sales by our electric utility offset byand expanded power production.
SixNine Months Ended JuneSeptember 30, 2002 Compared to SixNine Months Ended
JuneSeptember 30, 2001. Consolidated net income for the sixnine months ended
JuneSeptember 30, 2002 was $21.1$32.1 million compared to $41.1$49.3 million in the
same period of the prior year. Consolidated income from continuing
operations, before change in accounting principle, for the six-monthnine-month
period ended JuneSeptember 30, 2002 was $20.2$31.2 million compared to $36.2$44.5
million for the same period in the prior year. As discussed in Note 2
of Notes to Consolidated Financial Statements, during the quarter ended
March 31, 2001, the Company distributed its ownership interest in
Wyodak to its parent company, Black Hills Corporation. The consolidated
Condensed Statement of Income has been restated to reflect the
continuing operations of the Company.
The decrease in income from continuing operations is a result of
decreased off-system sales, a substantial decrease in prevailing prices
for wholesale electricity and increased depreciation expense,expense. These
factors were partially offset by increased generating capacity,
increased earnings from additional ownership of an energy partnership
and the collection of previously reserved amounts for California
operations.
Consolidated revenues for the sixnine months ended JuneSeptember 30, 2002 were
$143.1$217.7 million compared to $172.7$227.4 million for the same period of the
prior year. The decrease in revenues was a result of decreased prices
for off-system sales by our electric utility, partially offset by
expanded power production. Wholesale electricity average peak prices at
Mid-Columbia were approximately $182 per megawatt-hour during the first
nine months of 2001 compared to approximately $21 per megawatt-hour
during the first nine months of 2002.
15
Electric Utility
Three Months Ended SixNine Months Ended
JuneSeptember 30 JuneSeptember 30
2002 2001 2002 2001
---- ---- ---- ----
(in thousands)
Revenue $38,303 $61,601 $75,494 $132,180$45,291 $43,518 $120,786 $175,698
Operating income 13,353 29,310 27,680 57,974
Net income 6,792 16,784 14,614 34,124
EBITDA 17,845 33,337 36,471 66,50615,975 15,246 43,655 73,221
Income from
continuing operations 8,304 7,929 22,918 42,053
The following table provides certain operating statistics:
Three Months Ended Nine Months Ended
September 30 September 30
2002 2001 2002 2001
---- ---- ---- ----
(in MWh's)
Firm (system) sales 510,500 537,000 1,466,000 1,527,000
Off-system sales 317,600 211,000 688,700 761,000
15
Three Months Ended JuneSeptember 30, 2002 Compared to Three Months Ended
JuneSeptember 30, 2001. Electric utility revenues decreased 38increased 4 percent for
the three-month period ended JuneSeptember 30, 2002, compared to the same
period in the prior year. Net income for the segment decreased 60increased 5
percent from the same period in the prior year. The decreaseincrease in
revenues and net income was primarily due to a 2851 percent decreaseincrease in
wholesale
off-system electric megawatt-hour sales, atwhich was partially offset by
average prices received that were 6822 percent lower than the average
prices received in the same period of the prior year. Firm residential
and contracted electricity sales increased, but were offset by a
decline in industrial sales due to the closing of Homestake Gold Mine
at year-end 2001. Fuel and purchased power expense decreased 266 percent
for the three monththree-month period ended JuneSeptember 30, 2002 compared to the
same period in 2001, and total operating expense decreased 23increased 4 percent
for the same period.
SixNine Months Ended JuneSeptember 30, 2002 Compared to SixNine Months Ended
JuneSeptember 30, 2001. Electric utility revenues decreased 4331 percent for
the six-monthnine-month period ended JuneSeptember 30, 2002, compared to the same
period in the prior year. Net income for the segment decreased 5746
percent from the same period in the prior year. The decrease in
revenues and net income was primarily due to a 3310 percent decrease in
wholesale off-system electric megawatt-hour sales at average prices received that
were 7569 percent lower than average prices received in the same period
of the prior year. Firm residential and contracted electricity sales
increased, but were offset by a decline in industrial sales due to the
closing of Homestake Gold Mine at year-end 2001. Fuel and purchased
power expense decreased 5441 percent for the six monthnine-month period ended
JuneSeptember 30, 2002 compared to the same period in 2001, and operating
expense decreased 3625 percent for the same period.
