UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
10-Q
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| For the quarterly period ended | For the quarterly period ended June 30, 2020 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________.
Commission File Number 001-7978
Black Hills Power, Inc. Incorporated in South Dakota IRS Identification Number 46-0111677
7001 Mount Rushmore Road Rapid City, South Dakota 57702 Registrant’s telephone number (605) 721-1700
Former name, former address, and former fiscal year if changed since last report NONE
June 30, 2019
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☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| For the transition period from __________ to __________. |
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| Commission File Number | 1-7978 |
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Black Hills Power, Inc. |
Incorporated in | South Dakota | IRS Identification Number | 46-0111677 |
7001 Mount Rushmore Road | | Rapid City | | South Dakota | | 57702 |
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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 ☒ No ☐
Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the Registrant was required to submit and post such files). Yes ☒ No ☐
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Large Accelerated Filer | o | | Accelerated Filer | o |
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Non-accelerated Filer | x | (Do not check if a smaller reporting company) | | |
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Large Accelerated Filer | o | | Accelerated Filer | o |
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Non-accelerated Filer | x | (Do not check if a smaller reporting company) |
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| | | Smaller Reporting Company | ☐ |
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| | | Emerging Growth Company | ☐ |
If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
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Securities registered pursuant to Section 12(b) of the Act: None
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As of July 31, 2019,2020, 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.
TABLE OF CONTENTS
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Item 1. | | | |
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Item 2. | | | |
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Item 4. | | | |
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Item 1. | | | |
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Item 1.1A. | | | |
Item 6. | | | |
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GLOSSARY OF TERMS AND ABBREVIATIONS
The following terms and abbreviations appear in the text of this report and have the definitions described below:
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AFUDC | Allowance for Funds Used During Construction |
ASCAOCI | Accumulated Other Comprehensive Income |
ASC | Accounting Standards Codification |
ASU | Accounting Standards Update issued by the FASB |
BHC | Black Hills Corporation;Corporation, the Parent Companyof Black Hills Power, Inc. |
Black Hills Energy | The name used to conduct the business of BHCour utility companiescompany as well as our affiliates. |
Black Hills Service CompanyBHSC | Black Hills Service Company, LLC, a direct, wholly-owned subsidiary of BHC |
Cheyenne Light | Cheyenne Light, Fuel and Power Company, a direct, wholly-owned subsidiary of Black Hills Corporation (doing business as Black Hills Energy and providing electric service)Energy) |
CARES Act | Coronavirus Aid, Relief, and Economic Security Act, signed on March 27, 2020, which is a tax and spending package intended to provide additional economic relief and address the impact of the COVID-19 pandemic. |
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Cooling degree day (CDD) | A cooling degree day is equivalent to each degree that the average of the high and low temperature for a day is above 65 degrees. The warmer the climate, the greater the number of cooling degree days. Cooling degree days are used in the utility industry to measure the relative warmth of weather and to compare relative temperatures between one geographic area and another. Normal degree days are based on the National Weather Service data for selected locations. |
CPCNCorriedale | Certificate of Public ConvenienceWind project near Cheyenne, Wyoming, that will be a 52.5 MW wind farm jointly owned by South Dakota Electric and NecessityWyoming Electric and will serve as the dedicated wind energy supply to the Renewable Ready program. |
FASBCOVID-19 | The official name for the 2019 novel coronavirus disease announced on February 11, 2020 by the World Health Organization, that is causing a global pandemic. |
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FASB | Financial Accounting Standards Board |
FERC | United States Federal Energy Regulatory Commission |
Fitch | Fitch Ratings, Inc. |
GAAP | Accounting principles generally accepted in the United States of America |
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Happy Jack | Happy Jack Wind Farms, LLC, a subsidiary of Duke Energy Generation Services |
Heating degree day (HDD) | A heating degree day is equivalent to each degree that the average of the high and the low temperatures for a day is below 65 degrees. The colder the climate, the greater the number of heating degree days. Heating degree days are used in the utility industry to measure the relative coldness of weather and to compare relative temperatures between one geographic area and another. Normal degree days are based on the National Weather Service data for selected locations. |
Horizon Point | BHC Corporate headquarters building in Rapid City, South Dakota, which was completed in 2017. |
LIBORICFR | Internal Controls over Financial Reporting |
LIBOR | London Interbank Offered Rate |
Moody’s | Moody’s Investors Service, Inc. |
MW | Megawatts |
MWhMW | Megawatt-hoursMegawatts |
ParentMWh | Megawatt-hours |
Parent | Black Hills Corporation |
SDPUCRenewable Ready | Voluntary renewable energy subscription program for large commercial, industrial and governmental agency customers in South Dakota Public Utilities Commissionand Wyoming. |
SEC | U. S. |
SEC | United States Securities and Exchange Commission |
Silver Sage | Silver Sage Windpower, LLC, a subsidiary of Duke Energy Generation Services |
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South Dakota Electric | Black Hills Power, which includes operationsInc., a direct, wholly-owned subsidiary of Black Hills Corporation, providing electric service to customers in Montana, South Dakota and Wyoming and Montana(doing business as Black Hills Energy). |
S&P | Standard & Poor’s, a division of The McGraw-Hill Companies, Inc. |
TCJA | |
TCJA | Tax Cuts and Jobs Act enacted December 22, 2017 |
WPSC | Wyoming Public Service Commission |
WRDC | |
WRDC | Wyodak Resources Development Corp., an indirect,a direct, wholly-owned subsidiary of BHCBlack Hills Non-Regulated Holdings (doing business as Black Hills Energy). |
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Wygen III | 110 MW mine-mouth coal-fired power plant in which BHP owns a 52% interest, MDU owns a 25% interest and the City of Gillette owns the remaining 23% interest. BHP operates the plant. |
Wyodak Plant | Wyodak, |
Wyoming Electric | Cheyenne Light, Fuel and Power Company, a 362 MW mine-mouth coal-fired plant in Gillette, Wyoming, owned 80% by Pacificorp and 20% bydirect, wholly-owned subsidiary of Black Hills Energy South Dakota. Our WRDC mine supplies all ofCorporation, providing electric service to customers in the fuel for the plant. |
Cheyenne, Wyoming Electric | Includes Cheyenne Light’s electric utility operations
area (doing business as Black Hills Energy). |
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
BLACK HILLS POWER, INC.
CONDENSED STATEMENTS OF COMPREHENSIVE INCOME
| | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, | |
(unaudited) | 2020 | 2019 | 2020 | 2019 |
| (in thousands) | | | |
Revenue | $ | 62,587 | | $ | 69,246 | | $ | 134,198 | | $ | 148,287 | |
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Operating expenses: | | | | |
Fuel and purchased power | 12,614 | | 18,381 | | 28,601 | | 41,114 | |
Operations and maintenance | 19,204 | | 21,128 | | 40,263 | | 40,685 | |
Depreciation and amortization | 10,762 | | 10,357 | | 21,903 | | 20,434 | |
Taxes - property | 2,280 | | 2,070 | | 4,511 | | 4,102 | |
Total operating expenses | 44,860 | | 51,936 | | 95,278 | | 106,335 | |
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Operating income | 17,727 | | 17,310 | | 38,920 | | 41,952 | |
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Other income (expense): | | | | |
Interest expense incurred net of amounts capitalized (including amortization of debt issuance costs, premiums and discounts) | (5,994) | | (5,449) | | (11,942) | | (10,996) | |
Interest income | (27) | | 172 | | 123 | | 287 | |
Other income (expense), net | (543) | | 291 | | (184) | | (84) | |
Total other income (expense), net | (6,564) | | (4,986) | | (12,003) | | (10,793) | |
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Income before income taxes | 11,163 | | 12,324 | | 26,917 | | 31,159 | |
Income tax (expense) | (1,536) | | (2,176) | | (3,955) | | (5,514) | |
Net income | 9,627 | | 10,148 | | 22,962 | | 25,645 | |
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Other comprehensive income (loss), net of tax: | | | | |
Reclassification of net realized (gains) losses on settled/amortized interest rate swaps (net of tax of $(3), $(7), $(6) and $(7), respectively | 13 | | 25 | | 25 | | 25 | |
Reclassification adjustment of benefit plan liability - net gain (loss) (net of tax of $(7), $(2), $(14) and $(6), respectively) | 25 | | 14 | | 50 | | 26 | |
Other comprehensive income (loss), net of tax | 38 | | 39 | | 75 | | 51 | |
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Comprehensive income | $ | 9,665 | | $ | 10,187 | | $ | 23,037 | | $ | 25,696 | |
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| Three Months Ended June 30, | Six Months Ended June 30, |
(unaudited) | 2019 | 2018 | 2019 | 2018 |
| (in thousands) |
Revenue | $ | 69,246 |
| $ | 70,676 |
| $ | 148,287 |
| $ | 144,491 |
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Operating expenses: | | | | |
Fuel and purchased power | 18,381 |
| 20,753 |
| 41,114 |
| 43,193 |
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Operations and maintenance | 21,128 |
| 18,428 |
| 40,685 |
| 37,579 |
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Depreciation and amortization | 10,357 |
| 9,866 |
| 20,434 |
| 19,750 |
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Taxes - property | 2,070 |
| 2,134 |
| 4,102 |
| 4,110 |
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Total operating expenses | 51,936 |
| 51,181 |
| 106,335 |
| 104,632 |
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Operating income | 17,310 |
| 19,495 |
| 41,952 |
| 39,859 |
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Other income (expense): | | | | |
Interest charges - | | | | |
Interest expense incurred (including amortization of debt issuance costs, premiums, and discounts) | (5,876 | ) | (5,654 | ) | (11,706 | ) | (11,241 | ) |
Allowance for funds used during construction - borrowed | 427 |
| 152 |
| 710 |
| 200 |
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Interest income | 172 |
| 123 |
| 287 |
| 238 |
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Other income (expense), net | 291 |
| (242 | ) | (84 | ) | (359 | ) |
Total other income (expense), net | (4,986 | ) | (5,621 | ) | (10,793 | ) | (11,162 | ) |
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Income before income taxes | 12,324 |
| 13,874 |
| 31,159 |
| 28,697 |
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Income tax expense | (2,176 | ) | (2,749 | ) | (5,514 | ) | (5,812 | ) |
Net income | 10,148 |
| 11,125 |
| 25,645 |
| 22,885 |
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Other comprehensive income (loss), net of tax: | | | | |
Reclassification of net realized (gains) losses on settled/amortized interest rate swaps (net of tax of $(7), $(5), $(7) and $(11), respectively) | 25 |
| 11 |
| 25 |
| 21 |
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Reclassification adjustment of benefit plan liability - net gain (loss) (net of tax of $(2), $(9), $(6) and $(18), respectively) | 14 |
| 17 |
| 26 |
| 34 |
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Other comprehensive income (loss), net of tax | 39 |
| 28 |
| 51 |
| 55 |
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Comprehensive income | $ | 10,187 |
| $ | 11,153 |
| $ | 25,696 |
| $ | 22,940 |
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BLACK HILLS POWER, INC.
CONDENSED BALANCE SHEETS
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| As of | |
(unaudited) | June 30, 2020 | December 31, 2019 |
| (in thousands) | |
ASSETS | | |
Current assets: | | |
Cash | $ | 5 | | $ | 6 | |
Accounts receivable, net | 24,987 | | 25,532 | |
Accounts receivable from affiliates | 6,557 | | 7,838 | |
Materials, supplies and fuel | 31,800 | | 27,950 | |
Regulatory assets, current | 25,043 | | 21,588 | |
Other current assets | 7,064 | | 4,949 | |
Total current assets | 95,456 | | 87,863 | |
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Investments | 5,136 | | 5,079 | |
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Property, plant and equipment | 1,517,000 | | 1,494,670 | |
Less: accumulated depreciation and amortization | (382,896) | | (400,054) | |
Total property, plant and equipment, net | 1,134,104 | | 1,094,616 | |
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Other assets: | | |
Regulatory assets, non-current | 49,951 | | 54,109 | |
Other assets, non-current | 18,560 | | 18,690 | |
Total other assets, non-current | 68,511 | | 72,799 | |
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TOTAL ASSETS | $ | 1,303,207 | | $ | 1,260,357 | |
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| As of |
(unaudited) | June 30, 2019 | December 31, 2018 |
| (in thousands) |
ASSETS | | |
Current assets: | | |
Cash | $ | 5 |
| $ | 112 |
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Accounts receivable, net | 25,882 |
| 28,431 |
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Accounts receivable from affiliates | 5,102 |
| 8,119 |
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Materials, supplies and fuel | 25,313 |
| 24,853 |
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Regulatory assets, current | 22,339 |
| 19,052 |
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Other current assets | 4,460 |
| 4,538 |
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Total current assets | 83,101 |
| 85,105 |
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Investments | 4,846 |
| 4,889 |
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Property, plant and equipment | 1,428,721 |
| 1,381,045 |
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Less: accumulated depreciation and amortization | (390,570 | ) | (376,160 | ) |
Total property, plant and equipment, net | 1,038,151 |
| 1,004,885 |
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Other assets: | | |
Regulatory assets, non-current | 53,364 |
| 56,680 |
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Other assets, non-current | 26,284 |
| 9,729 |
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Total other assets, non-current | 79,648 |
| 66,409 |
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TOTAL ASSETS | $ | 1,205,746 |
| $ | 1,161,288 |
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BLACK HILLS POWER, INC.
CONDENSED BALANCE SHEETS
(Continued)
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| As of | |
(unaudited) | June 30, 2020 | December 31, 2019 |
| (in thousands, except share amounts) | |
LIABILITIES AND STOCKHOLDER’S EQUITY | | |
Current liabilities: | | |
Accounts payable | $ | 18,678 | | $ | 20,654 | |
Accounts payable to affiliates | 35,033 | | 32,121 | |
Accrued liabilities | 30,074 | | 25,492 | |
Money pool notes payable | 56,827 | | 57,585 | |
Notes payable to Parent | 65,000 | | 25,000 | |
Regulatory liabilities, current | 3,353 | | 3,162 | |
Total current liabilities | 208,965 | | 164,014 | |
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Long-term debt | 337,391 | | 340,176 | |
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Deferred credits and other liabilities: | | |
Deferred income tax liabilities, net | 113,079 | | 112,202 | |
Regulatory liabilities, non-current | 161,237 | | 163,009 | |
Benefit plan liabilities | 12,856 | | 14,636 | |
Other deferred credits and other liabilities | 15,738 | | 15,397 | |
Total deferred credits and other liabilities | 302,910 | | 305,244 | |
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Commitments and contingencies (Notes 5, 6 and 9) | | |
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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 | 39,575 | | 39,575 | |
Retained earnings | 392,255 | | 389,312 | |
Accumulated other comprehensive loss | (1,305) | | (1,380) | |
Total stockholder’s equity | 453,941 | | 450,923 | |
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TOTAL LIABILITIES AND STOCKHOLDER’S EQUITY | $ | 1,303,207 | | $ | 1,260,357 | |
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| As of |
(unaudited) | June 30, 2019 | December 31, 2018 |
| (in thousands, except share amounts) |
LIABILITIES AND STOCKHOLDER’S EQUITY | | |
Current liabilities: | | |
Accounts payable | $ | 22,730 |
| $ | 25,122 |
|
Accounts payable to affiliates | 24,737 |
| 25,804 |
|
Accrued liabilities | 38,159 |
| 34,193 |
|
Money pool notes payable | 13,071 |
| 38,690 |
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Notes payable to Parent | 25,000 |
| — |
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Regulatory liabilities, current | 2,392 |
| 2,574 |
|
Total current liabilities | 126,089 |
| 126,383 |
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Long-term debt | 340,105 |
| 340,035 |
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Deferred credits and other liabilities: | | |
Deferred income tax liabilities, net | 117,272 |
| 114,009 |
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Regulatory liabilities, non-current | 162,104 |
| 160,642 |
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Benefit plan liabilities | 14,568 |
| 14,606 |
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Other deferred credits and other liabilities | 15,672 |
| 1,368 |
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Total deferred credits and other liabilities | 309,616 |
| 290,625 |
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Commitments and contingencies (Notes 5, 6 and 9) |
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Stockholder’s equity: | | |
Common stock $1 par value; 50,000,000 shares authorized; 23,416,396 shares issued | 23,416 |
| 23,416 |
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Additional paid-in capital | 39,575 |
| 39,575 |
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Retained earnings | 367,785 |
| 342,145 |
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Accumulated other comprehensive loss | (840 | ) | (891 | ) |
Total stockholder’s equity | 429,936 |
| 404,245 |
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TOTAL LIABILITIES AND STOCKHOLDER’S EQUITY | $ | 1,205,746 |
| $ | 1,161,288 |
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BLACK HILLS POWER, INC.
CONDENSED STATEMENTS OF CASH FLOWS
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(unaudited) | Six Months Ended June 30, | |
| 2020 | 2019 |
| (in thousands) | |
Operating activities: | | |
Net income | $ | 22,962 | | $ | 25,645 | |
Adjustments to reconcile net income to net cash provided by operating activities: | | |
Depreciation and amortization | 21,903 | | 20,434 | |
Deferred income tax | (987) | | 2,004 | |
Employee benefits | 649 | | 389 | |
Other adjustments, net | 1,345 | | 1,767 | |
Change in operating assets and liabilities: | | |
Accounts receivable and other current assets | (3,611) | | 4,841 | |
Accounts payable and other current liabilities | 1,642 | | 47 | |
Regulatory assets - current | (693) | | (2,037) | |
Regulatory liabilities - current | 191 | | (131) | |
Contributions to defined benefit pension plan | (1,739) | | — | |
Other operating activities, net | (409) | | (2,372) | |
Net cash provided by operating activities | 41,253 | | 50,587 | |
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Investing activities: | | |
Property, plant and equipment additions | (56,837) | | (49,387) | |
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Other investing activities | (804) | | (688) | |
Net cash (used in) investing activities | (57,641) | | (50,075) | |
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Financing activities: | | |
Change in money pool notes payable, net | (758) | | (619) | |
Net borrowings of Notes payable to Parent | 40,000 | | — | |
Long-term debt - repayments | (2,855) | | — | |
Dividend to Parent company | (20,000) | | — | |
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Net cash provided by (used in) financing activities | 16,387 | | (619) | |
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Net change in cash | (1) | | (107) | |
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Cash, beginning of period | 6 | | 112 | |
Cash, end of period | $ | 5 | | $ | 5 | |
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Supplemental cash flow information: | | |
Cash (paid) during the period for - | | |
Interest (net of amounts capitalized) | $ | (11,681) | | $ | (11,342) | |
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Non-cash investing and financing activities - | | |
Accrued property, plant and equipment purchases at June 30 | $ | 11,573 | | $ | 15,316 | |
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(unaudited) | Six Months Ended June 30, |
| 2019 | 2018 |
| (in thousands) |
Operating activities: | | |
Net income | $ | 25,645 |
| $ | 22,885 |
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Adjustments to reconcile net income to net cash provided by operating activities: | | |
Depreciation and amortization | 20,434 |
| 19,750 |
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Deferred income tax | 2,004 |
| (1,407 | ) |
Employee benefits | 389 |
| 760 |
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Other adjustments, net | 1,767 |
| 1,091 |
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Change in operating assets and liabilities: | | |
Accounts receivable and other current assets | 4,841 |
| (1,494 | ) |
Accounts payable and other current liabilities | 47 |
| 2,170 |
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Regulatory assets - current | (2,037 | ) | 2,797 |
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Regulatory liabilities - current | (131 | ) | 5,709 |
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Other operating activities, net | (2,372 | ) | (458 | ) |
Net cash provided by (used in) operating activities | 50,587 |
| 51,803 |
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Investing activities: | | |
Property, plant and equipment additions | (49,387 | ) | (27,399 | ) |
Proceeds from sale of assets | — |
| 4,994 |
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Other investing activities | (688 | ) | (4,961 | ) |
Net cash provided by (used in) investing activities | (50,075 | ) | (27,366 | ) |
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Financing activities: | | |
Change in money pool notes payable, net | (619 | ) | (24,448 | ) |
Net cash provided by (used in) financing activities | (619 | ) | (24,448 | ) |
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Net change in cash | (107 | ) | (11 | ) |
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Cash, beginning of period | 112 |
| 16 |
|
Cash, end of period | $ | 5 |
| $ | 5 |
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See Note 8 for supplemental cash flow information.
BLACK HILLS POWER, INC.
CONDENSED STATEMENTS OF COMMON STOCKHOLDER’S EQUITY
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(unaudited) | Common Stock | | | | | |
(in thousands, except share amounts) | Shares | Value | Additional Paid in Capital | Retained Earnings | AOCI | Total |
December 31, 2019 | 23,416,396 | | $ | 23,416 | | $ | 39,575 | | $ | 389,312 | | $ | (1,380) | | $ | 450,923 | |
Net income | — | | — | | — | | 13,335 | | — | | 13,335 | |
Other comprehensive income (loss), net of tax | — | | — | | — | | — | | 37 | | 37 | |
Dividend to Parent company | — | | — | | — | | (20,000) | | — | | (20,000) | |
Implementation of ASU 2016-13 Financial Instruments — Credit Losses | — | | — | | — | | (19) | | — | | (19) | |
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March 31, 2020 | 23,416,396 | | $ | 23,416 | | $ | 39,575 | | $ | 382,628 | | $ | (1,343) | | $ | 444,276 | |
Net income | — | | — | | — | | 9,627 | | — | | 9,627 | |
Other comprehensive income (loss), net of tax | — | | — | | — | | — | | 38 | | 38 | |
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June 30, 2020 | 23,416,396 | | $ | 23,416 | | $ | 39,575 | | $ | 392,255 | | $ | (1,305) | | $ | 453,941 | |
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| Common Stock | | | | | |
(in thousands except share amounts) | Shares | Value | Additional Paid in Capital | Retained Earnings | AOCI | Total |
December 31, 2018 | 23,416,396 | | $ | 23,416 | | $ | 39,575 | | $ | 342,145 | | $ | (891) | | $ | 404,245 | |
Net income | — | | — | | — | | 15,497 | | — | | 15,497 | |
Other comprehensive income (loss), net of tax | — | | — | | — | | — | | 12 | | 12 | |
| | | | | | |
| | | | | | |
Cumulative effect of ASC 842 implementation | — | | — | | — | | (7) | | — | | (7) | |
Other adjustments | — | | — | | — | | 1 | | — | | 1 | |
March 31, 2019 | 23,416,396 | | $ | 23,416 | | $ | 39,575 | | $ | 357,636 | | $ | (879) | | $ | 419,748 | |
Net income | — | | — | | — | | 10,148 | | — | | 10,148 | |
Other comprehensive income (loss), net of tax | — | | — | | — | | — | | 39 | | 39 | |
Other adjustments | — | | — | | — | | 1 | | — | | 1 | |
June 30, 2019 | 23,416,396 | | $ | 23,416 | | $ | 39,575 | | $ | 367,785 | | $ | (840) | | $ | 429,936 | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
|
| | | | | | | | | | | | | | | | | |
| Common Stock | | | | |
(in thousands, except share amounts) | Shares | Value | Additional Paid in Capital | Retained Earnings | AOCI | Total |
December 31, 2018 | 23,416,396 |
| $ | 23,416 |
| $ | 39,575 |
| $ | 342,145 |
| $ | (891 | ) | $ | 404,245 |
|
Net income (loss) available for common stock | — |
| — |
| — |
| 15,497 |
| — |
| 15,497 |
|
Other comprehensive income (loss), net of tax | — |
| — |
| — |
| — |
| 12 |
| 12 |
|
Cumulative effect of ASC 842 implementation | — |
| — |
| — |
| (7 | ) | — |
| (7 | ) |
Other adjustments | — |
| — |
| — |
| 1 |
| — |
| 1 |
|
March 31, 2019 | 23,416,396 |
| $ | 23,416 |
| $ | 39,575 |
| $ | 357,636 |
| $ | (879 | ) | $ | 419,748 |
|
Net income (loss) available for common stock | — |
| — |
| — |
| 10,148 |
| — |
| 10,148 |
|
Other comprehensive income (loss), net of tax | — |
| — |
| — |
| — |
| 39 |
| 39 |
|
Other adjustments | — |
| — |
| — |
| 1 |
| — |
| 1 |
|
June 30, 2019 | 23,416,396 |
| $ | 23,416 |
| $ | 39,575 |
| $ | 367,785 |
| $ | (840 | ) | $ | 429,936 |
|
| | | | | | |
|
| | | | | | | | | | | | | | | | | |
| Common Stock | | | | |
(in thousands except share amounts) | Shares | Value | Additional Paid in Capital | Retained Earnings | AOCI | Total |
December 31, 2017 | 23,416,396 |
| $ | 23,416 |
| $ | 39,575 |
| $ | 332,499 |
| $ | (1,258 | ) | $ | 394,232 |
|
Net income (loss) available for common stock | — |
| — |
| — |
| 11,760 |
| — |
| 11,760 |
|
Other comprehensive income (loss), net of tax | — |
| — |
| — |
| — |
| 27 |
| 27 |
|
Dividend to Parent company | — |
| — |
| — |
| (16,000 | ) | — |
| (16,000 | ) |
Other adjustments | — |
| — |
| — |
| 1 |
| — |
| 1 |
|
March 31, 2018 | 23,416,396 |
| $ | 23,416 |
| $ | 39,575 |
| $ | 328,260 |
| $ | (1,231 | ) | $ | 390,020 |
|
Net income (loss) available for common stock | — |
| — |
| — |
| 11,125 |
| — |
| 11,125 |
|
Other comprehensive income (loss), net of tax | — |
| — |
| — |
| — |
| 28 |
| 28 |
|
Dividend to Parent company | — |
| — |
| — |
| (10,000 | ) | — |
| (10,000 | ) |
June 30, 2018 | 23,416,396 |
| $ | 23,416 |
| $ | 39,575 |
| $ | 329,385 |
| $ | (1,203 | ) | $ | 391,173 |
|
BLACK HILLS POWER, INC.