16
Independent Power Production
Three Months Ended SixNine Months Ended
JuneSeptember 30 JuneSeptember 30
2002 2001 2002 2001
---- ---- ---- ----
(in thousands)
Revenue $37,206 $22,476 $67,600 $40,521$32,391 $19,649 $96,958 $51,669
Operating income 14,441 11,214 29,039 16,779
Net income 2,339 3,187 6,501 2,096
EBITDA 19,641 14,161 40,496 21,35411,822 7,670 40,861 24,448
Income from
continuing operations 2,709 329 8,316 2,425
Three Months Ended JuneSeptember 30, 2002 Compared to Three Months Ended
JuneSeptember 30, 2001. Independent power revenues increased 6665 percent for
the three-month period ended JuneSeptember 30, 2002, compared to the same
period in the prior year. ThisThe substantial increase in revenues was
offset by a 58 percent increase in operating expense. These increases
can be attributed to additional generating capacity.capacity and increased
earnings from additional ownership of an energy partnership. As of
JuneSeptember 30, 2002, we had 606657 megawatts of independent power capacity
in service compared to 287625 megawatts as of
Juneat September 30, 2001.
An 102 percent increaseApproximately 300 megawatts of the 625 megawatts of capacity at
September 30, 2001 were placed in operatingservice during the third quarter of
2001. Additional partnership equity was earned by the Company in July
2002 as a result of certain performance measures being met at a
consolidated energy partnership. The earnings impact was approximately
$1.6 million pre-tax and was recorded as a reduction to "Minority
interest" expense and a 53
percent increase in interest expense contributed to a 27 percent
decrease in net income.
Sixon the accompanying Condensed Consolidated Statement
of Income.
Nine Months Ended JuneSeptember 30, 2002 Compared to SixNine Months Ended
JuneSeptember 30, 2001. Independent power revenues increased 6788 percent for
the six-monthnine-month period ended JuneSeptember 30, 2002 compared to the same
period in the prior year. Operating income increased 7367 percent for the
same period. Net
incomeIncome from continuing operations for the six-monthnine-month
period was more than triple netthree times income from continuing operations for
the prior six-monthnine-month period. Additional independent power capacity and
increased earnings from additional ownership of 606
megawatts at June 30, 2002, compared to 287 megawatts at June 30, 2001an energy partnership
contributed to
16
the increase in revenue and net income and was partially
offset by increased depreciation and interest expense. As of September
30, 2002, we had 657 megawatts of independent power capacity in service
compared to 625 megawatts at September 30, 2001. Approximately 300
megawatts of the 625 megawatts of capacity at September 30, 2001 were
placed in service during the third quarter of 2001. In addition for the
nine months ended September 30, 2002, $1.9 million after-tax was
collected for previously recorded reserves pertaining to exposure in
the California markets and the adoption of SFAS 142 resulted in a net
income benefit of $0.9 million after tax.
17
Forward Looking Statements
Some of the statements in this Form 10-Q include "forward-looking
statements" as defined by the Securities and Exchange Commission, or
SEC. We make these forward-looking statements in reliance on the safe
harbor protections provided under the Private Securities Litigation
Reform Act of 1995. All statements, other than statements of historical
facts, included in this Form 10-Q that address activities, events or
developments that we expect, believe or anticipate will or may occur in
the future are forward-looking statements. 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
could cause actual results to differ materially from those contained in
the forward-looking statements, including, among other things: (1)
unanticipated developments in the western power markets, including
unanticipated governmental intervention, deterioration in the financial
condition of counterparties, default on amounts due from
counterparties, adverse changes in current or future litigation,
adverse changes in the tariffs of the California Independent System
Operator, market disruption and adverse changes in energy and commodity
supply, volume and pricing and interest rates; (2) prevailing
governmental policies and regulatory actions with respect to allowed
rates of return, industry and rate structure, acquisition and disposal
of assets and facilities, operation and construction of plant
facilities, recovery of purchased power and other capital investments,
and present or prospective wholesale and retail competition; (3) the
State of California's efforts to reform its long-term power purchase
contracts;contracts and recover refunds for alleged price manipulation; (4)
changes in and compliance with environmental and safety laws and
policies; (5) weather conditions; (6) population growth and demographic
patterns; (7) competition for retail and wholesale customers; (8)
pricing and transportation of commodities; (9) market demand, including
structural market changes; (10) changes in tax rates or policies or in
rates of inflation; (11) changes in project costs; (12) unanticipated
changes in operating expenses or capital expenditures; (13) capital
market conditions; (14) technological advances by competitors; (15)
competition for new energy development opportunities; (16) legal and
administrative proceedings that influence our business and
profitability; (17) the effects on our business, including the
availability of insurance, resulting from the terrorist actions on
September 11, 2001, or any other terrorist actions or responses to such
actions; (18) the effects on our business resulting from the financial
difficulties of Enron and other energy companies, including their
effects on liquidity in the trading and power industry, and their
effects on the capital markets views of the energy or trading industry,
and our ability to access the capital markets on the same favorable
terms as in the past; (19) the effects on our business in connection
with a lowering of our credit rating (or actions we may take in
response to changing credit ratings criteria), including, increased
collateral requirements to execute our business plan, demands for
increased collateral by our current counterparties, refusal by our
current or potential counterparties or customers to enter into
transactions with us and our inability to obtain credit or capital in
amounts or on terms favorable to us; (20) risk factors discussed in
this Form 10-Q; and (21) other factors
17
discussed from
time to time in our filings with the SEC. 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
18
no obligation to update publicly any such forward-looking statements,
whether as a result of new information, future events, or otherwise.