Notes to Condensed Financial Statements
(unaudited)
(Reference is made to Notes to Financial Statements
included in our 20182019 Annual Report on Form 10-K)
(1) MANAGEMENT’S STATEMENTManagement’s Statement
The unaudited condensed financial statements included herein have been prepared by Black Hills Power, Inc. (the(“South Dakota Electric”, the “Company,” “we,” “us,”“us” or “our”), pursuant to the rules and regulations of the SEC. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such rules and regulations; however, we believe that the footnotes adequately disclose the information presented. These condensed financial statements should be read in conjunction with the financial statements and the notes thereto, included in our 20182019 Annual Report on Form 10-K filed with the SEC.
The information furnished in the accompanying condensed financial statements reflects certain estimates required and all adjustments, including accruals, which are, in the opinion of management, necessary for a fair presentation of the June 30, 2019,2020, December 31, 20182019 and June 30, 20182019 financial information and are of a normal recurring nature. The results of operations for the three and six months ended June 30, 20192020 and June 30, 2018,2019, and our financial condition as of June 30, 20192020 and December 31, 20182019 are not necessarily indicative of the results of operations and financial condition to be expected as of or for any other period.
COVID-19 Pandemic
In March 2020, the World Health Organization categorized COVID-19 as a pandemic and the President of the United States declared the outbreak a national emergency. The U.S. government has deemed electric utilities to be a critical infrastructure sector that provides essential services during this emergency. As a provider of essential services, the Company has an obligation to provide services to our customers. The Company remains focused on protecting the health of its employees and the communities in which it operates while assuring the continuity of its business operations.
The Company’s Condensed Financial Statements reflect estimates and assumptions made by management that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the Condensed Financial Statements and reported amounts of revenue and expenses during the reporting periods presented. The Company considered the impacts of COVID-19 on the assumptions and estimates used and determined that for the three and six months ended June 30, 2020, there were no material adverse impacts on the Company’s results of operations.
Change in Accounting Principle - Pension Accounting Asset Method
Effective January 1, 2020, we changed our method of accounting for net periodic benefit cost. Prior to the change, the Company used a calculated value for determining market-related value of plan assets which amortized the effects of gains and losses over a five-year period. Effective with the accounting change, the Company will use a calculated value for the return-seeking assets (equities) in the portfolio and change to fair value for the liability-hedging assets (fixed income). See Note 6 for additional information.
Recently Issued Accounting Standards
Simplifying the Accounting for Income Taxes, ASU 2019-12
In December 2019, the FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes as part of its overall simplification initiative to reduce costs and complexity in applying accounting standards while maintaining or improving the usefulness of the information provided to users of the financial statements. Amendments include removal of certain exceptions to the general principles of ASC 740, Income Taxes, and simplification in several other areas such as accounting for a franchise tax (or similar tax) that is partially based on income. The new guidance is effective for interim and annual periods beginning after December 15, 2020 with early adoption permitted. We are currently reviewing this standard to assess the impact on our financial position, results of operations and cash flows.
Recently Adopted Accounting Standards
Financial Instruments -- Credit Losses: Measurement of Credit Losses on Financial Instruments, ASU 2018-192016-13
In June 2016, the FASB issued ASU 2016-13, Financial Instruments -- Credit Losses: Measurement of Credit Losses on Financial InstrumentInstruments, s, which was subsequently amended by ASUASUs 2018-19, in November 2018.2019-04, 2019-05, 2019-10, and 2019-11. The standard introduces new accounting guidance for credit losses on financial instruments within its scope, including trade receivables. This new guidance adds an impairment model that is based on expected losses rather than incurred losses. It is effective
We adopted this standard on January 1, 2020, with prior year comparative financial information remaining as previously reported when transitioning to the new standard. On January 1, 2020, we recorded an increase to our allowance for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. We are currently assessingcredit losses, primarily associated with the impactsinclusion of adopting this standard.expected losses on unbilled revenue. The cumulative effect of the adoption, net of tax impact, was recorded as an adjustment to retained earnings.
Internal-Use Software: Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract, ASU 2018-15
Recently Adopted Accounting Standards
Leases, ASU 2016-02
In February 2016,August 2018, the FASB issued ASU 2016-02,2018-15, Leases (Topic 842)Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract, which aligns the requirements for recording implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to increase transparencydevelop or obtain internal-use software. As a result, certain categories of implementation costs that previously would have been charged to expense as incurred are now capitalized as prepayments and comparability among organizations by requiringamortized over the recognitionterm of right-of-use assets and lease liabilities on the balance sheet for most leases, whereas previously only financing-type lease liabilities (capital leases) were recognized on the balance sheet. Under the new standard, disclosures are required to meet the objective of enabling users of financial statements to assess the amount, timing and uncertainty of cash flows arising from leases.
arrangement. We adopted thethis standard effectiveprospectively on January 1, 2019. We elected2020. Adoption of this guidance did not have a material impact on our financial position, results of operations or cash flows.
(2) Revenue
Our revenue contracts generally provide for performance obligations that: are fulfilled and transfer control to customers over time; represent a series of distinct services that are substantially the option to not recast comparative periods presented with transitioningsame; involve the same pattern of transfer to the new lease standardcustomer; and will report these comparative periods as presented under previous lease guidance. In addition, we elected the package of practical expedients permitted under the transition guidance with the new standard, which among other things, allowed usprovide a right to carry forward the historical lease classification. We also elected the practical expedient related to land easements, allowing us to carry forwardconsideration from our accounting treatment of existing land easement agreements.
Adoption of the new standard resulted in the recording of an operating lease right-of-use asset and an off-setting operating lease obligation liability of $14 million as of January 1, 2019. The lease standard did not materially impact our net earnings and had no impact on cash flows.
(2) REVENUE
Revenue Recognition
As of January 1, 2018, we adopted ASU 2014-09, Revenue from Contracts with Customers (Topic 606), and its related amendments (collectively known as ASC 606). Revenue is recognizedcustomers in an amount that reflectscorresponds directly with the considerationvalue to the customer for the performance completed to date. Therefore, we expectrecognize revenue in the amount to receive in exchange for goods or services, when control of the promised goods or services is transferredwhich we have a right to our customers.invoice. The following table depictstables depict the disaggregation of revenue from contracts with customers by customer type and timing of revenue recognition for each of the reporting segments for the three and six months ended June 30, 20192020 and 2018.2019. Sales tax and other similar taxes are excluded from revenues.
| | | | | | | | | | | | | | |
| Three Months Ended June 30, 2020 | Three Months Ended June 30, 2019 | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 |
| (in thousands) | | | |
Customer types: | | | | |
Retail | $ | 46,509 | | $ | 46,809 | | $ | 97,936 | | $ | 99,885 | |
| | | | |
Wholesale | 2,716 | | 6,780 | | 7,098 | | 15,123 | |
Market - off-system sales | 2,004 | | 2,393 | | 4,381 | | 7,063 | |
Transmission/Other | 11,299 | | 13,083 | | 24,599 | | 25,914 | |
Revenue from contracts with customers | 62,528 | | 69,065 | | 134,014 | | 147,985 | |
Other revenues | 59 | | 181 | | 184 | | 302 | |
Total revenues | $ | 62,587 | | $ | 69,246 | | $ | 134,198 | | $ | 148,287 | |
| | | | |
Timing of revenue recognition: | | | | |
| | | | |
Services transferred over time | $ | 62,528 | | $ | 69,065 | | $ | 134,014 | | $ | 147,985 | |
Revenue from contracts with customers | $ | 62,528 | | $ | 69,065 | | $ | 134,014 | | $ | 147,985 | |
|
| | | | | | | | | | | | |
| Three Months Ended June 30, 2019 | Three Months Ended June 30, 2018 | Six Months Ended June 30, 2019 | Six Months Ended June 30, 2018 |
| (in thousands) |
Customer types: | | | | |
Retail | $ | 46,809 |
| $ | 46,525 |
| $ | 99,885 |
| $ | 97,166 |
|
Wholesale | 6,780 |
| 8,191 |
| 15,123 |
| 17,241 |
|
Market - off-system sales | 2,393 |
| 3,449 |
| 7,063 |
| 5,724 |
|
Transmission/Other | 13,083 |
| 12,372 |
| 25,914 |
| 24,090 |
|
Revenue from contracts with customers | 69,065 |
| 70,537 |
| 147,985 |
| 144,221 |
|
Other revenues | 181 |
| 139 |
| 302 |
| 270 |
|
Total revenues | $ | 69,246 |
| $ | 70,676 |
| $ | 148,287 |
| $ | 144,491 |
|
| | | | |
Timing of revenue recognition: | | | | |
Services transferred over time | $ | 69,065 |
| $ | 70,537 |
| $ | 147,985 |
| $ | 144,221 |
|
Revenue from contracts with customers | $ | 69,065 |
| $ | 70,537 |
| $ | 147,985 |
| $ | 144,221 |
|
Contract Balances
(3) Accounts Receivable
Following is a summary of Accounts receivable, net included in the accompanying Condensed Balance Sheets (in thousands) as of:
| | | | | | | | |
| June 30, 2020 | December 31, 2019 |
Accounts receivable, trade | $ | 14,615 | | $ | 14,778 | |
Unbilled revenues | 10,933 | | 10,914 | |
Less allowance for credit losses | (561) | | (160) | |
Accounts receivable, net | $ | 24,987 | | $ | 25,532 | |
|
| | | | | | |
| June 30, 2019 | December 31, 2018 |
Accounts receivable trade | $ | 15,972 |
| $ | 16,236 |
|
Unbilled revenues | 10,110 |
| 12,333 |
|
Allowance for doubtful accounts | (200 | ) | (138 | ) |
Accounts receivable, net | $ | 25,882 |
| $ | 28,431 |
|
Our regulated electric operations are subject to regulation by various state and federal agencies. The accounting policies followed are generally subjectDue to the Uniform SystemCOVID-19 pandemic, we experienced an increase in our accounts receivable arrears balances. As a result, we increased our allowance for credit losses and bad debt expense for the six months ended June 30, 2020 by $0.1 million.
The ongoing credit evaluation of Accountsour customers during the COVID-19 pandemic is further discussed in the Credit Risk section of Note 7.
(4) Regulatory Matters
We had the FERC.
Ourfollowing regulatory assets and liabilities were as follows (in thousands) as of:
| | | | | | | | | | | |
| June 30, 2020 | | December 31, 2019 |
Regulatory assets: | | | |
Loss on reacquired debt (a) | $ | 854 | | | $ | 989 | |
Deferred taxes on AFUDC (b) | 4,840 | | | 4,927 | |
Employee benefit plans and related deferred taxes (c) | 20,810 | | | 20,661 | |
Deferred energy and fuel cost adjustments (b) | 23,937 | | | 23,203 | |
| | | |
Deferred taxes on flow through accounting (c) | 10,727 | | | 9,801 | |
Decommissioning costs (a) | 5,323 | | | 6,211 | |
Vegetation management (a) | 6,911 | | | 8,062 | |
Other regulatory assets (a) | 1,592 | | | 1,843 | |
Total regulatory assets | $ | 74,994 | | | $ | 75,697 | |
Less current regulatory assets | (25,043) | | | (21,588) | |
Regulatory assets, non-current | $ | 49,951 | | | $ | 54,109 | |
|
| | | | | | | |
| June 30, 2019 | | December 31, 2018 |
Regulatory assets: | | | |
Loss on reacquired debt (a) | $ | 1,124 |
| | $ | 1,259 |
|
Deferred taxes on AFUDC (b) | 4,955 |
| | 5,020 |
|
Employee benefit plans and related deferred taxes (c)
| 20,022 |
| | 19,868 |
|
Deferred energy and fuel cost adjustments (b) | 22,195 |
| | 20,334 |
|
Deferred taxes on flow through accounting (c) | 9,201 |
| | 8,749 |
|
Decommissioning costs (a) | 7,168 |
| | 8,196 |
|
Vegetation management (a) | 9,214 |
| | 10,366 |
|
Other regulatory assets (a) | 1,824 |
| | 1,940 |
|
Total regulatory assets | $ | 75,703 |
| | $ | 75,732 |
|
Less current regulatory assets | (22,339 | ) | | (19,052 | ) |
Regulatory assets, non-current | $ | 53,364 |
| | $ | 56,680 |
|
| | | | | | | | | | | | |
Regulatory liabilities: | | | | |
Cost of removal (a) | | $ | 56,339 | | | $ | 57,318 | |
Employee benefit plan costs and related deferred taxes (c) | | 6,986 | | | 7,023 | |
Excess deferred income taxes (c) | | 97,254 | | | 98,228 | |
TCJA revenue reserve | | 3,209 | | | 3,162 | |
Other regulatory liabilities (c) | | 802 | | | 440 | |
Total regulatory liabilities | | $ | 164,590 | | | $ | 166,171 | |
Less current regulatory liabilities | | (3,353) | | | (3,162) | |
Regulatory liabilities, non-current | | $ | 161,237 | | | $ | 163,009 | |
____________________
(a) We are allowed a recovery of costs, but we are not allowed a rate of return.
(b) In addition to recovery of costs, we are allowed a rate of return.
(c) In addition to recovery or repayment of costs, we are allowed a return on a portion of this amount or a reduction in rate base.
Regulatory Activity
|
| | | | | | | |
Regulatory liabilities: | | | |
Cost of removal for utility plant (a) | $ | 54,947 |
| | $ | 52,366 |
|
Employee benefit plan costs and related deferred taxes (c) | 7,518 |
| | 7,518 |
|
Excess deferred income taxes (c) | 99,417 |
| | 100,276 |
|
TCJA revenue reserve | 2,392 |
| | 2,523 |
|
Other regulatory liabilities (c) | 222 |
| | 533 |
|
Total regulatory liabilities | $ | 164,496 |
| | $ | 163,216 |
|
Less current regulatory liabilities | (2,392 | ) | | (2,574 | ) |
Regulatory liabilities, non-current | $ | 162,104 |
| | $ | 160,642 |
|
____________________
| |
(a) | We are allowed a recovery of costs, but we are not allowed a rate of return. |
| |
(b) | In addition to recovery of costs, we are allowed a rate of return. |
| |
(c) | In addition to recovery or repayment of costs, we are allowed a return on a portion of this amount or a reduction in rate base. |
Regulatory Matters
There have been no significant changes to our Regulatory Matters from those previously disclosed in Note 17 of the Notes to the Financial Statements in our 20182019 Annual Report on Form 10-K except as reported below.10-K.
Renewable Ready Service Tariffs and Corriedale Wind Energy Project
South Dakota Electric and Wyoming Electric received approvals for the Renewable Ready Service Tariffs and related jointly-filed CPCN to construct the $57 million, 40 MW Corriedale Wind Energy Project. The wind project will be jointly owned by the two electric utilities to deliver renewable energy for large commercial and industrial customers and governmental agencies. The project is expected to be in service in 2020.(5) Related-Party Transactions
| |
(5) | RELATED-PARTY TRANSACTIONS |
Dividend to Parent
For the six months ended June 30, 2020, we paid a $20 million dividend to BHC. We did not recordpay any dividends for the six months ended June 30, 2019. We recorded non-cash dividends to our Parent of $26 million and decreased the utility Money pool note receivable by $26 million for the six months ended June 30, 2018.
Receivables and Payables
We have accounts receivable and accounts payable balances related to transactions with other BHC subsidiaries. The balances were as follows (in thousands) as of:
| | | | | | | | |
| June 30, 2020 | December 31, 2019 |
Accounts receivable from affiliates | $ | 6,557 | | $ | 7,838 | |
Accounts payable to affiliates | $ | 35,033 | | $ | 32,121 | |
|
| | | | | | |
| June 30, 2019 | December 31, 2018 |
Accounts receivable from affiliates | $ | 5,102 |
| $ | 8,119 |
|
Accounts payable to affiliates | $ | 24,737 |
| $ | 25,804 |
|
Money Pool Notes Receivable and Notes Payable
We participate in the Utility Money Pool Agreement (the Agreement). Under the Agreement, we may borrow from the pool; however the Agreement restricts the pool from loaning funds to BHC or to any of BHC’s non-utility subsidiaries. The Agreement does not restrict us from paying dividends to BHC. Borrowings under the Agreement bear interest at the weighted average daily cost of our parent company’s external borrowings as defined under the Agreement or, if there are no external funds outstanding on that date, then the rate will be the daily one-month LIBOR plus 1.0%. At June 30, 2019,2020, the average cost of borrowing under the Utility Money Pool was 2.78%1.16%.
We had the following balances with the Utility Money Pool (in thousands) as of:
| | | | | | | | |
| June 30, 2020 | December 31, 2019 |
Money pool notes payable | $ | 56,827 | | $ | 57,585 | |
|
| | | | | | |
| June 30, 2019 | December 31, 2018 |
Money pool notes payable | $ | 13,071 |
| $ | 38,690 |
|
Our net interest income (expense) relating to balances with the Utility Money Pool was as follows (in thousands):
| | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, | |
| 2020 | 2019 | 2020 | 2019 |
Net interest (expense) | $ | (201) | | $ | (198) | | $ | (488) | | $ | (471) | |
|
| | | | | | | | | | | | |
| Three Months Ended June 30, | Six Months Ended June 30, |
| 2019 | 2018 | 2019 | 2018 |
Net interest income (expense) | $ | (198 | ) | $ | (96 | ) | $ | (471 | ) | $ | (132 | ) |
Notes payable to Parent
|
| | | | | | |
| June 30, 2019 | December 31, 2018 |
Notes payable to Parent (a) | $ | 25,000 |
| $ | — |
|
(a) Note bears interest at 4.51%, expires December 31, 2019, andOn June 1, 2020, we entered into a $65 million, 4.11% short-term promissory note with BHC. This note is eligible for annual renewal. Interestrenewal at December 31, 2020. The current note replaces the prior $45 million short-term promissory note entered into on March 1, 2020. We had the following balances for our Notes payable related to this noteParent balance (in thousands) as of:
| | | | | | | | |
| June 30, 2020 | December 31, 2019 |
Notes payable to Parent | $ | 65,000 | | $ | 25,000 | |
Our Net interest income (expense) relating to balances of the Notes Payable to Parent was $0.2 million as follows (in thousands):
| | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, | |
| 2020 | 2019 | 2020 | 2019 |
Net interest (expense) | $ | (589) | | $ | (214) | | $ | (977) | | $ | (227) | |
Other related party activity was as follows (in thousands):
| | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, | |
| 2020 | 2019 | 2020 | 2019 |
Revenue: | | | | |
Energy sold to Wyoming Electric | $ | 235 | | $ | 340 | | $ | 529 | | $ | 914 | |
Rent from electric properties | $ | 989 | | $ | 895 | | $ | 1,978 | | $ | 1,791 | |
Horizon Point shared facility revenue | $ | 2,840 | | $ | 3,006 | | $ | 5,680 | | $ | 6,013 | |
| | | | |
Fuel and purchased power: | | | | |
Purchases from WRDC mine | $ | 4,332 | | $ | 3,216 | | $ | 8,649 | | $ | 7,873 | |
Purchase of excess energy from Wyoming Electric | $ | 125 | | $ | 41 | | $ | 286 | | $ | 173 | |
Purchase of renewable wind energy from Wyoming Electric - Happy Jack | $ | 416 | | $ | 342 | | $ | 1,208 | | $ | 877 | |
Purchase of renewable wind energy from Wyoming Electric - Silver Sage | $ | 804 | | $ | 611 | | $ | 2,196 | | $ | 1,594 | |
Gas transportation service agreement with Wyoming Electric for firm and interruptible gas transportation | $ | 82 | | $ | 75 | | $ | 164 | | $ | 151 | |
| | | | |
Operations and maintenance: | | | | |
Corporate support services and fees from BHSC | $ | 9,822 | | $ | 9,451 | | $ | 20,241 | | $ | 19,642 | |
Wygen III ground lease with WRDC | $ | 251 | | $ | 247 | | $ | 502 | | $ | 493 | |
|
| | | | | | | | | | | | |
| Three Months Ended June 30, | Six Months Ended June 30, |
| 2019 | 2018 | 2019 | 2018 |
Revenue: | | | | |
Energy sold to Cheyenne Light | $ | 340 |
| $ | 501 |
| $ | 914 |
| $ | 1,204 |
|
Rent from electric properties | $ | 895 |
| $ | 908 |
| $ | 1,791 |
| $ | 1,817 |
|
Horizon Point shared facility revenues | $ | 3,006 |
| $ | 2,783 |
| $ | 6,013 |
| $ | 5,552 |
|
| | | | |
Fuel and purchased power: | | | | |
Purchases of coal from WRDC | $ | 3,216 |
| $ | 4,249 |
| $ | 7,873 |
| $ | 8,316 |
|
Purchase of excess energy from Cheyenne Light | $ | 41 |
| $ | 82 |
| $ | 173 |
| $ | 168 |
|
Purchase of renewable wind energy from Cheyenne Light - Happy Jack | $ | 342 |
| $ | 381 |
| $ | 877 |
| $ | 1,022 |
|
Purchase of renewable wind energy from Cheyenne Light - Silver Sage | $ | 611 |
| $ | 696 |
| $ | 1,594 |
| $ | 1,789 |
|
Gas transportation service agreement with Cheyenne Light for firm and interruptible gas transportation | $ | 75 |
| $ | 96 |
| $ | 151 |
| $ | 192 |
|
| | | | |
Operations and maintenance: | | | | |
Corporate support services and fees from Black Hills Service Company (a) | $ | 9,451 |
| $ | 7,604 |
| $ | 19,642 |
| $ | 15,210 |
|
Wygen III ground lease with WRDC | $ | 247 |
| $ | 241 |
| $ | 493 |
| $ | 481 |
|
(a) Increase
(6) Employee Benefit Plans
Change in 2019 was primarily dueAccounting Principle - Pension Accounting Asset Method
Effective January 1, 2020, the Company changed its method of accounting for net periodic benefit cost. Prior to higher outsidethe change, the Company used a calculated value for determining market-related value of plan assets which amortized the effects of gains and losses over a five-year period. Effective with the accounting change, the Company will use a calculated value for the return-seeking assets (equities) in the portfolio and fair value for the liability-hedging assets (fixed income). The Company considers the fair value method for determining market-related value of liability-hedging assets to be a preferable method of accounting because asset-related gains and losses are subject to amortization into pension cost immediately. Additionally, the fair value for liability-hedging assets allows for the impact of gains and losses on this portion of the asset portfolio to be reflected in tandem with changes in the liability which is linked to changes in the discount rate assumption for remeasurement.