18ITEM 4. CONTROLS AND PROCEDURES
With the participation of management, our Chief Executive Officer and
Chief Financial Officer evaluated our disclosure controls and
procedures within 90 days of the filing of this quarterly report. Based
on this evaluation, the Chief Executive Officer and Chief Financial
Officer concluded that the disclosure controls and procedures are
effective in ensuring that information required to be disclosed by us
in the reports filed or submitted by us under the Exchange Act is
recorded, processed, summarized and reported within the time periods
specified in the Securities and Exchange Commission's rules and forms.
There have been no significant changes in our internal controls or
other factors that could significantly affect these controls subsequent
to the date of their evaluation, including any significant deficiencies
or material weaknesses of internal controls that would require
corrective action.
19
BLACK HILLS POWER, INC.
Part II - Other Information
Item 1. Legal Proceedings
For information regarding legal proceedings, see Note 11 to
the Company's 2001 Annual Report on Form 10-K and Note 12 in
Item 1 of Part I of this Quarterly Report on Form 10-Q, which
information from Note 12 is incorporated by reference into
this item.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits -
Exhibit 10.1 The First Supplemental Indenture, dated as
of August 13, 2002, between Black Hills
Power, Inc. and JPMorgan Chase Bank, as
Trustee.
Exhibit 99.1 Certification pursuant to 18
U.S.C. Section 1350, as adopted
pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
Exhibit 99.2 Certification pursuant to 18
U.S.C. Section 1350, as adopted
pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
(b) Reports on Form 8-K
We have not filed the followingany Reports on Form 8-K during the
quarter ended JuneSeptember 30, 2002:
Form 8-K dated May 31, 2002.
Reported under
Item 4, the change in our independent public
accountants from Arthur Andersen LLP to Deloitte &
Touche LLP.
1920
BLACK HILLS POWER, INC.
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.
BLACK HILLS POWER, INC.
/s/ Roxann R. Basham
---------------------------------------------
Roxann R. Basham, Vice President - Controller
(Principal Accounting Officer)Daniel P. Landguth
-------------------------------------------
Daniel P. Landguth, Chairman and
Chief Executive Officer
/s/ Mark T. Thies
----------------------------------------------------------------------------------------
Mark T. Thies, Senior Vice President and
Chief Financial Officer
(Principal Financial Officer)
Dated: AugustNovember 14, 2002
2021
CERTIFICATION
I, Daniel P. Landguth, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Black Hills
Power, Inc.;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant
and we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of registrant's board of directors (or persons
performing the equivalent function):
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's
ability to record, process, summarize and report financial data
and have identified for the registrant's auditors any material
weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
22
6. The registrant's other certifying officers and I have indicated in
this quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent
evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.
Date: November 14, 2002
/s/ Daniel P. Landguth
----------------------------
Chairman and
Chief Executive Officer
23
CERTIFICATION
I, Mark T. Thies, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Black Hills
Power, Inc.;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant
and we have:
a. designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
quarterly report is being prepared;
b. evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this quarterly report (the "Evaluation Date"); and
c. presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of registrant's board of directors (or persons
performing the equivalent function):
a. all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's
ability to record, process, summarize and report financial data
and have identified for the registrant's auditors any material
weaknesses in internal controls; and
b. any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
24
6. The registrant's other certifying officers and I have indicated in
this quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent
evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.
Date: November 14, 2002
/s/ Mark T. Thies
----------------------------
Senior Vice President and
Chief Financial Officer
25
EXHIBIT INDEX
Exhibit (99.1)Number Description
Exhibit 10.1 The First Supplemental Indenture, dated as of
August 13, 2002, between Black Hills
Power, Inc. and JPMorgan Chase Bank, as Trustee.
Exhibit 99.1 Certification pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
Exhibit (99.2)99.2 Certification pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
26