We evaluated the effect of this change in accounting method and deemed it immaterial to the historical and current financial statements and therefore did not account for the change retrospectively. Accordingly, the Company calculated the cumulative difference using a calculated value versus fair value to determine market-related value for liability-hedging assets of the portfolio. The cumulative effect of this change, as of January 1, 2020, resulted in a $0.1 million decrease to prior service expenses and higher employee costs, driven by labor and benefits.as recorded in Other income (expense), net within the accompanying Condensed Statements of Comprehensive Income for the six months ended June 30, 2020.
| |
(6) | EMPLOYEE BENEFIT PLANS |
Defined Benefit Pension Plan
The components of net periodic benefit cost for the Defined Benefit Pension Plan were as follows (in thousands):
| | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, | |
| 2020 | 2019 | 2020 | 2019 |
Service cost | $ | 92 | | $ | 92 | | $ | 184 | | $ | 183 | |
Interest cost | 463 | | 602 | | 926 | | 1,205 | |
Expected return on plan assets | (781) | | (852) | | (1,562) | | (1,703) | |
Prior service cost | — | | 3 | | — | | 5 | |
Net loss | 510 | | 305 | | 1,021 | | 610 | |
Net periodic benefit cost | $ | 284 | | $ | 150 | | $ | 569 | | $ | 300 | |
|
| | | | | | | | | | | | |
| Three Months Ended June 30, | Six Months Ended June 30, |
| 2019 | 2018 | 2019 | 2018 |
Service cost | $ | 92 |
| $ | 129 |
| $ | 183 |
| $ | 258 |
|
Interest cost | 602 |
| 549 |
| 1,205 |
| 1,097 |
|
Expected return on plan assets | (852 | ) | (887 | ) | (1,703 | ) | (1,773 | ) |
Prior service cost | 3 |
| 11 |
| 5 |
| 22 |
|
Net loss (gain) | 305 |
| 516 |
| 610 |
| 1,032 |
|
Net periodic benefit cost | $ | 150 |
| $ | 318 |
| $ | 300 |
| $ | 636 |
|
Defined Benefit Postretirement Healthcare Plan
The components of net periodic benefit cost for the Defined Benefit Postretirement Healthcare Plan were as follows (in thousands):
| | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, | |
| 2020 | 2019 | 2020 | 2019 |
Service cost | 39 | | 37 | | 78 | | 74 | |
Interest cost | 33 | | 46 | | 65 | | 93 | |
Prior service (benefit) | (84) | | (84) | | (168) | | (168) | |
Net periodic benefit cost | (12) | | (1) | | (25) | | (1) | |
|
| | | | | | | | | | | | |
| Three Months Ended June 30, | Six Months Ended June 30, |
| 2019 | 2018 | 2019 | 2018 |
Service cost | $ | 37 |
| $ | 49 |
| $ | 74 |
| $ | 97 |
|
Interest cost | 46 |
| 44 |
| 93 |
| 89 |
|
Prior service cost (benefit) | (84 | ) | (84 | ) | (168 | ) | (168 | ) |
Net periodic benefit cost | $ | (1 | ) | $ | 9 |
| $ | (1 | ) | $ | 18 |
|
Supplemental Non-qualified Defined Benefit Plans
The components of net periodic benefit cost for the Supplemental Non-qualified Defined Benefit Plans were as follows (in thousands):
| | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, | |
| 2020 | 2019 | 2020 | 2019 |
Interest cost | $ | 21 | | $ | 28 | | $ | 42 | | $ | 57 | |
Net loss | 32 | | 17 | | 63 | | 33 | |
Net periodic benefit cost | $ | 53 | | $ | 45 | | $ | 105 | | $ | 90 | |
|
| | | | | | | | | | | | |
| Three Months Ended June 30, | Six Months Ended June 30, |
| 2019 | 2018 | 2019 | 2018 |
Interest cost | $ | 28 |
| $ | 27 |
| $ | 57 |
| $ | 54 |
|
Net loss (gain) | 17 |
| 26 |
| 33 |
| 52 |
|
Net periodic benefit cost | $ | 45 |
| $ | 53 |
| $ | 90 |
| $ | 106 |
|
Contributions
Contributions to the Defined Benefit Pension Plan are cash contributions made directly to the Pension Plan Trust account. Contributions to the Postretirement Healthcare and Supplemental Plans are made in the form of benefit payments. Contributions made for 20192020 and anticipated contributions for 20192020 and 20202021 are as follows (in thousands):
| | | | | | | | | | | |
| Contributions | Remaining Anticipated Contributions for | Anticipated Contributions for |
| Six Months Ended June 30, 2020 | 2020 | 2021 |
Defined Benefit Pension Plan | $ | 1,739 | | $ | — | | $ | 1,703 | |
Defined Benefit Postretirement Healthcare Plan | $ | 293 | | $ | 293 | | $ | 597 | |
Supplemental Non-qualified Defined Benefit Plans | $ | 160 | | $ | 161 | | $ | 304 | |
|
| | | | | | | | | |
| Contributions Six Months Ended June 30, 2019 | Remaining Anticipated Contributions for 2019 | Anticipated Contributions for 2020 |
Defined Benefit Pension Plan | $ | — |
| $ | 1,753 |
| $ | 1,841 |
|
Defined Benefit Postretirement Healthcare Plan | $ | 233 |
| $ | 233 |
| $ | 466 |
|
Supplemental Non-qualified Defined Benefit Plans | $ | 115 |
| $ | 115 |
| $ | 240 |
|
(7) Derivatives and Fair Values
Market and Credit Risk Disclosures
Our activities in the regulated and non-regulated energy sectors expose us to a number of risks in the normal operations of our businesses. Depending on the activity, we are exposed to varying degrees of market risk and credit risk.
Market Risk
Market risk is the potential loss that may occur as a result of an adverse change in market price, rate or supply. We are exposed to the following market risks, including, but not limited to:
•Commodity price risk associated with our purchased power costs which include market fluctuations due to unpredictable factors such as weather, market speculation, transmission constraints, and other factors that may impact electric power supply and demand; and
•Interest rate risk associated with future debt, including reduced access to liquidity during periods of extreme capital markets volatility, such as the 2008 financial crisis and the COVID-19 pandemic;
Credit Risk
Credit risk is the risk of financial loss resulting from non-performance of contractual obligations by a counterparty.
For production and generation activities, we attempt to mitigate our credit exposure by conducting business primarily with high credit quality entities, setting tenor and credit limits commensurate with counterparty financial strength, obtaining master netting agreements, and mitigating credit exposure with less creditworthy counterparties through parental guarantees, cash collateral requirements, letters of credit, and other security agreements.
We perform ongoing credit evaluations of our customers and adjust credit limits based on payment history and the customers’ current creditworthiness, as determined by review of their current credit information. We maintain a provision for estimated credit losses based upon historical experience, changes in current market conditions, expected losses and any specific customer collection issue that is identified.
We continue to monitor COVID-19 impacts and changes to customer load, consistency in customer payments, requests for deferred or discounted payments, and requests for changes to credit limits to quantify estimated future financial impacts to the allowance for credit losses. During the three and six months ended June 30, 2020, the potential economic impact of the COVID-19 pandemic was considered in forward looking projections related to write-off and recovery rates, and resulted in increases to the allowance for credit losses and bad debt expense of $0.1 million and $0.1 million, respectively. See Note 3 for further information.
Derivatives
We have wholesale power purchase and sale contracts used to manage purchased power costs and customer load requirements associated with serving our electric customers that are considered derivative instruments. Changes in the fair value of these commodity derivatives are recorded in Fuel and purchased power, net of amounts credited to customers under margin-sharing mechanisms.
The contract or notional amounts and terms of the derivative commodity instruments held at our utilities are composed of both long and short positions. We were in a net long position as of:
| | | | | | | | | | | | | | | | | | | | | | | |
| June 30, 2020 | | | | December 31, 2019 | | |
| MWh | | Maximum Term (months) | | MWh | | Maximum Term (months) |
Wholesale power contracts (a) | 141,225 | | 6 | | — | | 0 |
__________
(a) Volumes exclude contracts that qualify for the normal purchases and normal sales exception.
From time to time we utilize risk management contracts including interest rate swaps to fix the interest on variable rate debt or to lock in the Treasury yield component associated with anticipated issuance of senior notes. For swaps that settled in connection with the issuance of senior debt, the effective portion is deferred as a component in AOCI and recognized as interest expense over the life of the senior note. As of June 30, 2020, we had no outstanding interest rate swap agreements.
Derivatives by Balance Sheet Classification
As required by accounting standards for derivatives and hedges, fair values within the following tables are presented on a gross basis aside from the netting of asset and liability positions. Netting of positions is permitted in accordance with accounting standards for offsetting and under terms of our master netting agreements that allow us to settle positive and negative positions.
The following table presents the fair value and balance sheet classification of our derivative instruments (in thousands) as of:
| | | | | | | | | | | | | | |
(7) | FAIR VALUE OF FINANCIAL INSTRUMENTSBalance Sheet Location | | June 30, 2020 | December 31, 2019 |
| | | | |
Derivatives not designated as hedges: | | | | |
Asset derivative instruments: | | | | |
Current commodity derivatives | Other current assets | | $ | 1,158 | | $ | — | |
Total derivatives not designated as hedges | | | $ | 1,158 | | $ | — | |
Derivatives Designated as Hedges
The impacts of cash flow hedges on our Condensed Statements of Comprehensive Income are presented below for the three and six months ended June 30, 2020 and 2019. Derivatives designated as cash flow hedges relate to a treasury lock entered into in August 2002 to hedge $50 million of our First Mortgage Bonds due on August 15, 2032. The treasury lock cash settled on August 8, 2002, the bond pricing date, and resulted in a $1.8 million loss. The treasury lock is treated as a cash flow hedge and the resulting loss is carried in Accumulated other comprehensive loss and is being amortized over the life of the related bonds.
| | | | | | | | | | | | | | | | | | | |
| | | | Three Months Ended June 30, | | Six Months Ended June 30, | |
| | | | 2020 | 2019 | 2020 | 2019 |
Derivatives in Cash Flow Hedging Relationships | | | Income Statement Location | Amount of Gain/(Loss) Reclassified from AOCI into Income | | | |
| | | | (in thousands) | | (in thousands) | |
Interest rate swaps | | | Interest expense | $ | (16) | | $ | (16) | | $ | (32) | | $ | (32) | |
Total | | | | $ | (16) | | $ | (16) | | $ | (32) | | $ | (32) | |
Derivatives Not Designated as Hedges
The following table summarizes the impacts of derivative instruments not designated as hedge instruments on our Condensed Statements of Comprehensive Income for the three and six months ended June 30, 2020 and 2019. Note that this presentation does not reflect gains or losses arising from the underlying physical transactions; therefore, it is not indicative of the economic profit or loss we realized when the underlying physical and financial transactions were settled.
| | | | | | | | | | | |
| | Three Months Ended June 30, | |
| | 2020 | 2019 |
Derivatives Not Designated as Hedging Instruments | Income Statement Location | Amount of Gain/(Loss) on Derivatives Recognized in Income | |
| | (in thousands) | |
Commodity derivatives | Fuel and purchased power | $ | (204) | | $ | — | |
| | $ | (204) | | $ | — | |
| | | | | | | | | | | |
| | Six Months Ended June 30, | |
| | 2020 | 2019 |
Derivatives Not Designated as Hedging Instruments | Income Statement Location | Amount of Gain/(Loss) on Derivatives Recognized in Income | |
| | (in thousands) | |
Commodity derivatives | Fuel and purchased power | $ | 1,158 | | $ | — | |
| | $ | 1,158 | | $ | — | |
As discussed above, financial instruments used to manage lowest cost resources for our customers are not designated as cash flow hedges. The unrealized gains and losses arising from these derivatives are recognized in the Condensed Statements of Comprehensive Income.
Fair Value
We use the following fair value hierarchy for determining inputs for our financial instruments. Our assets and liabilities for financial instruments are classified and disclosed in one of the following fair value categories:
Level 1 — Unadjusted quoted prices available in active markets that are accessible at the measurement date for identical unrestricted assets or liabilities. Level 1 instruments primarily consist of highly liquid and actively traded financial instruments with quoted pricing information on an ongoing basis.
Level 2 — Pricing inputs include quoted prices for identical or similar assets and liabilities in active markets other than quoted prices in Level 1, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability and inputs that are derived principally from or corroborated by observable market data by correlation or other means.
Level 3 — Pricing inputs are generally less observable from objective sources. These inputs reflect management’s best estimate of fair value using its own assumptions about the assumptions a market participant would use in pricing the asset or liability.
Assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. Our assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the placement within the fair value hierarchy levels. We record transfers, if necessary, between levels at the end of the reporting period for all of our financial instruments.
Transfers into Level 3, if any, occur when significant inputs used to value the derivative instruments become less observable, such as a significant decrease in the frequency and volume in which the instrument is traded, negatively impacting the availability of observable pricing inputs. Transfers out of Level 3, if any, occur when the significant inputs become more observable, such as when the time between the valuation date and the delivery date of a transaction becomes shorter, positively impacting the availability of observable pricing inputs. We currently do not have any Level 3 investments.
Recurring Fair Value Measurements
Derivatives
Our commodity contracts are valued using the market approach and include wholesale power contracts that do not meet the normal purchases and normal sales exception. For these derivative instruments, the fair value is obtained by utilizing a nationally recognized service that obtains observable inputs to compute the fair value.
| | | | | | | | | | | | | | | | | | | | |
| As of June 30, 2020 | | | | | |
| Level 1 | Level 2 | Level 3 | | Cash Collateral and Counterparty Netting | Total |
| (in thousands) | | | | | |
Assets: | | | | | | |
Commodity derivatives | $ | — | | $ | 1,158 | | $ | — | | | $ | — | | 1,158 | |
| | | | | | | | | | | | | | | | | | | | |
| As of December 31, 2019 | | | | | |
| Level 1 | Level 2 | Level 3 | | Cash Collateral and Counterparty Netting | Total |
| (in thousands) | | | | | |
Assets: | | | | | | |
Commodity derivatives | $ | — | | $ | — | | $ | — | | | $ | — | | $ | — | |
Pension and Postretirement Plan Assets
Fair value measurements also apply to the valuation of our pension and postretirement plan assets. Current accounting guidance requires employers to annually disclose information about the fair value measurements of their assets of a defined benefit pension or other postretirement plan. The fair value of these assets was presented in Note 12 to the Financial Statements included in our 2019 Annual Report on Form 10-K.
The Company has concluded that the market volatility associated with COVID-19 does not require interim re-measurement of our pension plan assets or defined benefit obligations.
Other fair value measures
Financial instruments for which the carrying amount did not equal the fair value were as follows (in thousands) as of:
|
| | | | | | | | | | | | |
| June 30, 2019 | December 31, 2018 |
| Carrying Amount | Fair Value | Carrying Amount | Fair Value |
Long-term debt, including current maturities (a) (b) | $ | 340,105 |
| $ | 447,036 |
| $ | 340,035 |
| $ | 412,894 |
|
| | | | | | | | | | | | | | |
| June 30, 2020 | | December 31, 2019 | |
| Carrying Amount | Fair Value | Carrying Amount | Fair Value |
Long-term debt, including current maturities (a) | $ | 337,391 | | $ | 491,595 | | $ | 340,176 | | $ | 458,286 | |
_________________
| |
(a) | Long-term debt is valued based on observable inputs available either directly or indirectly for similar liabilities in active markets and therefore is classified in Level 2 in the fair value hierarchy. |
| |
(b) | (a) Long-term debt is valued based on observable inputs available either directly or indirectly for similar liabilities in active markets and therefore is classified in Level 2 in the fair value hierarchy. Carrying amount of long-term debt is net of deferred financing costs. |
| |
(8) | SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION |
|
| | | | | | |
| Six Months Ended June 30, |
| 2019 | 2018 |
| (in thousands) |
Non-cash investing and financing activities - | | |
Property, plant and equipment acquired with accrued liabilities | $ | 15,316 |
| $ | 7,477 |
|
Non-cash (decrease) to money pool notes receivable, net | $ | — |
| $ | (26,000 | ) |
Non-cash dividend to Parent | $ | — |
| $ | 26,000 |
|
| | |
Cash (paid) refunded during the period for - | | |
Interest (net of amounts capitalized) | $ | (11,342 | ) | $ | (10,930 | ) |
| |
(9) | COMMITMENTS AND CONTINGENCIES |
(8) Commitments and Contingencies
There have been no significant changes to commitments and contingencies from those previously disclosed in Note 11 of our Notes to the Financial Statements in our 20182019 Annual Report on Form 10-K.
We have a ground lease for the Wygen III generating facility with an affiliate and communication tower site and operation center facility leases with third parties. Our leases have remaining terms ranging from less than one year to 30 years.
The components of lease expense were as follows (in thousands):
|
| | | | | | | |
| Income Statement Location | Three Months Ended June 30, 2019 | Six Months Ended June 30, 2019 |
Operating lease cost | Operations and maintenance | $ | 228 |
| $ | 456 |
|
Variable lease cost | Operations and maintenance | 39 |
| 82 |
|
Total lease cost | | $ | 267 |
| $ | 538 |
|
Supplemental balance sheet information related to leases was as follows (in thousands):
|
| | | | |
| Balance Sheet Location | As of June 30, 2019 |
Assets: | | |
Operating lease assets | Other assets, non-current | $ | 14,244 |
|
Total lease assets | | $ | 14,244 |
|
| | |
Liabilities: | | |
Current: | | |
Operating leases | Accrued liabilities | $ | 268 |
|
| | |
Noncurrent: | | |
Operating leases | Other deferred credits and other liabilities | 13,993 |
|
Total lease liabilities | | $ | 14,261 |
|
Supplemental cash flow information related to leases was as follows (in thousands):
|
| | | |
| Six Months Ended June 30, 2019 |
Cash paid for amounts included in the measurement of lease liabilities: | |
Operating cash flows from operating leases | $ | 451 |
|
Right-of-use assets obtained in exchange for lease obligations: | |
Operating leases | $ | — |
|
(9) Long-term Debt
|
| | |
| As of June 30, 2019 |
Weighted average remaining lease term (years): | |
Operating leases | 30 years |
|
| |
Weighted average discount rate: | |
Operating leases | 4.4 | % |
Series 94A Debt
Scheduled maturities of operating lease liabilities for future years
On March 24, 2020, South Dakota Electric paid off its $2.9 million, Series 94A variable rate notes due June 1, 2024. These notes were as follows (in thousands):tendered by the sole investor on March 17, 2020.
|
| | | |
| Total |
2019 (a) | $ | 463 |
|
2020 | 856 |
|
2021 | 856 |
|
2022 | 856 |
|
2023 | 853 |
|
Thereafter | 21,947 |
|
Total lease payments | $ | 25,831 |
|
Less imputed interest | 11,570 |
|
Present value of lease liabilities | $ | 14,261 |
|
| |
(a) | Includes lease obligations for the remaining six months of 2019. |
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Amounts are presented on a pre-tax basis unless otherwise indicated.
Minor differences in amounts may result due to rounding.
Significant Events
On July 23, 2019, Fitch affirmed South Dakota Electric’sCOVID-19 Pandemic
One of the Company’s core values is safety. The COVID-19 pandemic has given us an opportunity to demonstrate our commitment to the health and safety of our customers, employees, business partners and the communities we serve. We have executed our business continuity plan with the goal of continuing to provide safe and reliable service during the COVID-19 pandemic.
For the three and six months ended June 30, 2020, we experienced limited impacts to our financial results and operational activities due to COVID-19. Increased costs due to sequestration of mission-critical and essential employees and increased bad debt expense were mostly offset by decreased training, travel and outside services related expenses.
During the three months ended June 30, 2020, COVID-19 had a limited impact on revenues and customer loads, as the decline in commercial usage was partially offset by an increase in residential usage. Decline in revenues and customer loads for the six months ended June 30, 2020, when compared to the same period in the prior year, were driven primarily by weather. We continue to closely monitor loads and have proactively communicated with various commercial and industrial customers in our service territories to understand their needs and forecast the potential financial implications. We have increased our allowance for credit rating at A.losses and bad debt expense by $0.1 million for the three and six months ended June 30, 2020 after considering the potential economic impact of the COVID-19 pandemic in forward looking projections related to write-off and recovery efforts. We continue to monitor customer loads, accounts receivable arrears balances, disconnects, cash flows and bad debt expense. We are proactively working with customers to establish payment plans and find available payment assistance resources.
We continue to maintain adequate liquidity to operate our business and fund our capital investment program. The Company has no material upcoming debt maturities until August 2032. We have not had any changes to our credit ratings. We also continue to monitor the funding status of our employee benefit plan obligations, which did not materially change during the six months ended June 30, 2020.
We are monitoring supply chains, including lead times for key materials and supplies, availability of resources, and status of large capital projects. To date, there have been limited impacts to supply chains including availability of supplies, materials and lead times. Capital projects are ongoing without material disruption to schedules. Our third party resources continue to support our business plans without disruption. Contingency plans are ongoing due to the impacts of COVID-19, including the potential for rescheduling projects. We currently do not anticipate a significant impact to our capital investment plan for 2020.
We continue to work closely with local health, public safety and government officials to minimize the spread of COVID-19 and its impact to our employees and the service we provide to our customers. Some of the actions the Company has taken include implementing protocols for our field operations personnel to continue to safely and effectively interact with our customers, asking employees to work from home to the extent possible, quarantining employees if they have traveled to an at-risk area, limiting travel to only mission-critical purposes and sequestering essential employees.
As we look forward to the second half of 2020, we anticipate that our operating results could potentially be further affected from COVID-19, as discussed in detail in our Risk Factors.
During these uncertain times, we remain highly focused on the safety and health of our customers, employees, business partners and communities. We continue to monitor load, customers’ ability to pay, the potential for supply chain disruption that may impact our capital and maintenance project plans and the availability of resources to execute our plans.
Company Highlights
South Dakota Electric and Wyoming Electric received approvals forcontinued construction of the Renewable Ready Service Tariffs and related jointly-filed CPCN to construct the $57$79 million, 40-megawatt Corriedale Wind Energy Project.project. The wind project will be jointly owned by the two electric utilities to deliver renewable energy for large commercial, and industrial customers and governmental agencies.agency customers. The project is on schedule and on budget and expected to be in service inby year-end 2020.
South Dakota Electric continued construction on a 175-mile electric transmission line from Stegall, Nebraska to Rapid City, South Dakota. The 94-mile final segment of the transmission line is expected to be in service in the fall of 2019.
On April 30, 2019,16, 2020, S&P affirmed South Dakota Electric’sour credit rating at A.
Results of Operations
The following discussion includes financial information prepared in accordance with GAAP, as well as another financial measure, gross margin, that is considered a “non-GAAP financial measure.” Generally, a non-GAAP financial measure is a numerical measure of a company’s financial performance, financial position or cash flows that excludes (or includes) amounts that are included in (or excluded from) the most directly comparable measure calculated and presented in accordance with GAAP. Gross margin (revenue less cost of sales) is a non-GAAP financial measure due to the exclusion of depreciation and amortization from the measure. The presentation of gross margin is intended to supplement investors’ understanding of our operating performance.
Gross margin is calculated as operating revenue less cost of fuel and purchased power. Our gross margin is impacted by the fluctuations in purchased power, natural gas and other fuel supply costs. However, while these fluctuating costs impact gross margin as a percentage of revenue, they only impact total gross margin if the costs cannot be passed through to our customers.
Our gross margin measure may not be comparable to other companies’ gross margin measure.measures. Furthermore, this measure is not intended to replace operating income as determined in accordance with GAAP as an indicator of operating performance.
The following tables provide certain financial information and operating statistics:
| | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | | Six Months Ended June 30, | | |
| 2020 | 2019 | Variance | 2020 | 2019 | Variance |
| (in thousands) | | | | | |
Revenue (a) | $ | 62,587 | | $ | 69,246 | | $ | (6,659) | | $ | 134,198 | | $ | 148,287 | | $ | (14,089) | |
Fuel and purchased power (a) | 12,614 | | 18,381 | | (5,767) | | 28,601 | | 41,114 | | (12,513) | |
Gross margin (non-GAAP) | 49,973 | | 50,865 | | (892) | | 105,597 | | 107,173 | | (1,576) | |
| | | | | | |
Operating expenses | 32,246 | | 33,555 | | (1,309) | | 66,677 | | 65,221 | | 1,456 | |
Operating income | 17,727 | | 17,310 | | 417 | | 38,920 | | 41,952 | | (3,032) | |
| | | | | | |
Interest expense, net | (6,021) | | (5,277) | | (744) | | (11,819) | | (10,709) | | (1,110) | |
Other income (expense), net | (543) | | 291 | | (834) | | (184) | | (84) | | (100) | |
Income tax (expense) | (1,536) | | (2,176) | | 640 | | (3,955) | | (5,514) | | 1,559 | |
Net income | $ | 9,627 | | $ | 10,148 | | $ | (521) | | $ | 22,962 | | $ | 25,645 | | $ | (2,683) | |
____________________
(a) Revenue and purchased power for the three and six months ended June 30, 2020, as well as associated quantities, for certain wholesale contracts have been presented on a net basis, which resulted in a decrease of $5.0 million and $8.6 million, or 183,120 MWh and 318,447 MWh, respectively. Amounts for the three and six months ended June 30, 2019, were presented on a gross basis and, due to their immaterial nature, were not revised. This presentation change has no impact on Gross margin.
|
| | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | Six Months Ended June 30, |
| 2019 | 2018 | Variance | 2019 | 2018 | Variance |
| (in thousands) |
Revenue | $ | 69,246 |
| $ | 70,676 |
| $ | (1,430 | ) | $ | 148,287 |
| $ | 144,491 |
| $ | 3,796 |
|
Fuel and purchased power | 18,381 |
| 20,753 |
| (2,372 | ) | 41,114 |
| 43,193 |
| (2,079 | ) |
Gross margin (non-GAAP) | 50,865 |
| 49,923 |
| 942 |
| 107,173 |
| 101,298 |
| 5,875 |
|
| | | | | | |
Operating expenses | 33,555 |
| 30,428 |
| 3,127 |
| 65,221 |
| 61,439 |
| 3,782 |
|
Operating income | 17,310 |
| 19,495 |
| (2,185 | ) | 41,952 |
| 39,859 |
| 2,093 |
|
| | | | | | |
Interest income (expense), net | (5,277 | ) | (5,379 | ) | 102 |
| (10,709 | ) | (10,803 | ) | 94 |
|
Other income (expense), net | 291 |
| (242 | ) | 533 |
| (84 | ) | (359 | ) | 275 |
|
Income tax expense | (2,176 | ) | (2,749 | ) | 573 |
| (5,514 | ) | (5,812 | ) | 298 |
|
Net income | $ | 10,148 |
| $ | 11,125 |
| $ | (977 | ) | $ | 25,645 |
| $ | 22,885 |
| $ | 2,760 |
|
Six Months Ended June 30, 20192020 Compared to Six Months Ended June 30, 2018.2019. Net income was $26$23 million compared to $23$26 million for the same period in the prior year primarily due to the following:
Gross margin increaseddecreased primarily due to a $3.2$1.2 million reduction in the purchased power capacity chargesdecline from lower heating demand with warmer weather and higher rider revenues$1.1 million of $1.4 million related to transmission investment recovery. Higherlower off-system power marketing revenue, customer growth, and favorable weather, comprised the remainder of the increase.margins partially offset by a $1.2 million mark-to-market gain on wholesale energy contracts. COVID-19 impacts to gross margin included a $0.8 million decrease due to lower commercial volumes partially offset by higher residential usage.
Operating expenses increased primarily due higher depreciation due to a higher asset base driven by prior year and current year capital expenditures. COVID-19 impacts to operations and maintenance expense included $0.7 million of expenses related to the sequestration of essential employees and $0.1 million of additional bad debt expense which were mostly offset by $0.6 million of lower travel, training and outside services related expenses.
Interest expense, net increased primarily due to higher outside services expensesMoney pool notes payable and higher employee costs driven by increased headcountNotes payable to Parent balances partially offset by a decreaselower interest rates.
Income Tax (Expense): The effective tax rate was 14.7% compared to 17.7% for the same period in expenses2019. The lower effective tax rate is primarily due to generation outages.current year tax flow-through benefits related to repairs.
|
| | | | | | | | | | | | | | | | | | | |
| Electric Revenue by Customer Type |
| Three Months Ended June 30, | | Six Months Ended June 30, |
| (in thousands) |
| 2019 | | Percentage Change | | 2018 | | 2019 | | Percentage Change | | 2018 |
Residential | $ | 15,570 |
| | (5)% | | $ | 16,426 |
| | $ | 36,760 |
| | (2)% | | $ | 37,487 |
|
Commercial | 22,131 |
| | (6)% | | 23,538 |
| | 45,275 |
| | (4)% | | 47,082 |
|
Industrial | 8,576 |
| | 5% | | 8,170 |
| | 16,933 |
| | 3% | | 16,446 |
|
Municipal | 776 |
| | (11)% | | 876 |
| | 1,557 |
| | (8)% | | 1,687 |
|
Total retail revenue | 47,053 |
| | (4)% | | 49,010 |
| | 100,525 |
| | (2)% | | 102,702 |
|
Wholesale (a) | 6,780 |
| | (17)% | | 8,191 |
| | 15,123 |
| | (12)% | | 17,241 |
|
Market - off-system sales (b) | 2,393 |
| | (31)% | | 3,449 |
| | 7,063 |
| | 23% | | 5,724 |
|
Other revenue (c) | 13,020 |
| | 30% | | 10,026 |
| | 25,576 |
| | 36% | | 18,824 |
|
Total revenue | $ | 69,246 |
| | (2)% | | $ | 70,676 |
| | $ | 148,287 |
| | 3% | | $ | 144,491 |
|
____________________
| |
(a) | Decrease for the six months ended June 30, 2019 was primarily driven by prior year increased volumes on long-term wholesale contracts. |
| |
(b) | Increase for the six months ended June 30, 2019 was driven by weather and energy prices. |
| |
(c) | Increase for the six months ended June 30, 2019 was primarily due to the prior year reserve to revenue to reflect the reduction of the lower federal income tax rate from the TCJA on our existing rate tariffs. |
|
| | | | | | | | | | | | | | | |
| Megawatt Hours Sold by Customer Type |
| Three Months Ended June 30, | | Six Months Ended June 30, |
| 2019 | | Percentage Change | | 2018 | | 2019 | | Percentage Change | | 2018 |
Residential | 114,399 |
| | (1)% | | 115,905 |
| | 284,335 |
| | 2% | | 279,018 |
|
Commercial | 180,966 |
| | (3)% | | 186,784 |
| | 375,760 |
| | (2)% | | 381,715 |
|
Industrial | 112,623 |
| | 6% | | 106,100 |
| | 220,819 |
| | 5% | | 210,402 |
|
Municipal | 6,756 |
| | (10)% | | 7,479 |
| | 14,329 |
| | (4)% | | 14,982 |
|
Total retail quantity sold | 414,744 |
| | —% | | 416,268 |
| | 895,243 |
| | 1% | | 886,117 |
|
Wholesale | 194,222 |
| | (11)% | | 218,132 |
| | 417,242 |
| | (8)% | | 455,836 |
|
Market - off-system sales | 113,014 |
| | (20)% | | 141,866 |
| | 212,586 |
| | (9)% | | 233,968 |
|
Total quantity sold | 721,980 |
| | (7)% | | 776,266 |
| | 1,525,071 |
| | (3)% | | 1,575,921 |
|
Losses and Company use (a) | 35,660 |
| | (42)% | | 61,677 |
| | 77,570 |
| | (14)% | | 90,199 |
|
Total energy | 757,640 |
| | (10)% | | 837,943 |
| | 1,602,641 |
| | (4)% | | 1,666,120 |
|
____________________
| |
(a) | Includes company uses, line losses, and excess exchange production. |
|
| | | | | | | | | | | | | | | |
| Megawatt Hours Generated and Purchased |
| Three Months Ended June 30, | | Six Months Ended June 30, |
Generated - | 2019 | | Percentage Change | | 2018 | | 2019 | | Percentage Change | | 2018 |
Coal-fired (a) | 287,201 |
| | (26)% | | 388,081 |
| | 696,867 |
| | (11)% | | 787,168 |
|
Natural Gas and Oil (b) | 28,724 |
| | 21% | | 23,758 |
| | 76,427 |
| | 107% | | 36,865 |
|
Total generated | 315,925 |
| | (23)% | | 411,839 |
| | 773,294 |
| | (6)% | | 824,033 |
|
|
| | | | | | | | | | |
Total purchased | 441,715 |
| | 4% | | 426,104 |
| | 829,347 |
| | (2)% | | 842,087 |
|
Total generated and purchased | 757,640 |
| | (10)% | | 837,943 |
| | 1,602,641 |
| | (4)% | | 1,666,120 |
|
| | | | | | | | | | | | | | | | | | | | |
| | Electric Revenue by Customer Type | | | | |
| | (in thousands) | | | | |
| | Three Months Ended June 30, | | | Six Months Ended June 30, | |
| | 2020 | 2019 | | 2020 | 2019 |
Residential | | $ | 16,693 | | $ | 15,570 | | | $ | 36,374 | | $ | 36,760 | |
Commercial | | 20,540 | | 22,131 | | | 42,766 | | 45,275 | |
Industrial | | 8,111 | | 8,576 | | | 17,197 | | 16,933 | |
Municipal | | 799 | | 776 | | | 1,570 | | 1,557 | |
Total retail revenue | | 46,143 | | 47,053 | | | 97,907 | | 100,525 | |
Wholesale (a) | | 2,716 | | 6,780 | | | 7,098 | | 15,123 | |
Market - off-system sales | | 2,004 | | 2,393 | | | 4,381 | | 7,063 | |
Other revenue | | 11,724 | | 13,020 | | | 24,812 | | 25,576 | |
Total revenue | | $ | 62,587 | | $ | 69,246 | | | $ | 134,198 | | $ | 148,287 | |
____________________
(a) DecreaseRevenue for the three and six months ended June 30, 2020 for certain wholesale contracts has been presented on a net basis, which resulted in a decrease of $5.0 million and $8.6 million, respectively. Amounts for the three and six months ended June 30, 2019, iswere presented on a gross basis and, due to their immaterial nature, were not revised. This presentation change has no impact on Gross margin.
| | | | | | | | | | | | | | | | | | | | |
| | Quantities Sold (MWh) by Customer Type | | | | |
| | Three Months Ended June 30, | | | Six Months Ended June 30, | |
| | 2020 | 2019 | | 2020 | 2019 |
Residential | | 122,223 | | 114,399 | | | 275,260 | | 284,335 | |
Commercial | | 166,711 | | 180,966 | | | 352,672 | | 375,760 | |
Industrial | | 100,761 | | 112,623 | | | 219,319 | | 220,819 | |
Municipal | | 7,263 | | 6,756 | | | 14,702 | | 14,329 | |
Total retail quantity sold | | 396,958 | | 414,744 | | | 861,953 | | 895,243 | |
Wholesale (a) | | 38,483 | | 194,222 | | | 120,220 | | 417,242 | |
Market - off-system sales | | 106,005 | | 113,014 | | | 211,749 | | 212,586 | |
Total quantity sold | | 541,446 | | 721,980 | | | 1,193,922 | | 1,525,071 | |
Losses and Company use (b) | | 29,083 | | 35,660 | | | 61,830 | | 77,570 | |
Total energy | | 570,529 | | 757,640 | | | 1,255,752 | | 1,602,641 | |
____________________
(a) MWh sold for the three and six months ended June 30, 2020 for certain wholesale contracts have been presented on a net basis, which resulted in a decrease of 183,120 MWh and 318,447 MWh, respectively. Amounts for the three and six months ended June 30, 2019, were presented on a gross basis and, due to their immaterial nature, were not revised. This presentation change has no impact on Gross margin.
(b) Includes company uses, line losses, and excess exchange production.
| | | | | | | | | | | | | | | | | |
Quantities Generated and Purchased (MWh) | Three Months Ended June 30, | | | Six Months Ended June 30, | |
| 2020 | 2019 | | 2020 | 2019 |
Coal-fired | 399,005 | | 287,201 | | | 779,500 | | 696,867 | |
Natural Gas and Oil | 43,561 | | 28,724 | | | 136,032 | | 76,427 | |
Total generated | 442,566 | | 315,925 | | | 915,532 | | 773,294 | |
| | | | | |
Purchased (a) | 127,963 | | 441,715 | | | 340,220 | | 829,347 | |
Total generated and purchased | 570,529 | | 757,640 | | | 1,255,752 | | 1,602,641 | |
________________
(a) Purchased power quantities for the three and six months ended June 30, 2020 for certain wholesale contracts have been presented on a net basis, which resulted in a decrease of 183,120 MWh and 318,447 MWh, respectively. Amounts for the three and six months ended June 30, 2019, were presented on a gross basis and, due to their immaterial nature, were not revised. This presentation change has no impact on Gross margin.
| | | | | | | | | | | | | | |
Contracted Power Plant Fleet Availability (a) | Three Months Ended June 30, | | Six Months Ended June 30, | |
| 2020 | 2019 | 2020 | 2019 |
Coal-fired plants (b) | 97.1 | % | 71.9 | % | 94.4 | % | 85.0 | % |
Other plants (c) (d) | 86.1 | % | 79.7 | % | 92.1 | % | 83.5 | % |
Total availability | 91.2 | % | 76.0 | % | 93.2 | % | 84.2 | % |
____________________
(a) Total availability is calculated using a weighted average based on capacity of our generating fleet.
(b) 2019 included planned outages at Neil Simpson II and Wygen III and unplanned outages at Wyodak Plant.
(b) Increase is primarily due to low natural gas prices(c) 2019 included planned outages at Neil Simpson CT and the ability to generateLange CT.
(d) 2020 includes planned outages at a lower cost than to purchase generation on the open market for the six months ended June 30, 2019.Ben French CTs #1-4.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | | | | | Six Months Ended June 30, | | | | |
| 2020 | | | 2019 | | | 2020 | | | 2019 | |
| Actual | Variance from Normal | | Actual | Variance from Normal | | Actual | Variance from Normal | | Actual | Variance from Normal |
Heating degree days | 1,127 | | 10 | % | | 1,279 | | 25 | % | | 4,238 | | — | % | | 5,195 | | 23 | % |
Cooling degree days | 120 | | 21 | % | | 38 | | (62) | % | | 120 | | 21 | % | | 38 | | (62) | % |
|
| | | | | | | | |
| Power Plant Availability |
| Three Months Ended June 30, | Six Months Ended June 30, |
| 2019 | 2018 | 2019 | 2018 |
Coal-fired plants (a) | 71.9 | % | 91.3 | % | 85.0 | % | 92.1 | % |
Other plants (b) | 79.7 | % | 97.5 | % | 83.5 | % | 98.4 | % |
Total availability | 76.0 | % | 94.6 | % | 84.2 | % | 95.5 | % |
____________________
| |
(a) | 2019 included planned outages at Neil Simpson II and Wygen III unplanned outages at Wyodak Plant, and 2018 included planned outages at Neil Simpson II and Wyodak Plant. |
| |
(b) | 2019 included planned outages at Neil Simpson CT and Lange CT. |
|
| | | | | | | | | | | | | | | | | | | |
| Degree Days | | Degree Days |
| Three Months Ended June 30, | | Six Months Ended June 30, |
| 2019 | | 2018 | | 2019 | | 2018 |
| Actual | Variance from Normal | | Actual | Variance from Normal | | Actual | Variance from Normal | | Actual | Variance from Normal |
| | | | | | | | | | | |
Heating degree days | 1,279 |
| 25 | % | | 1,037 |
| 1 | % | | 5,195 |
| 23 | % | | 4,736 |
| 12 | % |
Cooling degree days | 38 |
| (62 | )% | | 132 |
| 33 | % | | 38 |
| (62 | )% | | 132 |
| 33 | % |
Credit Ratings
Credit ratings impact our ability to obtain short and long-term financing, the cost of such financing, and vendor payment terms including collateral requirements. The following table represents our secured credit rating from each agency’s review which was in effect at June 30, 2019:
|
| | | | |
Rating Agency | Senior Secured Rating |
S&P (a) | A |
Moody’s (b) | A1 |
Fitch (c) | A |
__________
| |
(a) | On April 30, 2019,(a) On April 16, 2020, S&P affirmed A rating. |
| |
(b) | On December 12, 2018, Moody’s affirmed A1 rating. |
| |
(c) | On July 23, 2019, Fitch affirmed A rating. |
(b) On December 20, 2019, Moody’s affirmed A1 rating.
(c) On August 29, 2019, Fitch affirmed A rating.
FORWARD-LOOKING INFORMATION
This Quarterly Report on Form 10-Q contains forward-looking statements as defined by the SEC. Forward-looking statements are all statements other than statements of historical fact, including without limitation those statements that are identified by the words “anticipates”, “estimates”, “expects”, “intends”, “plans”, “predicts” and similar expressions, and include statements concerning plans, objectives, goals, strategies, future events or performance, and underlying assumptions and other statements that are other than statements of historical facts. From time to time, the Company may publish or otherwise make available forward-looking statements of this nature, including statements contained within Item 2 - Management’s Discussion & Analysis of Financial Condition and Results of Operations.
Forward-looking statements involve risks and uncertainties, which could cause actual results or outcomes to differ materially from those expressed. The Company’s expectations, beliefs and projections are expressed in good faith and are believed by the Company to have a reasonable basis, including without limitation, management’s examination of historical operating trends, data contained in the Company’s records and other data available from third parties. Nonetheless, the Company’s expectations, beliefs or projections may not be achieved or accomplished.
Any forward-looking statement contained in this document speaks only as of the date on which the statement is made and the Company undertakes no obligation to update any forward-looking statement or statements to reflect events or circumstances that occur after the date on which the statement is made or to reflect the occurrence of unanticipated events. New factors emerge from time to time, such as the COVID-19 pandemic, and it is not possible for management to predict all of the factors, nor can it assess the effect of each factor on the Company’s business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statement. All forward-looking statements, whether written or oral and whether made by or on behalf of the Company, are expressly qualified by the risk factors and cautionary statements described in Item 1A of our 20182019 Annual Report on Form 10-K, including statements contained within Item 1A - Risk Factors and Part II, Item 1A of this Quarterly Report on Form 10-Q.
| |
ITEM 4. | CONTROLS AND PROCEDURES |
ITEM 4.CONTROLS AND PROCEDURES
This section should be read in conjunction with Item 9A, “Controls and Procedures” included in our Annual Report on Form 10-K for the year ended December 31, 2018.
Our Chief Executive Officer and Chief Financial Officer evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934)1934, as amended (the “Exchange Act”)) as of June 30, 2019.2020. Based on their evaluation, they have concluded that our disclosure controls and procedures were effective as ofat June 30, 2019.2020.
Our disclosure controls and procedures are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Security Exchange Act of 1934, as amended, is recorded, processed, summarized and reported, within the time periods specified in the Commission’sSEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
Changes in Internal Control over Financial Reporting
During the quarter ended June 30, 2019,2020, there have been no changes in our internal controlcontrols over financial reporting that have materially affected or are reasonably likely to materially affect our internal control over financial reporting. Although we have altered some work routines due to the COVID-19 pandemic, the changes in our work environment (i.e. remote work arrangements) have not materially impacted our internal controls over financial reporting and have not adversely affected the Company’s ability to maintain operations, including financial reporting systems, ICFR, and disclosure controls and procedures.
BLACK HILLS POWER, INC.
PART II. OTHER INFORMATION
Part II - Other Information
ITEM 1.LEGAL PROCEEDINGS
For information regarding legal proceedings, see Note 11 of Notes to Financial Statements in Item 8 of our 20182019 Annual Report on Form 10-K and Note 98 of our Notes to Condensed Financial Statements in this Quarterly Report on Form 10-Q,10-Q.
ITEM 1A.RISK FACTORS
There are no material changes to the risk factors previously disclosed in Item 1A of Part I in our 2019 Annual Report on Form 10-K filed with the SEC except as shown below:
Our business, results of operations, financial condition and cash flows could be adversely affected by the recent coronavirus (COVID-19) pandemic.
We have responded to the global pandemic of COVID-19 by taking steps to mitigate the potential risks to us posed by its spread.
For the six months ended June 30, 2020, the COVID-19 pandemic had a limited financial impact on our business, operations, financial condition and cash flows. In particular, we experienced:
•Lower commercial volumes partially offset by higher residential usage;
•Increased allowance for credit losses and bad debt expense due to anticipated higher customer accounts receivable arrears balances;
•Minimal cash flow impacts from delayed payments from residential, commercial and industrial customers;
•Minimal disruptions receiving the materials and supplies necessary to maintain operations and continue executing our capital investment plan;
•Reduced availability and productivity of our employees;
•Minimal impacts to the availability of our third-party resources;
•Minimal decline in the funded status of our pension plan;
•Increased costs for personal protection equipment and cleaning supplies;
•Increased costs due to sequestration of mission-critical and essential employees; and
•Reduced training, travel and outside services related expenses.
Should the COVID-19 pandemic continue for a prolonged period or impact the areas we serve more significantly than it has today, our business, operations, financial condition and cash flows could be impacted in more significant ways. In addition to exacerbating the impacts described above, we could experience:
•Adverse impacts on our strategic business plans, growth strategy and capital investment plans;
•Increased adverse impacts to electricity demand from our customers, particularly from commercial and industrial customers;
•Further reduction in the availability and productivity of our employees and third-party resources;
•Increased costs as a result of our emergency measures;
•Increased allowance for credit losses and bad debt expense as a result of delayed or non-payment from our customers, both of which information from Note 9could be magnified by Federal or state government legislation that requires us to extend suspensions of disconnections for non-payment;
•Delays and disruptions in the availability, timely delivery and cost of materials and components used in our operations;
•Disruptions in the commercial operation dates of certain projects impacting qualification criteria for certain tax credits and potential damages in our power purchase agreements;
•Deterioration of the credit quality of our counterparties, including power purchase agreement counterparties, contractors or retail customers, that could result in credit losses;
•Impairment of long-lived assets;
•Adverse impacts on our ability to develop, construct and operate facilities;
•Deterioration in our financial metrics or the business environment that adversely impacts our credit ratings;
•Delay in the permitting process of certain development projects, affecting the timing of final investment decisions and start dates of construction;
•Delays in our ability to change rates through regulatory proceedings; and
•Other risks that impact us, such as the risks described in the “Risk Factors” section of our 2019 Annual Report on Form 10-K and our ability to meet our financial obligations.
To date, we have experienced limited impacts to our results of operations, financial condition, cash flows or business plans. However, the situation remains fluid and it is incorporated by reference into this item.difficult to predict with certainty the potential impact of COVID-19 on our business, results of operations, financial condition and cash flows.
ITEM 6. EXHIBITS
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Exhibit 31.1 |
101.INS XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document 101.SCH XBRL Taxonomy Extension Schema Document 101.CAL XBRL Taxonomy Extension Calculation Linkbase Document 101.DEF XBRL Taxonomy Extension Definition Linkbase Document 101.LAB XBRL Taxonomy Extension Label Linkbase Document 101.PRE XBRL Taxonomy Extension Presentation Linkbase Document
104 Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101) |
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101.INS | XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document |
| |
101.SCH | XBRL Taxonomy Extension Schema Document |
| |
101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document |
| |
101.DEF | XBRL Taxonomy Extension Definition Linkbase Document |
| |
101.LAB | XBRL Taxonomy Extension Label Linkbase Document |
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101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document |
_________________________
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* | * Previously filed as part of the filing indicated and incorporated by reference herein. |
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/ LINDEN R. EVANS
Linden R. Evans, Chairman, President
and Chief Executive Officer
/S/ RICHARD W. KINZLEY
Richard W. Kinzley, Senior Vice President
and Chief Financial Officer
| | | | | | | | |
| | /s/ Linden R. Evans |
| | Linden R. Evans, Chairman, President and |
| | Chief Executive Officer |
| | |
| | /s/ Richard W. Kinzley |
| | Richard W. Kinzley, Senior Vice President and |
| | Chief Financial Officer |
| | |
Dated: | August 4, 2020 | |
Dated: August 6, 2019